The conference had just gotten underway at the Chemical Bank headquarters in New York City on March 18, 1975, when one of the bankers saw a small object drop to the floor from under the table. Picking up the inch-square black box, he inspected it briefly, then tossed it into an ashtray on the conference table.

Unknowingly the banker had picked up an electronic eavesdropping device that had been placed under the table specifically to learn what was said at the conference.

The bug had been ordered by Charles S. (Chris) Christopher, a 29-year-old jet-setting high school dropout from Dallas.

At the time, Christopher's eavesdropping seemed little more than the act of a brash young hustler competitors. But the bugging at the Chemical Bank has since proved to be just one episode in a fast-paced, cutthroat game of international finance that now threatens the venerable Lloyds of London with the biggest loss in its 291-year history.

It is a story of how a young American supersalesman with virtually no technical knowledge was able to sell one of the world's most famous insurance combines on an insurance scheme that made him, and many of his imitators, overnight millionaires.In effect, Christopher convinced Lloyds to pay off computer leasing firms if their business was canceled by new technology in the industry.

Generally, here is how Christopher - and others after him - got their business: On the strength of the insurance coverage from Lloyds, Christopher was able to convince banks and other financial institutions that it was safe to lend his firm hundreds of millions of dollars. He then used the money to buy computer equipment. The equipment went to users, such as corporations and governments which made monthly payments to retire Christopher's bank debt over a seven-year period and give him a handsome profit - up front, of course. If the users decided they wanted to cancel their contracts between years four and seven. Lloyds said it would make good on any losses.

About $1 billion worth of these policies had been written when IBM came out with a better, cheaper computer than those already under lease.

At The Hall in London where Lloyds underwriters daily assay risks brought to them by brokers, the fear is that as claims are filed over the next few years losses could run as high as half a billion dollars.

On January 30 of this year, Lloyd's loss adjusters in the United States warned the group of underwriters involved in issuing the policy that they had better set aside a $220 million reserve to pay claims. This figure is several times the amount paid out for claims resulting from Hurricane Betsy in 1965, the biggest previous loss in Lloyd's long history.

During an interview at Lloyds, Murray Lawrence, a senior underwriter and chairman of the working committee investigating the computer insurance situation, explained the loss this way:

"The fact that Lloyds got itself into this position is because from the beginning of its history, it has been willing to take risks others wouldn't - automobiles in aviation, Comsat satellites, the first oil rigs. All new developments in insurance begin at Lloyd's"

The Lloyd's insurance plan was suggested by Christopher, who was in the business of leasing big computers and equipment to corporations and to federal, state and municipal governments, among others.

Mindful of IBM's aggressive development program, the banks would lend money for only relatively short periods of time, figuring that their collateral, the computers, could be rendered obsolete overnight by new technology. Moreover, the stiff terms dictated by the banks called for repayment of the loan in full, usually within only four years.

Under the policy, if a company or a government agency with a seven year computer lease canceled for any reason after only three or four years, Lloyds agreed to repay any balance due the bank. As security, Lloyds held the rights to the re-leasing of the computers.

For Lloyds, however, the insurance plan backfired in January of this year when IBM announced its new 4300 series of computers that were faster, more powerful and up to 30 percent cheaper than anything already on the market.

The bulk of computers under lease do not become eligible for cancellation until 1980-1981 under their contracts, accordng to marketing sources. Therefore, most of the potential claims against Lloyds have yet to occur.

Most of the major U.S. banks, and many of the minor ones, finaced computers based on Lloyds' policies and now they want to be paid off. Some major investment banking firms, like Salomon Bros. also raised money from investors for computer leases.

Earlier this month, a computer leasing firm in McLean, Va., Federal Leasing Inc., filed a $627 million damage suit against Lloyds, claiming most of its lending banks had not been repaid.

William T. Evans Jr., 36, co-owner of Federal Leasing, the biggest leasser of computers to the U.S. government says he has some 50 lending banks calling him almost daily to learn when Lloyds is going to pay up. He says Lloyds so far has paid $10 million in claims to several of his lending banks, but he say he has $27 million more in claims past due and $12 million more coming due in the next few months.

