Experts Suggest Walsh is innocent

Angry borrowers and legal experts have suggested that federal investigators may have gotten the wrong man when a federal court convicted City Councillor William H. Walsh for his involvement in a scheme to defraud Dime Savings Bank of New York.

Walsh was convicted March 28 of 41 counts of bank fraud in connection with a scheme to swindle Diem of $2.9 million. Walsh concealed second mortgages granted to cover a 20 percent down payment on loans.

But borrowers and legal experts said Dime may actually have perpetrated the fraud, and that Walsh was merely used as the scapegoat.

Richard V. Kelleher, a Dime borrower who heads the dime Borrowers Association on Cape Cod, said "the government singled out Bill Walsh."

"There was a pattern of falsifications of second mortgages," Kelleher said. "the bank set up the whole scheme, but the bank walks off clean."

Edmund L. Kobylis, a Dime borrower who founded the Dime Borrowers Association in Derry, N.H., called Walsh "a victim of Dime."

And in a recent companion case to the Walsh case, 102 counts of bank fraud charges against attorney Alan H. Segal were dismissed.

In that case, Judge Edward F. Har- rington allowed testimony regarding Dime, whileJudge Mark L. Wolf did not allow such testimony inthe Walsh case.

Borrowers and other sources allege Dime deviseda scheme in the late '80s in which it granted asmany loans as it could give, through a 48-hourloan approval program called the "no document loanprogram."

Under the "no doc" program, informationprovided by an applicant--including employment.assets and the proposed purchase--was notverified, according to former Dime counsel WilliamCandee's testimony in the Segal case.

"There was an utter failure to maintain anysort of underwriting standards," said DorothyAnderson, deputy chief of the Public ProtectionBureau in the Mass. attorney general's office."Lending was extremely irresponsible.

Anderson said Dime loan representativesencouraged borrowers to put in false numbers or tosign a blank application, which the loan officerswould later furnish with false numbers.

Many loans had negative amortizations, causingmonthly interest rates to exceed caps on monthlypayments, she said. The balances of the loansactually went up even when borrowers made monthlypayments, she added.

Candee testified in the Segal case that he wasaware of negative amortizations as a feature ofthe "no doc" loan program. Through this scheme,Kelleher said, Dime encouraged widespread secondmortgages in Massachusetts, New Hampshire,Connecticut and elsewhere.

When the real estate market collapsed in the'80s, Dime borrowers could not repay theirloans--many of which should not have been approvedin the first place, Anderson said. Thirteenpercent of borrowers in 1978 and 19 percent in1988 never even made the first payment, accordingto the anonymous source.

An FBI investigation ensued but when the probereached the upper echelons of Dime management, itabruptly and mysteriously shifted focus to closingattorneys such as Walsh, Kelleher said.

Kelleher and others suggested that Dimeofficials with political connections, includingDime Chairman Richard Parsons, may have influencedthe investigation. Parsons is expected to run forthe Republican nomination for governor of NewYork

Borrowers and other sources allege Dime deviseda scheme in the late '80s in which it granted asmany loans as it could give, through a 48-hourloan approval program called the "no document loanprogram."

Under the "no doc" program, informationprovided by an applicant--including employment.assets and the proposed purchase--was notverified, according to former Dime counsel WilliamCandee's testimony in the Segal case.

"There was an utter failure to maintain anysort of underwriting standards," said DorothyAnderson, deputy chief of the Public ProtectionBureau in the Mass. attorney general's office."Lending was extremely irresponsible.

Anderson said Dime loan representativesencouraged borrowers to put in false numbers or tosign a blank application, which the loan officerswould later furnish with false numbers.

Many loans had negative amortizations, causingmonthly interest rates to exceed caps on monthlypayments, she said. The balances of the loansactually went up even when borrowers made monthlypayments, she added.

Candee testified in the Segal case that he wasaware of negative amortizations as a feature ofthe "no doc" loan program. Through this scheme,Kelleher said, Dime encouraged widespread secondmortgages in Massachusetts, New Hampshire,Connecticut and elsewhere.

When the real estate market collapsed in the'80s, Dime borrowers could not repay theirloans--many of which should not have been approvedin the first place, Anderson said. Thirteenpercent of borrowers in 1978 and 19 percent in1988 never even made the first payment, accordingto the anonymous source.

An FBI investigation ensued but when the probereached the upper echelons of Dime management, itabruptly and mysteriously shifted focus to closingattorneys such as Walsh, Kelleher said.

Kelleher and others suggested that Dimeofficials with political connections, includingDime Chairman Richard Parsons, may have influencedthe investigation. Parsons is expected to run forthe Republican nomination for governor of NewYork