JEFFERSON, Wis. (AP) _ A businessman accused of bilking customers says he was part of an unsuccessful FBI sting operation designed to set up former Wisconsin Attorney General Bronson C. La Follette with a $100,000 bribe.

Dale T. Armstrong says he was told he could avoid prosecution by helping offer the bribe to La Follette through Madison lobbyist James Boullion, a La Follette associate.

Armstrong testified Monday during a hearing on his motions to dismiss charges of fraud involving cemetery sales practices. The motions were denied.

Milwaukee FBI agent Ronald Aebly denied he ever promised Armstrong immunity from prosecution. He said the FBI only offered to advise state prosecutors about Armstrong's cooperation.

Aebly did not mention La Follette by name.

The agent said two assistant attorneys general had gone to the FBI with concerns about a possible conflict of interest after the attorney general's office issued an opinion considered favorable to Armstrong.

Armstrong said he does not know whether La Follette ever actually heard of the bribe offer.

Attempts to reach La Follette for comment Monday and Tuesday were unsuccessful. A person answering the telephone at his Madison home said he was out of town.

In Sarasota, Fla., where he is in real estate after closing his lobbying office, Boullion said he was ''just totally outraged, incensed, boiling'' over the report of the sting operation.

''I think it is absolutely horrendous that the FBI and prosecutors in Milwaukee would be involved in a sting operation to try to entrap me or anyone else,'' Boullion told an interviewer. ''No one is safe. There ought to be a law against it.''

La Follette was a director of a Boullion company at the time of disclosures a year ago that the company had borrowed money from Armstrong, whose companies were under investigation by La Follette's Justice Department.

The department turned the investigation over to the Milwaukee County district attorney's office to avoid questions of a conflict of interest. La Follette was voted out of office in November.

Armstrong cemetery operations in Texas and Minnesota have been cited in complaints by attorneys general in those states. Armstrong, sought on a Wisconsin warrant since January, was captured in May in Georgia.

Armstrong and a business partner, Raymond W. Turner, are charged with taking about $1.2 million in funds that customers had paid for mausoleum space.

Armstrong testified he and Turner made telephone calls to Boullion in April 1986 to set up a bribe offer to La Follette. He said Turner called Boullion from the FBI's Milwaukee office.

''It was to be given to Jim Boullion and Bronson La Follette to end all the problems the cemeteries were having in the state,'' Armstrong said.

The FBI told him it planned to videotape the $100,000 exchange, Armstrong said.

In a telephone conversation that was taped by agents, Boullion declined to meet with Armstrong and Turner, he said.

While the FBI talked with Armstrong about a $100,000 deal, ''we did not want him to institute any criminal activity,'' Aebly said.

Armstrong, who operated four Wisconsin cemeteries in the early 1980s, is held in lieu of $500,000 bond on charges he bilked customers of $278,000 in payments for mausoleum space that was never constructed at Glenview Memorial Cemetery in Ixonia.