For years, the fraternal clubs here in Washington County defended the legal daily gambling that flourished within their halls by asserting that the numbers betting allowed the groups to raise funds for local charities. In 1971, they even paid for a full-page ad in the local paper saying that laws restricting them could hurt the charities.

But recent revelations in a court case that seven of the county's 22 such groups have taken in several million dollars from gambling and donated only an average of 5 percent to charity have rocked the county. Some residents said they worry that this land of apple orchards, dairy farms and Appalachian springs may gain a less bucolic reputation as western Maryland's version of Atlantic City.

The practice of numbers gambling here, in its openness and in its scope, is unrivaled in Maryland, officials said. The law allows it so long as no individual in the sponsoring organization receives any of the proceeds. In a county of 113,086 citizens, about 20,000 belong to the clubs that thrive on the legalized club gambling.

The gambling here is primarily numbers betting. Packets of five numbers are sold for $1 and pulled from glass containers known as "tip jars." Winning numbers pay up to $10 immediately or $100 after the last batch of numbers is sold. The revenue raised, their private competitors contend and the clubs have admitted, gives them an unfair advantage because it enables the clubs to charge less for food and beverages than private establishments and to pay off mortgages early or to plunk down large amounts of cash to build additions to their facilities. But there also have been allegations by politicians of skimming from the gambling, and officials privately talk of a possible grand jury probe of charges that the true beneficiaries have been a small faceless elite of club officers.

"It scares me that a few people control such magnitude of money without accountability," said Del. Paul Muldowney (D-Washington), chairman of the county's legislative delegation. "It's all cash, all in small denominations."

In one instance this year, a club officer pleaded no contest to a charge of theft and agreed to repay the Boonsboro American Legion $35,000. At another veterans post, the state Amvets commander has testified in court, money has been missing and there have been other fiscal irregularities.

The widespread publicity "certainly is detrimental to the clubs," said Doug Shumaker, a Hagerstown grocer and past president of the clubs' association. "But we have so many organizations, there's bound to be a few not up to par. It's been sensationalized, blown out of proportion."

Shumaker, still a director of the association, contends that the clubs give more to charities than has been disclosed in court. "Everyone wants to attack the clubs," he said. "We have nothing to hide."

But the disclosures of charitable donations ranging from 2.5 to 16.3 percent of gross gambling proceeds were not made willingly. Over their protests, officers of the seven clubs appeared last month at a pretrial hearing for a tavern owner and two of his bartenders who are accused of violating gambling laws by having "tip jars." The defendants have argued that the law allowing club gambling unconstitutionally discriminates against them.

The case pits Roy M. Snyder's modest Locker Room Stag Bar on West Franklin Street against the likes of Elks Lodge 378, whose sprawling building sits at the outskirts of town on several well-manicured acres. While Snyder said his blue-collar bar is virtually empty most nights, the recently enlarged Elks parking lot was two-thirds full one evening last week and some customers arrived by cab for the $3.25 broasted chicken and $3.50 lasagna specials advertised in the local paper.

What makes the cut rate possible, the clubs' critics say, is gambling, officially outlawed in Maryland but with exceptions granted by the legislature in 18 of the 23 counties. This year, a series of raids and trials, from the Eastern Shore to Charles and Montgomery counties to western Maryland, has spotlighted gambling and made it a likely focal point of the 1985 General Assembly, which convenes next month.

"I don't think the public, especially when they know how much money is involved, would want it to be completely open," said Del. Joseph Owens (D-Montgomery), the respected chairman of the powerful House Judiciary Committee. But Owens said he intends to introduce legislation to at least place limits on when gambling may legally occur.

Currently, among the counties allowing charitable or club gambling, only St. Mary's County requires an official accounting of proceeds. Here in Washington County, club gambling has been legal since 1975. The betting is continuous, lucrative and exempt from public accounting.

"It's unfair, and I'm afraid if this continues that we might have worse than organized crime up here," said Nick Giannaris, who owns the Sheraton Hotel and the Airport Inn restaurant here. "When there's that much money up here, you don't know what you're going to have."

Giannaris said he gave $50,000 to charity last year -- more than the amounts disclosed by any of the clubs. He is appalled, he said, that the Funkstown Legion post is paying cash for a $300,000 addition. "I've been in the restaurant business for 23 years, and I still have a mortgage on my building," he said.

Four years ago, a previous prosecutor went after the clubs, charging nine of them with violating the state law because they allowed gambling more than occasionally. But the cases were dropped after the Maryland Court of Appeals overturned the first conviction, saying the law does not prohibit more than "occasional" gambling, as the prosecutor and state attorney general had argued.

The current court case hinges on a police raid earlier this year at the Locker Room. In District Court, Snyder and his two employes were convicted of gambling violations by having tip jars. Snyder spent a day in jail while trying to raise a $50,000 appeal bond set for the three. And Snyder was sentenced to two years in prison, in addition to a $3,000 fine. Each of the employes was fined $1,000.

"He the judge put down 'the penitentiary in Baltimore,' with all the rest of the murderers and rapists," said Snyder, 53, still steaming.

The men appealed to the Circuit Court, where their case is being heard by Judge John Corderman, the former state senator who sponsored the 1975 law allowing club gambling in the county. Corderman directed the clubs to produce records of gambling proceeds and amounts given to charities, despite objections by the prosecutor and the clubs' lawyers.

The Hagerstown Moose Lodge 212, according to the testimony, raised $1,132,357 from gambling between May 1981 and May 1984. The 6,000-member club gave $40,928, or 3.6 percent, to charity. The Hagerstown Eagles reported gambling revenues of $403,365 in two fiscal years, of which $10,223, or 2.5 percent, went to charity. And so it went: $5.9 million in the years 1981 to 1984 for the clubs, while an average of 5 percent of that was given to charity.

"We've got Atlantic City in Hagerstown," said Ken Mackley, the attorney for Snyder and his two employes. "The only difference is in Atlantic City, they've got some controls and the city and state are getting some taxes from it."

Corderman also heard from Harold H. King Sr., state Amvets commander and a member of Amvets Post No. 10 in Hagerstown. After he took charge of gambling receipts in July, King testified, recorded profits rose from 59 percent in prior periods to more than 400 percent. He also said that $800 in gambling receipts simply "disappeared" one day. King later said he was fired from his overseer's post after he found gaps in the records of gambling proceeds.

Also affected by the Amvets gambling is George Stotler, who owns the Double T Lounge just down the street. "They have [price] specials down there I cannot meet," noted Stotler, who said his customers often leave his bar for Amvets on certain nights. "The Amvets have tip jars and gambling facilities we're not allowed. It's not a charitable thing anymore. It's big business."

The courtroom disclosures appeared to confirm the suspicions of some but stunned many others in the county. Jess Kagle, director of Washington County's United Way, said his organization plans to ask the clubs for more money next year, now that he knows how much money is brought in.

The disclosures also have given new impetus to some politicians who have been wary in the past of challenging the perceived political power of the clubs. "The law as written leaves a terrible amount to be desired," said Muldowney, a critic of the clubs. "The original intent was to allow bingo at firemen's carnivals."

Should Corderman rule for Snyder, legalized gambling would be greatly expanded, unless the legislature clamps down. While the ruling would apply only in Washington County, it could be cited as precedent elsewhere.

"I don't believe in opening it up any further," said state Sen. Victor Cushwa (D-Washington), whose bill to allow the county to tax gambling proceeds has passed the Senate but died in Owens' committee. "But the clubs should be accountable. They brought a lot of this on themselves, no doubt about it. They've taken advantage of a good thing."