The prosecution of three Fairfax County residents on federal racketeering charges for distributing allegedly obscene materials has generated widespread concern among mainstream publishers and booksellers.

The case is being closely watched, they said, because a conviction would allow the government to close the defendants' video and book outlets by seizing their entire inventories, including videotapes and magazines that are not obscene and thus protected by the free-speech guarantee of the First Amendment.

"We think this is the ground floor of an extraordinarily important First Amendment case which is likely to be decided at the Supreme Court level," said lawyer and First Amendment specialist Bruce J. Ennis. The case is scheduled to go to trial in federal district court in Alexandria on Oct. 19.

"The penalty is so severe," said Maxwell J. Lillienstein, general counsel for the American Booksellers Association in New York, "that I'd have to advise our membership to exclude anything which was sexually explicit because of the enormous risk involved" in a possible racketeering prosecution, he said.

The prosecution of Dennis E. and Barbara A. Pryba of Lorton, Jennifer G. Williams of Woodbridge and the Pryba-owned Educational Books Inc. of Upper Marlboro marks the first time prosecutors have taken up a recommendation from the Commission on Pornography to use federal racketeering charges against distributors of allegedly obscene magazines and videotapes.

The so-called RICO (Racketeer Influenced and Corrupt Organization) statute was enacted in 1970 to fight organized crime and has been widely used against major narcotics, illegal gambling and extortionist operations. In 1984, Congress extended RICO to cover trafficking in obscene materials.

A RICO conviction permits the government to seize a defendant's assets, thus giving it the power to shut down his businesses.

In an indictment returned in August, the Prybas, Williams and Educational Books each were charged with three counts of racketeering and seven counts of interstate distribution of obscene materials. The Prybas also were charged with two counts of tax evasion for allegedly failing to report $300 a week in income from coin-operated "peep shows" in one of their retail outlets over two years. They have denied the accusations.

The order prohibits the Prybas from divesting themselves of assets acquired since 1973 from "their distribution of obscenity," including a $2 million house in Lorton, bank accounts, several vehicles worth $40,000 and inventories of three adult bookstores and nine video rental stores. If they are convicted, all these assets would be forfeitable to the government.

In addition, the Prybas and Williams each face prison sentences of up to 95 years.

Defense attorneys, in pretrial arguments that will be considered by the court Oct. 9, assert that the Prybas' inventory includes videotapes no one has alleged are obscene and many made for family viewing.

"The indictment seeks to impose a forfeiture of well over a million dollars worth of assets -- much of which consists of constitutionally protected expression such as films, " . . . The theory behind the case causes . . . great concern."

-- Michael Bamberger, Media Coalition general counsel

books and magazines -- as punishment for alleged transactions in obscene material worth less than $500," the attorneys said.

"The defendants' alleged scheme to sell obscene material involved a very small part of the legitimate book and tape merchandising conducted by the Pryba corporations over the years," they stated. Forfeiture of their entire inventory would amount to unconstitutional prior restraint on free expression, they argued.

The government contends that the RICO forfeiture provision is not unconstitutional because it is not aimed at impeding free speech, but at punishing racketeering.

"Some inconvenience on free expression is inherent in all criminal laws, including RICO," assistant U.S. attorneys Lawrence J. Leiser and Cynthia R. Christfield argued. "But the inconvenience to defendants is caused by their participation in a pattern of criminal activity, not by a desire of the government to hinder distribution of legal communicative material.

"If the effect of the forfeiture punishment is that the dealer must give over his untainted as well as tainted inventory, then that is the cost of his illegal activity."

The Indiana Supreme Court, the prosecutors noted, in considering a state racketeering law used in an obscenity case, ruled that forfeiture was meant to "disgorge assets acquired through racketeering activity."

"Stated simply, it is irrelevant whether assets derived from an alleged violation of the RICO statute are or are not obscene," that court said.

Finally, the government said, forfeiture does not amount to prior restraint on free expression because the defendants are free to open new bookstores or video stores.

"Of course, our members don't publish the kinds of materials" at issue in the Pryba prosecution, "but the theory behind the case causes them great concern," said Michael Bamberger, general counsel for the Chicago-based Media Coalition. The coalition comprises publishers and distributors concerned about legal restrictions on free speech.

"For example, if a Dalton bookstore were to sell one book twice or two books that subsequently were found under local community standards to violate the law . . . the government could come in and seek forfeiture of the assets of the whole chain" through a RICO prosecution, he said.

The Alexandria case, which is also the first to stem from Attorney General Edwin Meese III's efforts to stamp out "an explosion of obscenity," is being jointly prosecuted by the Justice Department's newly created National Obscenity Enforcement Unit and by the office of Henry E. Hudson, U.S. attorney in Alexandria, who headed Meese's Commission on Pornography.

Mainstream booksellers are not the only ones concerned. Already, the case has drawn legal briefs and financial help for the defense team from at least two other distributors of sexually explicit materials.

Phil Harvey, a North Carolina distributor of "materials with a sexual theme," has filed a friend-of-the-court brief opposing the Pryba prosecution as unconstitutional. This is an unusual move before a case reaches the appeals level, legal experts said.

Harvey, who said that about 20 percent of the materials he distributes are "sexually explicit," confirmed that his firm is under investigation by a federal grand jury in Raleigh, N.C.

According to two sources, Reuben Sturman of Cleveland, cited in the commission's final report last year as one of the country's largest distributors of pornography, is contributing financially to the Prybas' defense. Sturman did not return phone calls.