Federal prosecutors have accused U.S. District Court Judge Robert Merhige of "outtrageous" legal behavior in his handling of the Smith Bagley trail said the jurist was all too friendly with the defendants.

The charges, leveled by Attorney H.M. Michaux Jr. and Assistant U.S. Attorney Patricia W. Lemley, of Greensboro, N.C., were contained in a letter requested by their superior, Deputy Assistant Attorney General John C. Keeney. A copy of the letter was obtained by The Washington Post.

Bagley; the socialite heir to the R.J. Reynolds fortune, and four others involved in the bankruptcy of The Washington Group Inc., a company Bagley once headed, were acquitted of conspiracy and stock minipulation charges by a jury in August. Merhige presided over that trial and was sharply critical of the government's presentation of the case.

Merhige also has been assigned to a variety of civil cases relating to Bagley and the others, stemming from the corporate bankruptcy.

Gagley's lawyers also have asked that a civil case filed by the Securities and Exchange Commission be transferred from federal court in Richmond to a North Carolina location, where Merhige is assigned.

"The antigovernment bias was manifested by Judge Merhige in virtually every phase of the trial," the U.S. attorney said. "This bias was most clearly reflected in the court's intemperate comments and outrageous jury instructions."

Although the indictment was handed down by a federal grand jury sitting in Winston-Salem, at the request of the defendants the trial was moved to Richmond, Va., where it was heard by Merhige.

According to the letter, after Merhige was assigned to hear the case in North Carolina, the defendants filed motions for a non-jury trial and for the change of venue to Richmond.

"While the significance of these motions may simply lie in defense counsel's skilled advocacy when viewed in light of later events, they suggest that the defense team recognized an all too friendly forum at the outset," they said.

The two U.S. attorneys said that "in overview, the Bagley trial takes on the quality of a 'set up.'

"Individual incidents, which at the time had the appearance of mere intemperance, laid the foundation for jury instructions which had the effect of a direction to the jury to acquit.

"Only at the time of jury instructions did certain of the judge's exclusionary rulings, unsolicited witness cross-examinations and verbal explosions make sense."

The letter dated Oct. 5, was written by Lemley at the request of Keeney and signed by both Lemely and Michaux.

Keeney said last night that he asked for the prosecutors' comments to determine if there were mistakes in the prosecution of the case that could be corrected in the future.

"We do that in cases where the result is different than we expected it to be," Keeney said.

He said the department had no plans to follow up on the letter, although he noted the prosecutors "probably would have used less colorful language if they knew it would be made public."

Attempts to reach Merhige through his secretary were unsuccessful. The secretary said Merhige said he could not talk the Bagley case.

Lemley, contacted last night, would not comment on the letter. "The words speak for themselves," Lemley said. Michaux could not be reached.

The two charged in their letter that through a series of comments during the trying of the case, Merhige undermined the government's case.

For example, the U.S. attorneys said that Merhige ridiculed a government witness, Wesley Bailey, who purchased Washington Group stock on a "buy-back guarantee."

"The timing of the purchases and the favorableness of the terms underscored the manipulation as charged in the indictment," they wrote.

"Nevertheless, the entire weight of Bailey's testimony was sledge-hammered by Judge Merhige off-the-cuff remark. The judge's comments thus had the effect of making the prosectuion team appear inept, overbearing and/or erroneous in the jury's eyes."

The letter said Merhige sustaned the defense team's objections to the government's introduction of charts in the case, a decision that "again belied his impartiality."

Further, the two attorneys said Merhige "displayed a more than merely solicitous attitude toward the jury." They noted in the letter that Merhige "personally served the panel with coffee and donuts on a daily basis and arranged on at least one occasion for them to lunch at his private club."

In addition, the letter said that the judge's instructions to the jury "were tantamount to a directed verdict.

"Only a thorough reading of these instructions fully reveals the not-guilty bias through their juxtaposition of phrases, concepts and gratuitous comments," they wrote, "they wrote. "The government was never given a chance to present its view of the case and at no time during the trial was the indicment read to the jury."

The prosecutors said that the heart of their case was the allegation that employes of the Washington Group were encouraged to buy stock to inflate its market price.

"The judge took every element of proof such as the encouragement to buy stock and the making and guaranteeing loans for stock purchases, and stated these acts were not unlawful," they wrote.

They also said that the jury could not find the defendants guilty of mail and wire fraud charges, without proving guilt on a manipulation charge. "This rulling is clearly wrong," they wrote.

The letter charged that several of Merhige's instructions to the jury "fail to ear the remotest resemblance to the law."

Merhige is a wel-known and controversial figure in the Richmond area for his decision ordering the racial integration in the city's school system.

In addition, Merhige was the presiding judge in the governments's case against Allied Chemical Co. and others for their roles in the Kepone contamination of the James River. Merhige fined Allied $8 million, the largest such fine for a pollution case at the time.