A Councillor's Financial Activities Come Under the Magnifying Glass

Questions Raised by Investigation of Walsh Have Been Asked by His Political Enemies

Cambridge City Councillor William H. Walsh is under investigation for bank fraud by federal authorities. And, according to many of Walsh's political enemies, it comes as no surprise.

Questions about the integrity of Walsh's dealings floated around Cambridge long before the Boston Globe announced the investigation Monday, many of them arising during the decades the fourth term councillor spent building his real estate empire and solidifying his political career. They arose when Walsh started to "do business" with colleagues at city council and politically eminent Cantabrigians.

Walsh's business transactions became mixed up with the lives of colleagues such as fellow Councillor Sheila T. Russell, City Clerk Joseph E. Connarton and former Police Chief Anthony G. Paolillo. And although Mayor Alice K. Wolf acknowledged that the dealings may be construed as "potential conflicts [of interest]," Walsh maintains his innocence, despite the suspicions of a sizable political faction in Cambridge and a group of federal investigators.

Justice Department officials are probing the mechanics of a major real estate deal in Andover, according to the Globe report. Although the case is in its "early stages," investigators hypothesize that Walsh artifically inflated condominium prices to obtain larger mortgages from banks and prevent the failure of the 70-unit condo development, the Globe reported.

But Walsh firmly denies the allegations.

"There was no inflating of prices," he says. Walsh explains that "the ultimate price [of the condominiums] was based on a formula" which combined his estimate and the bank's estimate of the property value.

"To my knowledge, everything was 100 percent legitimate," Walsh says of his real estate dealings.

Life of Success

Before Walsh's career on the council started in 1985, he carved out a successful private law practice and real estate business. After his election, however, his private and public careers began to intermingle, according to the Globe, marking the start of numerous questionable dealings.

Walsh is currently involved in at least 25 law-suits in various courts throughout the state filed by former banks, clients, partners and the FDIC, The Globe reported.

The ups and downs of Walsh's real estate fortune in many ways mirror the successes and failures of area banks that loaned him money. The failure of the Eliot Savings bank in June of 1990 suspiciously coincided with the demise of many of Walsh's condominium enterprises--and many people blame him for the bank's collapse.

Councillor Edward N. Cyr says it is important to get to the bottom of the insolvency of Eliot and other banks to identify the responsible parties.

"The folks who are responsible for [the failures] that behaved inappropriately should be held accountable," Cyr says. Otherwise, the people of Cambridge and America are going to have to pay off the bank's debts, he adds.

Many Cambridge politicians and activists--mostly his political enemies--say they doubt Walsh's claim of innocence, saying that his questionable dealings have affected his impartiality as a publicly elected representative and that Walsh may be entangled in numerous conflicts of interest.

In the winter edition of the Tenant Independent, the Cambridge Tenant Union's publication, Walsh was accused in an editorial of having used his clout to block the criminal prosecution of his client, Jacqueline Rickard. Rickard was found to have "willfully violated Cambridge's Removal Ordinance," but was able to remain an alternate member of the Board of Zoning Appeals, the editorial stated.

And when hard times hit the real estate market last year, several of Walsh's former friends and partners sued him, claiming that he showed favoritism to other partners.

In an affidavit, one of the plaintiffs in the case, Dennis M. Cargill, accused Walsh of using his power to aid his personal business interests.

"Cambridge is known to be a difficult place to do real estate development because constituents are basically 'anti-development,'" the affidavit said. "Walsh exuded a cocky self-confidence based on his legal/political clout and believed that he could do most anything [in his business deals]."

In his affidavit Cargill also stated Walsh's real estate transactions "had serious conflicts of interest."

City Ethics Legislation

Last month, possible conflicts of interest prompted the city council to amend its ethics legislation, which now requires the city's elected and appointed officials to publicly disclose financial holdings and the names of all business partners.

But despite the move, which made Cambridge's ethics law "the toughest local ethics law in the country," according to Cyr, Walsh and other councillors recognize that reporting business partners will not definitively cap dealings between colleagues.

In defense of his financial ties to Russell, Connarton and other city employees, Walsh says no law can prohibit him from selling his house to the city manager, just as no law can prevent him from conducting business with his colleagues.

"Involving other elected officials in business dealings is not an illegal act," Cyr says.

Cyr says the law was designed to emphasize the separation of the public and private interests of city officials.

But other council members say the legislation is unnecessary because of the umbrella effect of the Massachusetts ethics legislation and because of the integrity of Cambridge's councillors.

"I don't think [the ethics legislation] was necessary," Russell says. "This makes it look like people think we're crooked. No one on the council is crooked."

Walsh's Opposition to Rent Control

But not everyone agrees. In the past, many Cantabrigians have criticized Walsh's conduct. And much of the criticism centered around his vehement opposition to rent control legislation. Along with Russell, Walsh has consistently voted against rent control bills and in favor of developer interests.

"He was always a representative of the real estate industry," Cyr said. "People vote for him knowing that that's what he does."

But many of Walsh's property investments are in rent control developments, and some Cambridge rent control activists question whether some of these properties were illegally changed into uncontrolled condominiums.

"What's been a concern to us is the way in which permits have been removed where his [Walsh's] office has been involved," says Michael H. Turk of the Cambridge Tennants Union (CTU). "There is a question as to whether there have been illegal removals as well as legal."

But the allegations against Walsh put up by Cambridge residents and the Justice Department will probably not be fully answered until-federal authorities complete their inquiry. And, while investigators probe his financial past, business will go on as usual. According to Wolf, Walsh's council term will continue and if Walsh is found guilty of the allegations, the public will decide his political future.

Of course the speculation continues.

"Was Billy Walsh acting criminally?" Cyr asks. "Who the hell knows?"