Walsh Stands Up to Intense Cross-Examination in Continuing Trial

BOSTON--Cambridge City Councillor William H. Walsh remained poised under intense cross-examination Thursday in his trial on 59 counts of bank fraud and conspiracy.

Walsh, the first Cambridge elected official to stand federal trial in a halfcentury, is accused of masterminding a scheme to defraud Dime Savings Bank of New York of $8 million. If convicted, Walsh faces up to 208 years in prison and $14.75 million in fines.

Walsh's testimony, which began with direct examination on Wednesday, comes after five weeks of testimony by his former employees and business associates, who have said he presided over illegal activities.

The prosecution has charged that Walsh's law firm, Ferraro and Walsh, offered illegal "second mortgages" to attract enough buyers to rescue a failing condominium project in nearby Taunton, Mass.

Walsh allegedly used funds from the mortgages to finance down payments, which in turn enticed people to purchase the condos.

But Walsh has said that the project was not failing and that two of his subordinates, A. Frances G. Schwartz and Ann Jarosiewicz, had complete authority over the Taunton condos. Both women were originally indicted with Walsh, but charges were later dropped in exchange for their testimony against him.

On Thursday, Assistant U.S. Attorney Peter J. Mullion attempted to show Walsh's involvement in the scheme by asking him to identify investors who had approached him regarding the project.

Walsh acknowledged contact with several people on the list of investors, some of which he identified as employees or friends, including fellow City Councillor Sheila T. Russell.

Others, he testified, were unknown to him and must have approached Schwartz or someone else.

Mullin also produced several memoranda regarding the project. In one, Schwartz asked Walsh to whom nine unsold units should be assigned.

Walsh denied that the memo indicated a day-to-day role for him in the project, saying he was involved simply because Schwartz planned to cut out some of the project's initial investors.

"I wanted to talk to her to find out why she cut these people because I knew some of them and I feared that they might get angry," Walsh testified.

To show that Walsh knew the condo investment was failing, prosecutors produced a memo in which Walsh termed the project "bankrupt."

But Walsh claimed that he was merely trying to "light a firecracker" under Jarosiewicz and Schwartz so they would close out some units and pay back some of the original mortgage to avoid interest payments.

Walsh said 53 units had already been sold at the time, and that this was enough to cover costs.

But Mullin produced a November 18, 1986 memo from an accountant at Eric Management, which managed the property, showing that the project was losing $26,000 a month and had shown a net loss of $216,000.

"Is this desperate?" Mullin asked.

"NO, its a matter of getting people to do their jobs," Walsh responded.

And by introducing Walsh's 1986 income tax return, Mullin tried to impugn Walsh's earlier testimony. Specifically, Mullin suggested the income report on the tax return contradicted Walsh's claim that Schwartz left him with only 10-15 percent of all the firm's income for which she was responsible.

The prosecutor also noted that while Walsh's tax return said neither he nor any of his family members used any of the property listed on his form, Walsh's mother lived in one such property at 28 Hurlbut St.

"Is that a false statement on your tax return?" Mullin asked

"I don't understand how it got there," Walsh said.

Testimony ended yesterday, with closing arguments set for Monday.