BALTIMORE -- An Annapolis asbestos abatement firm has been barred from bidding on state contracts while the State Ethics Commission looks into alleged conflicts of interest by the former head of the state's asbestos program, who now runs the company, it was reported yesterday.

In addition, the FBI has been investigating allegations that the former state official, Leroy A. Phillips, used state bidding procedures to favor two companies -- Applied Construction and ARC Asbestos Removal Co. -- during two periods, according to the report by the Baltimore Sun.

Phillips, 50, ran the state's asbestos surveying and abatement program in the Department of General Services from December 1985 until June, when he became president and half-owner of Applied.

Phillips, an Annapolis resident, and representatives of Applied and ARC have denied any wrongdoing.

Last month, General Services Deputy Secretary Jerome W. Klasmeier barred Applied from bidding on state contracts and rejected the firm's low bids on six projects totaling about $340,000 because of the inquiry, The Sun said.

Two of the jobs have been awarded to another contractor. The delay of the largest of the other four jobs -- a $151,800 contract to remove asbestos from the basement kitchen of the Spring Grove State Hospital -- is stalling the correction of a potential safety hazard, said John C. Flannery, a state health department facilities administrator.

{Klasmeier told The Washington Post yesterday that he had discussed Phillips' intentions to go into the asbestos abatement business during an exit interview with Phillips about June 30.

{Phillips told him that he had discussed the issue with Ethics Commission officials, Klasmeier said. Klasmeier added that Phillips had cited an earlier ruling by the Ethics Commission in another case and had argued that it appeared to apply to him.

{"Leroy was a very hard-working, motivated employe who worked here in various capacities for 12 years," Klasmeier said. "I guess I'm disappointed . . . . A lot of this could have been avoided" if the commission had been asked for more advice. Neither Phillips nor Ethics Commission officials could be reached for comment yesterday.}