Resorts International's attorney and the first substantive witness at the Casino Commission hearings today charged that the state recommendation against giving Resorts a permanent casino license is based on a biased report replete with misstatements.

In an angry exchange with Assistant Attorney General G. Michael Brown, Resorts' chief lawyer Raymond A. Brown called state investigators liars and said the nature of their work "goes to the heart of the matter, because it goes to the question of the integrity of the investigation."

On the basis of a lengthy investigation, the New Jersey attorney general's office recommended in December that Resorts be denied a permanent license.

Witness Richard H. Olsen labeled investigators' report of their interview with him "the greatest misstatement of fact I've seen in 20 years of practicing law."

Olsen has worked for Resorts off and on since the early 1960s and is vice president of Chalk International Airline, a Resorts subsidiary.

The interview, as read at the hearing, suggested that Olsen has lived a legal life extraordinarily sheltered from misstatements.

"Raymond Brown may want to make the integrity of the investigation the issue," the assistant attorney general retorted, "but it's not relevant."

Chairman Joseph Lordi of the fivemember Casino Control Commission agreed.

The investigation "is not on trial," he said. "You're not going to impress this commission by saying someone was a liar," he told Resorts' attorney.

Oisen repeatedly described the reputation of Resourts and board chairman James Crosby as excellent, and told the commission that Crosby was initially reluctant to get into the gambling business in the Bahamas.

"You always have a taint that goes around a casino," Olsen said in characterizing Crosby's reluctance.

The alleged taint attaching to Resorts' practices since it began running gambling casinos in the Bahamas -- including allegations of bribery and refusal to honor orders of the Bahamaian casino commission -- is the substance on which the commission will decide whether Resorts can keep control of its wildly successful casino here.

Resorts must persuade at least four of the five commissioners that it is worthy of a license for its casino, which has grossed $133 million since opening with a temporary license last May 26. Otherwise the casino will be given to a conservator to be sold to a new owner.

The commission's hearings are expected to last at least four weeks. The pace of the first two days indicates they may even run very close to the Feb. 26 expiration of the temporary license

The ailing board chairman, Crosby, took the witness stand this afternoon to begin what will be a lengthy defense of his integrity and reputation.

Crosby, 51, has audible difficulty breathing as a result of emphysema. He cleared his throat repeatedly, but spoke clearly and on occasion forcefully as his lawyer led him through a recitation of his early career.

Crosby turned Mary Carter Paint Co. into Resorts International and then brought Resorts from financial doldrums to become one of 1978's hottest stocks because of its profitable move into Atlantic City.

Crosby has vowed to lead the defense here, calling this license hearing a battle to save his company's life. When a large chart showing Resorts' table of organization fell off its easel while Crosby was being questioned, he remarked laconically:

"There it goes."