Mary S. Morris, a wealthy widow from Naples, Fla., used to laugh at how people reacted to the platinum ring she inherited from her mother. Appraised at $259,000, the ring held a 15.33 carat diamond with two baguettes.

"Mrs. Morris used to refer to it as a 'rattlesnake diamond' because everyone jumped back when they saw it," recalls John Allen, a Florida trust officer. She had two replicas made, saving the genuine ring for special occasions.

A petite woman who had no children, Morris died on March 3, 1980 at age 77. In her will dated Nov. 24, 1978, she left instructions about the ring:

"I give my large square diamond ring to the Smithsonian Institution, Washington D.C. for use in its jewel collection. If the Smithsonian Institution shall fail to accept said gift, I give said ring to Yale University School of Music to be applied to the Samuel Sanford Professorship."

On Sept. 12, 1980, the trust officer went to Morris' safe deposit box, opened the drawstring of a velvet pouch, and presented the ring to Smithsonian gem and mineral curator Paul Desautels.

It was not the last time the "rattlesnake diamond" would change hands.

Morris' friend, Ponce Kehoe, recalls that Morris "was very fond of the Smithsonian Institution, and it the ring was something she wanted people to see . . . I've often wondered what happened to it. Is it in a case in the museum?" Kehoe asked. "She wanted it to be put on display. She thought it was pretty."

At the Smithsonian, the ring was known by its accession number, "342511." Desautels, who recently retired after 15 years as curator of the collection, remembers the "rattlesnake diamond." It was, he says, "big and ugly . . . It was yellowish, poor quality, but it was big."

For Desautels, who singlehandedly transformed the collection into the world's premier collection of gems and minerals, Morris' bequest was one of many he viewed not as potential display or research materials, but as objects that someday could be used as barter to obtain specific gems and minerals he had targeted for acquisition.

Desautels says he "madly solicited gifts" and promoted the Smithsonian in the course of as many as 40 lectures a year.

"Do you know that half the little old ladies in the United States, when they try to figure out what they're going to do with their jewelry, think of the Smithsonian?" says Desautels.

"I have lectured to every major city in this country to everybody from the local tea groups to enormous audiences of a couple thousand people, and the theme is always the same, so that when they do think of it, they think of the Smithsonian."

Six months after receiving the "rattlesnake diamond," on March 20, 1981, Desautels placed the ring on consignment with St. Louis gem and mineral dealer Gary Hansen, according to museum records. Desautels' instructions: get what he could for it--at least $250,000. For handling the sale, Desautels says he told Hansen to keep 10 percent as commission.

"I thought that $250,000 was a good fat price because under normal circumstances it wouldn't bring anywhere near that much. You know doggy diamonds were selling . . . the great diamond fever was upon us and people were buying just any big diamond," the former curator says.

According to Desautels, Hansen sold the ring a short time later for $270,000, keeping $27,000 as commission. "The market was really cooking," he recalls. Desautels says Hansen used the remaining $243,000 to pay off bills on behalf of the Smithsonian--bills for specimens from numerous dealers, including Hansen.

Desautels says the language used in Morris' will--"for use in its jewel collection"--did not prohibit the museum from disposing of the diamond.

"That means to me that her intent was that the gem should be converted to whatever use anybody should make out of it. She picked the Smithsonian first and if we didn't accept it, it was to be sold. So she didn't care that much about the stone." Desautels says a Smithsonian lawyer agreed with his interpretation.

"As a matter of fact," said Desautels, "she Morris blew that one by suggesting that if it wasn't accepted here, it could go somewhere else to be sold."

Morris' attorney, John Sheppard, acknowledged that there were no express restrictions, but said he assumed from Morris' language "it was to be put on display since she said it was to be part of a collection. I don't think she put it there to be sold."

Desautels says, "As the whole thing turned out, it was a damned good thing I did it sold the diamond when I did because it wasn't three months later that the diamond market collapsed." 'A Bleeding Heart'

"Well," said Smithsonian Secretary S. Dillon Ripley, "I suppose that's making use of it, I don't know. That's news to me. I hadn't heard of that . . . I'm not going to read somebody's intent over a thing like that. I'm sorry if there was an optional thing to be done, if that wasn't perhaps looked into.

"I have a bleeding heart about donors so that I would try to comply with their intent. I feel very sincerely about it. That was one of the reasons I feel I'm here is to try to interpret what the intent of the donor was . . . I think you should always lean over backwards to observe that kind of feeling which is an honest and a real feeling, because these are people . . . I'm afraid I tend to feel rather chary about getting into doing things which would imply that somehow you haven't any respect for the interests of the donor.

"I'm disappointed," Ripley told a reporter, "that you have to bring up these things, and feel on the one hand ignorant about the circumstances and on the other that you are implying that I'm supposed to sit in judgment on other people because it hurts me to think about that." The Unwritten Ban

Exchanges of materials from the Smithsonian gem and mineral collection are allowed. Outright sales have been banned by long tradition.

