In the middle aisle of the county-owned liquor store on East Montgomery Avenue in Rockville, there is a large display of Drouhin Pouilly-Fuisse wines, all marked down in price by two dollars a bottle in recent months.

"They're white elephants," says the store clerk, Kevin McMahon, and the sales figures seem to substantiate his judgement. Of the 190 bottles of the white delivered to his store in January, only 12 have been sold. Of the 7,800 Drouhin Pouilly-Fuisse bottles delivered to the county warehouse last summer, less than 10 percent have been sold, leaving nearly $100,000 worth on the shelves.

These wines cluttering the stores and warehouses are symbols of the unusual process by which alcoholic beverages are sold in Montgomery County -- the only county in the United States that runs its own monopoly in the wholesale and retail sale of liquor, wine and beer.

Since the wealthy and traditionally corruption-free county created its own liquor control agency in 1933, the way of doing business there has been marked by apparent conflicts of interest and favoritism.

The Pouilly-Fuisse wines that Montgomery's Department of Liquor Control is having so much trouble selling at the marked-down price of $13.39 a bottle were purchased in the spring of 1979 from a salesman for Schenley Industries, Inc., a New York-based distiller. The salesman, Frank Orifici, has since left Schenley to become the deputy director of the county's liquor control department.

Orifici is part of a network of men -- most of them close friends or relatives -- who have dominated the $60 million-a-year Montgomery liquor system for decades, often moving back and forth between the government agency and private industry in a pattern that has greatly benefited the distillers, particularly Schenley. Consider:

Charles Buscher, regarded as the patriarch of the Montgomery County system, ran the liquor control department in the early 1940s, then moved over to the industry. From 1967 to 1978, Buscher served as the executive vice president of Schenley in charge of sales to government-controlled jurisidictions, including Montgomery. cWhile at Schenley, Buscher flew from New York to Rockville on a regular basis to meet with the liquor control director, who once had been his assistant in the agency.

In 1978, Buscher was charged by West Virginia officials with illegally inducing state liquor officials to buy Schenley products, an act for which he paid a $4,500 fine. Following that incident, he served as an adviser to Montgomery County Executive Charles Gilchrist on liquor board matters.

Orifici, the new deputy director of the county's liquor control department, is related by marriage to Buscher. His wife is Buscher's niece. For eight years before he was appointed to the county job, Orifici sold Schenley products to the liquor board. In addition, Orifici in his new job will be purchasing liquor from two relatives -- Philip Buscher, the new Schenley salesman, and Earl Buscher, who sells for Brown Forman distillers. Both are brothers of Charles Buscher.

Joseph (Buddy) Saunders Jr., who worked in the liquor control department for several years and was the acting director in 1971, now sells liquor to the county for a major distiller, Fleischmann's.

Jerome Baylin, the liquor control department's director from 1971 to 1977, now sells to the county for four distillers.

Ken Dragon, who served as deputy director of the liquor control department from 1972 to 1978, came to that job from Globe Distributors Inc., a wholesale liquor outlet in the District of Columbia. Dragon resigned from his post in 1978 shortly after county police detectives took photographs of him sitting with Schenley executives in the company's box seats at Yankee Stadium during a World Series game.

Most of those connections have been with Schenley, a company that has had extraordinary success in selling alcoholic beverages to Montgomery County.

According to figures supplied by the National Association of Controlled States, Schenley received slightly more than 10 percent of Montgomery's liquor business, a share that is 2 1/2 times greater than its percentage of the market in other jurisidictions where government controls liquor purchasing. t

Although Schenley has no brands on the list of top 20 most popular liquors in the county, it ranks second among all liquor companies in terms of both cases sold and dollar volume cases of liquor to the county for more than $1.5 million last year.

The only Liquor company that gets more business from the county, National Distilling Co., has three brands ranked among the top 20. Seagrams, which has the third largest amount of business in Montgomery, has two brands among the top 20.

The most popular brand Schenley sells in Montgomery County is not even distilled by Schenley's it is Dewar's White Label, a scotch that is distributed in the U.S. by a Schenley subsidiary. In addition, Schenley sells 30 of its own brands to the county -- nearly eight times as many brands as are carried by most liquor stores in neighboring jurisidictions, according to a Washington Post survey.

Larry Meyers, the owner of the Cork N' Bottle liquor store on Georgia Avenue in Washington near the county line, was one of 10 area liquor owners recently presented with a list of all the Schenley brands carried by Montgomery County stores.

"we don't carry that," Meyers said repeatedly as the Schenley names were read off. "It doesn't sell well. It's not worth the shelf space."

The current director of Montgomery's Department of Liquor Control, Robert Passmore, strongly endorses the county's purchase of so many Schenley brands. "There's a demand for them," said Passmore. "People buy them." 'Gut Feelings'

As director, Passmore has the most say in what brands, the county purchases. Every week, salesmen from the liquor companies visit his large office next to the liquor warehouse on Crabbs Branch Way in Rockville. With samples of liquor in hand, they give their sales pitch, usually telling Passmore that the brand in question has been selling well in Washington or Virginia or Prince George's and should sell at least as well in Montgomery.

