The arrest of a D.C. police officer Sunday in connection with the theft of nearly $100,000 in personal computers from the U.S. Commerce Department is the latest twist in an investigation that began with a domestic quarrel.

When police responded to a shooting report at a Southwest Washington apartment Sept. 26, they found John Milton Mudd, 52, who had been shot in the head and critically wounded. Jacquece Lavon Stubbs, 24, whom authorities identified as a live-in companion of Mudd's, was charged with his shooting.

The investigation expanded and the FBI was called in when police also found in Mudd's residence at the Tiber Island Apartments a Wang computer system that turned out to be part of equipment stolen from the Commerce Department, according to an FBI search warrant affidavit filed in U.S. District Court. Some of the computer parts in Mudd's apartment were in boxes marked "U.S. Commerce Department," according to the affidavit.

Mudd, the president of a company that operates Fair Liquors at 5008 First St. NW, has not been charged in the matter. He is under investigation, according to the search affidavit, which was filed by the FBI after the computer parts were found in his apartment at 429 N St. SW, Apt. 405. John K. Zwerling, Mudd's attorney, declined yesterday to comment on the allegations in the FBI's search affidavit.

Commerce Department officials told the FBI on Sept. 20 that 12 Wang personal computer systems valued at about $84,000 were missing from a room that only two employes had keys to.

On Sunday, police internal affairs investigators arrested D.C. police Officer Joseph John Reilly and charged him with possessing one of the stolen Commerce computers after an unidentified person allegedly gave Reilly a $500 down payment to buy the computer.

Reilly, 35, who is assigned to the 6th District, was released on his personal recognizance yesterday after he appeared before a U.S. magistrate. A 13-year-veteran of the force, Reilly was placed on administrative leave with pay pending further investigation.

Reilly told the police informant that the computer was stolen from the Commerce Department and that he was selling it for $3,500 as a favor for an unidentified friend, according to a police search warrant affidavit.

Shirley Deshields, who along with Mudd is an officer in Fair Liquors and who said she was speaking for Mudd, said yesterday that Mudd does not know Reilly. Deshields said Mudd is partially paralyzed from his wound and is "not able . . . to give any kind of interview."

The case of Stubbs, who was charged with assault with the intent to kill in the shooting of Mudd, is awaiting action by a D.C. Superior Court grand jury, according to court records.