A federal grand jury subpoenaed documents earlier this week in the investigation of three-term City Councillor William H. Walsh for bank fraud, The Boston Globe reported yesterday.

Federal officials are investigating Walsh for two counts of fraud, according to The Globe. They suspect that Walsh illegally transferred ownership of dozens of condominiums in Weymouth, Mass. without making down payments, and that he loaned buyers the money to make down payments on his own properties.

In both cases, Walsh allegedly defrauded the banks by not informing them of his actions, officials told The Globe.

Walsh, in a telephone interview from his law office yesterday, confirmed the federal investigation into his dealings in Weymouth. He also said he is cooperating with federal authorities by handing over the subpoenaed documents.

Walsh did not deny the Weymouth allegations but he said the article in yesterday's Globe was "very misleading."

Authorities are depending on one informant, a former Walsh associate, for leads in the probe, according to The Globe. The newspaper reported the informantsaid he provided investigators with 50 to 60pounds of documents, including closing documents,memos and letters pertaining to the Weymouthdevelopment.

Walsh said he knows who the informant is andthat the former partner is trying to destroy hisreal estate fortune. He refused to reveal theinformant's identity.

"He's been after me for 37 months and I sure doknow who it is," the councillor said. "To betruthful, I think the man's a lunatic."

Walsh's real estate career has been plaguedwith allegations of improprieties. There have beenat least twenty-five lawsuits against Walsh incourts throughout the state, many of which werefiled by former partners.

Walsh, an Independent councillor, has a historyof representing the interests of real estate andbusiness on the council.

In addition to the charges of impropriety inWalsh's Weymouth condominium dealings, thethird-term councillor may also be the subject ofanother investigation involving real estatetransactions in the nearby towns of Andover andShrewsbury.

But yesterday Walsh once again denied theallegations of bank fraud that The Globe reportedin December.

"I know of no probe in Andover other than thestory in The Globe," Walsh said. "The Globe seemsto know more than I do."

Walsh's alleged improprieties in Weymouthinvolve two different state banks, one of which isbeing investigated by federal authorities, TheGlobe reported.

'Loan Flips'

"It looks like loan flips," said John V. Lane,assistant regional director of the Federal DepositInsurance Corporation (FDIC). "They createfictitious values and sell in between themselves."

Lane explained that Walsh allegedly inflatedthe prices of his own condominiums by selling themto his associates. He fostered the sale of theproperties by providing his partners with themoney for down payments.

This practice, Lane said, led the banks tobelieve Walsh's investors had the capacity tosupport his projects, when in fact Walsh wasfinancially backing himself.

Evidence from the FDIC could be used in aninvestigation of Walsh, Lane said.

Many of Walsh's colleagues could not be reachedfor comment, but Vice Mayor Edward N. Cyr saidthat it is too early in the investigation to drawany conclusions.

"I don't know any of the evidence yet," hesaid. Cyr added that "it's up to us to leave it tothe legal process at this juncture.