IN HIS suite on the top floor of the Madison Hotel, down the hallway lined with pink azaleas in full bloom and past the armed guards, 28-year-old Sheik Mohammed al-Fassi is holding court on a warm May afternoon.

Seated to his left on a couch is one of his wives--the one who isn't suing him for divorce and $3 billion. To the right of al-Fassi sits the ambassador from El Salvador--the sheik wants to donate some money to that country's poor. Helping the poor is a habit he's acquired lately.

"I receive thousands of letters every day," says al-Fassi, who has been known to send $50 to complete strangers who write him with even the most benign hard-luck stories. "And I'm using all my power to help people--Moslem, Jewish, it doesn't matter. I feel like I'm helping people, and it gives me satisfaction."

Seated in a cluster near the couch are a half-dozen acquaintances who came to watch on videotape the latest example of his largess, a gift of $50,000 to the District of Columbia summer jobs for youth program. On the television in the center of the room, al-Fassi and friends see a replay of a ceremony at the District Building earlier that afternoon:

A motorcade of black limousines with a police escort screams through Washington streets . . . In Mayor Marion Barry's office, the sheik presents his check and asks for continued friendship between his homeland, Saudi Arabia, and the United States, as reporters try to figure out who this out-of-season Santa Claus is . . . A quick shot of the sheik and his entourage entering an elevator . . . Then more motorcade footage as the sheik returns to his hotel suite.

Sheik Mohammed al-Fassi is a slightly built man, with soft brown eyes and a receding hairline. He talks quietly as aides lean toward him at the arch of his thick eyebrows. While the videotape runs, he keeps an arm around his third wife (the first two are in the process of divorcing him) and divides his attention between the ambassador from El Salvador and the television screen. A waiter arrives with a tray of drinks for everyone: grape juice on the rocks.

Later, the sheik hosts a feast of Middle Eastern cuisine for about 30 acquaintances at a restaurant, Bacchus, that he reserves for the night. No liquor is served, and al-Fassi chats in Arabic and English with friends seated in his immediate vicinity. Even though his English is more than adequate, he asks a friend to read his toast which heaps effusive praise on his guests. He seems almost an interloper at his own dinner party.

The toast is recorded by the videotape crew al-Fassi hired to follow him during his visit to Washington. Then it's off to Desiree, a private disco at The Four Seasons Hotel, where al-Fassi watches patrons dance. Apparently, when you're one of the world's richest young men, memories are made of this.

America first noticed Sheik Mohammed al-Fassi in 1978, when he paid $2.4 million in cash to buy a 38-room mansion in Beverly Hills, just down Sunset Boulevard from the Beverly Hills Hotel. He infuriated his neighbors and stopped traffic by painting the white stucco home mint green, replacing the classic red tile roof with copper and garishly painting the genitalia on the Italian statuary surrounding the 3 1/2-acre estate.

Al-Fassi's extravagant life style was made possible by his sister, Hend, who seven years ago put the Al-Fassi family in the money by fortuitously marrying Prince Turki bin Abdul Aziz, brother of Saudi Arabia's King Khalid and the former Saudi deputy minister of defense and aviation.

As Prince Turki's brother-in-law, Mohammed al-Fassi enjoys access to both wealth and prestige, even though the prince, according to "The House of Saud" by David Holden and Richard Johns, resigned his post in 1978 because of a "partiality to alcohol" alcohol is forbidden by the Koran and because his marriage to Hend was not held in high regard by the royal family.

That, apparently, doesn't matter.

"Money-wise," says al-Fassi, "my life would not be different because the al-Fassi family is rich, too."

Which is a good thing for the roughly 100 people who live and travel with him. At one point, as many as 150 of Hollywood, Florida's 290 police officers worked part-time guarding al-Fassi at the Diplomat Hotel, where he lives while he oversees renovation of three mansions on South Florida's posh Star Island.

His daily room bill at the Diplomat reportedly is $25,000, then there's another several thousand dollars a day for security, and untold thousands for his entourage's salaries, clothing, medical care and other routine expenses. That doesn't take into consideration al-Fassi's expensive tastes for luxury goods and collectibles of nearly every description.

Al-Fassi's income apparently consists of an allowance from the Saudi Arabian royal family and commissions from a company al-Fassi and his father began that imports medical supplies to their homeland. All al-Fassi will say on that subject is: "We manage to find money all the time."

