Portraits of Confederate generals looked down from the walls, crystal chandeliers hung above, the fine china plates were piled with Virginia ham and seafood, and the guests wore casual dress and six-figure incomes.

It was "An Evening with Marshall Coleman," Virginia's state attorney general and the Republican nominee for governor, held last month at the exclusive, all-white Commonwealth Club. The affair was hosted by J. Smith Ferebee, the millionaire investor who is one of the Virginia establishment's most legendary political fundraisers, and his business partner Max Goodloe.

For Coleman, the evening was in many ways a rite of passage. He had once criticized an opponent for belonging to the segregated club. Now here he was, celebrating his acceptance by many of the very people he had once scorned. The transformation was complete -- the maverick, aggressive outsider who four years ago won election as the state's first Republican attorney general by running as "the people's lawyer" was now the cautious conservative insider embraced by the establishment and entrusted with its most revered office.

It was a transformation accomplished, in large part, through skillful use of the attorney general's office. And as he likes to point out, Marshall Coleman's performance in that office -- as lawyer, politician and administrator -- offers the best indication of how he would perform as governor.

By Coleman's own reckoning, his proudest achievement of four years as attorney general has been a series of challenges to tough federal laws in areas such as strip mining, worker health and safety and minimum wage standards for migrant workers.

The actions were taken in the name of "federalism," the modern conservative successor to the old rallying cry of states' rights, which seeks a return of power from the federal government to the states. But they also happened to be popular causes with important conservative interest groups such as the strip mining industry, builders and agribusiness, most of whom gave little money to Coleman in 1977 but are major campaign contributors this year.

At the same time, staff members say Coleman paid increasingly less attention to areas such as consumer protection and white-collar crime, fields where aggressive enforcement had run up against opposition from the state's influential business community. While Coleman is credited with maintaining the same level of activity in utility rate cases, even his closest aides acknowledge that the rest of the office's consumer affairs unit is a shambles. The unit's two nonutility attorneys filed suit or obtained legal consent decrees in only three cases last year. By contrast, in Maryland, which has a smaller population, the attorney general's consumer protection division has seven attorneys and filed suit or obtained legal assurance settlements in 39 cases.

Coleman's antitrust unit took an activist and largely independent role in investigating government corruption and other white-collar crimes during his first two years in office. But by the third year, following criticism by Ferebee and other conservatives, Coleman had quashed an antitrust probe into the state's politically influential beer wholesaling industry and had demoted antitrust's aggressive and outspoken director, who later quit along with the unit's other two attorneys. The section's activity rate dropped dramatically -- from 14 cases during those first two years to two during the last 21 months.

"He didn't gut the enforcement function of the attorney general's office as far as white-collar crime is concerned -- he just put it to sleep," said Joseph Kaestner, the former antitrust director. "It's become somnolent, just like consumer protection."

Coinciding Interests

Coleman contends it was coincidence, rather than a calculated plan to win conservative support, that his lawsuits were directed toward the goals championed by business. "What we did was take a case on the merits," he said. "Their interests and our interests coincided and there's certainly nothing to me that's wrong in accepting their contributions."

Similarly, Coleman and his aides deny any link between conservative criticism and changes in the antitrust unit. They say that Kaestner was demoted because he vocally resisted efforts to make the unit more accountable to Coleman and the central office.

"We did put antitrust under control but we did not let politics influence our enforcement of the law," said Anson Franklin, who has managed both of Coleman's statewide campaigns and who was the office's chief administrator for three years. While acknowledging that he sometimes felt heat from Republicans angry over lawsuits or investigations brought by Kaestner's unit, he insisted that the influence went no further. "We were not wedded to counting contributions before we made decisions," he said. "I did my best to keep the two separate."

Others suggest that effort was less than successful. "You never really got the impression that the job was anything but a stepping stone to the governorship," said John J. Miles, another former antitrust attorney.

Crammed into the top floor of the state's New Deal-era Supreme Court Building, the attorney general's office is one of the least inspiring settings in state government. The peeling walls are painted a drab institutional green, the tattered rug is a dirty gray. The attorney general's cramped private office boasts a nice view overlooking the governor's mansion across the street -- Coleman is fond of pointing out the symbolism -- but can barely accommodate three people at the same time. It is, said one Coleman aide, "the most depressing looking place I'd ever worked."

It was a suitable setting for the middle-aged group of 20 or so lawyers who occupied the space for decades. They coped as best they could with day-to-day legal problems, while state agencies sent more important and controversial cases to outside counsel. But the office experienced a dramatic upheaval during the 1970s under Democrat Andrew P. Miller, a Princeton-educated workaholic with a precision-like legal mind and an obsession for detail. Miller expanded the staff geometrically, bringing in dozens of young lawyers, and improved the quality of the legal work. By the time the Miller era ended in 1977, the office had more than 90 lawyers and virtually all of the state's important legal matters were handled in-house.

