To catch and convict a big crook, you grant immunity from prosecution to one or more smaller crooks who had dealings with the big crook and who will testify against him.

That is the essence of what is known as "trading up", a form of plea bargaining often used in public corruption cases.

Government attorneys argue that "trading up" is perhaps their most important prosecutorial tool, that without it they would be unable in most cases to bring corrupt public officials to trial. Many defense attorneys - particularly the ones who represent the smaller crooks - also like "trading up" because it often allows their clients to avoid prosecution or make deals for lighter sentences.

Yesterday, however, at a federal courtroom in Baltimore, the U.S. Justice Department in effect conceded that the "trading up" process was fallible when it dropped a bribery indictment against former Maryland Rep. Edward A. Garmatz.

Deputy Assistant Attorney General Russel T. Baker Jr. said the government was forced to dismiss the case against Garmatz because it was discovered that the key witness, shipping company president Edward Heine, who in this instance was doing the "trading up" to avoid his own prosecution, had fabricated major evidence against the former congressman.

Garmatz's attorney, Arnold M. Weiner, said Heine's action demonestrated the danger of the plea bargaining method.

"In this age of cynicism," said Weiner, "too many are eager to accept any accusations about political corruption. Random accusations by desperate men must not be accepted uncritically against others to save their own skins."

Although Baker and the othe government prosecutors involved in the Garmatz case refused to comment on the plea bargaining with Heine, several present and former prosecutors were quick to defend the "trading up" process.

"Without the ability to immunize, to protect some witnesses, to trade, the criminal justice system would be a revolving door of convictions of petty crooks," said Baltimore attorney Steve Sachs who served as U.S. Attorney for Maryland from 1967 to 1970. "We would never be able to bring Mr. Big to justice."

Sachs noted that during his tenure he relied on a "trading up" deal with Nathan Coren, a Baltimore businessman under investigation by the Securities and Exchange Commission, to build a bribery case against former Texas Re. John P. Dowdy. "Cohen was out to save his own skin," said Sachs. "But it was the only way to prosecute the public official."

Sachs said the Watergate-related prosecutions offered the most obvious examples of the value of plea bargaining. "What better proof do you need than the fam that if we had been content to have an endless line of John Deans going to jail, Richard Nixon would not have resigned?"

Barnet Skolnik, the assistant U.S. attorney for Maryland who prosecuted former Maryland Gov. Marvin Mandel, said "It is very often the case that the only people with admissible evidence regarding a consensual crime . . . are people who participated in the crime themselves," said Skolnik.

"Therefore, in order to prosecute anybody in the case, you have to take some participants in the crime and make them witnesses against others in the crime who are defendants."

Skolnik said there was no "trading up" in the Mandel case - all six participants were tried and convicted - because the charges against the defendants were based on what he called "circumstantial" rather than "direct" evidence.

"That was a rare case in which we presented to the jury a pattern of corruption that was clear and could stand without the testimony of any of the insiders," said Skolnik. "In most public corruption cases, however, we have to rely on the credibility of an insider."