District of Columbia police have arrested two veteran officers after a police investigation into allegations that suspected drug dealers had failed to receive all their money back after it was confiscated by two officers during arrests.

Police have charged 12-year veteran William M. J. Surgeon, 37, of Morningside, Md., with theft, and 14-year veteran George C. Woody Jr., 38, of Capitol Heights, with assault. Both charges are misdemeanors.

Both officers were placed on administrative leave after their arrests on Friday and ordered to surrender their guns and badges. They were released on their own recognizance.

Reached at his home last night, Surgeon said: "I don't want to say anything, except that I'm innocent." Woody could not be reached for comment.

Inspector Leonard A. Maiden, who heads the internal affairs division, said yesterday that the arrests occurred after the police department's internal affairs division, acting on the complaints, stationed an undercover U.S. Park Policeman at 17th and Fuller streets NW.

Surgeon and Woody, both members of a special narcotics task force, were given the description of the undercover park policeman and told that he was suspected of selling drugs, Maiden said. A park policeman volunteer was used as the plant because the officers would probably have recognized any undercover agent on the metropolitan police force, Maiden said.

With members of the internal affairs division monitoring the encounter, Surgeon and Woody searched the decoy, Maiden said. According to Maiden, Surgeon allegedly confiscated some money from the decoy, and Woody allegedly struck him. They found no narcotics, and they did not arrest the decoy, Maiden said.

According to Assistant U.S. Attorney W. Randolph Teslik, the officers were able to confiscate the money even though they found no drugs and made no arrest because under normal police procedures, officers who receive a complaint and suspect they have found the proceeds of criminal activity, may confiscate those proceeds. Money is normally processed through the police property clerk to the courts, and if no arrest is made, people can get their money back by petitioning the court.

After they left the decoy last Friday, Maiden said, the two officers returned to police headquarters and purported to turn over the money they had taken from the decoy. The sum was less than what the U.S. Park policeman had on him, Maiden alleged. The exact amounts could not be learned.

At that point, Surgeon and Woody were placed under arrest. Because the amount allegedly taken was under $250, the theft charge against Surgeon is a misdemeanor. The assault charge is also carried as a misdemeanor because there were no allegations that a weapon was used.

The two men are to appear in D.C. Superior Court June 15.

Yesterday, Assistant D.C. Police Chief William Dixon described both officers as aggressive officers who had done "outstanding work" up to the time of their arrest.

"Of course, we never like to see these things happen in the police department," Dixon said of the arrests, "but if there is corruption or misconduct, we would rather we uncover it ourselves than have someone else uncover it."

During the 21 months the special narcotics task force, on which the two served, has been in operation, it has made 5,008 arrests, recovered $215,370 in cash, and confiscated a variety of cars, vans, handguns, rifles, and shotguns, Dixon said.