Perched on a southern extremity of this sandy 720-square-mile base-"biggest in the free world" as it's described here-is a tidy 28-acre federal prison camp, the temporary home for 440 convicted criminals.

A wall-less manicured landscape of blossoming magnolias, lawns and tennis courts, it's a far cry from the notorious "Big House" of film fame. "If you got to go to prison," says one official here, "this is the place to go."

At this minimum security prison on North Florida reside two major categories of inmates: convicted dope smugglers or peddlers and convicted white-collar financial wheeler-dealers.

The largest group-about 44 percent of the inmates-is here because they were caught smuggling or peddling quantities of the tamer varieties of dope, such as marijuana.

Perhaps inevitably, the young dope shippers, some of whom amassed sizable fortunes before they were caught have sought investment advice form the financial wheel-dealers who make up the other major population group here.

One of these financial liaisons produced what federal authorities believe may be the first instance of stock price manipulation carried out from within a prison.

This episode, unique in the annals of finance, is under investigation by the Securities and Exchange Commission.

The focus of the SEC's investigation is James Corr, a 41-year-old fallen Wall Street whiz who was released from Eglin in October 1978 after serving a 2 1/2-year sentence for perjury, wire and mail fraud and making false statements to a bank.

Before leaving Eglin, federal authorities believe that Corr masterminded a secret run on the stock of CHB Foods Inc., a small southern California food-processing concern. Between July 1978 and last Feb. 8, when the SEC suspended trading in CHB Foods on the American Stock Exchange, the price of the stock went up from 7 to 16 7/8.

In announcing the February suspension, the SEC hinted that Corr and his wife, Neica, through whom he sometimes invests, were behind the CHB, affair.

The SEC release said that ". . . several persons may have been acting directly or indirectly in concert with individuals who have been permanently enjoined from violations of antifraud, manipulative and reporting provisions of the federal laws."

Since then, federal authorities have gathered evidence indicating that Corr was using his well-heeled fellow inmates to pump up the price of CHB Foods' stock.

The way they see it, Corr bought CHB Foods' stock on the rise. By convict purchases and by spreading rumors that the company was due to be bought out by another corporation, Corr allegedly hoped to keep the stock price inflated so he could his shares at a profit.

However, before this last step, the SEC stepped in and suspended trading in CHB Foods. When trading resumed 10 days later, the price of the stock plunged, wiping out Corr's investment, and those of his fellow inmates and some unknowing investors who had bought the stock on the way up.

Corr's leading jailhouse associates in the CHB Foods deal reportedly were Robert Higgens, 32, who was serving 1 1/2 years for importing marijuana, and 28-year-old Robert Marchand, who was in for a year for distributing marijuana. Both men are out on parole. Neither could be reached for comment.

Most of the orders for stock were placed from one of the 10 phone booths here that the inmates can use at any time. Reportedly all of the calls were made in a manner that made them virtually impossible for authorities to trace.

Much of the stock was bought through the Boca Raton, Fla., office of the major Wall Street brokerage firm. Loeb Rhoades Hornblower & Co. (Now Shearson Loeb Rhoades). Bundles of cash totaling more than $125,000 were delivered to Loeb Rhoades offices in Boston, Boca Raton and St. Petersburg to help cover the 50 percent payment requirement on purchases by Higgens and Marchand, according to Myer Berg, who was the broker on the account.

Loeb Rhoades accepted the unusual form of payment without question. But soon after the SEC entered the scene, the firm fired Berg.

Frank Kane, general counsel at Loeb Rhoades, at first denied that Corr did business with his firm. "He didn't buy through us," he said.

Later, Kane acknowledged that the account was in the name of Corr's wife, Neica. But he added: "I'm not free to comment."

Corr, who views himself as a last bastion of the free market system under siege from vindictive legal authorities, says he is waiting out the storm at his beach house in St. Petersburg as he watches over his personal portfolio.

"There's nothing to it," he says of the alleged manipulation of CHB Foods store. "I kept a low profile at Eglin."

Corr landed in Eglin because of his role in two fraudulent business deals.

He was a financial adviser to a New York franchiser called Jerome Mackey's Judo Inc., which collapsed in the early 1970s. For his part in the failure, Corr was found guilty of wire and mail fraud.

In 1974, Corr masterminded the manipulation of the stock of a Florida citrus company, American Agronomics Inc. Using a $4 million loan from a St. Petersburg bank, Corr drove up the company's stock price from 1 1/2 to 18 3/8 in just three months.

The SEC charged that Corr planned to bail out a profit but, before he could make his move, trading in the stock was suspended and the investigation began. It also turned out that the $4 million bank loan was made illegally, and the bank lost most of when American Agronomics' stock price collapsed after the rig was discovered.

In the end, Corr and his wife were charged with securities fraud and defrauding the bank, among other things.

Once at Eglin, says Corr, "I got back to basics" - a business expression that means analyzing a company's financial picture. He says he spent "16 to 18 hours a day reading" financial statements.

This information came as a surprise to prison authorities here, who say Corr was supposed to be working in the mail room.

