D.C. Mayor Marion Barry spent the Thanksgiving holiday weekend in the Bahamas with a longtime female friend who formerly worked in the mayor's office and now represents a firm under contract to advise the District on hundreds of millions of dollars in bond sales.

Barry and the woman, Bettye L. Smith of W R Lazard Co., occupied adjacent rooms at the Cable Beach Hotel resort near Nassau where a Washington Post reporter observed them spending time together at poolside and in the hotel, apart from the mayor's 7-year-old son Christopher, security guards and other associates who accompanied Barry. The mayor's wife Effi did not make the trip, and instead went to London to represent the city at a travel convention.

Several administration officials this week said privately that the close relationship of Barry and Smith gives the appearance of a conflict and raises questions about Barry's independent judgment in making financial decisions for the city, particularly in deciding whether to renew Lazard's contract as financial adviser to the city.

The contract, which city records show has generated $2.8 million in fees for the firm since 1985, expires next year.

The city's bond business is the subject of an ongoing grand jury probe. Wardell Lazard, the founder of W R Lazard Co., and a number of officials from other investment banking firms have been interviewed by FBI agents in connection with the probe, which appears to be in a preliminary stage.

Smith also has been interviewed by the FBI, but the subject of the interview could not be determined. There is no indication that Smith or Lazard are subjects of the probe.

Barry, in an interview Friday, described Smith as a "family associate" who has socialized in the past with him, Effi Barry and their son, and said he saw no conflict in Smith's position with the city's financial adviser.

"You're assuming I don't have the ability to separate out the city's good and interest -- which I do -- from any other interest," Barry said.

"I'm very clear on my role. I know the city comes first."

Barry, who previously has said he makes all major decisions in selecting firms to handle the city's banking and investment accounts, said W R Lazard was chosen as financial adviser before Smith went to work there.

He said that a "very tight" selection process would be in place to pick a financial adviser when the contract expires.

The mayor said "women ought to be outraged" that a relationship between him and a woman other than his wife should attract attention. In response to a question, he said the relationship was not romantic. Previously, he noted that his son knows Smith as "Aunt Bettye."

Barry said Jeff Mitchell, a mutual friend of Barry and Smith's who has business interests in the Bahamas, made the arrangements for the trip and invited Smith. The mayor said Smith was also in the Bahamas when he visited there in June.

Barry requested that The Post delay publication of this story until a reporter interviewed Effi Barry, who was expected to return from London tonight. Efforts to reach her at her hotel on Thursday and Friday were unsuccessful.

Smith, who did not respond to requests for interviews, also was instrumental in raising money from the financial and investment community for Barry's reelection campaign last year, including helping Lazard host a breakfast at the Waldorf-Astoria in New York City.

Barry said that to his "best recollection" he has known Smith for five to six years.

Associates of the mayor and neighbors of Smith also say that Barry during a period of at least three years has frequently visited Smith alone at night and on weekends at her Capitol Hill apartment.

The mayor said he has made no effort to conceal numerous visits to Smith's apartment. He said he has made the visits alone and with his family or others.

"If you're trying to hide something, you don't do it that way," he said.

Barry's close relationship with Smith was evident to associates and friends during the period of 1984 through 1986 when Smith worked as an assistant secretary of the District and in Barry's Office of Policy and Program Analysis.

But some administration officials said the mayor's relationship with Smith, who generally was regarded by her peers as a competent employe, did not become an issue of concern until after she joined Lazard in June 1986.

Barry last year ordered the publication of integrity standards that were printed on wallet-sized cards and posters that have been prominently displayed in D.C. government offices.

The standards in part state that city employes "shall avoid any action which might result in, or create the appearance of . . . losing independence or impartiality {or} . . . affecting adversely the confidence of the public in the integrity of the government or its operations."

Herbert O. Reid Sr., the mayor's legal counsel who was among three aides with Barry at the interview, said there is no appearance of a conflict of interest, in part because Barry has taken no action toward the Lazard firm since Smith's hiring last year.

In a prepared statement provided during a telephone interview this week, Lazard said he had "no idea of the extent of the relationship with Bettye Smith and the mayor . . . I have no control over the personal actions of my employes as long as it does not impair the business or the quality of the work we perform. Now that this has come to light, I will have to meet with my partners and decide what the implications of all this mean to us and to what extent we want to use independent consultants."

W R Lazard Co. was hired as financial adviser to the District for general obligation bonds in 1985, shortly after the company was formed. The financial adviser provides guidance to the city on when to enter the bond market and which investment firms to select as bond underwriters.

Lazard said he met Smith socially while she worked for the mayor and that she expressed interest in working in the investment banking business, in which she apparently had no experience.

He said he asked her to join his firm as a consultant in the summer of 1986 and enrolled her in a six-month entry-level course conducted by Salomon Brothers Inc. in New York.

A resume for Smith released by the Lazard company states that Smith "is responsible for managing the firm's office in D.C." Lazard said this week that Smith used the title of office manager for a period of time, but is paid as an independent consultant on commission, not as an employe of the firm.