Ideological Mix

Marshall Coleman came to the attorney general's office at age 35 after achieving an upset victory over a heavily favored conservative Democrat by forging an unlikely coalition of Republican loyalists, liberals and blacks. He had promised much on the campaign trail and, like his coalition of supporters, the promises were an ideological mix: Crackdown on white-collar crime, reform of sentencing laws to put violent criminals in prison with no chance of early parole, new management controls, a 10 percent cut in the number of attorneys in the office.

Most of all, he had pledged to transform the office from being simply counsel to government agencies to being "the people's law firm." Where Miller had discouraged subordinates from spending their time giving informal legal advice to the general public, Coleman instituted a policy of answering all constituent letters within two weeks and handed out legal opinions to virtually anyone who asked. The policy created the public image that the Coleman regime was more responsive -- an impression many staff members contend did not always jibe with reality.

In consumer protection, for example, the two attorneys and support staff logged answers to 1,000 phone call requests and complaints last year, but only three legal actions were taken. In the last year of Miller's administration, operating with only one attorney, Edward Nolde, the section had filed 11 actions. "I'll bet I responded to probably less than 100 phone calls that year," said Nolde, who left the unit around the time Coleman took office. "If you spend your time doing that kind of stuff, you don't have time to investigate and you don't have time to litigate."

Coleman suggests consumer protection simply merited less priority than matters such as criminal justice. He points with pride to his challenge of a judge's early release from prison of three drug smugglers. "I can assure you the public interest is more fully served by taking on a sitting judge who grants early release to people who have absolutely no business being back on the streets than it is by bringing four, five or six consumer action cases."

While Coleman was requiring attorneys to spend more time on non-legal work, he was at the same time cutting back their numbers -- from 93 positions when he arrived, to 84 today. The cuts allowed Coleman to appear before the House Appropriations Committee after less than a month in office to suggest a $120,000 decrease in his budget. It stood in marked contrast with the request of his soon-to-be gubernatorial foe, Democrat Lt. Gov. Charles S. Robb, who asked that same panel to increase his office's budget by about two-thirds. But Coleman's cuts angered many veteran staff members who believed he was more intent on fulfilling a campaign promise than on improving the office.

Spreading It Thin

"Marshall couldn't have known there was fat when he made his promise to cut ," said Stuart Dunn, Coleman's first chief deputy, who resigned after a year under the new regime. Dunn was one of several deputies who privately criticized the cuts, saying they were responsible for a decrease in quality in the office's legal work. James Ryan, another deputy who left last year for private practice, continually raised the spectre that the office might some day lose an important case because it was spread too thin.

Some of that thinness was evident even in the far reaches of state government. At Western State Hospital in Staunton, the large state mental facility where hundreds of patients were held under an improper legal status for a half dozen years, officials complained that part of the problem was that they couldn't get advice from the attorney general's office.

"I've worked in three states and in no other hospital was legal advice this hard to get," Lawrence Sutker, chief psychiatrist for the hospital's geriatric center, told a legislative committee investigating conditions at the institution. "The attorney general's office was so short-staffed that we've been unable to get a written reply to even the most simple questions."

Critics also charged that the cutback constituted a false economy, that much of the slack was taken up by private counsel hired by state agencies using their own funds, costs not reflected in the attorney general's budget. For example, the Corrections Department, which spent $23,000 for outside legal help in the 1978-79 fiscal year, spent $121,000 last year, a fivefold increase.

Morale at the attorney general's office was further damaged by Coleman's appointment of ex-campaign manager Franklin, then 30, as the office's chief administrator. Franklin's previous administrative experience had been limited to running statewide political campaigns in Virginia and Texas and operating a four-member congressional district office.

Franklin says that from a manager's view, the office was a wreck when he arrived, still operating as if it were a small private law firm, with no system for tracking cases and workloads, no controls on spending. He and Coleman take credit for changing all of that and he contends "that place works 10 times better now than it did when we came in."

Coleman dismisses staff complaints by saying "put that under the category of excuse-making by people who don't want to fulfill their jobs." Others believe it isn't quite so simple and that Coleman's inability to inspire his staff suggests the problems he would have managing a recalcitrant bureaucracy as governor. Mirroring the pledge he made as a candidate for attorney general, Coleman already has promised a 5 percent cut in state employment if elected.

"Marshall's an excellent campaigner, but once in office, what will he do?" asks Robert Kyle, another former staff lawyer. "It's one thing not to get along with your assistant AGs, but what happens when he has to deal with the agency heads? I won't say they're all barracudas, but they've been around."

The Antitrust Issue

One lawyer who appeared exempt from office turmoil was Joe Kaestner, a lanky, chain-smoking native New Yorker who came to the antitrust unit after several years with New Jersey's attorney general. Like Coleman, he was bright, intense, strong-willed and not adverse to publicity. The two men hit it off almost immediately. Soon Kaestner was a regular participant at Coleman's weekly deputies' meetings and he had virtually free reign to pursue white-collar crime.

