When Virginia state auditors first spotted money missing from the books of Fairfax City Treasurer Frances L. Cox in 1965, she wrote the $826 discrepancy off as a clerical error and paid the difference herself.

It was a seemingly elegant gesture from an elegant woman who had become an almost invincible power in the politics of the small suburban community. "It was incredible," recalled Terry Ingalsbe, a former Cox assistant who had the courage in 1981 to oppose Cox. "It seemed like every time she got into a scrape, she got out of it."

For 27 years Cox led a charmed life.

A beer company executive's wife who entered the city's politics in 1953, Cox proved equally capable of silencing her occasional fiscal critics and defeating her opponents at the polls. She became an often feisty Democratic power in the conservative, largely Republican city. In 1967, when Fairfax County prosecutor Robert F. Horan sought reelection, Cox ran his campaign in Fairfax City.

Last year city voters turned her out of office in a political upset and last week, in a fifth-floor courtroom in Fairfax County's new courthouse, Horan's top deputy drew another portrait of Cox. It was of a woman whose high fashions and lavish style were supported by funds she embezzled from the city treasury.

A jury refused to buy Cox's excuses of incompetence and found her guilty of embezzlement, recommending that she be imprisoned for 10 years.

In a trial that stunned local residents, prosecutors argued that Cox had routinely siphoned off city cash -- collected from dog tags, auto license and other taxes -- to support her tastes for expensive clothes and French resturants.

From the prosecutors came details of spending sprees at Neiman Marcus, Elizabeth Arden and Saks Fifth Avenue. Colleagues later recalled Cox's long lunches at The Alibi restaurant in downtown Fairfax City, her four-hour trips to a Bethesda beauty parlor, her expensive cars and the purchase of a mink coat, which one coworker described as costing $10,000.

"She spent a lot of money on clothes and drove around in a Cadillac," said ex-mayor Frederick Silverthorne, a longtime adversary. "She goes first class; she's a smooth operator."

Investigators traced only $24,994 in missing city funds directly to Cox but said they found cash deposits totaling at least $200,000 in Cox's four private bank accounts. This, city officials theorized, went to support a life style that prosecutors said would have strained Cox's $41,200-a-year salary.

"She spent most of the cash ," said Fairfax City Deputy Sheriff Sam Ellis, noting that most of the payments went to staggeringly large monthly payments to American Express and her favorite clothing stores. "There were no major purchases of any kind."

Opponents had frequently accused the 56-year-old former treasurer of incompetence and a tyrannical managerial style but for many, the evidence of wrongdoing came as a surprise. "I was shocked," said former mayor John H. Rust Sr., who had worked with her in City Hall and whose son was her defense attorney. "It's still very hard for me to accept."

John H. Rust Jr., her lawyer, said an appeal was likely. His client was ordered jailed after the verdict and is scheduled to be sentenced Oct. 15.

Cox's political career dated from 1953 when she was appointed clerk of what was then the Town of Fairfax. By the end of the decade she had been appointed treasurer, a post that in 1961 became an elected office when the community opted for city status. She went on to win five successive four-year terms, losing finally in a three-way race last year.

"Mrs. Cox wielded considerable political power within the Democratic Party and the city," said Ray M. Birch, whose victory over Cox in 1981 triggered the investigation of mismanagement of her office.

On the campaign trail, Cox was known for her outgoing manner and her ability to work a crowd. "I will have to say that she could be the most charming person that ever was," Ingalsbe said. "She could be the most gracious hostess. She was an excellent politican: that's all there was to it."

Some of her fellow workers at the red brick, colonial-style City Hall remembered another side. "She was unreasonably demanding," said George Thomas Lumpkin, an assistant city treasurer who resigned a year ago. "People felt they could never do anything right."

Several former colleagues said that Cox ruled her office with an iron hand, refusing to let her employes handle the mail or open the office safe. Her own methods of bookkeeping became increasingly irrational and contrary to most sound accounting practices, they said. "There were demands made on us to try to read her mind," said Lumpkin.

As a result of these and other frustrations, turnover among Cox's employes was high.

Those who dared challenge Cox, particularly in her last years in office, said they ran the risk of becoming the target of vindictive attacks. In the early 1970s, Cox threatened to sue Michael Lewis, then the city's acting comptroller, over a memo he had written criticizing her operations, according to Lewis.

Last year, Cox filed a lawsuit against John Smith, a part-time employe, who had initiated an abortive recall campaign to oust her from office. That suit, accusing Smith of libel, was dropped after Smith, a 67-year-old retired federal employe, died of a heart attack. His widow, Margaret, filed a $1.5 million suit of her own against Cox yesterday, accusing the former treasurer of launching a campaign to "harass and humiliate" her husband.

By her last term, Cox was fighting an uphill battle against the mounting evidence of her mismanagement. A 1978 audit showed that hundreds of thousands of dollars had been misclassified, charges that would be repeated in a series of successive audits.

Yet because of her Cox's stature as an independent elected official and her accumulated clout, the Fairfax City Council was reluctant to challenge the treasurer or to force her to make needed improvements. "People didn't want to tangle with her," Birch said. "The council was hoodwinked; the people were hoodwinked."

The seriousness of the problems in the treasurer's office prompted Ingalsbe and Birch to challenge Cox in 1981. In his campaign, Ingalsbe, a 28-year-old CPA, lambasted his former boss for leaving undeposited checks lying around her office, sloppy procedures that he charged cost the city an estimated $25,000 a year in lost interest.

"You had to get ugly," recalled Ingalsbe, who finished third behind Birch and Cox, "You cannot be a nice guy and criticize someone who has been there for 27 years."

Silverthorne, who in 1978 lobbied the council to demand reforms in the treasurer's office, said he ran into a backlash when he criticized Cox. "I was amazed," he said. "People don't want bad news. People would say to me, 'The city has a black eye already. Why do you have to drag this out?' "

After the verdict, Silverthorne believed he had been vindicated in his four-year effort to change the treasurer's office. "People didn't want to think anything was wrong," he said "But, boy, there was plenty wrong."