It was al-Fassi's all-cash purchase of his mansion in Beverly Hills four years ago that created the kind of furor that troubles those sensitive to the stereotyped image of free-wheeling, free-spending Saudis.

After the Los Angeles press labeled the estate "a dirty Disneyland" and the city council vowed to take up the matter, al-Fassi held a press conference. He gave no reason for his unusual renovation, but did applaud the "freedom of the United States" and asked that he be left to his privacy.

"I would like to walk down the street like any other person," al-Fassi told reporters.

But in the past four years, al-Fassi has demonstrated that his life isn't like any other person's:

* While still married to his first wife, Italian-born Dena al-Fassi, the sheik wed an aspiring American actress, Victoria Sosa, who, only weeks later, left him and charged in a lawsuit that he had "bitten her about the entire body," beaten her, and held her prisoner. The suit was dropped after an outof court settlement.

* During the final stages of his Sunset Boulevard mansion's renovation, and before al-Fassi moved into it, the home was destroyed by arson on New Year's Day 1980. Neighbors chanted "Burn! Burn! Burn!" as flames leapt from the windows. The pool, guesthouse, kennel and mosque on the property were not touched by the fire. Also spared were many of al-Fassi's treasures that were stored in the mansion; police later learned some had been stolen before the fire to be resold in a complex art-insurance fraud case involving some of the sheik's former employes.

* For almost a year, al-Fassi and a steadily growing entourage roamed the globe, moving from London to Monte Carlo to Saudi Arabia before finally settling in the Diplomat Hotel in Hollywood, Fla. On his return to the United States, he faced lawsuits for allegedly failing to pay debts in Los Angeles.

* And today al-Fassi faces suits from former staffers alleging a variety of abuses at the hands of al-Fassi or members of his family. A Silver Spring resident, Gloria Jean Banks, claims in a lawsuit that she was beaten by al-Fassi and kept against her will in Saudi Arabia after being hired to work as a nursemaid to the children of al-Fassi and his sister.

Soon after her arrival in Saudi Arabia, Banks contends in court papers that al-Fassi ordered her to kiss his feet. She refused and says she soon learned that other members of the staff were being kept in the royal household against their will. Her request to return to the United States, alleges Banks, led to imprisonment and beatings. Al-Fassi denies the allegations, and the case is in the discovery stage in U.S. District Court here.

Additionally, two Sri Lanka baby-sitters hired by al-Fassi fled in tears to a Miami police station last December claiming they were being held by al-Fassi against their will and could not leave the country because he held their passports. Representatives of the sheik denied the allegations, returned the women's passports, and arranged for transportation back to Sri Lanka. As a result of the incident, Hollywood, Fla., police were ordered to stop working during their off-hours for al-Fassi.

Whatever his labor problems might be, there is no debate that the young sheik has a passion for posssessions that makes some of the careless characters of F. Scott Fitzgerald's novels look like window shoppers at a five-and-dime.

When he lived in Los Angeles, al-Fassi would spend $20,000 buying a few suits in an afternoon stroll down posh Rodeo Drive. (William Nealy, a former bodyguard, recalls that al-Fassi couldn't wait to take home the clothes, so he insisted alterations be made while he waited. "They never told him 'No,' " says Nealy.)

Al-Fassi collected, among other things, shoes, musical instruments, tapestries, model ships, watches, lighters, ceramic sculptures, jukeboxes and art.

He collected it all in big gulps, sending agents around the world to buy in lots whatever particular item was his current fancy. One of al-Fassi's employes said he once paid $250,000 to buy the contents of a model ship museum in Belgium.

Al-Fassi refuses to discuss the subject of his wealth, but reports have placed it as high as $6 billion.

And it is for exactly half that amount that his first wife, Dena, sued him late last year through her lawyer, divorce specialist Marvin Mitchelson. Last February in Los Angeles, a judge granted Dena al-Fassi temporary custody of the couple's four children and $75,000 for three months' temporary support.

That decision did not--and still does not--sit well with al-Fassi.

"Everything was clear," al-Fassi says of his marriage to Dena al-Fassi as his voice rises in anger. "She was told what religion she followed, she knew what would happen. She knew! I did not hide anything!"

Moslem law permits a man four wives, provided he is in a position to offer all his wives equal treatment. The husband also is permitted to keep the children should he decide to divorce. Al-Fassi feels betrayed by his first wife's refusal to accept that condition.

"Her attorney is either searching for publicity and fame or some material status, but he is going about it in the wrong way," says al-Fassi of Mitchelson.