Prison Supt. Michael Quinlin says Corr was not supposed to conduct his business while he was here.

"Absolutely not," he says. "The only thing an inmate is allowed to do is make periodic decisions to protect his assets. He can sell stock, for example, but it must be done with the OK of his case manager here."

"Using the phone was kind of a big status symbol," says Corr. "I used it 8 or 10 times a day, called all over the world. Immediately, the young people looked to me for advice."

He adds: "Lots of these kids, 25 to 30 years old, have big money from the marijuana business. They've been in it since they were 18 years old. I had kids up there who wanted to build restaurants. I had two kids who wanted to arrange to buy Lear jets through banks in Bermuda."

Did Corr suggest that some of these cash-rich inmates use their money to invest in CHB Foods to help drive up the stock, as federal authorities apparently suspect?

"I did not give out any recommendations," claims Corr, "but now I hear about 50 people up there bought stock."

Corr says that one of his close prison pals told other inmates about his investments and they, in turn, may have invested, too.

Another inmate, who was there with Corr, says that Corr freely discussed his investments in front of prison officials.

"I was surprised at the latitude Jim had in discussing his portfolio in front of the big shots," says this source, who asked not to be identified. "He was well connected down there. He was just bright enough to get on the right side of people.'

But Supt. Quinlin, who was assigned here at the end of Corr's sentence, scoffs at the suggestion that any of the staff invested on advice from Corr. "I'm not sure we have any employes who have the money to invest in the market," he says.

Corr had a sizable investment in CHB Foods for about five years prior to the 1978 alleged manipulation. The stock, 25,558 shares, was listed in Neica Corr's name.

Like American Agronomics, CHB Foods had a relatively small number of shares outstanding. And about 50 percent of CHB Foods outstanding shares are controlled by the managing Passarow family.

With this small "float" - the outstanding shares available to the public - the price of the stock can be driven upward by stock purchases. And this is precisely what happened when Corr and certain inmates allegedly bought more than $1 million worth of CHB Foods beginning in the summer of 1978.

Other investors, seeing the stock climb steadily, jumped on the bandwagon. Adding further impetus to the stock rise were rumors that CHB Foods, like several other food processing companies, was about to be the subject of a takeover offer at the premium price of $25 a share by a major unnamed company.

"We attributed the sharp increase in our stock to the mob psychology," recalls CHB Foods Chairman Robert Passarow. He attributes the "mob psychology" to the takeover fever that had been sweeping the food processing industry.

Passarow remembers getting a telephone call from a stockholder using the name of a McConnell, who said he was a retired ambassador, asking about the takeover rumors. (The Washington Post has been unable to determine the existence of an Ambassador McConnell.) As it happens, one of Corr's fellow inmates at Eglin was John McConnell, a disbarred attorney from Raleigh, N.C., an area of the country to which the takeover rumors can be traced.

McConnell, who bought stock in CHB Foods, left Eglin in March 1978, after serving a year and a day on a perjury conviction. But efforts to reach McConnell proved unsuccessful. On June 1, he began serving a five-year sentence in a North Carolina penitentiary after being convicted of conspiring to sell heroin.

Between the summer of 1978 and mid-January, Corr and others reportedly bought about 175,000 shares of CHB Foods, and the stock climbed steadily from $7 a share to $16 7/8. The two largest investors besides Corr, the inmates Higgens and Marchand, reportedly paid for their stock in cash.

Payments for Marchand's stock were made by his father, Robert Marchand Sr., a suburban Boston businessman who says he also invested in CHB Foods on the strength of his son's tip. "My son was told the company was going to be bought out for $25 a share," says Marchand, who estimates "collectively we lost in the six figures." Federal authorities believe most of the money came from Marchand's son.

Most of the investors, including Corr, bought their stock at an average of about $10 a share as it was rising.

In January, the bubble began to lose air. And as CHB Foods stock slipped in price, the brokerage, Loeb Rhoades, demanded that the investors increase their margin from the 50 percent requirement.

At one point, Marchand senior appeared at Loeb Rhoades' office at Boca Raton with $52,000 in cash stuffed in a brief case, according to Myer Berg, the broker who was later fired by the firm. Marchand himself claims that paying in cash was simply a convenience. Another $70,000 in cash was deposited in other offices.

By late January, the stock had dropped from 16 7/8 a share to 11. On Feb. 8, with questions being raised by brokers and investors about the strange behavior of the CHB shares, the SEC suspended trading. In effect, the SEC killed any hope Corr and the other investors had of making a profit.

Not long after the suspension ended, the investors were unable to come up with any more margin payments. Loeb Rhoades sold off about 125,000 shares, including a large block in Neica Corr's name, and the stock dropped back down to about $7 a share.

Corr had bought 9,000 shares of CHB Foods through Neuberger Securities Corp. in New York, according to his broker there, Stanley Fingerhut. When the stock plunged, Corr could not cover the margin payments and the firm sold off his shares.

Corr now says: "I'm totally out of CHB Foods. I lost a lot of money."