Prosecution Continues in Walsh Trial

BOSTON--Federal government attorneys continued to press their case yesterday in the trial of Cambridge city councillor William H. Walsh at U.S. District Court in downtown Boston.

Walsh is accused of 59 counts of bank fraud and conspiracy for heading a scheme to defraud Dime Savings Bank of New York of approximately $8 million to finance condominium developments in Massachusetts.

If convicted on all counts, the Cambridge councillor faces a maximum sentence of 208 years in prison and $14.75 million in fines.

Walsh allegedly tricked Dime into issuing mortgages on condominiums to his friends and allies by offering to cover their down payments with "second mortgages" which he concealed from Dime. Dime required 20 percent down for its mortgages.

Walsh allegedly orchestrated this scheme to save a multi-million dollar loan that he had guaranteed to finance development of condominiums. The loan was in jeopardy unless more condominium buyers could be found.

Walsh alleged scheme was revealed when Dime searched for answers after many borrowers defaulted.

Second Mortgages Testimony

Yesterday's proceedings featured the continued testimony of A. Frances G. Schwartz, a lawyer who worked with Walsh at his firm, Ferraro and Walsh, and a co-defendent in the case. Schwartz testified as part of a plea bargain arrangement.

Schwartz, who allegedly was romantically involved with Walsh in the '70's, testified regarding files that documented the concealment of the second mortgages.

Schwartz testified that she requested the files during a phone conversation with Walsh on September 30, 1992.

The telephone conversation took place while Walsh was fleeing to the West Coast on the day of his indictment, according to Schwartz. Walsh disappeared for eight days after he was indicted and was classified as a "fugitive from justice."

Assistant US attorney Peter J. Mullin, the prosecutor for the case, referred to documents in the files and asked Schwartz to verify that Walsh had whited out and otherwise concealed and sale agreements.

Schwartz's testimony, which lasted for most of the day, became somewhat dry at times with one spectators having to be awakened when his snores began disrupting the trial.

Neither Mullin nor California attorney Thomas G. Kontos, who is representing Walsh, returned phone calls yesterday.

Three other major figures were indicted in the Dime scheme along with Walsh and Schwartz: Dennis Cargill, a real estate broker and a former close business associate of Walsh; Ann Jarosiewicz, a paralegal at Ferraro and Walsh; and Arthur E. Peach, a loan representative at Dime.

Charges against Cargill were dropped immediately before the trial began after he cooperated with prosecutors, and the rest have agreed to plea-bargain agreements.

People who accepted the second mortgages and purchased the condos were not charged. They included State Representive Alvin E. Thompson (D-Cambridge) and Cambridge police Lieutenant Richard L. Bongiorno.

Walsh has insisted since his indictment that he is innocent. In a phone interview last week, he said the case involved "Dime getting caught with their pants down, trying to find a scapegoat."

"They made a lot of bad loans, and never verified anything," Walsh said.

Walsh said last week that the second mortgages were not the causes of most of the defaults.

"They [Dime] alleged that all of the mortgages that were defaulted on were defaulted on because of second mortgages, but I owned only 2-3% of the property they had second mortgages on," he said.

Walsh's Political Opponents

But many people disagreed with Walsh's position and with his self-proclaimed innocence.

Some of the most vocal are officials from the Cambridge Tenants Union (CTU) which strongly opposes Walsh and his position against rent control.

The CTU staged a demonstration outside City Hall calling for Walsh's resignation after his indictment in September, 1992.

"The man is guilty, the man should not be holding political office," Malcolm L. Kaufman, a member of the CTU steering committee said yesterday. "It's blight on the city."

"If he had any sense of decency, he would have stepped down," Kaufman said. "People in all ends of the political spectrum are after him."

Kaufman said he thinks it is likely that Walsh will be convicted. "I don't think that man will be finishing his term on the [Cambridge city] council," he said. "He will be starting a term in federal prison."

The Cambridge Civic Association (CCA) has taken a similar stance.

"[Walsh's] constituents deserve a better councillor, even if they don't think that they do." CCA President R. Philip Dowds said yesterday.

"He has been a wildly ineffective counsellor," Dowds added. "He has accomplished very little."

Dowds proposed two theories about the motives of Walsh's real estate dealings, both of which he says imply improprieties.

One is the theory being advanced by the prosecution--that Walsh made fraudulent deals to rescue his personal real estate empire, Dowds said.

The other theory, which does not depend on his guilt of fraud, is that Walsh was trying to curry favor in the city government by offering its members real estate deals, Dowds said.

Dowds said that even if Walsh did not perpetrate fraud, the fact that he made deals with his fellow city government officials is ethically questionable.

Engaging in real estate dealings with other members of the local government was not against Cambridge rules two years ago, but would be now, Dowds said.

"Cambridge municipal ethics legislation was designed to stop his [Walsh's] real estate deals," said Dowds, adding that while Walsh's "very disturbing to many people."

"It was just not clean government," Kaufmann said.

Such relationships between public officials, "compromise their ability to effectively carry out their positions," Kaufman said. "City councillors should have nothing a common with each other besides the fact they both happy to be on the city council."

CTU co-chair Michael H. Turk voiced additional concerns arising from the Walsh trial. Turk said that in light of Walsh's firm's implication in the trial, the firm's past cases involving Cambridge affairs should be reviewed.

Turk said he also questions whether those persons who accepted the mortgages, including Representative Thomspson and Officer Bongiorno, are completely without blame.

City Council Not Affected

Others are concerned about the effects of the Walsh concerned about the effects of the Walsh controversy on the everyday dealings of the city council. Walsh said yesterday that there had been none, and councillor Timothy J. Toomey agreed, saying, "it hasn't affected [the council] in any way yet. Walsh hasn't missed a meeting yet, and he's been as vocal as ever."

But one councillor, who requested anonymity until the end of the trial, said "obviously it's disruptive. It's very difficult to have this going on."

Kaufman said the trial "put a cloud over the body."

Walsh's Supporters

But throughout the trial Walsh has also maintained a number of supporters in Cambridge and elsewhere.

Former Eliot House Superintendent Margaret Garland, who attended the trial yesterday, characterized herself as a "staunch supporter" of Walsh.

"He's man of great integrity," Garland said. "He's done more for the less fortunate than most people know. He's an honorable man."

Another Walsh supporter in the audience yesterday was Joseph D. Fernandez, former director of Bilingual Programs for Cambridge Schools.

"I don't think he's guilty," Fernandez said before yesterday's proceedings. "He usually only helps people."

"A lot of times he doesn't know what goes on his office. A lot of times people use him," Fernandez added.

One impartial observer who claimed to have observed a "hundreds" of trials said he expects a conviction.

Says Louis A. Morrissey: "The evidence [against Walsh] is just piling up."