Alexandria Public Safety Director Charles T. Strobel testified yesterday that he was told in June 1983 that the officer in charge of the city's vice and narcotics squad and its internal affairs section was a homosexual and decided that was grounds to transfer -- but not fire -- the officer.

Strobel's statement came in U.S. District Court in Alexandria as he defended himself in a civil lawsuit filed by two police officers who have alleged that he failed to fully investigate allegations against the officer, Lt. John Stedman.

Alexandria police officers Joseph Morrash and Morton Ford have charged in the suit that Strobel did not pursue their allegations that Stedman had been involved in sexual misconduct with a young boy. The two officers claim that Strobel transferred them from desk jobs to patrol beats for reporting the allegations and are seeking a total of $500,000 on grounds that Strobel, who is also the city's police chief, violated their constitutional rights.

Strobel, who was on the stand for two hours, said he interviewed the alleged victim of the offense and Stedman after the allegations were brought to his attention. He said Stedman and the boy denied the alleged incident had occurred seven or eight years earlier.

"I was told that nothing had occured," Strobel said. "I saw no need to go any further than I had done."

Strobel said that a month earlier he was told by Stedman, then the head of the force's internal affairs and vice-narcotics sections, that he was gay. The chief said he was "shocked, disgusted and somewhat concerned as to what my administrative decision should be."

He said he consulted the police department's legal counsel, Mark Canoyer, who told him he had no grounds for firing the officer. Strobel testified that although he had "utmost credibility and utmost faith" in Stedman, he decided in June of that year to transfer him because it was "not appropriate" for Stedman to remain in his jobs.

Strobel said he told Stedman he would do this "as inconspicuously as he could" sometime before September 1983. After the two officers raised their allegations in July of that year, Stedman was transferred immediately to head the department's patrol section.

Ford, who had urged an internal investigation, saying Stedman might need counseling, was transferred to patrol duty Aug. 15, according to testimony. Morrash was transferred in November after he and Ford took part in an investigation of the way Strobel had handled the allegations against Stedman.

The two men conducted an investigation of the charges for the Alexandria Police Association, a group that represents most members of the force, and the inquiry did not find evidence that the alleged incident occurred. A special grand jury also investigated the allegations this year and said it did not find any support for them.

Stedman testified during the trial that the incident did not occur. He was not asked about his sexuality during his testimony.

Robert A. Boraks, attorney for Morrash and Ford, said in his summary that "the real reason" Strobel transferred Ford was that "Strobel was offended Ford had made the allegations against a member of his high command . . . he was transferred because he raised allegations nobody wanted to deal with."

Strobel said he transferred Ford for "poor performance, bad judgment and disobedience to orders," and not because he raised the allegations. He said Morrash was transferred by Deputy Chief Arlen Justice, a decision he concurred with because he believed Morrash needed a "more structured environment" at work. The jury begins its deliberations today.