"That's been the unwritten law as long as I've been here," said John White, who worked with Desautels for a decade and is now acting curator of the collection. "I think the public would be a little distressed if they heard the Smithsonian was selling stuff out of the nation's attic--I think that's a pretty solid reason, frankly. The public image is, as you know, important to us."

Desautels says that several of his "exchanges" were not substantially different from sales. "Every exchange is almost a sale," he says. "It's a very gray area. How exchangey does it have to be before it gets to be a sale?"

For all practical purposes, Desautels was autonomous in overseeing the collection and making decisions on acquisitions and exchanges. Technically he needed the approval of his supervisor, Dan Appleman, then the department's research-oriented chairman, to exchange specimens. Appleman said he deferred to Desautels' expertise. "I was depending on Paul's judgment. I had confidence in his judgment and still do. I think he's the best in the business . . . " said Appleman.

Some major museums have stricter controls on the exchange of museum material. For example, at New York's American Museum of Natural History, no specimen valued at over $1,000 can be sold or traded from the collection without approval from the director of the museum and board of trustees.

The latitude accorded Desautels in exchange practices was characteristic of the freedom he enjoyed in his management of the collection. "I don't think anybody much cared," said acting curator White. "As far as people across the Mall in the administration , one always had the feeling until recently that we could pretty much do as we pleased. There was not a lot of supervision. I mean we were trusted basically." "Rembrandts, Not Calendar Prints

Over the years, Desautels kept a notebook of what he says were "coveted" gems and minerals--specimens found in museums or private collections around the world--that he had "targeted" for acquisition. His criteria: "Rembrandts, not calendar prints."

To make it worthwhile for miners and dealers to preserve gems and minerals for collections, Desautels did his best to drive up mineral prices worldwide. As his expertise and reputation grew, so did the weight accorded the values he set. Says Desautels:

"If Desautels says it's worth $5,000, then by God, that's what it's worth in two ways. In the first place, I know it can be sold for that, and in the second place, if I say so, whoever's listening is going to take that as the gospel truth. I know that."

The practice irritated some. "It's possible to rationalize anything," said his longtime competitor and counterpart at the British Museum, Peter Embrey. "I would say he has undoubtedly done a good job for the Smithsonian, but on the other hand he has probably done a disservice to the rest of the museums by actively driving up prices . . . we are progressively left behind." Diamonds for Gold

For some time, Desautels had kept an eye on a group of delicate leaf-like specimens of natural California gold as they passed from collection to collection and dealer to dealer. In 1979, he finally saw his chance to acquire them for the museum, so he decided to trade some of the Smithsonian's many diamonds (not "the rattlesnake") to get the golds.

The diamonds, says Desautels, were worth about $250,000 and the Smithsonian got more than its money's worth. Prior to trading the diamonds, he says he had them independently appraised and inflated the value when he offered them to the seller of the golds.

"I just upped them the diamonds 40 percent over their appraisals and made the deal and I got away with murder . . . I felt very guilty about it because I felt like I was taking them."

Smithsonian auditors aren't so sure. Auditor Chris Peratino says that according to Smithsonian records, the diamonds were appraised at more than $500,000--at least twice as much as some internal appraisals of the gold.

Money is not the primary issue, Desautels says.

"This was one of those opportunities when it's just like a Rembrandt suddenly flying around loose somewhere, and obviously something of very high demand and something priceless to have at a museum," he says. "I decided we had to have those golds. We just had to have them because they were the finest American golds still existing--the very finest.

"I think if I had to do that again today and I had to pay half-a-million, I'd do it. If I had to pay three-quarters of a million I'd do it, because they're worth what you have to pay to get them . . . We have the best in the world. Now what does that mean versus these diamonds which we don't have any need for at all?"

None of the diamonds had been on display. The golds, heralded in the 1980 Smithsonian annual report and the subject of a wall poster sold to the public, have become a featured attraction in the mineral hall. Disputes With Auditors

The disagreements between Desautels and Smithsonian auditors are nothing new. In 1972 auditors cited his poor record keeping and questioned a number of exchanges. Peratino said he suggested a complete examination of transactions be undertaken in 1972 but that "nothing really significant was done." Had his advice been followed, problems found by auditors 10 years later might have been avoided, he said.

A 1982 audit focused on exchange practices and poor record keeping, noting that some specimens had been traded out of the collection even before they were counted in. Only 6,000 of the Smithsonian's estimated 10,000 gems had been logged in inventory records--records that had not been updated in two years, according to the 1982 audit.

Desautels answers, "I'm not record-oriented at all. I never felt that my job was to be the registrar's office."

Desautels' boss, Appleman, says, "Sometimes it would get away from him a little bit, especially in recent years when the pace got so frantic."

