Virginia's Democratic lieutenant governor candidate, Richard J. Davis, likes to tell how, as a 7-year-old child of poor Catholic parents, he peeked through a keyhole of his Portsmouth home to see white-robed Ku Klux Klansmen burning a cross on his front porch.

"I guess that's why I wanted to try to help right some injustices," says Davis, who today uses the story to help shape his political persona.

The often-told vignette apparently is intended to remind listeners that Davis, a 60-year-old, ruddy-faced, white-haired former Portsmouth mayor, lived with poverty and discrimination, and thus shares a bond with those at the bottom of society. But as a self-made millionaire today, Davis also tries to convey a sense that he shares a bond with those at the top -- making him a natural broker of the public interest.

It was a successful image in Portsmouth, where as mayor Davis built a powerful coalition of businessmen, blacks and labor leaders that reshaped the face of the dirty, deteriorating industrial town of 110,000. It is also the image that helped Davis rise to chairman of the state Democratic Party and win his party's nomination for lieutenant governor.

"He has a real ability to put people to work on a problem so that it comes out as a joint solution," says Helen Jones, who learned that lesson in the mid-1970s when Davis named her to a Portsmouth budget commission only weeks after she had castigated him publicly for planned budget cuts. "It becomes partly their effort, and they can't come out against their own work."

Richard Davis is a negotiator, a horse trader, a conciliator, a man who has made things happen by sharing the pie with others. He also is the most liberal of all Virginia's statewide candidates, although there has been little discussion of issues in the race. He is reserved, his speeches genial and uneventful.

"A real nice guy," is how Davis' wife, Martha, describes her husband. "But sometimes he can be real boring, you know what I mean?"

But if Davis is sometimes dull, he is always shrewd. Davis' association with the wealthy father of his first wife eventually made Davis one of Portsmouth's richest men. His personal fortune is conservatively estimated at $1.7 million. He later used his elaborate network of business friends to become Portsmouth mayor. And after becoming state chairman -- in part because of his wealth and that of his associates -- he parlayed his new connections with local Virginia politicos into the lieutenant governor's nomination. He also has not hesitated to wage a very personal campaign against his opponent.

Davis is a man who seems always to look ahead to the next goal, cautiously laying the necessary groundwork, always making friends in the proper places, always willing to seize momentary opportunity. He went from businessman to mayor to state party chairman to lieutenant governor candidate in seven years. Today, he even looks ahead to becoming governor some day.

"I think every person who ever lived in Virginia would like to be governor," he says, "and I think I'm not different from all the rest."

Shouldering through a crowd of admirers at a $500-a-plate dinner in Norfolk, his pipe clenched firmly in his teeth, Davis is the picture of the good ol' boy of Virginia politics: Stocky with a slight paunch, a bulbous nose and meaty jowls, dressed in a tailor-made, pin-striped suit. Every businessman gets a warmly growled greeting, every wife a kiss.

"And how are things at the Chamber, Robert?" he asks one Tidewater industrialist. "I'm afraid I haven't seen much of y'all since the campaign started."

The style and viewpoint of Dick Davis stand in stark contrast with those of his youthful, conservative Republican opponent, State Sen. Nathan H. Miller, 38. Davis supported George McGovern, Jimmy Carter and Henry Howell, all of whom were opposed by the hordes of conservative Harry F. Byrd Democrats turned Republican. This despite Davis' efforts to cast himself as the man who turned the state Democratic party to the right. Miller, on the other hand, supported Richard Nixon, Gerald Ford, John Dalton and Ronald Reagan.

Davis also resembles the caricature of a courthouse pol, while Miller's finely chiseled good looks conjure an image of Pepsi commercials rather than back-county political pig roasts and crab fests. And as Miller exudes ambition and youthful enthusiasm, Davis is a passionless, soft-spoken man. He is, however, not without ambition.

"Look at it this way," says a Portsmouth supporter who would like to see Davis become governor. "Why else would he be doing this? He sure doesn't need the money."

Richard J. Davis grew up in a poor Irish neighborhood, where his mother ran a rooming house for the men who worked in the Portsmouth shipyard. At Christmas, charity workers would deliver packages of food. His father, a lawyer, died when Davis was 7 years old. As a boy, Davis delivered newspapers, worked in a movie theater and sold peanuts at Portsmouth's minor league baseball games for a nickel a bag. When the peanuts ran out, he and his enterprising pals would crawl beneath the bleachers, collect the nuts that had fallen and sell them again -- at the same price.