Neither Evans or Christopher stands to lose money, if Lloyds refuses to pay any claims; the banks and the investors would be the losers. "We could have sat back and let the banks deal with Lloyds," says Evans. "But if the banks shut us off, this company would die - and I want to stay in the business.

It's a mystery to almost everyone concerned how the normally cool odds players at Lloyds somehow failed to include the IBM factor in their calculations. "Pure greed" is the explanation of one knowledgeable observer a sentiment that is often repeated.

But to Lloyd's underwriter Peter Cameron Webb, who is on the working committee, the risk was carefully calculated. "At the time that the risk was broached in The Room, the IBM record followed a fairly stable pattern," he says. "What nobody anticipated was that in launching the new series (of computers), IBM would cut prices by 30 percent."

The whole story of how Lloyds resolves what looms as its biggest disaster may never be known. For while the underwriters granted an extraordinary interview to The Washington Post, the membership is only slightly more forthcoming about the inner sanctum than are the Swiss about their banks.

What is clear is how it all began about five years ago with an idea developed in the fertile financial imagination of Chris Christopher.

An irrepressible salesman with a natural bent for big deals, young Christopher in the early 1960s did his apprenticeship peddling encyclopedias, then pushing insurance for W. Christopher Stone's Combined Insurance Co. of America. By 1969, Christopher had discovered leasing and, in 1971, he started Surety Insurance Inc. in Dallas.

"We leased all sorts of equipment," says Christopher, who claims his earnings climbed from $75,000 a year to $25,000 a month in just three years.

It was in 1963 that Christopher came up with his insurance policy. A Lloyds broker named Peter Nottage of Adams Bros. in London went for the idea. And by January 1974, with his new Lloyds policy in hand, Christopher says he approached Chemical Bank looking for financing on a $2.5 million computer he planned to lease to the U.S. Post Office in St. Louis.

"Chemical called the idea ridiculous then six weeks later Chemical had its own representative in London trying to get the same policy," recalled Christopher during recent interviews at his Dallas estate and the muncipal airport in Wichiita Falls, Tex.

Bank of America in San Francisco, which was to become a major lender under the policy, made the $2.5 million loan.

Soon after, says Christopher, Bank of America also approved a $25 million loan to him to buy peripheral IBM computer equipment from Storage Technology Corp in Denver.

But the very next morning, according to Christopher, the bank had second thoughts when its leasing arm, Decimus, asked why the bank didn't go to London to get their own Lloyds policy instead of going through Christopher. "The next week," he says, "ten Bank of America representatives were in London. And by that time, Citibank, Ford Motor's credit agency, and just about everyone else had people visiting Lloyds."

However, in the beginning, the policy was available only on a test basis to very few computer leasing brokers other than Christopher, giving those outfits a decided advantage over competitiors who were enraged at Lloyds. One of them even filed suit to break open the coverage.

At the time, Christopher says he was jetting in his private Lear between U.S. cities and London every few days putting deals together with his magic Lloyds policy.

Nottaage, the Lloyd broker who issued the controversial policy, is a specialist in unorthdox coverage - so called contingency insurance for actresses and actors, sporting events and the like.

During the first year of the computer leasing insurance, Lloyds permitted a few more U.S. Companies to write policies. Not suprisingly, those holding policies kept warning Lloyds against letting too many leasing firms use it. Recalls Christopher' "We told Lloyds that if the market is improperly controlled, they were courting chaos."

"There was tremendous pressure on Lloyds from other leasing companies recalls Federal Leasing Evans. "Basically we had a financial guarantee. Lloyds dosen't like to use this phrase because it's against their rules to issue guarantees. But if the policy wasn't a financial guarantee, I don't know what was."