Coincidentally or not, days after the California court granted $75,000 and temporary custody of the four al-Fassi children to Dena, Mohammed al-Fassi decided to vacation in the Bahamas. His children and third wife, a Saudi woman known as Sheika Abtisham, accompanied him.

The command to vacate his headquarters at the Diplomat Hotel was given just after midnight and set in motion a frantic evacuation involving family members, bodyguards, cooks, aides and nursemaids who were permitted 20 minutes to pack for an unknown destination.

"You learn," said one of al-Fassi's veteran bodyguards of the sudden, unexplained order, "to stop trying to figure these things out."

In Miami, two chartered Lear jets awaited the sheik's whim. Other members of his entourage followed aboard his family's 110-foot yacht. In Nassau, al-Fassi took over the ninth floor of the Paradise Island Hotel at a weekly cost of at least $37,000. His British and American bodyguards challenged anyone who stepped off the elevators and rose in deference to "His Excellency" when he passed them.

Hotel executives scurried to meet al-Fassi's particular demands: limousines and maid service around-the-clock; facilities for his cooks; and for some of the rooms, fresh flowers and video recorders.

Day after day, al-Fassi's four children, aged 2 to 5, were seen wandering the hallways in pajamas, trailed anxiously by nurses in pink-striped uniforms. For much of February and March, al-Fassi stayed in an exile of his own making, in the best tradition of such earlier Paradise Island guests as Howard Hughes, Robert Vesco and the shah of Iran.

Attorney Mitchelson and Dena al-Fassi made one foray to Nassau, in the hopes of retrieving--or at least thwarting the further removal of--the al-Fassi children. A shoving match between Mitchelson and al-Fassi's security men ensued in the elevator of the Paradise Island Hotel. A Bahamian court eventually let al-Fassi keep custody of his children, but granted their mother vistation rights.

Al-Fassi never talked with his estranged wife face-to-face in Nassau. In fact, he rarely left his suite, visiting neither the casino in his hotel nor the turquoise sea and white beach below his windows.

One afternoon he took the Bahamian prime minister, Lynden O. Pindling, for an afternoon cruise and lunch aboard his yacht. Al-Fassi's Korean crew lined up to greet the prime minister as a band on the tailfin of the huge boat struck up "This Song's for You." Another afternoon, al-Fassi made a brief attempt at sport fishing--he wanted to catch a shark, but a large tuna broke al-Fassi's line and his chartered boat headed back to port.

For a month in the Bahamas, al-Fassi seemed relatively safe from the pursuit of his wife and reporters anxious to learn details about a life style that lawyer Mitchelson had termed "so opulent, it's almost obscene." He was far enough away from the United States that the arm of the law could not reach him should one of the pending civil suits against him take an adverse turn. For a moment, amidst the palm trees of Paradise Island, Sheik Mohammed al-Fassi could put behind him whispers of a bizarre life that seemed devoted mainly to the pursuit of spending money.

Dena al-Fassi was born the daughter of an Italian coal miner, though her family moved to Belgium during her childhood. She was a 15-year-old shopgirl in London when Mohammed al-Fassi, then 19, fell in love with her dark good looks and promptly flew to Italy to ask her parents for her hand in marriage. She converted to Islam, and the couple was wed in a Moslem ceremony in Saudi Arabia and, later, at a civil one in Los Angeles in 1976.

Dena al-Fassi remembers that life was relatively simple when she and her husband first moved to California in the spring of America's bicentennial celebration. They rented a $200-a-month apartment in West Los Angeles. She registered for classes at a Catholic high school; he enrolled in a small, private business school.

But the simple life didn't last. Several months after his arrival in Los Angeles, al-Fassi met Jorge Ciccone, a native of Uruguay, who helped al-Fassi buy some videotapes al-Fassi's sister had requested.

Ciccone is a slight, darkly handsome man with an eye for an opportunity. He became, by his own description, al-Fassi's Svengali, "the first man he saw when he woke up and the last he saw when he went to sleep."

For nearly three years, Ciccone served al-Fassi, helping him to buy (and often, by his own admission, receiving kickbacks for buying such items as) cars, pedigree dogs, videotape recorders and other luxury consumer items for al-Fassi's wealthy relatives in Saudi Arabia.