"Joe was the golden boy who could do no wrong," said Miles, who worked with Kaestner in antitrust for more than a year. "You got the impression that Marshall was thinking 'here's a guy who can really make me look good.' "

With Coleman's support, Kaestner took over a nearly moribund investigation into bid rigging and fraud in state purchasing practices. And he got results. Five state employes and businessmen eventually were convicted in connection with the probe, which uncovered the most widespread public corruption in modern Virginia history, and the state recovered nearly $175,000 from companies alleged to have participated in the fraud.

But by late 1979, relations between antitrust and the central office had soured. The first incident arose that summer when Kaestner launched an investigation of charges of alleged price fixing by the state's beer wholesalers in collusion with the state's Alcoholic Beverage Control Commission. When Kaestner decided some of the wholesalers were stonewalling the probe, he issued seven subpeona-like orders for their financial records.

That action triggered protesting phone calls to Coleman from wholesalers' lawyers, two of whom were influential Republicans. Although Coleman denies the calls had any impact, he withdrew the orders, saying Kaestner had not obtained his prior approval before issuing them. Kaestner protested, pointing out that he had issued dozens of similar orders in past investigations without having to obtain Coleman's okay. He said he was infuriated because he learned of the attorney general's action not from Coleman, but from lawyers for the wholesalers.

An Angry Memo

"First, you have interfered with the investigation of illegal conduct," Kaestner wrote Coleman in an angry memo. "Second, you have tainted this unit's investigations and have made us appear to be politically motivated . . . Lastly, your order indicates a disregard for illegal conduct engaged in by a significant state regulatory agency and a major local industry."

There were more problems later in the year when Kaestner filed a lawsuit against a number of firms in the purchasing scandal, including General Medical Corp., a Richmond company headed by Goodloe, investment partner of Ferebee, the GOP fundraiser. Ferebee reacted angrily, telling one local reporter "I didn't think the suit was right, and the bad publicity hurt, too."

For Coleman, who was already looking ahead to the governor's race, the complaints could not have come at a worse time. They fanned brush fires started by right-wing independents who questioned his conservative credentials and who were conducting a feverish search for a viable alternative candidate.

"The more he looked toward the governorship, the more he looked toward his potential rivals," said Roanoke Sen. Ray Garland, a political ally and longtime friend. "It was a terrible burden to always have to be looking over his shoulder, wondering whether he would be accepted or not."

Franklin, Coleman's political eyes and ears, says he heard the complaints about General Medical. "There were some people who did not like the approach to the case," he said.

The General Medical suit was settled out of court in January 1980, for $14,000. But a few weeks before the settlement, Kaestner blew up at Coleman over Franklin's refusal to approve expenses for an investigator's trip to California. There had been arguments before, but this time, when Kaestner offered to resign, Coleman accepted. Kaestner eventually backed down, but Coleman refused to relent. He said he would allow Kaestner to remain with the unit, but with a cut in pay and loss of his post as director. Authority over the unit was turned over to Deputy Attorney General Walter Ryland. Four months later, Kaestner resigned to take a job with Richmond's commonwealth's attorney. His two top legal aides also eventually left.

Personality Conflicts

Coleman and Franklin insist that personality conflicts and management considerations, not politics, led to Kaestner's fall from grace. "Until he left, he said I was the Achilles of the law, and then when he left suddenly I was no good at all," said Coleman.

Kaestner sees it quite differently. He says there were two distinct phases to Marshall Coleman's administration. "First he was the let's-get-my-name-in-the-newspapers activist, the people's lawyer," he said. "That lasted two years. Then came phase two -- 'now that we have everybody convinced, let's forget all that and go after campaign money.' "

In any case, Kaestner's departure helped assuage conservative doubts about Coleman. Franklin now labels Kaestner "a liberal Democrat" who was not in tune with Coleman's conservative philosophy. "Unlike Joe, we didn't think all businessmen were guilty until proven innocent. There had to be a reasonable suspicion that the law had been violated."

There were, of course, many other factors in Marshall Coleman's transformation. His strong ties to Gov. John N. Dalton, an establishment favorite, were a crucial element in his acceptance.

Under the governor's prodding, Coleman shed some of the liberal, black and union support he enjoyed in 1977 in return for the keys to the conservative kingdom. At Dalton's behest, he filed a suit challenging the right of public employes to have their union dues automatically deducted from their salaries -- a direct blow to the pocketbook of the Virginia Education Association, which had endorsed Coleman for attorney general. And early this year, he supported Dalton's veto of a bill that would have established a special holiday honoring slain civil rights leader Martin Luther King Jr., a veto supported by Ferebee and many of those who came to "An Evening with Marshall Coleman."

Besides dinner, the assembled group had come to watch a half-hour Coleman fundraising program on television. The show ended with banjos and guitars picking out a country-western jingle whose reassuring words promised that Marshall Coleman would be the conservative champion of the status quo that they cherished:

"We've got a good thing goin' and we're gonna keep it goin', the Marshall Coleman way."