A former executive of McDonnell Douglas Corp. has accused the defense contractor of "corrupt and potentially criminal activity," including the "irregular acquisition" and careless handling of sensitive national security documents.

John R. Betzler, former director of McDonnell Douglas's military aircraft group, has charged in a civil suit that he was demoted after reporting the activity to the highest levels of the company's management. Betzler, now director of military requirements for Northrop Corp., would not discuss the case when contacted yesterday.

McDonnell Douglas, the Pentagon's largest defense contractor with sales of $7.7 billion last year, flatly denied the charges yesterday, saying in a statement that the Washington law firm Steptoe & Johnson had "investigated Mr. Betzler's allegations of irregular activity and found no merit in them."

A Pentagon spokesman said yesterday that the Defense Department was "not aware" of Betzler's charges. A spokesman for the Justice Department, which disclosed this week that it is investigating misuse of Pentagon documents by companies, would not comment yesterday on whether the department is looking at McDonnell Douglas.

Betzler, 58, also claims that he was eventually fired a year ago after refusing to lie under oath in a legal battle between McDonnell Douglas and Northrop. He is now seeking more than $7 million in damages from his former employer, charging breach of contract, wrongful discharge and intentional infliction of emotional distress, according to documents filed in Arlington County Circuit Court.

McDonnell Douglas, based in St. Louis, said Betzler retired last December, and that the company denies "emphatically" that his departure "was in any way wrongful or in violation of Mr. Betzler's rights."

In the suit, Betzler said that in August 1982, he "reported a pattern of unethical, corrupt and potentially criminal activity by other employes and agents" in the firm's Washington and Arlington offices.

Betzler informed company Chairman Sanford N. McDonnell, President John F. McDonnell and James S. McDonnell III, vice president of marketing, of the activity and "stated his reluctance to participate," the court documents say.

The company's alleged activity included both the improper possession of certain military documents, as well as "lax" handling of classified material, said Betzler's attorney, David H. Cox, yesterday.

Betzler also objected to "irregular acquisition from federal government officials of sensitive U.S. national security defense information by employes and agents of McDonnell Douglas," according to court papers.

The information included details about future military programs and projected Air Force needs, said Cox, an attorney with the Washington law firm of Jackson & Campbell. The company then used the information to "begin marketing efforts and begin lobbying the Air Force" to obtain contracts, he said.

Other sensitive Pentagon documents, including "confidential or secret" papers were "very casually treated," by the local McDonnell Douglas office, Cox said. "There were lax controls over who had access to those documents."

Three months after he reported the improper activity, Betzler was transferred from the company's local headquarters to an office in Hampton, Va., where he worked until his dismissal in September 1984, the court papers say. Although he retained his title and salary, which exceeded $100,000 a year including benefits, Betzler considered himself demoted as a result of his reports, Cox said.

According to the court papers, Betzler received a termination letter dated Sept. 17 last year, shortly after refusing to withdraw his corrections of his testimony in a legal dispute between McDonnell Douglas and Northrop. The two defense giants filed suits and countersuits worth nearly $1 billion over how to share profits from their jointly built F/A18 jet warplane.

When Betzler reviewed the transcripts of his testimony in the case and attempted to correct them, his supervisor "attempted to discourage" him from making the changes "if, as a result of the corrections, defendant McDonnell Douglas may be exposed to liability in the Northrop litigation," Betzler's court documents say.

The company's Sept. 17 letter told Betzler that he was being put on paid leave of absence for up to 90 days so he could look for other work. A copy of the letter obtained by The Washington Post says that unless Betzler resigned or retired in that time, his separation would be listed as a termination.

Betzler grew up in Arlington and is a graduate of Washington Lee High School.