Jeffrey A. Levitt rejected an arrangement yesterday under which the former president of Old Court Savings & Loan Association would have pleaded guilty to 25 counts of embezzling and misappropriating $14.6 million from the thrift.

"Levitt has decided not to plead guilty on the terms and conditions demanded by the state," Attorney General Stephen H. Sachs announced yesterday. "The case will go to trial on June 2 as scheduled. We look forward to the trial and are absolutely confident it will be a successful prosecution."

Negotiations between Levitt's attorneys and the state, which began a month ago, apparently broke down because of disagreements related to parallel talks on an out-of-court settlement of a $200 million civil suit brought by Maryland officials against Levitt and others associated with his Baltimore thrift. Prosecutors were reported to have set a deadline of Monday for agreement on the criminal case.

Levitt, according to sources familiar with the civil and criminal negotiations, had sought assurances that his wife Karol would be allowed to keep the couple's Lutherville house, valued at more than $400,000, and retain assets she inherited from her parents, estimated to be worth several million dollars. Karol Levitt is also a defendant in the civil suit.

Levitt's attorney, William H. Hundley, said his client was unwilling to accede to the state's demand that he relinquish his house. The civil negotiations also foundered, Hundley said, over the question of how much of her inheritance Karol Levitt would retain.

Sources close to the negotiations said that state officials were adamant that there be no linkage between the plea bargain on criminal charges and any agreement to settle the civil suit against the Levitts.

Under the proposed plea bargain rejected by Levitt, the ousted Old Court executive would have agreed to pay the state $14.6 million and cooperate with state prosecutors in their criminal investigation of other individuals associated with the thrift. As part of the agreement, the state would have recommended that Levitt receive a jail term of 20 years, and Baltimore Circuit Court Judge Edward Angeletti would have sentenced Levitt to a term of 12 to 20 years. In addition, Levitt would have been disbarred from the practice of law.

"It just fell apart," said Hundley, who said he was "keenly disappointed" that the plea arrangement was not concluded.

"I really wanted a deal because I believe it would be in Levitt's very, very best interest," Hundley said.

Sources close to the investigation said that Levitt's cooperation would have been helpful, although not crucial, to building the state's criminal case against others involved with Old Court, where depositor runs a year ago provoked a widespread crisis in Maryland's $9 billion savings and loan industry.

In addition to Levitt, who was indicted on Jan. 3, Ocean City developer Walter Otstot, a Levitt associate, has been indicted in the Old Court case. Sources familiar with the Old Court investigation said that the state had hoped for Levitt's cooperation in its investigations of Jerome S. Cardin and Allan H. Pearlstein, owners of the thrift with Levitt.

Since Jan. 30, Levitt, 43, has been serving an 18-month sentence in state prison for violating a judge's order limiting his personal spending.

The limit was imposed on Levitt and his wife at the request of the state, which sought to preserve the couple's assets pending a resolution of the $200 million civil suit.

Hundley said he was "fresh out of ideas" on how to bring the two sides together, and jokingly suggested that he was exploring a new defense, "that Old Court is a CIA front."

Despite the breakdown in negotiations with the state, Hundley said Levitt's spirits remain high. Hundley said that, as he was leaving the state correction facility at Jessup yesterday after Levitt rejected the plea bargain, his client asked him to place a wager on today's Preakness race in Baltimore. Levitt, said Hundley, asked him to bet on Ferdinand, the Kentucky Derby winner who is a 9-to-5 favorite to win the Preakness.

"He's sort of an eternal optimist," said Hundley. "Don't ask me why."