By HENRY J. STERN

Last week, we reported on events in the burgeoning scandal on City Council budget lines allocated to fictitious entities, and fund transfers from those accounts to organizations whose officers stole the city money they received.

Two Council staffers who worked for Brooklyn member Kendall Stewart, were indicted for embezzlement. The aides, including former chief of staff Asquith Reid, allegedly stole $145,000 and spent $21,000 on Stewart's political needs, so the Councilman's denial of any knowledge of the crime rings is exceedingly hollow. We assume from the threatened 80- year sentence for the 64-year-old former chief of staff that the intention of the authorities is to loosen his tongue with regard to his former employer.

Speaker Christine Quinn was making the rounds of Council offices expressing regret for what she had tried to do in giving up Councilmembers' rights to the Mayor. Not even the Pope's visit had driven this story out of the newspapers.

The result of this uproar is that Christine Quinn will have an enormous handicap if she pursues her projected mayoral candidacy. If she cannot oversee a $55 million Council budget, people will say, how can she handle the $61 billion that the City spends annually. She could have a shot at Manhattan Borough President if Scott Stringer runs for Public Advocate and there are eight other candidates in the race, as there were in 2005, provided that she has not committed any wrongdoing.

The problem with these investigations is that even if you did not steal one cent, if you answered questions differently at different times, or failed to report what you knew to the authorities, you may be pursued for perjury or obstruction of justice. It is hard to remember exactly what one said months ago, especially if you can no longer rely on staff to corroborate your recollection, whatever it is.

Two things the Speaker is reported to have said, may require, as Senator Clinton said of General Petraeus the first time around, "a willing suspension of disbelief."

The first doubtful claim is that she ordered the practice of using fictitious names stopped as soon as she learned of it, but that her aides failed to follow her instructions. The second is that she was the person who brought the matter to the attention of the U.S. Attorney and the New York City Department of Investigation.

Others say that the investigation was already well underway when she called the cops. She has now wisely decided not to answer press questions and to leave the talking to her attorney. Although silence or pleading ignorance does not come off well to the media, it may save her considerable grief.

A collateral question is her using city funds to pay Richards as her personal attorney.

This is all sad because Speaker Quinn is widely and fairly regarded as a capable public servant. She proved, if in any way it needed to be proven, that a person who was open about her sexual orientation could do a fine job in a high public office and win general respect.

When I began as a Councilman in 1974, we received a staff allotment of $7,500. The basic allotment for each Councilmember is now about $350,000. Their salaries have risen from $20,000 to $112,500 plus lulus. There is no requirement for full time service, and no limitation on outside income, earned or unearned.

The amount of discretionary spending, which is money that members can appropriate to outside organizations, sometimes called "earmarks", varies from member to member. Like committee chairs, the amount of funds each member can allocate is determined in part by considering three basic principles: seniority, geography and loyalty.

In the difficult circumstance of managing a body of members with diverse ambitions, some conflicting with each other, we observe that Ms. Quinn has provided sound leadership. The inmates have not taken over the asylum. Her staff varies in talent, considering that after eight phone calls, no one could tell us their budget for 2007-08. But neither could another city agency. We finally got the data from the Citizens Budget Commission.

The great majority of Council-members are honest and decent, although many are ambitious, partisan, self-absorbed and unduly frightened by noisy constituents. They are 51 men and women, chosen by different neighborhoods. Unfortunately, some are not immune to the charms of avarice.

We await the next disclosures in this unfolding drama.

Fortunately, there are other New Yorkers who will join the competition for 2009. Congressman Weiner and Comptroller Thompson are first out of the gate, but the lure of high office will draw other contenders. There are 18 and 1/2 months until the finish line is reached.

If the Speaker recovers from her present travails, she could be a contender. But on the basis of last week's editorials and columns, a decent interval will have to transpire before she can be regarded seriously as a candidate for elevation. Her rivals may have problems with intellect and character, but they have not been so vividly displayed to the public.

StarQuest@NYCivic.org