The prosecutor who directed the grand jury's investigation of Loudoun County Sheriff Donald L. Lacy rejected yesterday the sheriff's contention that the panel's report calling for Lacy's ouster was biased.

"The grand jury heard the facts . . . and, as an outsider brought in to direct the investigation, I had no interest in the case whatsoever," said Richmond Commonwealth's Attorney Aubrey M. Davis, who oversaw the special grand jury probe.

"I found the grand jury to be a dedicated bunch of county residents who were not on any witch hunt," Davis said. " . . . The people have spoken."

Davis would not comment on whether any criminal prosecutions will result from the jury's report. Lacy angrily denounced the eight-page report late Wednesday night, saying it was based on "half truths, and one-sided presentations by person who have been determined to undermine my efforts to upgrade the sheriff's department."

The grand jury was convened in December to investigate allegations that the 34-year-old Republican sheriff had engaged in sexual and financial improprieties. They concluded that he misused county funds, intimidated his deputies, violated county hiring practices, helped to cover up improper information in a search warrant, and agreed to drop criminal cases at the request of his friends.

The seven-member jury, which was not empowered under Virginia law to issue criminal indictments, recommended that Lacy "should not continue in his position."

Lacy called a news conference in Leesburg yesterday, but then canceled it, announcing through a deputy that he wanted to confer with his lawyer before talking to reporters.

Prosecutor Davis declined to comment on specifics in Lacy's statement, saying that "it's not appropriate to get into a debate with Mr. Lacy . . .

"Mr. Lacy was given an opportunity to discuss the allegations with the investigative grand jury and chose only to discuss the matter of the alleged misuse of county credit cards. He declined to discuss anything further."

Carl F. Hendrickson, chairman of the Loudoun County Board of Supervisors and a Democrat, said yesterday the supervisors would not try to intervene in the issue. "I think the board is going to treat this one tenderly . . . . We just have to wait and see."

A county Republican Party official, who asked not to be named, said he expected the party would support Lacy, although he said no formal policy had been adopted since the report was issued.

When the allegations began to surface last fall, Lacy, the first Republican sheriff in Loudoun history, briefly stepped aside and placed the administration of his 99-member department in the hands of a top deputy.

In his statement, the sheriff asserted that individuals, including some of his own officers, had conspired last fall and sought to oust him in "a typical Latin American-type coup d'etat."

In an apparent reference to the jury's charge that "the sheriff has made a fool of himself" in an alleged drinking incident at a restaurant near Dulles International Airport, Lacy said "I have always conducted myself as a gentleman and know my friends will attest to this. . . . "

"The level of smear that my apparent enemies have stooped to includes malicious and false rumors about sexual misbehavior," he said. "They are vicious and untrue and I am sorry that my family has had to put up with these lies and rumors."

Lacy also denied the jury's charges that he substituted evidence in a drug case and that he wrongly used a county-issued credit card.