But Davis and some of the other boys in the riverfront crew did very well. Davis got rich and another of his boyhood friends, William B. Spong, grew up to be a U.S. senator -- and Davis' law partner. "It seemed like all of them were racing around all the time," says Spong's mother Emily, 81. "They all turned out to be judges, you know?"

Davis was voted the student most likely to succeed in high school. He worked his way through college and law school and spent World War II as a marine in the South Pacific, returning to Portsmouth to marry the daughter of Portsmouth's largest builder of homes and shopping centers.

His father-in-law helped Davis set up a mortgage banking company to broker the loans on the family's real estate deals, and before long Virginia Investment and Mortgage Co. was booming. Davis and his first wife were divorced in 1965, but today his share of the investment company is valued at $1 million.

Davis didn't stop there. In the next three decades, he built an extraordinary web of businesses and partnerships. He has substantial holdings in radio and television operations in five states, including stations in Norfolk and Winston-Salem, N.C.; interests in several real estate partnerships, a propane gas company, a bank, a data processing firm, a recording company, a law practice and the triple-A Tidewater Tides baseball team.

His strategy: Court "OPM" -- other people's money. Gradually, Davis put together a dizzying tangle of overlapping investors.

Davis' fellow investors today include some of Tidewater's most powerful men: His law partner, former senator Spong; a state highway commissioner; a former congressman; several Portsmouth city councilmen; a popular local disc jockey; and Herbert Bangel, chairman of the Portsmouth Redevelopment and Housing Authority. Davis brought men together for their mutual financial advantage.

"Dick is the kind of guy," says Tim McDonald, president of Davis' television interests, "who believes that the only good business deal is one where there are all winners and no losers."

So in 1974, when Davis and a small group of local businessmen decided they would run a team of candidates for city council of Portsmouth -- a shipyard gray, blue-collar community that had made little progress against the ravages of urban exodus and decay -- Richard Davis seemed a natural. His friends and business partners were the most influential in the city. And Davis, although credited with having a pleasant demeanor, was not a man most wished to cross needlessly.

"You don't say much against him around here," says Portsmouth City Councilman Jack Barnes, a longtime political rival who says Davis' local network of associates is akin to a political machine. "He has influence in the business community . . . You might not want to say anything against him if you were trying to get a loan, or if you were a little late making the payments on a loan you had."

Davis won and was elected mayor by the council. Later, he was elected mayor in a citywide election. Whether it was because of Davis' influence, as Barnes suggests, or because Davis is the master builder of coalitions, as McDonald says, there is much applause and little criticism of Davis' tenure.

"Without any authority to do it, and with only a talent for persuasion, he was able to get things done," says G. Robert House, Portsmouth's city manager. "You can call it personality. You can call it leadership. Whatever it was, it worked."

The raging issue in Portsmouth, as in other Eastern cities, was urban decay. Its streets were lined with dilapidated, 100-year-old wood frame houses, its downtown blighted with tattoo parlors and honky-tonks. Rotting warehouses hulked along the waterfront. More than half of Portsmouth's land is in military installations and institutions that don't pay city taxes, and the need for an expanded industrial tax base was dramatic.

Under Davis and the new businessmen's council, $30 million in new industry moved to the city in six years -- six times the amount of the five years before. A terrible slum only a few blocks from where Davis grew up was torn down and replaced with federally subsidized town houses. The empty warehouses on the waterfront were razed, and a new city hall, apartments and offices were built.

Mount Hermon, a crumbling black, working-class neighborhood where most people owned their own homes, was completely renovated -- in a way that left the ownership of the small homes with most of the original occupants. It was Davis who put that deal together, playing the go-between among bankers, builders, federal bureacrats and local residents distrustful of the plan.

The Mount Hermon project was vintage Davis: Businessmen made money, labor unions got jobs, financially strapped minority residents got new or rebuilt homes with the help of low-interest loans and federal assistance.

And Dick Davis got the credit.

"People listen to Mr. Davis," says Sylvia Y. Parker of Mount Hermon. "He seems to care about people and their needs. The folks here would do anything for Mr. Davis."

