The special counsel for the Senate ethics committee urged yesterday that the Senate denounce Sen. Dave Durenberger (R-Minn.) for "knowingly engaging in unethical conduct which has brought dishonor and disrepute to this institution."

While stopping short of recommending expulsion, committee counsel Robert S. Bennett said Durenberger should be dealt with severely for conduct that was "unconditionally and unequivocally unethical." Durenberger, he said, has "consistently engaged in a pattern of unethical conduct and showed a very serious insensitivity to the ethical demands of his office."

With detailed argument, Bennett laid out the case against Durenberger as the ethics panel opened hearings into charges that he padded his income in violation of Senate rules through a book publishing deal, a condominium swap and acceptance of free limousine service from special interest groups.

Responding to Bennett, James Hamilton, Durenberger's attorney, said the senator "feels some sanction is appropriate because he was inattentive and he was unwise" in the handling of his finances. But Hamilton took issue with the severity of the punishment proposed by Bennett, saying it was "simply not justified" because Durenberger "thought he was obeying the rules."

Durenberger, who is expected to give a full opening statement today, later issued a brief statement saying all his actions "were taken in good faith in an attempt to comply with all the laws and rules." But he said he was "deeply sorry" for any pain he caused for others, including colleagues in the Senate.

"While I have admitted mistakes, and even some violations of rules, I feel the sanction of denouncement . . . is harsher than warranted," he said.

Short of expulsion, denunciation is one of the most serious forms of censure that the Senate as a whole can take in disciplining a member, indicating what Bennett called "reprehensible conduct" that cannot be condoned by a senator's colleagues.

If the committee recommends denunciation, Durenberger would have to go before the full Senate to face the charges, and he could be denounced by majority vote. Bennett also suggested that the committee may want to call on the Senate Republican Conference to consider further discipline involving Durenberger's seniority and "positions of responsibility."

Bennett ruled out a relatively mild reprimand from the committee, which would not require a Senate vote, but also said expulsion was not warranted because there was no evidence of "criminal intent . . . malice . . . or a specific intent to break the law."

In the most recent ethics case to come to a conclusion before the Senate, Herman E. Talmadge (D-Ga.) was denounced in 1979 for improprieties in handling his campaign and office expense accounts, following an investigation also conducted by Bennett, a Washington lawyer. In 1982, the ethics committee recommended expulsion of Harrison A. Williams Jr. (D-N.J.) for his involvement in the Abscam scandal, but Williams resigned from the Senate before it voted on the expulsion proposal.

Durenberger's case, one of seven pending before the Senate Select Committee on Ethics, drew a crowd of about 200 to the huge, ultra-modern Hart Office Building hearing room. The audience included Durenberger's 23-year-old son, Dan; his colleague, Rudy Boschwitz (R-Minn.); and camera crews from at least three Minnesota television stations.

Chatting with friends as he entered the room, the 55-year-old lawmaker, who has served in the Senate since 1978 and was once viewed as one of its rising stars, appeared relaxed during most of the six hours of opening statements before the panel members, who sat stony-faced throughout.

Bennett took nearly three hours to lay out his case, starting with the charge that Durenberger evaded Senate limits on honoraria by disguising $100,000 worth of speaking fees as payments for promoting two books dealing with national security and health care issues in 1985 and 1986.

Under agreement with Piranha Press of Minnesota, Durenberger had honoraria payments sent to the publisher, and the publisher in turn paid him fees for promotional services, Bennett said. When he neared the honoraria limit of $22,530 in 1985 and $30,040 in 1986, honoraria checks were routinely directed to Piranha Press, he said. "This is unethical. This is not honest," Bennett contended.

None of the 113 groups that made honoraria payments requested speeches promoting the books, and on only three occasions were the books put on display. No promotional literature was ever distributed, and even Durenberger seldom tried to promote their sale, Bennett said, quoting Durenberger as saying on one occasion, "My publisher is Piranha Press, if you can believe that." The second of the two books, a compilation of Durenberger speeches on health, appeared to have been put together to justify continuation of the arrangement, Bennett said.

Piranha Press, a struggling firm whose owner previously had published only one book, about wres tling, made $248,360 from Durenberger's speeches but only $15,560 from the sale of his books.

"These were very hungry fish at Piranha Press, who were allowed to engage in a feeding frenzy" at the expense of organizations that thought they were paying honoraria, not book promotional fees, Bennett said. "Unfortunately, the evidence shows that Sen. Durenberger allowed . . . himself and his office to be used as the bait and got $100,000 for his trouble," he added.

In response, Hamilton said the books were "legitimate" and praised by many of Durenberger's colleagues, and he argued that the arrangement, which he said had been cleared with the Federal Election Commission, broke no rules. Durenberger made no attempt to hide the arrangement, which Hamilton said Durenberger had set up as a "legitimate way to supplement his income."

In all his dealings, Hamilton said, Durenberger sought advice from the Senate's ethics and rules committees, as well as the FEC. "What we have here is mistakes and sloppiness, not intentional impropriety," Hamilton concluded.

On the condominium deal, Bennett contended that Durenberger improperly sought and received Senate reimbursement of $40,055 for living expenses outside of Washington from 1983 to 1989 by attempting to obscure ownership of a condominium that he owned in Minneapolis. Bennett also said Durenberger backdated a partnership agreement that included the condo in order to justify part of the reimbursement and appeared to arrange trips to Minnesota to assure enough days at the condo to cover expenses of maintaining it.

Hamilton said the transfer of ownership was legitimate and denied any attempt to hide the transactions. "If someone intends to cheat, they don't leave a jigsaw paper trail," he said in reference to the papers cited by Bennett.

Bennett also said Durenberger "showed a pattern of insensitivity" by accepting free limousine rides worth $4,776 in connection with speeches to special interest groups, even though the trips were for personal business. Durenberger has said the visits were made to a marriage counselor. Hamilton is expected to address this issue today.

Staff writer Tom Kenworthy contributed to this report.