Lobbyist Nicholas J. Bush's extramarital affair with Margaret Elizabeth Martin, a Canadian diplomat, lasted no more than six or seven months, but it proved to be a costly liaison, according to the Natural Gas Supply Association, the trade group Bush used to run.

By the time their romance ended in 1991, Bush supposedly had promised to buy Martin, an energy counselor at the Canadian Embassy in Washington, a $250,000 island home in Ontario, a mink coat, jewelry and even a lawn mower. The association has alleged in court papers that the gifts were a "quid pro quo" for Martin's promise to keep silent about what she had found at the house she briefly shared with Bush in Northwest Washington.

It was at their home on Palisade Lane, the association says, that Martin found a checkbook bearing the name of a consultant Bush was using to bleed funds from the organization. The association sued Bush earlier this year, claiming that he had embezzled almost $2.5 million using bogus consulting contracts from 1987 to 1999.

How such a scheme could have gone undetected for nearly 13 years was one of the key questions raised by the case. In an amended complaint filed in D.C. Superior Court last month, the association alleged that Martin knew about Bush's fraud but said nothing. The association also disclosed new details of how the mild-mannered 54-year-old lobbyist allegedly looted the organization.

The amended lawsuit also raised the amount of money Bush allegedly stole to $3 million and asked for an additional $5 million in punitive damages from Bush.

In addition to the phony consulting contracts, the association's latest complaint alleges that Bush said he had signed one of Washington's premier lobbying firms, the Duberstein Group, for $60,000 in 1991. He also claimed to have taken the firm's namesake, Reagan chief of staff Kenneth Duberstein, to an $802.45 dinner that year.

"It never happened," said Duberstein last week. He did not have dinner with Bush, nor did his firm do any work for the Natural Gas Supply Association, he said. The Duberstein Group avoids short-term lobbying clients and charges much more than the $60,000 Bush claimed.

Not only were the Duberstein bills phony, the association has alleged, but Bush actually had a printed pad of billing invoices from Germaine's and Lion D'Or, two of Washington's most expensive restaurants. He was reimbursed for meals totaling $2,284.75 from the two restaurants in June 1992 alone; the association says the expenses were fake.

Martin, who is now a lobbyist for TransCanada Pipeline in Ottawa, was added as a defendant to the lawsuit last month, but then dropped several weeks later. The case against her was dismissed "without prejudice," which means the association can refile the complaint. It had sought $250,000 in actual damages from her, as well as $1 million in punitive damages.

Efforts to reach Martin for comment were unsuccessful although petroleum trade newspapers have quoted her as saying the allegations are "totally false" and will be contested by her lawyers.

Bush's lawyer, William J. Murphy of Baltimore, has declined to comment on the case. Bush has not contested any of the association's allegations and has given them access to his Palisade Lane home, which is being sold by the association with all its furnishings. The U.S. attorney's office in Washington has begun a criminal investigation into the allegations.

Martin worked at the Canadian Embassy from 1990 to 1994, according to embassy spokeswoman Pam Chappell. "We are not aware of any allegation of wrongdoing or abuse of [diplomatic] status by this woman," she said.

Chappell said she knew of no request by American officials for assistance in the case.

CAPTION: Nicholas J. Bush's Northwest Washington home, now being sold by the Natural Gas Supply Association.