The other concerns that got policies included Citicorp Leasing Inc., Chase Manhattan Leasing Corp., Lease Financing Corp., Decimus (Bank American Corp's leasing division) and giant Itel Corp. of San Francisco, the world's biggest leasing company.

Itel quickly became the most energetic use of the Lloyd policy employing it to borrow some $250 million to finance the purchase of computer equipment, according to a source close to the company.

No one knows how much of this $250 million business will cancel and file claim, and Itel refuses to comment. But Itel so far has collected for its lenders - the biggest being Bank of America - less than $10 milliom from Lloyds, a source says. Itel has offered legal support to Federal Leasing's suit against Lloyds, according to Federal Leasing's Evans.

In March 1975, a full year after Lloyds had started writing insurance on the computer policy, Nottage and four other Lloyds executives apparently decided they had better learn more about the leasing business. They flew to Dallas for five days of intensive instructions at Christopher's Surety Leasing Co.

At about the same time, recalls Christopher, he had negotiated a $25 million credit line for his business with Chemical Bank. He also had negotiated a $15 million computer deal based on the Lloyds policy in the works.

Suddenly both deals went sour, and Christopher grew suspicious when he heard Nottage was going from Dallas to New York for a meeting at Chemical Bank. "We heard Commonwealth Leasing of Fort Lauderdale Commonwealth was going to be at Chemical at the meeting with Nottage.

Despite Nottage's alleged denials of any deal with Chemical and Commonwealth, Christopher hired a Florida detective who, in turn, contracted for a New York electronics expert to install eavesdropping devices. Bugs were placed in the Chemical Bank meeting room, Nottage's room at the Plaza Hotel and the head of Commonwealth's private plane.

Unfortunately for Christopher, the professonal eavesdropper was an FBI informant and he, in turn, recorded telephone conversations with Christopher in which he orderd the bug.

Christopher was indicted by a federal grand jury in Manhattan and, after pleading guilty on June 1976 to one count of electronic eavesdropping was placed on probation for two years and fined $10,000

Both Lloyds and Bank of America, Christopher's biggest lender wanted him out after his legal problems. So, his company, Surety Industries sold the portfolio of leasing contracts to Bank of America, Christopher said.

But then two former Surety officers started a company called Intercap which had access to a Lloyds policy through an insurance broker in Dallas called Nationwide General. This agency belonged to Christopher.

In testimony in a federal criminal suit in Dallas, a vice president of Southwestern Bell Telephone Co. said he took about $2 million in bribes over a four-year period from two Intercap executives, who formerly worked for Christopher at Surety. Intercap, using the Lloyds policy, placed some $77 million in computer equipment with the St. Louis-based Bell company.

In March, a jury was unable to agree on a verdict on the Intercap defendant. The government says it will retry the two men.

Right after the bugging incident in New York, Lloyds made the insurance policy available to a broad range of computer leasing firms.

"They turned on the spigot over at Lloyds," is how Federal Leasing's Evans describes what happened as over the next two years. Lloyds insured the financing of more than $1 billion worth of computer equipments.

Lloyds turned off the spigot a bit in March 1977, when stories began to circulate that IBM was coming out with the new line computers. The news caused Lloyds not to insure any more computers, but it continued to write insurance on peripheral equipment that is attached to computers.

Then in January, 1978, IBM broke the news, and Lloyds stopped writing the insurance altogether. In just four year, Lloyds had insured $550 million worth of computers and $500 million of peripheral equipment, according to knowledgeable sources.

Some 60 of Lloyds 400 syndicates are involved in the business, along with about 20 British insurance companies that also took part in the underwriting.

Webb says that none of the syndicates, whose members have unlimited liability for losses, are threatened with insolvency because of the potential computer insurance losses. He also labels as "rubbish" rumors that Nottage has been ostracized by Lloyds underwriters, who reportedly will no longer take the broker's business after the computer experience.

To handle claims, Lloyds has hired First National Bank of Boston, which has set up a special 20-person division. CAPTION: Picture, Charles S. (Chris) Christopher relaxing at poolside at his home in Dallas. AP