In a book proposal Ciccone recently wrote, he described himself in the third person as "well-equipped with the cunning and assertiveness that Mohammed lacked. In the extraordinarily close relationship that developed between the two men, Jorge played every role, controlling the younger man by skillfully playing on his timidity, shyness and lust for expensive objects and compliant women . . . Jorge knew everyone had a price, and Mohammed was willing to pay; what most people would see as impossible, Jorge would succeed and be rewarded."

(Al-Fassi will not discuss Ciccone or his claims. "I would make him famous," says al-Fassi.)

With his father, al-Fassi founded a trading company with offices in Los Angeles that served as a middleman to sell medical equipment to Saudi Arabia. He began hiring bodyguards to accompany him to restaurants around town. He hired as his personal secretary a woman, Andi Martinez, who had been working as a baby-sitter to his children.

Martinez says she tried to curb the crazier ideas of al-Fassi and Ciccone. It was Martinez, for example, who insisted that al-Fassi not install an antique Shell gas pump in the front yard of his Beverly Hills mansion during the height of gas lines of America. It was she who struggled to organize al-Fassi's accounts and prodded him to keep up with his many bills.

"Although he always had a lot of cash on hand, he never paid with cash," recalls Martinez, who left al-Fassi's employ two years ago. "His security came from what money he had on him. Using his credit cards postponed having to pay the money. He'd have thousands of dollars sitting around the house, attache' cases full of jewelry, money and gold. Wherever he went, his cases went with him."

Ciccone still has the typed pages listing dozens of credit cards--from American Express to VISA--that al-Fassi had a bodyguard carry while he lived in Los Angeles. According to Ciccone, al-Fassi often obtained more than one of each card by applying at different banks or ordering a separate card for his trading company, he did.

"He had in his mind that this gave him status, the more credit cards he had, the more important he was," says Ciccone.

Credit cards also provided handy monthly bills.

"That meant he could call back to Saudi Arabia and say, 'Oh, I owe American Express $10,000. Could you pay it?' " remembers Martinez. "The request usually went directly to his sister, the princess. Then large sums of money would come over by wire. He'd use part of it to pay bills and then go further into debt. It was a never-ending process."

Dena al-Fassi contributed to the family's profligate ways. She collected antiques, music boxes, ceramic shoes and dolls and says she owned 20 fur coats and every model of Rolex and jewel-encrusted Piaget watch manufactured. She remembers routinely spending $100,000 for designer gowns in Paris, where al-Fassi had a representative charged with keeping him up-to-date on the latest fashions. The al-Fassis stashed much of their treasures in storage vaults around the world.

It was while Dena al-Fassi was pregnant with her second child in 1978 that her husband met Victoria Sosa, an aspiring actress he spotted across a nightclub floor in Los Angeles. Jorge Ciccone said he sent champagne to Sosa's table, and it was only a matter of time before she and her sister became frequent companions to not only al-Fassi, but also his father, Shamsaddin al-Fassi, who often visited his son in California.

Eventually, in the late summer of 1978, Ciccone, at al-Fassi's request, played the role of a minister and "married" Sosa and al-Fassi in a ceremony at a Los Angeles restaurant. The union lasted several weeks before Sosa fled al-Fassi and filed a $10 million lawsuit claiming cruelty. But after a meeting in London between Sosa, her attorney and al-Fassi the suit was dropped, and today Sosa's attorney says neither he nor his client can discuss any aspect of her marriage to al-Fassi.

"We are in the process of getting a divorce," is all al-Fassi will say on the subject.

His marriage to Sosa enraged Dena al-Fassi. After al-Fassi had negotiated a truce with Sosa, she moved into a separate floor of the hotel the al-Fassi group occupied in London. Pregnant and upset, Dena al-Fassi left London and returned to her parent's home in Italy.

Martinez says al-Fassi dispatched her to bring back his first wife.

"She was depressed about Victoria," remembers Martinez. "But she wanted her man. We talked for an evening and the next day, and I sensed that she would come back if he came to her personally."

So in the fall of 1978, al-Fassi flew to his in-laws' home in Italy and, according to Martinez, "promised Dena everlasting love." The couple spent Christmas together in Japan with Prince Turki's family.

What did al-Fassi tell her about Victoria Sosa?

"He would not allow me to pronounce her name," she says.

Could she have taken a lover?

"We always traveled with bodyguards," she says, "so I could not have any adventures, if you want to put it that way."

To an observer, al-Fassi appears to be a modern-day Bedouin, roaming the globe, carrying his family and followers with him, plotting business deals and designing grand residences. He turns down numerous requests for press interviews, but is intensely interested in any media attention he receives.