Passmore then meets with his "purchasing committee," which includes Joan Nolan, an office assistant, Whitey Moreland, the warehouse manager, and, come September, the deputy director, Orifici. They talk about sales statistics, prices and advertising, and then, according to Moreland, "Passmore expresses his opinion, I express mine and the others express theirs -- a lot of times our opinions are based on gut feelings."

The county government has been purchasing and selling liquor this way since Prohibition ended 47 years ago. Originally, the Liquor Control Board, as it was called then, operated only a few liquor stores and sold liquor to only three restaurants. Today, the Department of Liquor Control operates 23 liquor stores -- the only liquor stores in the county -- and acts as the only wholesaler for restaurants, country clubs and wine and cheese shops in the county.

About 40 percent of the department's sales are to the county-owned liquor stores. The other 60 percent goes to the restaurants, country clubs and wine and cheese shops. Last year the department showed total sales of $65 million and earned a net profit of $4.9 million, which went into the county government's treasury.

There are those in the county who say that the department does not earn enough profit. During the 1977 fiscal year, when the percent of profit was higher than during the last fiscal year's -- $4.5 million profit on $48.8 million gross sales -- the director of the county Department of Finance complained that the net profits in relation to sales in Montgomery County were about half the corresponding ratio for Virginia stores.

The report also said that inventory in the county liquor stores was too high in relations to sales, with 77 percent of the items staying on the shelves more than a month.

Today, some county businessmen claim that they pay about 5 percent more for the alcohol they purchase from the county than they would have to pay private wholesalers.

"They have to cover up their inefficiency somewhere and they do it with higher markups," claims Peter Franks, owner of the Talbert Ice and Beverage Service in Bethesda. Franks who purchases beer and wine from the department, thinks the county should get out of the business. The Buscher Legacy

But the Montgomery County system has powerful defenders, none more influential and articulate than Charles Buscher, the 63-year-old liquor patriarch who has, in his career, bought liquor for the county, sold liquor to the county, and advised the county on how to buy and sell liquor.

The government-controlled system is good, Buscher said in a recent interview, "because it eliminates competition. It doesn't make it too convenient to buy liquor. Alcohol, if not used correctly, can bring about social problems in the country."

Buscher, the director of the Department of Liquor Control from 1940 to 1945, began the pattern of passing through the "revolving door" between the Department of Liquor Control and the liquor industry.

Before becoming director, Buscher worked as a reporter for The Maryland News. His boss at the small county paper was Col. E. Brooke Lee, the Democratic powerbroker of Montgomery County. The two have remained friends through the years, and Buscher often talks to Lee about which Democratic candidates to support.

When Buscher was director of the department, his deputy director was James F. Ervin. Seventeen years later, when Buscher was an executive vice president for Schenley in New York, he often visited Ervin, who succeeded him as director of the department.

"I would call on Ervin once a month and see him at Lions Club meetings," Buscher said.

It was not Buscher's job to sell Ervin liquor; that was the job of the Schenley salesman. Nonetheless Buscher kept on his "personal contact" with Ervin, and with the directors who followed him: Buddy Saunders, Jerry Baylin and Alex Wernick.

Most of the Schenley brands that are now on the shelves of the county-owned liquor stores were put there during the years that Buscher was executive vice president for Schenley, from 1967 to 1978.

Between his job as director of the department and his job as an executive for Schenley, Buscher worked for the National Alcoholic Beverage Control Association, where he compiled sales data on the alcohol prices paid to distillers by states where the government controlled liquor purchasing.

In 1978, Buscher pleaded guilty to seven counts of a 23-count indictment charging him with illegally inducing officials in West Virginia to buy Schenley liquor from 1970 to 1976.

According to Wayne Rich, the prosecutor in the case, Buscher and his assistant at Schenley, William Whelan, approved credit memos allowing West Virginia ABC officials to take free cases of Schenley liquor from the state liquor warehouse in Charleston. The officials used the liquor at parties with state legislators, Rich said.

Since then, Buscher has written two reports for County Executive Gilchrist suggesting improvements in the Montgomery Department of Liquor Control.

The reports on the "Management and Operations of the Department of Liquor Control" made 10 recommendations, including one that the department discontinue stocking half pints and miniatures of wines to increase warehouse and retail stores shelf space; that it advertise only liquor, not wine and beer; and that it discontinue selling beer in the county-owned liquor stores, leaving that to the private sector.

Gilchrist responded to the first report in February 1979, with a nine-page memo, endorsing most of the recommendations. The department since has implemented 11 of the 16 recommendations, according to a February 1980 memo from Passmore, the director.

In an interview, Gilchrist said that after his election to county executive, he was told by Buscher that he had pleaded guilty to charges of inducing officials to buy liquor.

"I was distressed to hear it," Gilchrist said. "It was a situation in which a number of major distillers were involved. I was distressed for him. I don't think it has anything to do with us. I continue to talk to him and consider him as a friend." The Succession

The revolving door pattern was most noticeable in the 1970s. Ervin was succeeded by Joseph (Buddy) Saunders Jr., who was acting director of the department during part of 1970 and part of 1971. Today, Saunders sells liquor to the county for a major distiller, Fleischmann's.