Lazard in the telephone interviews this week said that "I would be lying to you" if Smith's connections to the mayor "didn't cross my mind" in hiring her. But he said he did not hire her to maintain his business with the District and that he places calls to the mayor directly and waits "four days for him to call me back, like everyone else."

Lazard said he wanted Smith to develop new business, primarily among minority officials of other local governments. "Barry was president of the National Conference of Black Mayors. He could introduce Bettye to other black mayors, who could in turn introduce us to them," he said.

Barry said Friday that investment firms hire some employes based on political connections that will help the firms get business. He said most financial firms offer similar basic services and that "this whole thing is how to get in the door."

Acquaintances of Smith said she supported Barry in his 1982 reelection bid and then served in a paid position on the mayor's transition team that year before joining the government full time in 1983.

According to the Lazard resume, Smith, a former management consultant, is a graduate of the University of Tennessee at Chattanooga and the St. Thomas University of Miami.

Neighbors on Smith's Capitol Hill block have said Barry has been a frequent visitor to the apartment building in which Smith lives.

They said the mayor's Lincoln Town Car used to be routinely parked in front of Smith's building, but in recent months has been parked nearby.

"The {mayor's car} pulls up and there's no question who gets out," said one longtime Capitol Hill resident familiar with the neighborhood.

Barry, in the interview, said he was trying to "set a new tone . . . in the sense that you can have . . . relationships with women, both married and nonmarried, and it ought not to be viewed automatically as dirty, nasty, sexual and those kinds of things."

Barry and his son went to the Bahamas Nov. 25, the day before Thanksgiving. Smith went to the Bahamas the same day, but took a different flight. Effi Barry remained in Washington until Nov. 28 when she left for a week-long trip to London.

Barry said he had tried to persuade his wife to go to the Bahamas, but that she wanted to represent the District.

Barry said his wife told him that he and Christopher should go to the Bahamas because they did not have much time together in Washington.

Barry said Smith also was in the Bahamas in June when he and his son visited there. At the time, Barry said his wife did not go because she had to work.

Barry said his trips to the Bahamas are arranged by Jeff Mitchell, a friend since the early 1970s.

Mitchell, who holds a Bahamian government contract to handle advertising at the Nassau airport, has said previously that he arranges discounts for the mayor at the Cable Beach Hotel.

Mitchell, who lives in Washington and also has an office here, has said he does no business with the city.

Barry said Friday that he specifically told Mitchell to be careful who was invited on the five-day Thanksgiving trip because the mayor believed the news media might be present.

"I said, 'Let me know who you are inviting,' " Barry said. " 'I don't need any nonsense going on. {The Post and other media} may have a reporter down there so I don't want them to have any appearance of any nonsense.' "

A Post reporter went to the Bahamas to report on Barry's trip in June. The reporter did not recognize Smith; no story was published.

Barry, after learning that a Washington Post reporter was en route to the Bahamas, angrily complained at the time in a telephone call to a Post editor about "invasion of my personal privacy" because the trip was being paid for "with my own private money," not city funds.

"This is just going too far," Barry said, adding, "You don't go {on vacation} with white people, but you go with black people."

"From now on I won't tell anybody where I'm going" on vacation, Barry said, or, "I will deliberately lie."

"That's why Effi didn't come. {She said, 'Those} goddamned reporters {will} be down there. I can't even take a vacation.' "

On the Thanksgiving trip, Barry said Mitchell arranged for rooms. The mayor and his son were registered in rooms 864 and 865 and Smith was in 866. Mitchell was on the same floor and wing of the hotel, Barry said.

A Post reporter traveled to the Bahamas to cover the Thanksgiving trip after the newspaper was told that Barry and Smith would be there. The reporter interviewed Barry for half an hour in his hotel room Nov. 28 and spoke with Smith on the telephone.

When the reporter asked Smith if he could interview her about her trip to the Bahamas and time with the mayor, she said, "No, you may not."

Smith said she was on vacation and referred other questions to the mayor or his aides.

While Barry and Smith spent part of their trip with the mayor's entourage, they also spent time together apart from the group, on occasion leaving the mayor's security guards and Christopher at the pool.

Barry previously has had to contend with questions about his associations with women.

In May, the mayor's aides confirmed that Barry on March 28 had visited the home of part-time model Grace T. Shell, who complained he was harassing her. She said, "The man never touched me . . . . The man never got what he wanted and I know what he wanted."

Herbert Reid told The Post that Barry had no romantic interest in Shell and that Shell had called Barry the day before the March incident to invite him over to meet her 3-year-old son. "The landlady took exception to his being there," Reid said last spring.

In 1984, Reid said Barry had a "personal relationship" with Karen K. Johnson, a convicted cocaine dealer who is a central figure in the ongoing grand jury probe of possible corruption in the District government. Barry more recently has said that the relationship, which ended in December 1983 or January 1984, was "nonintimate."

Effi Barry said in a television interview in September that she blames her husband for indiscreet behavior toward women but said people may be misinterpreting harmless affection.

"Marion is a black Southern man, and Southern folks love people," she said. "I mean they hug and they kiss and they get very personal. And they will pull up a chair and put their feet under your kitchen table and become very folksy."Staff writers Sharon LaFraniere and Nancy Lewis contributed to this report.