Philip S. Hughes, the Smithsonian's under secretary, says, "We are an institution which is devoted to collecting, to building collections . . . You could think of somebody like Paul Desautels) who is as aggressive and hustling and dedicated to the proposition, who kept all his records straight. You can imagine such a guy, but the odds are terribly heavily against it. Terribly heavily. The odds are, if he was going to keep all his records better, he would be more like Chris Peratino, the auditor and I--we're the last guys anyone would want to build their gem collection."

Desautels bristles at the auditors' questions: "They talk about gem evaluation and whether this is worth so much of that. Listen, I wrote the book. I know. So don't let them tell me. When did they study the gem market? What do they know?"

Auditors acknowledged lacking the credentials to challenge Desautels, and said they brought in a Canadian curator to help them appraise some specimens and evaluate some transactions.

Desautels says the auditors are incapable of appreciating what he has accomplished: "Auditors have to have the numbers in this column equal the numbers in that column, and if they don't know the numbers in either column, it's very hard to balance them out. They don't care about intentions, about ultimate goals, about values. That's not in their lexicon."

Any mistakes Desautels says he might have made are to be expected in a market fraught with unexpected turns. "Of course there's risk. The risk is that you misprice something or you misjudge the market. The market moves faster than you're moving. It's always possible . . . you have to be very fast on your feet or you'll be dead."

But Desautels has no doubt about the final assessment of his 25-year tenure. "The only way you can judge is whether you end up ultimately in a better position than where you started. And nobody, auditors be damned, can refute that that's where we are. We're vastly better off than we've ever been . . . We are the envy of the world." An Anniversary, A Retirement

Next year marks the 100th anniversary of the founding of the gem and mineral collection. Desautels, who worked at collection through one-quarter of its history--15 of those years as its curator, had planned a champagne celebration and hoped a commemorative stamp would be issued. Instead he retired from the Smithsonian--the "finest institution of its kind that man has ever known"--feeling beleaguered.

"They have no appreciation for what I've done, absolutely none. To come in here with that audit just when I was planning on leaving at the end of a glorious career where I've done them more good than they can ever count--I feel like I've been had and I'm trying not to be bitter."

The Smithsonian, which had extolled Desautels' work for years and honored him in 1977 "for outstanding service to the Museum of Natural History," let him leave without fanfare.

Philip S. Hughes, the Smithsonian under secretary, says:

"Absent some of these goings on, he would have retained some sort of an office in Natural History, with some sort of title like 'scholar emeritus' or 'curator emeritus', something like that. I thought that inappropriate and he ain't got it. So he's out of there."

Today, Desautels sells gems on the private market and is consulted by dealers and collectors worldwide. Much of his time, however, is spent working for a flamboyant Texas oil millionaire named Perkins D. Sams. With Sams' money and Desautels' expertise, they assembled in two years time what many consider to be the finest private mineral collection in the world.

A large part of Sams' collection was acquired in 1981 and 1982, while Desautels was still a full-time $55,000-a-year employe of the Smithsonian. Desautels says he was paid an additional $30,000 to "negotiate and engineer" some of Sams' private mineral acquisitions.

On Aug. 1, 1982, the day after Desautels retired from the Smithsonian, he said he became the president of Sams' mineral company, Provenance Minerals. His current salary with Provenance, says Desautels, is "my business. I earn it."

Desautels disclosed the $30,000 payment on his 1981 Smithsonian financial disclosure statement. He was not required to say what he did for Sams and the disclosure statement remains locked away in the Smithsonian general counsel's office safe. The ethics counselor who reviews such statements never signed off on the form.

Defending his dual role, Desautels says that Sams' acquisitions "are things that the Smithsonian certainly couldn't buy even by the wildest stretch of the imagination." The Smithsonian had less than $50,000 a year in endowments with which to purchase specimens on the open market and Sams' resources were extensive.

Desautels does not think his work on the public and private collections were in any way in conflict. On the contrary, he says he has always had one goal: to build the most important gem and mineral collection the world has ever seen. He says he has always had a tacit understanding that Sams' collection would one day end up in a museum.

That museum, he says, should be the Smithsonian.

George Harlow, curator of gems and minerals at New York's American Museum of Natural History, says museum-wide trading has slowed with Desautels' departure from the Smithsonian. "Paul was sort of like a stimulant. When you have a leader, it's easier to follow. When that person disappears, there is really nobody to jump into his shoes," says Harlow.

"In the short run," Harlow says, "one might say that they the Smithsonian compromised their research capabilities by having someone like him around . . . But I think the long-range point of view, which is probably more important, is he put their collection on the map.

"The fact that he brought it into the limelight and people donated seriously, that will continue onwards. The glow is still there. It's not going to disappear. He brought the national museum up to where it should be.

"People may dispute the means," Harlow said, "but I think the results are fairly evident."

Desautels says, "I've got a very big ego, and it will sound very egotistical of me to say, but I'm the last one of me. I'm gone now, and whoever's coming after me doesn't know all this."Tomorrow: King of Gems, Part III