There are critics of Davis in Portsmouth: He is too powerful, has his fingers in too many pies, his numerous business interests simply make some people nervous. But these are only whispers.

"There was a feeling that Dick Davis was a dictator, that he ran things with a strong hand," says Barnes, one of his critics. "And he did, to a certain extent. But if it was a strong hand, it was a soft strong hand."

When a man makes good in politics, other men make good with him. In the case of Davis, one of these men was Bobby Watson, a 25-year-old political whiz kid from Portsmouth who helped run Davis' first citywide mayoral campaign in 1976. Watson is now a campaign stategist who has worked not only for Davis, but Carter and Democratic gubernatorial candidate Charles S. Robb. It was young Bobby Watson who took Davis from the mayor's office to the lieutenant governor's race.

In the winter of 1978, Lt. Gov. Robb's lieutenants -- Watson among them -- were drinking in The Tobacco Company, a Richmond nightspot, and talking about who should be state party chairman. The Democrats hadn't won the governor's seat since 1965, and the new chairman had to have a conservative image. He needed connections with the Democratic money men. He needed personal wealth. He needed time to travel the state, visiting every backwater county seat and county chairman.

Bobby Watson suggested Richard Davis -- and no one had ever heard of him. So Watson ticked off his assets: Money, rich friends, conservative style, a hard worker.

"We decided to go like gangbusters," recalls Laurie Naismith, a Robb aide.

The Robb forces telephoned many of the party's 189 state central committee members and donned red Davis baseball caps -- a Watson idea -- at the state committee meeting.

Davis won the chairmanship. And he and Watson began to log the first of 35,000 miles they would put on Watson's Pontiac Phoenix, which Davis had helped him buy from a business friend at a low price. (Davis also paid Watson's $17,000-a-year salary out of his pocket.) Together, they visited virtually every county courthouse in the state.

It was in the Pontiac Phoenix that Watson and Davis began calculating the potential of all of this handshaking: A man could make enough friends to run for statewide office. A close Davis friend, business partner Herb Bangel, privately collected $30,000 from Tidewater developers, bankers, lawyers and real estate operators, and with Robb's tacit approval Davis kicked off his campaign for statewide office last fall.

But with all the talk of the proper conservative image, the fat bank account and the well-heeled friends, Davis' relatively liberal credentials seemed to have been overlooked.

Davis favors letting public workers meet with employers to discuss job conditions, the extension of the federal Voting Rights Act, limited use of Medicaid dollars for abortions, repeal of the regressive sales tax on food and prescription drugs and the Equal Rights Amendment. He opposes the death penalty and would support tighter restrictions on handgun purchases.

"I'm fiscally conservative, but in the field of rights, dignity and equalities, I think I'm to the liberal side of center," Davis says.

So far, however, it has not been Davis but Miller who is the issue in the race. Early in the campaign, The Washington Post reported that Miller had received approximately $250,000 in legal fees from the state's electric cooperatives, while writing and voting for legislation that gave them tax breaks and business benefits totaling about $13 million.

Davis has hammered at that, bringing it up again and again, always in that genial manner that seems so absent of malice, while still taking the gloves hard to the midsection: "I'm not going to pass judgment on Nathan's actions, because Nathan has to do that himself," he told the Richmond Jaycees, "but I sincerely call it to your attention."

Davis has done the same with the only conservative issue going for him: Nathan Miller was a conscientious objector. Davis mentions that frequently and will even add that he hit the beach with the Marines six times in the South Pacific.

The not-so-subtle juxtaposition of phrase has rattled Miller's strategists: "Personal shots", "small and undignified personal attacks" , "attacks on Miller's religious beliefs", they have fired back. The result has been that the "sometimes boring" Richard Davis is waging the most lively lieutenant governor campaign in years. The Davis race could cost as much as $350,000 -- almost twice what Robb spent to win the office in 1977 in the most expensive lieutenant governor's race in Virginia history.

Richard Davis is a man of odd contrasts. He is a wealthy man who does not always share the standard ideology of the wealthy. He rarely tells jokes, although he laughs loudly when others tell them. He has few close friends, but is well liked by many. He is reticent and private, but is criss-crossing the state attacking and exposing himself to attack in return. He claims never to plan ahead, to always take what comes as it comes. And yet, Davis always seems to be going somewhere one step at a time, the destination known only to himself.