Fumo and the IRS debate whether he was helping himself or his constituents

Former State Sen. Vincent J. Fumo and the IRS began fighting in court on Monday over the agency’s demand that he pay about $3 million in back taxes and penalties stemming from the corruption case more than a decade ago that led to his fraud conviction, prison term, and fall from political power.

In an opening statement in a civil trial before a U.S. Tax Court judge, IRS lawyers recapitulated that criminal case while showing slides detailing how Fumo had defrauded the state Senate and a South Philadelphia nonprofit.

Fumo’s lawyer, Mark Cedrone, countered that the IRS was piling on Fumo out of lingering government anger that he had to serve only four years behind bars for his 137-count conviction in 2009.

The dispute between Fumo and the IRS has languished for years in the U.S. Tax Court system and concerns some taxes that date back as far as 2001. When the trial finally got underway, Fumo, 79, walking with the help of a cane, and Cedrone faced about 10 IRS staffers in the courtroom at the U.S. Customs House, Second and Chestnut Streets in Philadelphia.

With the government expected to call dozens of witnesses, the trial is expected to last up to three weeks. U.S. Tax Court Judge Albert Lauber is not expected to issue an opinion until some months after the conclusion of the trial.

IRS lawyer Kristina Rico told Lauber that Fumo tapped into taxpayer money to benefit himself, ignoring Senate guidelines to wildly overpay his legislative staff. This, Rico said, bought their loyalty as Fumo deployed them, as well as a coterie of highly paid consultants, to support his luxurious lifestyle, his campaign agenda, and his personal vendettas.

The IRS says Fumo similarly exploited the staff and treasury of the nonprofit he founded, Citizens Alliance for Better Neighborhoods, secretly using its money to buy himself tools and consumer goods and to pay for political polls and a campaign to protect the ocean view at one of his summer homes at the Shore. The IRS demand includes a special levy the IRS imposes against insiders who abuse nonprofits for personal gain.

Rico said the tax agency’s overall demands were conservative compared with the financial benefits the former state senator had pocketed. Fumo, she said, had “completely lost sight of the border between right and wrong.”

Fumo funded Citizens Alliance in large part by striking a deal with Peco Energy under which the utility donated $17 million to the nonprofit organization and Fumo dropped his legislative opposition to its business plans. The secret held for five years until The Inquirer revealed the arrangement in 2003.

In another secret deal, Fumo steered an additional $10 million to Citizens Alliance from the coffers of a multistate authority that oversees the region’s bridges.

Cedrone said the money spent on Senate staff, polls, and the like benefited not the state senator but Fumo’s constituents, by helping make Fumo one of the state’s most effective Democratic legislators ever.

By dint of the money, Cedrone said, “He got power. He used it to benefit his people, his constituents, the people he served.”

On the first day of the civil trial Monday, testimony mirrored the criminal case of 2009. Three accountants testified that they could not get a straight answer from the nonprofit when they learned that the group had paid for political polling.

And a longtime friend of Fumo’s, Albert Mezzaroba, a former board chair of Citizens Alliance, testified that someone forged his name to numerous nonprofit forms retroactively approving its spending.