The D.C. police department and the U.S. attorney's office here are investigating the handling and disposal of more than $1 million in confiscated merchandise kept in the department's property office, according to law enforcement sources.

Law enforcement officials said the investigation began after reports of apparent irregularities in Cissel's handling of the sale of one vehicle siezed by police in connection with a massive drug investigation earlier this year. At least one grand jury subpoena has been issued in connection with the investigation, and police investigators have confiscated the clerks office records, sources said.

Cissel became a liscensed auctioneer at police request to dispose of the city's property. He conducted 54 auctions last year of the $1 million in confiscated merchandise, resulting in sales totaling more than $400,000 to be depositioned in city treasury.

The police property division handles lost, found, seized and abandoned items as well as items kept for safekeeping as evidence in pending criminal trials. Merchandise kept by the office includes cars, bicycles, jewelry, junked vehicles and other items.

Cissel was transferred last friday to the police and fire clinic, the same week that the department's inspectional services division began what was described as a routine audit of the property clerk's operation.

Cissel was trained as an auctioneer under police department auspices in order to save money, police officials said. In the Past, the department would hire outside auctioneers to conduct the sales and pay them a percentage of the profit.

Police auctions are conducted often, and are advertised in advance in local newspapers.

Cissel, 40, became a police lieutenant in 1973 and was transferred to the property division in 1976. His auctioneering license was obtained solely for use in connection with his police job.

The allegation of impropriety that prompted the investigation involved Chissel's hadnling of a van that was seized by police when they closed an investigation several months ago of convicted tax evader Linwood Gray, sources said.

Gary was acquitted of drug charges in a tril in federal court here, but convicted on charges of evading income taxes.

When Gary was arrested, police seized 12 cars registered in his and others' names as proceeds of an alleged illegal criminal enterprise. There was one report yesterday that the alleged irregularity involving the van came to the police department's attention only after Gray's attorney tried to have it returned.

The investigation of the property offices is being conducted by the internal affairs division of the police department with the major crimes division of the U.S. attorney's office here.

The police auction of seized and abandoned vehicles is usually held on the first Tuesday of each month at the department's nine-acre Blue Plains holding lot, and regularly attracts about 500 people.

As property clerk for the polce department, Cissel is the largest volume used car salesman in the metropolitan area. In one auction last August, he and two assistants sold 367 cars, and three motorcycles, three mopeds and a tractor for prices that ranged from $20 to $8,750.

All of the sales at the auction are cash transactions.