Scandal in New Orleans, particularly of the gambling variety, is as much a part of the town as wrought iron and neon. But when students, gamblers and highly regarded college basketball players were accused last week of participating in a betting scam at a genteel private southern university called Tulane, the old town took notice.

In a city noted for the revelry of its French Quarter, residents on their way to work are accustomed to stepping over misspent youth. But Tulane is on the other side of town, at the end of a mansion-lined boulevard called St. Charles Avenue, where scandal is not invited.

Nevertheless, according to indictments handed down by the Orleans Parish grand jury Thursday, there was a conspiracy to affect the outcome of three of Tulane's Metro Conference games last season. Of the eight indicted, six are students. Four members of the Green Wave's starting five -- including John (Hot Rod) Williams, a near-certain first-round NBA draft choice -- are alleged to have split at least $19,500 in the scheme.

"It's the gang that couldn't shoot straight," said one player's attorney. "A bunch of kids who thought they were smarter than anyone else."

The three Green Wave players under indictment are 6-foot-11 center Williams and guards David Dominique and Bobby Thompson, all born in Louisiana. Dominique and Williams are charged with two counts of sports bribery and three counts of conspiracy. Thompson, a reserve who sources say is cooperating with prosecutors, has been indicted on two counts of conspiracy.

Two more players, forwards Clyde Eads and Jon Johnson, turned state's evidence and have been granted immunity from prosecution.

Williams also has alleged, in a statement to the district attorney's office on the evening of his arrest, that he received regular payments from a coach plus $10,000 to sign with Tulane. That charge was denied by a former Tulane assistant. Nevertheless, Coach Ned Fowler and his staff, who are not implicated in the gambling allegations, resigned when the school announced that its investigation had revealed allegations of payments to players.

Tulane President Eamon Kelly is so shaken by the allegations that he has recommended the school drop basketball.

Like most rumors, this one started with a friend of a friend. It began with a phone call from a player, who said: "The fix is on."

Edward Kohnke, a New Orleans attorney and Tulane alumnus who at the time worked as a volunteer prosecutor for the district attorney's office, was dining with his brothers three weeks ago when he heard the rumor. One brother had heard it from his friend, who had heard it from the alleged recipient of the phone call from the player. Kohnke, a passionate Tulane supporter, went to Harry Connick, the Orleans Parish district attorney.

"I could have done nothing, but it would have gnawed at me forever," Kohnke said. "The idea was that if it was false, I'd be able to bury it. If it was true, then I would have a hand in the investigation."

The district attorney's office began interviewing book makers, who said an unusually large amount of money had been placed on the Memphis State game. Kohnke, who resigned from his voluntary capacity in the probe last week, then began talking to players, some of whom were friends. He confronted Eads, who agreed to go to the district attorney and asked for immunity for himself and Johnson.

Three students not connected with the team, all from wealthy eastern communities, are under indictment for their suspected roles in approaching the players. They are Gary Kranz of New Rochelle, N.Y., Mark Olensky of Fair Lawn, N.J., and David Rothenberg of Wilton, Conn. Kranz also faces 10 narcotics counts, which, coupled with 10 counts of sports bribery and three of conspiracy, could bring him a maximum prison sentence of 332 1/2 years should he be convicted.

The force behind the investigation is Connick, a courtly 59-year-old gentleman who was raised in New Orleans and received his law degree from Tulane. Because of his ties to the school and the age of most of the suspects, it has not been an easy task.

"I don't like it," he said. "It's like family. It's my school and my city. I know I don't have any monopoly on it, but that doesn't take the sting away. I believe most kids are good kids. I see things and I can understand why they may do things. But I can't approve. I came in with a commitment to do a job. I've been around too long to have misgivings like that now."

The act of shaving points involves attempting to win a game by a lesser margin or lose a game by a greater margin than the established betting line. On Feb. 2, Tulane was favored to defeat Southern Mississippi by 10 1/2 points, and won by one, 64-63. On Feb. 20, Tulane was a seven-point underdog to Memphis State and lost, 60-49, after leading at halftime. The indictments handed down Thursday also alleged something new: that the players received an undisclosed amount of cash to ensure a 66-65 loss to Virginia Tech on Feb. 16.

Some of the indictments also involved cocaine distribution, which prosecutors said might have brought some of the principal figures together. Kranz is accused of distributing cocaine and one afternoon, he and Olensky allegedly approached Eads about shaving points in a game that night against Southern Mississippi.

Prosecutors allege that Eads then went to Johnson, and the two went to Williams and Dominique. Later in the day, they believe Thompson was brought in. The indictment charges that a total of $3,500 was divided among the five, with Eads, Johnson and Williams receiving $900 each, and Thompson and Dominique receiving $400 each. Allegations in the Virginia Tech game still are hazy, but against Memphis State, prosecutors feel the stakes were higher.

According to the indictments, the players allegedly split $16,000 for that game.

