Walsh Testifies in Bank Fraud Trial

BOSTON--The only Cambridge elected official to face a federal trail in this half of the 20th century took the stand yesterday to defend himself here in U.S. District Court.

City Councillor William H. Walsh has spent six weeks in the twelfth floor of the federal courtroom standing trial on 59 counts of bank fraud and conspiracy. Walsh allegedly masterminded a scheme to defraud Dime Savings Bank of New York of approximately $8 million.

Prosecutors started cross-examination during the last 45 minutes of the session and will continue questioning tomorrow. The trial is expected to go the jury either Friday or Monday.

Prosecutors charge that Walsh, 49, used the money to finance condominium developments in Massachusetts. He faces up to 208 years in prison and $14.75 million in fines if convicted on all counts.

Walsh, a fifth term city councillor, is accused of offering illegal "second mortgages" to attract enough buyers and rescue a comdominium project. The second mortgages were allegedly used to finance down payments, which in turn enticed people to purchase the condos.

But under questioning from his California attorney, Thomas G. Kontos, Walsh testified that he did not know Dime prohibited second mortgages until he was indicted in 1992.

Walsh told the court the condominiums that were allegedly failing, the Country Village Estates in Taunton, had plenty of buyers.

He said he wrote many describing an "emergency situation" at Taunton only to pressure his staff into closing deals on the condos more quickly.

Walsh testified that two of his former business associates, A. Frances G. Schwartz and Ann Jarosiewicz, were responsible for the illegal second mortgages. The city councillor said he had given the two women full authority over firm business in Taunton and other locations outside Cambridge.

Schwartz, an attorney, had full control of his firm's business outside of Cambridge, including the power to hire and fire people, according to Walsh. She kept a significant portion of the income from that business and all of the income from her own clients, Walsh said.

Walsh said Schwartz was taking so much of the firm's profits that he had to tell her to cut back.

Jarosiewicz became Schwartz's project coordinator in 1986 and the two women worked closely together, Walsh testified.

Walsh's account directly contradicted what Schwartz and Jarosiewicz said earlier in the trial. The two testified that it was Walsh who arranged the second mortgages.

Walsh also denied the two women's testimony that they discussed the second mortgages with the city councillor in meetings during November 1986.

Kontos attempted to show that Walsh may have been in Texas during one of the alleged meetings. The lawyer, in fact, produced a purchase order from the city clerk's office allocating funds for Walsh and other councillors to attend a conference in San Antonio, Tex., between November 29 and December 3, 1986.

Walsh, however, said he couldn't remember for sure whether he had been in Texas during that time.

During yesterday's testimony, Kontos askedquestions designed to depict the city councilloras a poor Cambridge boy who made good.

"My father came to Cambridge from Cork, Irelandin 1918," Walsh recounted under questioning fromKontos.

Walsh testified that his family lived in abasement apartment at 24 Hurlbut Street when hewas born. The councillor said he has lived at thataddress or in the apartment next door all hislife.

Walsh talked about how he worked odd jobs toput himself through college and law school. Healso recounted how he took care of his motherafter his father died in 1968.

He testified that he did pro-bono work out ofhis law office, which he founded in a house on 954Cambridge Street two decades ago. Walsh said hedid the work because "I know what it is like notto have money, and it's part of my moralobligation to do [pro-bono work]."

He testified that he ran for city council in1971 because he "had a great interest in the cityand people." He lost that election, but came backto win a seat in 1985.

Walsh's law firm became extremely profitableafter he began doing real estate work, thecouncillor said. By 1985, Walsh said he routinelysaw between 30 to 60 clients and took 200 to 300phone calls each day. His work day stretched from8 a.m. until after midnight, Walsh said.

At one point, Walsh's building became socrowded that his firm had to conduct business in atrailer on the parking lot.

During the last 45 minutes of yesterday'ssession, assistant U.S. attorney Peter J. Mullincross-examined Walsh. Mullin tried to cast doubtson Walsh's assertion that Schwartz was in totalcontrol of the firm's finances

During yesterday's testimony, Kontos askedquestions designed to depict the city councilloras a poor Cambridge boy who made good.

"My father came to Cambridge from Cork, Irelandin 1918," Walsh recounted under questioning fromKontos.

Walsh testified that his family lived in abasement apartment at 24 Hurlbut Street when hewas born. The councillor said he has lived at thataddress or in the apartment next door all hislife.

Walsh talked about how he worked odd jobs toput himself through college and law school. Healso recounted how he took care of his motherafter his father died in 1968.

He testified that he did pro-bono work out ofhis law office, which he founded in a house on 954Cambridge Street two decades ago. Walsh said hedid the work because "I know what it is like notto have money, and it's part of my moralobligation to do [pro-bono work]."

He testified that he ran for city council in1971 because he "had a great interest in the cityand people." He lost that election, but came backto win a seat in 1985.

Walsh's law firm became extremely profitableafter he began doing real estate work, thecouncillor said. By 1985, Walsh said he routinelysaw between 30 to 60 clients and took 200 to 300phone calls each day. His work day stretched from8 a.m. until after midnight, Walsh said.

At one point, Walsh's building became socrowded that his firm had to conduct business in atrailer on the parking lot.

During the last 45 minutes of yesterday'ssession, assistant U.S. attorney Peter J. Mullincross-examined Walsh. Mullin tried to cast doubtson Walsh's assertion that Schwartz was in totalcontrol of the firm's finances