City Councillor Cross-Examined

BOSTON--The only Cambridge elected official to face a federal trial 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 thecondos.

But under questioning from his Californiaattorney, Thomas G. Kontos, Walsh testified thathe did not know Dime prohibited second mortgagesuntil he was indicted in 1992.

Walsh told the court the condominiums that wereallegedly failing, the Country Village Estates inTaunton, had plenty of buyers.

He said he wrote memos describing an "emergencysituation" at Taunton only to pressure his staffinto closing deals on the condos more quickly.

Walsh testified that two of his former businessassociates, A. Frances G. Schwartz and AnnJarosiewicz, were responsible for the illegalsecond mortgages. The city councillor said he hadgiven the two women full authority over firmbusiness in Taunton and other locations outsideCambridge.

Schwartz, an attorney, had full control of hisfirm's business outside of Cambridge, includingthe power to hire and fire people, according toWalsh. She kept a significant portion of theincome from that business and all of the incomefrom her own clients, Walsh said.

Walsh said Schwartz was taking so much of thefirm's profits that he had to tell her to cutback.

Jarosiewicz became Schwart'z's projectcoordinator in 1986 and the two women workedclosely together, Walsh testified.

Walsh's account directly contradicted whatSchwartz and Jarosiewicz said earlier in thetrial. The two testified that it was Walsh whoarrange the second mortages.

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

Kontos attempted to show that Walsh may havebeen in Texas during one of the alleged meetings.The lawyer, in fact, produced a purchase orderfrom the city clerk's office allocating funds forWalsh and other councillors to attend a conferencein San Antonio, Tex., between November 29 andDecember 3, 1986.

Walsh, however, said he couldn't remember forsure whether he had been in Texas during thattime.

Poor Boy Makes Good

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 at 24 Hurl-but Street when he was born.The councillor said he has lived at that addressor in the apartment next door all his life.

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 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 firm became extremely profitable afterhe began doing real estate work, the councillorsaid. By 1985, Walsh said he routinely saw between30 to 60 clients and took 200 to 300 phone callseach day. His work day stretched from 8 a.m. untilafter 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

But under questioning from his Californiaattorney, Thomas G. Kontos, Walsh testified thathe did not know Dime prohibited second mortgagesuntil he was indicted in 1992.

Walsh told the court the condominiums that wereallegedly failing, the Country Village Estates inTaunton, had plenty of buyers.

He said he wrote memos describing an "emergencysituation" at Taunton only to pressure his staffinto closing deals on the condos more quickly.

Walsh testified that two of his former businessassociates, A. Frances G. Schwartz and AnnJarosiewicz, were responsible for the illegalsecond mortgages. The city councillor said he hadgiven the two women full authority over firmbusiness in Taunton and other locations outsideCambridge.

Schwartz, an attorney, had full control of hisfirm's business outside of Cambridge, includingthe power to hire and fire people, according toWalsh. She kept a significant portion of theincome from that business and all of the incomefrom her own clients, Walsh said.

Walsh said Schwartz was taking so much of thefirm's profits that he had to tell her to cutback.

Jarosiewicz became Schwart'z's projectcoordinator in 1986 and the two women workedclosely together, Walsh testified.

Walsh's account directly contradicted whatSchwartz and Jarosiewicz said earlier in thetrial. The two testified that it was Walsh whoarrange the second mortages.

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

Kontos attempted to show that Walsh may havebeen in Texas during one of the alleged meetings.The lawyer, in fact, produced a purchase orderfrom the city clerk's office allocating funds forWalsh and other councillors to attend a conferencein San Antonio, Tex., between November 29 andDecember 3, 1986.

Walsh, however, said he couldn't remember forsure whether he had been in Texas during thattime.

Poor Boy Makes Good

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 at 24 Hurl-but Street when he was born.The councillor said he has lived at that addressor in the apartment next door all his life.

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 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 firm became extremely profitable afterhe began doing real estate work, the councillorsaid. By 1985, Walsh said he routinely saw between30 to 60 clients and took 200 to 300 phone callseach day. His work day stretched from 8 a.m. untilafter 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