Shortly before he defeated Democratic challenger Edward R. Garvey last fall, Sen. Robert W. Kasten Jr. (R-Wis.) aired a commercial which contended that $750,000 in union money "disappeared" while Garvey was the head of the National Football League Players Association. Garvey sued Kasten's campaign committee and his media adviser, Roger Ailes, for $2 million. Yesterday, Kasten admitted that the ad contained false information and Garvey announced he was dropping the libel suit.

"The union's records on public file report for the time in question that the union funds were fully accounted for," Kasten's statement said. "I do not suggest that Mr. Garvey did anything illegal or that union funds were spent for other than valid union purposes. There was no intent to challenge his integrity."

Kasten made clear at a news conference that he was not apologizing, adding, "This is a tremendous victory for us . . . . {Garvey's} not receiving a penny . . . . We have won . . . . "

Garvey, however, sees the outcome differently: "Of course he meant to challenge my integrity; that's why he spent more than $200,000 to air that commercial repeatedly even after I offered proof that it was false and demanded that it be taken off the air. The reason we brought this lawsuit was to clear up any question about my integrity . . . . Now that Kasten has admitted the commercial wasn't true, there isn't anything left to prove." He added: "Money wasn't the issue, the truth was."