BOSTON--Cambridge City Councillor William H. Walsh was sentenced to 18 months in prison yesterday for 41 counts of bank fraud and making false statements to the Dime Savings Bank of New York. Walsh was granted a stay pending appeal of his conviction.

Assistant U.S. Attorney Peter J. Mullin had asked for 36 months in prison, but federal Judge Mark L. Wolf handed down a lesser sentence because he said that Dime's policies encouraged the fraud.

"Dime Savings Bank virtually invited the commission of the crime," Wolf said.

Walsh was convicted of concealing second mortgages on loan applications submitted to the Dime Savings Bank, but Walsh and others contend that Dime knew about the second mortgages and did not care.

Wolf told Walsh during the sentencing that Dime's "egregious behavior" did not lessen Walsh's criminal responsibility.

"The misconduct of Dime Savings Bank does not excuse your offense legally or morally," Wolf said.

Walsh maintained his innocence in an interview yesterday and said he hopes to vindicate himself in an appeal.

"I'm going to fight and overturn this no matter what," Walsh said. "I'm the toughest fighter you've ever met."

Wolf said he took into consideration Walsh's "persistent perjury" during the trial.

"You lied, you caused others to lie, and you deliberately lied under oath," Wolf said.

Wolf said Walsh's motive was to prevent financial ruin in 1986 when one of his investments was in jeopardy.

When presented with a chance to raise the money by defrauding Dime, Walsh "accepted that opportunity immediately and without hesitation," according to Wolf.

Wolf said he also took into consideration Walsh's service to the community through his seat on the city council.

"I have probably never sentenced someone who has done so much for other people," Wolf said, citing the numerous letters he received from Walsh's constituents.

Councillor Walsh?

During the sentencing, Mullin cited a letter from the attorney general's office stating that Walsh will be required to forfeit his council seat because of his prison sentence, pursuant to state law.