John Fedders, enforcement chief for the Securities and Exchange Commission, is a subject of a federal grand jury investigation in New York, according to federal sources.

Fedders has twice testified before a grand jury that was looking into irregularities that led to the indictment earlier this month of Southland Corp., parent of the 7-Eleven convenience store chain, for involvement in a bribery and cover-up conspiracy.

Before his 1981 appointment to the SEC, Fedders was an attorney with the Washington law firm of Arnold & Porter. In 1978, the firm chose him to assist Southland as outside counsel in an internal investigation requested by the SEC.

Fedders' role in that internal investigation is also the object of an inquiry by the House Energy and Commerce subcommittee on oversight and investigations. It wants to know if Fedders had discovered the company's failure to disclose the bribery and kickback scheme to the SEC and outside auditors and then failed to notify them himself.

Rep. John D. Dingell (D-Mich.), who heads the committee and subcommittee, has asked the Justice Department to turn over information about Fedders' grand jury appearances. Justice said it will consider his request when the grand jury investigation ends in 60 to 90 days.

Sources said Fedders is only a "subject" of the grand jury investigation. A "subject" is defined by the Justice Department as a "person whose conduct is within the scope of the grand jury investigation."

The sources said he is not at this time a "target . . . a person as to whom the prosecutor or grand jury has substantial evidence linking him to the commission of a crime . . . ."

Fedders has declined to comment on his services for Southland, citing the attorney-client privilege.

But Washington lawyer Nathan Lewin, who is representing Fedders, said, "Fedders did not know. He was an outside consultant, not the man running the investigation . . . . He did not know about a bribery conspiracy."

Lewin said that in the course of the investigation, Fedders learned that a company official had "said something about a payment," but that was just a "mosaic in the whole picture . . . . In the total picture as it appeared at that time, the statement about the payment was overridden by a lot of things that indicated nothing was wrong."

Southland, one of its officials and a former New York City Council member were indicted by a federal grand jury in New York earlier this month on charges of conspiring to bribe one or more New York tax officials in return for a favorable settlement on a Southland tax case. Southland has entered a plea of not guilty.

The indictment, which followed a three-year criminal investigation, charged that in 1977 Eugene DeFalco, a Southland regional official, gave $96,500 to former New York City Council member Eugene Mastropieri, which was then laundered through a Canadian bank and returned to Mastropieri. According to the indictment, Mastropieri was to keep $25,000, use $20,000 for a "slush fund" to bribe one or more New York tax officials and kick back an undisclosed amount to DeFalco.

The Southland case began in 1976 when the SEC, for unknown reasons, requested Southland to investigate whether there had been "any questionable receipts, payments or political contributions" by the company since 1969. Southland turned for assistance to Arnold & Porter, which had previously represented the firm, and Fedders was assigned to the case.

The Southland indictment indicates that the internal investigation eventually turned up evidence of the illegal 1977 payment of $96,500 and that a cover-up was begun in 1978. Fedders participated in the internal investigation, but he was not cited in the Southland indictment for any wrongdoing.

In 1978, meanwhile, Southland's outside accounting firm was conducting an unrelated examination of the firm's 1977 financial records in preparation for a planned public sale of "millions of dollars" of securities, according to court papers. When officials of the accounting firm asked about the $96,500 payment, they were shown the summarized results of the internal probe. All references to the $96,500 payment had been deleted, although it had been mentioned in earlier drafts.

The grand jury began its deliberations in 1980 and returned the Southland indictments earlier this month. According to reports in National Law Journal, Fedders represented the company before the grand jury until he joined the SEC in 1981.

In two appearances as a witness before the grand jury and in two closed sessions before Dingell's subcommittee, Fedders has refused to talk about his role in the Southland internal investigation, citing attorney-client privilege.

One source, who asked to remain anonymous, said Fedders "would like to talk about it. It's in his best interest." But up to now, Southland has been unwilling to waive the attorney-client privilege.

The source said Fedders was unaware of the alleged conspiracy because he was dealing through two levels of Southland officials who were also unaware of the scheme. "Fedders was three steps removed from whoever was doing the lying," he said.

John Rogers, general counsel for the Dallas-based Southland Corp., did not return phone calls from The Washington Post.

Dingell, in his letter to Attorney General William French Smith, noted that the Southland indictment specifically listed persons from whom "material information was withheld." The list did not include Fedders or the Arnold & Porter law firm, Dingell said, which "suggests that counsel was aware of the information about the bribe and may have been among those who was involved in withholding the information."

Lewin acknowledged that Fedders is probably a subject of the investigation. "What the U.S. attorney's office has said is that with regard to business ethics reviews, anyone involved in any way is within the scope of the investigation." By that definition, Lewin said that Fedders would be a subject.

Attorney Peter Bleakley of Arnold & Porter, who took over the Southland case after Fedders went to the SEC, said in a telephone interview that the law firm "is not a subject or a target of the investigation."

Michael Barrett, chief counsel to Dingell's oversight and investigations subcommittee, said the subcommittee will begin hearings next month to determine what, if anything, Fedders knew about the alleged bribery attempt.

"If he knew about the $96,500 and knew it was a bribe and took it out of the draft report, that would be wrong," Barrett said. "If he knew nothing about it, he has no problems."

In his letter to the Justice Department, Dingell said that the SEC "inquiry, which has been going on for months, is proceeding at a very slow pace. Meanwhile, Mr. Fedders continues to act . . . as director of the Division of Enforcement.

"The Southland matter raises issues of character and integrity which may reflect on his fitness to hold his present office. Mr. Fedders has been taking positions on legal and policy matters, some of which may involve issues in the Southland case where he has a strong personal interest at stake," Dingell said.