A special Virginia grand jury has accused former U.S. attorney William B. Cummings of Alexandria and other federal prosecutors of thwarting a 1977 investigation of a major banking fraud at the state's second-largest bank.

Members of a special Norfolk jury have charged that many people escaped indictment in a Tidewater loan kickback scheme because Cummings and other Justice Department lawyers were lax in pursuing allegations of wrongdoing at Virginia National Bank.

"We believe that, had the federal prosecutors been vigilant and the state prosecutors informed, convictions would have been obtained against several defaulting Norfolk bank officers and as many collaborators and coconspirators who, as matters stand, will escape indictment," a summary of the investigative panel's report said.

Cummings, who served as the chief federal prosecutor in eastern Virginia from 1975 to 1979, dismissed the jury's report yesterday as "crazy . . . . "crazy . . . . ridiculous." The lawyer now maintains a private practice in Alexandria, said his staff conducted a detailed investigation, of the fraud.

"Every allegation of banking misuse was thoroughly and exhaustively investigated," he said. "It's a laugh to say we weren't vigilant."

Norfolk's state prosecutor Joseph H. Campbell expressed a different view yesterday of the federal role in the probe, which centered on more than $500,000 in loans and related kickbacks to bank officials. Campbell said only one conviction was obtained in the investigations although federal prosecutors had "a great mass of evidence about numerous other people involved in this thing."

The controversy over the banking investigation became public after a state court judge in Norfolk released a summary of the special grand jury's five-month investigation. In addition to a lack of cooperation between federal and state for the collapse of the investigation.

Judge Thomas McNamara issued a gag order barring Campbell and others from discussing the jury's findings. The Associated Press, however, quoted a source close to the jury as saying it found that kickbacks to bank loan officers in Norfolk were "a way of doing business."

"Frauds, kickbacks, favoritism, and false statements are a way of doing business because of a small, corrupt element in the business community here," the source told the AP. Banks that discovered a loan officer accepting kickbacks would "just let the officer resign and go to work for another bank," the source said.

Cummings said in an interview yesterday that his staff "found some things that might have been a violation of [banking] laws, but we never got enough information to take to trial and win a conviction. It's like the Bert Lance case, you can't go throwing around minor, technical violations of the law."

Campbell, who has clashed previously with federal prosecutors over banking investigations in Norfolk, said yesterday he intended to take the special grand jury's report before a regular grand jury on Monday. Under Virginia law, special grand juries are not empowered to issue criminal indictments.

In some instances, Campbell said, bank officers might be receiving kickbacks as high as 10 percent of the loans they were making. "Say a bank officer is authorized to issue a loan for no more than $50,000 to any one person. But if he receives a gift, he might issue three $50,000 loans to one person using three different names, three people who work for the same company, or three corporations controlled by the same person," Campbell said. Such a transaction violated both state and federal laws.

John Bernhardt, president of Virginia National, said yesterday that two of the bank's senior loan officials had resigned after the federal investigation of Carl Lee Etheridge, the one convicted bank officer, began. Etheridge, who pleaded guilty to two of 40 counts of loan fraud and was a Virginia National vice president, has yet to be sentenced.