Viola R. Lutz fled to this bayfront location on Maryland's Eastern Shore in 1973, after government housing and health inspectors found hundreds of violations in her Washington foster care home for the aged.

For seven years, she and her charges lived here in the shadow of the Chesapeake Bay Bridge, beyond the reach of regulators. Neighbors complained about conditions. Authorities said they were powerless to act, even when in 1977, one of her residents -- a suicidal former nun -- waded into the cold waters of the Chesapeake Bay and drowned.

But in late February, amidst escalating reports of inadequate care and supervision, filthy living conditions and overcrowding, Viola Lutz was arrested for operating a foster care home without a license. In addition, four neighborhood youths, some of whom had helped her with odd jobs, were charged with assaulting one of her residents.

Through it all, the sudden unwelcome glare of publicity, the visits by officials and reporters, the surveillance by suspiciious neighbors, Lutz, a platinum-coiffed woman of 72, professed her innocence and her competence to care for the 10 or so cast-off elderly people she calls "my family."

Her residents, whose pensions and trust funds pay their room and board, include a 1924 Annapolis graduate, an adoptive relative of a former Maryland Court of Special Appeals judge and the brother of a prominent publisher of a Washington area real estate directory service. Several of the residents are former mental patients of St. Elizabeths Hospital in the District and have lived with Viola Lutz for years, here and in Washington.

"I think my people all like me and I like them," she said in an interview last week. "All the people's families are not interested in taking the people away, and the people themselves are not interested in going. I never was a quitter, sir. I don't believe in letting people make me run."

The old people sometimes "get lost," she said. One in particular wears a beret and a sweater and is "the cutest thing you ever saw," she said. He was found in a confused state New Year's Eve by a neighbor more than a mile away. "All he said," recalled the neighbor, John F. Couthirt 3d, "was, 'It's terrible to be lost, it's terrible to be cold.'"

From the nearby Kentmorr Marina store, the elderly men in her care can be seen foraging through the trash dumpster four or five times a day. "It's a sad situation just to see it," said proprietor John Pepe.

The alleged "torture" of one of her charges by neighborhood youths included slapping the elderly man in the face with a piece of surgical hose, sanding the soles of his shoe with an electric sander, and setting his shoelaces on fire, according to court papers and neightbors. "I only saw one mark on his hand," Viola Lutz said. "I imagine the kids were teasing him."

There were other disturbing reports: moldy food, roach-infested kitchens, residents defecating in their clothes and on the floors. Viola Lutz denies these reports. She attributes the complaint to "disgruntled neighbors" and others who bear her ill.

Over the past week, neighbors say they have seen as many as eight truckloads of garbage and debris hauled from the Lutz properties, the arrival of carpenters and cleaners and the rare removal of large loads of laundry. Lutz said the trash came from dismantling a porch and that the home improvements under way have been long planned.

Viola Lutz bought her first house here in 1957, when Kentmorr was just a few summer homes and the marina. Now, there are some 50 houses, many of them imposing brick and frame buildings occupied by year-round residents who commute to jobs in Washington, Baltimore and Annapolis. Lutz acquired two more cottages here in 1976 and 1977 and lives in a large white pillared house she bought last year for $95,000 in cash, according to land records.

In the beginning, Lutz -- a one-time Washington real estate broker with a Mount Pleasant mansion -- brought the elderly people here summers only. They spent the rest of the year at her Washington facility, the entire fourth floor of Park Towers, 2440 16th St. NW.

"It smelled like Shanghai on an August day," recalled the D.C. fire inspector who was instrumental in citing her for 511 health and housing code violations.

Insisting that foster care homes should not have to meet city standards, Lutz closed the operations, which had housed some 50 persons, 14 of them from St. Elizabeths. She then moved to the Eastern Shore.

In 1975, a Queen Anne's County zoning examiner said Lutz could not keep the old people at her Kent Island property. An appeals board overruled that, allowing her to run a foster home if it was licensed by the state. She chose to avoid licensing and regulation by promising to have fewer than four unrelated persons in each house.

County and state officials, seeking to inspect her property and interview her residents, were turned away by Lutz. "We had no jurisdiction," the officials said.

Then, in March 1977, neighbors rescued Margaret Griffin, 64, a former nun, living in a Lutz house, from the Chesapeake Bay. A week later, the woman walked into the bay and drowned.

"The lady was suicidal," Viola Lutz said last week. "She talked about it but I didn't believe her."

After the drowning, county health officials wrote to Lutz, saying they were "not satisfied with the level of care these individuals are now receiving." They encouraged her to bring her residents to a county-run socialization program for the elderly in Centreville.

"We don't go down there for that kind of silly stuff," Viola Lutz said. "We might go out for dinner and drink beer. Sometimes we have a party."

Besides each other, she said, her residents have several dogs to keep them company, six according to the neighbors who allege that at least one of the pets is vicious. "Everybody's got their little dog to love," Lutz said.

Michelle, a Chesapeake Bay retriever, often accompanies 81-year-old Walter Lautenbach as he rummages through the trash dumpster. Lautenbach lives in a yellow frame cottage with John Peter Lusk, a man in his 50s who allegedly was assaulted by the youths.

Across the street, in what neighbors call "the pink house," live two men and three women. There's the Naval Academy graduate; a former English teacher at Washington's Woodrow Wilson High School who is a constant pacer; a nearly blind woman who rarely leaves her chair; Victoria Hamilton, the former judge's relative who helps with the cooking, and Joe Tasonis, 72, a stout, white-haired man with a faint New England accent.

"We're all happy with Mrs. Lutz, have been for years," Tasonis said. "There's been discipline, just like any mother, but no harsh stuff. She knows how to run these places. We're got a happy set-up here, just like one big happy family."

The large wood-paneled living room has an old piano, a color television, a stereo and a picture window view of the Chesapeake Bay. Bridget, a barking poodle, is also a fixture here.

"While the pink house is not paradise," said former Maryland judge Alfred L. Scanlan from his Washington law office, "Victoria has flourished there. She called me last night and asked if she could stay with Mrs. Lutz. tIt's not always the big, fancy institutions that produce the best results."

"I haven't been there," said Rufus Lusk Jr., whose brother was allegedly tortured by teen-agers. "We've thought very highly of Mrs. Lusk for a very long time. I thought my brother was her pet."

In addition to the elderly people, three teen-age girls had lived here with Lutz. According to neighbors, they partied unsupervised in a travel trailer next to the pink house. The girls, from Montgomery County, were removed from the Lutz home last week b y Queen Anne's officials.

Those same officials are now considering whether to seek court permission to remove the old people as well, under a 1977 state law designed to protect abused adults. "It's not a light matter to take such action," said William Wise, the county's social services director. "However, we're into it, cognizant of matters not being what they should."

Lutz goes to trial March 10, facing fines of up to $1,100.

"Well, honey, this is just something that happens," said Viola Lutz."We'll straighten things out."