CHRISTMAS shopping in the city seemed like a more exciting idea, somehow, than trudging about the local mall, so Jean Ann Gottsch recruited her friend, Clarice Doernte, and the two West Islip women headed for the garment district.

Mrs. Doernte brought along her 4-year-old son, Walther, who, considering his immeasurable unconcern about the relative excellence of particular fabrics, colors, cuts, styles or prices, exhibited exemplary behavior throughout the busy morning. To reward Walther for patience and fortitude above and beyond the call of pre-schooler duty, the women swallowed their culinary prejudices and chose a metropolitan eatery on what they assumed to be a 4-year-old boy's criteria. They would lunch at a McDonald's restaurant.

After the women had purchased their preheated packages of burgers and fries, and slid into one of the brightly colored booths, they were startled by an oddly dressed old woman, who asked bluntly if she could sit down with them. Instinctively, the two women nodded that, yes, she certainly could, though Mrs. Gottsch anxiously glanced around to determine if other booths were available. They were, which made Mrs. Gottsch nervous.

The old woman's appearance made Mrs. Gottsch more nervous. She wore a brown leather jacket, brown slacks cut for a man (and a large man, at that) and brown men's shoes. She carried three large, wrinkled shopping bags. She seemed to be in her late 60s, and she seemed impoverished, except for her hair. Bleached an incongruously bright blonde, her hair had obviously been professionally coiffed, and recently. Also, several of the old woman's teeth were capped with gold.

The old woman's hands, Mrs. Gottsch said, were grotesque, terribly deformed, gnarled and crippled. Seated across from the old woman, Mrs.Doernte said later that from the moment the old woman sat down, all she could smell was soap.

The old woman never looked directly into the eyes of either of the West Islip women, but she waited no more than a minute to address Walther directly. Reaching into one of her shopping bags, she asked the boy what he knew about Santa Claus. "See, I'm a woman Santa," she said softly. "I wear my costume inside. Inside. Here, I have something for you."

Mrs. Gottsch and Mrs. Doernte looked at each other. Mrs. Gottsch said later that would not have blamed Mrs. Doernte for leaving that very moment, or, for that matter, any other moment. But they stayed.

Groping in apparent pain, the old woman extracted from the shopping bag a small, clear plastic, sandwich bag filled with dollar bills and coins; maybe $10 worth, Mrs. Gotsch guessed. The old woman opened it slowly, all the while excusing herself and begging pardon for her awful hands. "I know they're deformed," she said to the boy. "But don't look at them. You look at my money, and you choose a dollar for yourself. You'll probably like the coins better. You want four quarters?" Walther indicated that he did. "See, this is all a part of the spirit of giving," she told Walther. "Santa comes alive during the last part of the year. Only then. The rest of the time, he sleeps, him and his reindeer."

Carefully, Walther chose his four quarters. The old woman then asked him to help put the rest back. "See, my fingers are deformed and I can't open the bag so well," she said. She made a strange analogy between herself and President Reagan. "See, I'm a lady Santa Claus. I'm like the President. He used to be a cowboy, but now, he's president. So, you have to be liberal in your thinking. Do you know what `liberal' means?"

"No," Walther said.

"Well, neither do I. But it sounds all right, doesn't it. Are you sure you want the coins and not the dollar bill?"

Walther was sure.

"I have something else for you," she said, as Walther's mother and her friend watched, silently. "It's a treasure chest. But you have to use your imagination. If you just look at it, it's a soap dish, but it doesn't have to be."

She took out a yellow, plastic soap dish wrapped in clear plastic. She asked Walther to open it. He did; the dish was empty. "You can put cotton in it and pretend it's anything you want it to be," she said. Walther said, "Thank you."

"Thank you," the old woman answered. "Thank you very much. I love you."

Then she got up and left.

A standoff between officials has stalled progress, eroded community patience and escalated the price tag for taxpayers. Newsday investigative editor Paul LaRocco and NewsdayTV's Virginia Huie report. Credit: Newsday/Steve Pfost,Kendall Rodriguez, Alejandra Villa Loarca, Howard Schnapp, Newsday file; Anthony Florio. Photo credit: Newsday Photo: John Conrad Williams Jr., Newsday Graphic: Andrew Wong

'A spark for them to escalate the fighting' A standoff between officials has stalled progress, eroded community patience and escalated the price tag for taxpayers. Newsday investigative editor Paul LaRocco and NewsdayTV's Virginia Huie report.

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