When Mallory Factor took over the reins of the startup conservative organization Free Enterprise Fund two years ago, the New York financier set high expectations for what he envisioned would become a major player in the political and lobbying scene.

Factor talked a big talk. “We’re not a think tank. We’re a do tank,” he said at the time.

Factor made a name for himself in part through the Gotham-based Monday Meeting group that tried to link the Wall Street business world and Congress.

The FEF, he said, would take on the biggest issues — such as reform of the Sarbanes-Oxley corporate accountability legislation — while showering campaign contributions on free-market candidates.

But for all practical purposes, the FEF, as it was just a few weeks ago, is gone — most of the 13 staff members have either left or been laid off, and no one answers the phones.

And the group’s future, much like its apparent demise, remains shrouded in mystery.

Several former FEF staffers and more than a dozen people familiar with the organization said they did not know what Factor plans to do with the group. And Factor, who has since left New York for South Carolina, declined to comment for this story, saying through an assistant that he was traveling in Asia.

But several sources said the group plans to transform itself from a lobbying and political organization to one that will focus more on raising money for candidates. The group also is planning to add new employees and bring on a big-name serious conservative who is well-known in the free-market world, according to three sources who said they were unable to be more specific.

The FEF got off to a rocky start. Steve Moore, the founder and former president of the like-minded group Club for Growth, started the FEF after being ousted from the club in late 2004. But just five months after he and Factor and other former Club for Growth cohorts decamped for the FEF, Moore took an editorial job at The Wall Street Journal, where he remains.

“I talked to Mallory a few weeks ago and gather that their plan is to really gear up for the 2008 election cycle and stop spending money now,” Moore said in an e-mail. “They want to do more in ’08 especially since Republicans have more vulnerable Senate seats than Democrats.”

Grover Norquist, president of the conservative, free-market Americans for Tax Reform, said the FEF is “in transition. I think it’s going to be exciting. Look for good stuff.”

Whatever that good stuff is, no one’s talking.

Several sources familiar with the FEF said they believed Moore had indicated he could return to the FEF or perhaps start a new organization. But in an e-mail Moore said that was not the case and that he was staying at The Wall Street Journal.

It’s also not clear why the FEF is in such turmoil.

According to its 2005 tax report, the latest year available, the FEF had revenues of $1.7 million but expenses of just more than $2 million and ran a deficit of $282,818. Among its expenses were $45,000 for five months of salary for Moore; $100,000 for then-Vice President Larry Hunter from April to November, and $64,000 for E. O’Brien Murray for the last four months of the year. Factor took no salary.

In the 2006 election cycle, its political action committee gave out about $75,000 to Republican candidates. The FEF also paid for ads defending then-Rep. Tom DeLay (R-Texas) after he was indicted in Texas.

“It sounded like they were burning through money, and they weren’t raising it,” said one person familiar with the operation. “They hired a lot of people with big salaries, and it just didn’t go.”

Others said the group lacked clear direction or management.

Several sources said that nearly every employee, including Executive Director James Terry, was laid off as of last week, but when reached by cell phone, Terry declined to comment. The top remaining employee, these sources said, was Steve Goodrick, vice president for strategic programs, but Goodrick refused to say whether he is still an employee there. “I cannot have any comment on internal matters,” he said. “The Free Enterprise Fund is not going to have any public discussions regarding its internal matters.”

Membership director Lynn Bradshaw, reached by cell phone, would not say whether she still works at the FEF either. “I really can’t answer any questions,” she said.

“I understand that the chairman, Mallory Factor, has dismissed the vast majority of the staff,” said another person familiar with the group. “They are clearly in transition, and I don’t know if they’re going to carry on or close up shop.” This person added that many of the employees got severance packages and risk losing their payout if they discuss their terminations.

One board member, James Higgins, said it’s too early to write off the FEF just yet and that the 2008 election cycle is in its infancy. “Despite all the attention in the presidential race, the election is still quite a ways away,” said Higgins, an investment manager in New York. “There is still a tremendous amount of interest in some of the key issues that the Free Enterprise Fund has been involved in.”