Before the Memphis State game, prosecutors believe that the point shaving branched out to include convicted gambler Roland Ruiz, also under indictment.

Also, prosecutors say one of the three indicted students not on the team made a sizable bet in Las Vegas, where gambling is legal. A New Orleans newspaper reported yesterday that Krantz, Olensky and Rothenberg might have bet at least $34,000 on the game.

The Times-Picayune, The States-Item, citing sources close to the investigation, said the bets on the Memphis State game were placed at various locations, including Las Vegas, New Orleans and Birmingham. The $34,000 betting figure also was reported in this week's issue of Sports Illustrated.

"Smart kids, right?" said one player's attorney. "They think they're going to hide it in Vegas? That stuff spreads like wildfire." And the rumors began.

Prosecutors believe they know how points might have been shaved. But the motivation remains a mystery.

The athletes accused are an NBA prospect weeks away from signing what surely would have been a million-dollar contract, a college sophomore from rural Louisiana and a member of a respected New Orleans family. Then there are the three apparently bright students.

"They're all basically good kids," said one university official. "They're nice, clean-cut youngsters. There are some kids on campus who are trouble, but these weren't among them."

Williams' family lives in a trailer in Sorrento, La., a small rural town that mainly consists of an oil refinery. Back home, where he was voted all-everything at St. Amant High School, Williams is perceived as a victim. Acquaintances and former teachers describe him as somewhat shy and and awkward with his height, although he became more outgoing as he got older.

"He worked hard, he had a sense of pride in himself and he still does," says Tom Wall, his high school coach. "He never even heard of point shaving."

Thompson's father Robert Sr. is a well-known financier. But three years ago he was convicted of financial improprieties and is serving two years in a federal penitentiary. The younger Thompson is a devout Baptist who listed the Bible as his favorite book in the Tulane media guide.

"A lot of things happened to him at once, and it was too much for him to handle," said the Thompson family's attorney, Russell Schonekas, a well-known criminal and civil lawyer who says he is defending Bobby for nothing. "He's still a good kid."

Dominique, a 19-year-old sophomore, is from New Iberia, a small Cajun town. His father works in a salt mine.

Ed Castaing, Dominique's attorney, says, "I was prepared to meet a sharp guy, but he was very naive. He doesn't even know where downtown is. One thing that has to be underscored is that these are kids. David is 19, and he's been cloistered. 'No criminal intent' could be relevant to the defense, and it's something I'm going to pursue."

The three students not on the team -- Kranz, Olensky and Rothenberg -- were at one time members of the Alpha Epsilon Pi fraternity. Kranz, 21, whose father is an apparel executive, is a junior majoring in business. Olensky, 21, is the son of William Olensky, who prosecutors say is associated with a New York handicapping service called Tipps. Rothenberg, like Thompson, faces the least significant charges, two counts of conspiracy. All three have hired well-known attorneys.

Kranz's attorney, Mike Fawer, one of the most notable criminal lawyers in town, contends that his client had friends who bet heavily and also friends who were athletes, and he may have unwittingly gotten caught in the middle of a scandal "in the sense that he had contacts in both camps."

Even though there is no evidence that the allegations here involve other schools, the issue of integrity goes beyond Tulane. Recent history has shown that it can occur anywhere, as it did at Boston College in 1981, when player Rick Kuhn was given a 10-year sentence, and in 1963, when game fixer Jack Molinas was sentenced to 10-15 years for bribing a variety of college players. A total of 27 schools across the country were involved in a two-year investigation that included Columbia, St. John's and North Carolina.

"What I feel personally responsible about is that schools don't do enough job of counseling," Kelly, the Tulane president, says. "That's where we fell down. Dreaming that it would never happen here, we really didn't develop a program to help the student athlete understand the dangers of gambling, drugs and other things."

Neither has the NCAA developed such a program. Dave Cawood, head of the NCAA's task force on gambling, says that because of the number of schools, an overall education program is difficult and should, instead, be done by each institution.

Billy Packer and Al McGuire, network basketball announcers, have a different approach. Shortly after the Boston College scandal, they made a documentary on point shaving. They included interviews with FBI agents, who not only predicted that it would happen again, but that the next time it would involve cocaine.

They took the 47-minute tape to the NCAA, hoping it would be distributed across the country. Cawood said the tape, in addition to NCAA literature, is available by request, but has not been distributed nationwide.

"We notified the conferences that the tape was available and how it could be obtained," Cawood said. "The unfortunate thing is that no one thinks it can happen at their school. That's the main problem we've encountered in trying to make everyone aware."

Packer would like to make the tape required viewing for all incoming athletes.

"My goal is for it to be shown on Oct. 14 to every player across the country who is about to sign a letter of intent, along with a statement that he's seen it," Packer said. "Then he signs. That way every kid understands what the penalties are.

"There's still an element out there that's going to try something. But at least no kid can ever say, 'I didn't understand.' "