The next director was Jerry Baylin, who had been a sales manager for a wholesale house in the District, Forman Brothers.The county did not purchase liquor or wine from Forman Brothers until Baylin became director of the Department of Liquor Control, according to sales records and a manager at Forman Brothers.

Store clerks in the county-owned liquor stores remember Baylin as the director who stopped purchasing cordials from General Wine and Spirits, Inc. because they were not selling well, but who re-ordered them for the county liquor store two years later, in 1976.

Soon after the cordials re-appeared on the shelves, Baylin left his county job and started working as a salesman for the company that sold him the cordials, General Wine and Spirits. Today, Baylin sells liquor to Montgomery County for four companies, including General Wine and Spirits.

Baylin said in a recent interview that he resumed purchasing the cordials because he wanted to "round out the line" of cordials that the county offered. "That was before my association with General Wine and Spirits," said Baylin. "That was before my tie with the industry."

No sooner had Baylin left his county job to become a liquor salesman than the Schenley liquor company invited the department's deputy director, Ken Dragon, to a Yankees-Dodgers World Series game. Dragon accepted the invitation. He did not pay for his box seat, according to Montgomery County police who photographed him at the game sitting with Schenley officials.

Police gave the photograph to former county executive James P. Gleason and former chief administrative officer William Hussman. They asked him to resign because the incident "jeopardized his integrity," according to one former official.

Dragon, who was in charge of re-ordering brands for the county-owned liquor stores, said he resigned two weeks after the game because of his health, and also because the job was not "up to my capabilities."

He said he did not pay for the cost of the box seat because he "didn't have my checkbook with me when I went that day to New York. Why should I? They don't accept out-of-state checks."

William Whelan, Buscher's assistant at Schenley who invited Dragon to the game, offered another explanation for the fact that Dragon did not pay for his box seat at the stadium. In a letter sent to Dragon on Oct. 11, 1977, several days after the game -- and after county police had interviewed county officials and Schenley officials about Dragon's trip -- Whelan wrote: "Ken, the ticket cost is $15. I'm glad you could make the game at such short notice, I didn't know the cost at the time of the game."

At the Department of Liquor Control, few people were surprised that Dragon had attended the game at Schenley expense. "Everyone here knew that Schenley had invited Dragon," says Casey Bula, the number-three person at the department. "It gets so you can't even accept a cup of coffee."

Orifici, the department's deputy director who at the time was Schenley's salesman to the county, said he "found out that Dragon was at the ballgame the day of the ballgame," from Alex Wernick, the director of the department.Wernick, now a salesman for several liquor companies in Atlanta, confirmed in a telephone interview that he told Orifici that Schenley had invited Dragon to the game.

No charges were brought against Dragon, although the county conflict of interest statute and the code of ethics for public officials prohibit them from taking even small gifts from persons who do business with the county.

Montgomery County State's Attorney Andrew Sonner said charges were not brought against Dragon because "it was more a matter for administrative disposition than criminal sanction," and because "the burden to the county taxpayers and the courts would outweigh any public benefit."

Dragon's position at the Liquor Control Department was not filled until April 7, when Orifici, the former Schenley salesman to the county, assumed the job of deputy director. Disgruntled applicants for that job -- many of them liquor salesman to the county -- say that Orifici was selected because Buscher is his wife's uncle.

"With this particular incident with Orifici, it was rigged from the very beginning," claimed Irwin Feldman, a salesman to the county for House of Wines who applied for the deputy director's job. "Charlie Buscher influences all the decisions that are made about the liquor control board."

A symbol of that favoritism said Feldman, is the quantity of Pouilly Fuisse wine that the county purchased from Orifici less than a year before he became deputy director, and which are now considered "white elephants."

The department had purchased Drouhin Pouilly-Fuisse wine from Orifici for the past several years. But until last year, the department purchased the wine only in small quantities -- about 100 cases per year. And until last year, the department purchased the wine for the restaurants -- not for the county-owned liquor stores.

Then during the spring of 1979, the department purchased 650 cases. William Davis, who at the time was in charge of reordering brands already on the list of brands carried by the county, said he decided to order 650 cases because of the "demand for Pouilly-Fuisse at the time from the restaurants."

But John Buckler, the department employe who at the time took orders from restaurants and other licensees, said he told Davis only that "we could use more than 50 cases" of the wine."

According to the county personnel office, 126 persons applied for the job Orifici won. Of the 126 persons, seven were interviewed, including Orifici. oOne of the three persons who interviewed Orifici was Pierre Eaton, general manager of radio station WINX, who has done business with Orifici for several years.

"We would trade goods for advertising," said Orifici. "A dollars worth of advertising for a dollar's worth of liquor."

Eaton said he did not feel his acquanitance with Orifici affected his ability to judge him fairly as a candidate for the deputy director's job.

Gilchrist denied that Orifici was selected for the merit job because of his relationship to Buscher. But Gilchrist's aide, Gerry Evans, shrugged and said, "I'm not going to throw up my hands and say it's a great coincidence."