A 1988 finding by the U.S. Fish and Wildlife Service that a proposed Arizona telescope complex would not threaten the endangered Mt. Graham red squirrel overlooked key scientific evidence and may have violated the Endangered Species Act, a congressional investigation has found.

The report by the General Accounting Office, the investigative arm of Congress, found that the final decision on the telescope project was based in part on "non-biological considerations," such as the value of the complex to astrophysical science.

The opinion became the basis for congressional legislation that allowed the telescope project atop Mt. Graham in southwestern Arizona to go foward. Conservationists have fought to preserve the mountaintop, considered a "sky island" whose altitude and isolation have bred plant and animal species found nowhere else in the world.

The GAO found that Fish and Wildlife regional director Michael J. Spear, in approving the University of Arizona project atop Emerald Peak on Mt. Graham, overlooked compelling evidence that the telescopes and a road and associated development would threaten the survival of the Mt. Graham red squirrel, an endangered subspecies whose numbers have dwindled to about 150.

"The {Emerald Peak} alternative is not supported by prior biological studies of Mt. Graham," said James Duffus III, the GAO's director of natural resources management issues, in an appearance yesterday before two House subcommittees. "These studies indicated that any development on Emerald Peak posed an unacceptable risk to the red squirrel's survival."

The report recommended that Congress consider instructing the Fish and Wildlife Service to reconsider the effects of the telescope project, already under construction, on the red squirrel.

Spear defended his decision, telling the panel that the loss of 8.6 acres of forest, when considered with other protective measures taken by the university, "was not likely to jeopardize the continued existence of the squirrel."