A 39-year-old District of Columbia fireman has been ordered to pay an $8,500 fine -- the largest ever decreed by a police or fire department trial board -- for having "feigned physical disability" while "actively engaged in outside employment as a construction contractor," according to a fire department trial board.

It was the first conviction on charges related to malingering in the fire department's 100-year history.

John E. Frye, a 12-year veteran fireman assigned to Engine Company 7 at 1101 Half St. SW, reported injuries to his back and neck and a mild concussion after he slipped on ice while fighting a fire in January. He was kept overnight at Washington Hospital Center, but "continued to suffer from the injury for a period of about three months," according to Steven Willner, Frye's attorney.

Frye's conviction by a trial board grew out of an investigation conducted last spring by the D.C. Police Casualty Investigation Unit, which photographed him driving construction vehicles, lifting sheets of plywood and building an extension to his house, according to a prosecutor.

Frye was on sick leave or light duty during the period of the investigation, and a Police and Fire Clinic physician had told him not to do any bending, lifting or climbing, the prosecutor said.

Willner said he did not dispute this evidence, but he said "the finding was based on technicalities, minor infractions, and we are planning to appeal it."

"Because of all the publicity about disability retirements," Willner said, "the fire department is running scared... Frye had no intention of ever asking for disability retirement and I believe the department is set on making an example of him."

Frye had received fire department permission in 1973 to run a contracting firm, and "he just couldn't let his business go down the drain" when he was injured, Willner said.

Last winter and spring, while Frye was on sick leave and light duty, a series of news stories and congressional hearings focused attention on alleged abuses in the city's police and fire retirement programs. Except for police chief Jerry V. Wilson, every police and fire chief since World War II has retired on a tax-free disability pension, it was revealed. Of 3,300 retired police and fire officers drawing pensions, 81 percent had claimed disability.

But the rate of disability retirements has declined sharply this year -- to 43 percent as of Nov. 1. Twice as many disability applicants have been turned down, and two policemen have been fired in connection with malingering charges.

The trial board found Frye guilty of making false statements to a clinic physician, of disobeying a second physician's orders, of feigning a disability, and of doing outside work while on sick leave. He was found innocent of engaging in unauthorized outside employment.

Fire Chief Jefferson Lewis approved the trial board's findings and the proposed fine. Frye was served with papers informing him of the punishment when he reported to work Friday night. He refused to comment on the matter last night, and referred all questions to his attorney.

Police officials said they could not recall a similar penalty -- a large fine without suspension or dismissal -- in any comparable case involving a police officer. Chief Lewis said he would have no comment.

One fireman questioned the decision when asked about it by a reporter."Heck, if he had done anything that bad why didn't they fire him?" the fireman said. "But to fine him $8,500 to be taken out of his pay $50 every two weeks -- he'll be paying this fine for the rest of his tenure in the fire department."

The Casualty Invesitgation Unit, which is part of the police Internal Affairs Division, handles investigations for both police and fire department employes. It is currently charges of malingering by firemen, an investigator said. investigating three other cases involving