"He was the kind of person who always wanted to do what we Americans wouldn't think was the best thing," says Andi Martinez of the sheik's years in Los Angeles. "The more they wrote about the negative, the more he did, because he thought that was the way to get famous. Everything he did to that house put an article in the paper."

Says Ciccone: "He reacts drastically to simple things he doesn't like. He doesn't care how things are, because he knows no one can touch him. That's his favorite expression: 'Nobody can touch us!' "

"The reading I have is a very complex one," says Dena al-Fassi's lawyer, Marvin Mitchelson. "It's the Arab equivalent of the Napoleonic complex. He seems to feel the law is what he says it is and has a great disdain for courts and judges and anything he doesn't think is right."

On the other hand, a friend of al-Fassi's in Miami who accompanied him during his visit to Washington earlier this month portrays the sheik as a misunderstood, "lovely, down-to-earth" billionaire.

"Before I got to know him," says Carolyn Weiss, a Miami real-estate entrepreneur, "I used to say, 'Is he a complicated person? Does he like publicity?' I found out he's a very private person, very religious and very uncomplicated. He believes if you have money and can help an unfortunate person, why not? He's not looking for reward or recognition. The Saudis feel since they've been blessed with wealth, why not bestow it?"

Al-Fassi and some of his staff arrived from Miami at Baltimore-Washington International Airport earlier this month in a chartered (at $8,500-an-hour) 707, complete with master bedroom and living room with bar. Upon landing, the sheik and Wife No. 3 changed into formal wear in the plane's bedroom and traveled by limo to the White House to attend a reception prior to a Republican congressional fund-raising party.

On al-Fassi's third day in Washington, an aide called the mayor's office to say the sheik wished to donate $50,000 to the city. Within hours, Marion Barry proclaimed May 8 "His Excellency Doctor Sheik Mohammed, S.A. al-Fassi Day" in Washington and presented al--Fassi with a key to the city at the District Building.

It was the second key to a major American city al-Fassi had picked up. Earlier this year al-Fassi received the key to Miami after he and other members of his family made large donations to local charities. And as the city of Washington did, Miami sent a police escort to fetch al-Fassi, who arrived in a motorcade of seven cars, including a magenta Stutz Bearcat with a gilded steering wheel.

However:

"I don't like publicity," vows al-Fassi. "but it is a free country and a free press." And for that reason, he says with a trace of noblesse oblige, he understands why the press is compelled to report stories that he considers inaccurate.

Consider the watershed incident, his painting of the statues around his Beverly Hills mansion.

"I saw them as plain and pale," al-Fassi explains. "I saw it as a personal touch. I can't understand why anyone would object . . . I must sometimes question (my critics') wisdom of interfering with my private life."

But interfering with al-Fassi's life is a growth industry these days. Not even his principal benefactor, his brother-in-law Prince Turki, is immune from controversy.

Last February, five Miami police officers were allegedly assaulted while investigating allegations that Prince Turki and Princess Hend al-Fassi were holding a servant as a slave in their luxurious Miami condominium. No servants were discovered, but several Miami police officers, including one who said her hand was smashed in the apartment's door, filed civil damage suits against the couple. The Saudis countersued for $210 million in damages, claiming the police were "abusive, disgusting and violent."

This spring, two State Department officials traveled to Miami, where according to a spokesman, they "were asked to express to Prince Turki the concern of the department over the situation in which he was involved and its implications for Saudi-U.S. relations, its appreciation of his position within the Saudi royal family, and its desire to assist in resolving the situation in every appropriate way."

The upshot of the meeting: About a month later the State Department granted the prince and the princess retroactive diplomatic immunity, reportedly at the request of the king of Saudi Arabia, even thought Prince Turki currently holds no position with the Saudi government.

Of more immediate concern to al-Fassi, however, is his wife's highly publicized divorce action. While she awaits the machinations of the legal system, Dena al-Fassi lives in the guesthouse behind the burned-out mansion on Sunset Boulevard in Los Angeles.

Not long ago she walked around the grounds of the estate, looking at the pool filled with debris and the peeling paint on the mosque.

"It was always in my husband's mind to have this house in the future," she said quietly. "No one builds a mosque behind their own house unless they intend to live in it."

She says her only concern is the return of her four children so she can raise them "in a normal environment" in Los Angeles. As far as Mohammed al-Fassi is concerned, says Dena al-Fassi, "He has money, he can do what he wants."