Former State Senator Vincent Fumo faces retrial over IRS demand to pay $3 million in back taxes

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Thirteen years after former state senator Vincent J. Fumo was convicted of defrauding the state senate and two nonprofits, he’s set to take on the federal government in another long-delayed trial.

In a civil trial due to begin on Monday before a US Tax Court judge, Fumo, 79, is challenging an IRS claim made against him a decade ago while he was in prison. The agency charged him with approximately $3 million in back taxes and penalties in connection with allegedly undeclared benefits paid to him as a result of his corruption.

The IRS request is based on Fumo’s criminal conviction for 237 counts in 2009. The agency says he reaped financial benefits by overpaying his Senate staff while using them as personal servants and foot soldiers campaign, and hiring a taxpayer-paid private detective to investigate. political enemies, an ex-girlfriend, two strippers and even his own son, among other abuses.

The IRS also wants to fine Fumo for exploiting the South Philadephia nonprofit he started, the former Citizens Alliance for Better Neighborhoods, tapping his money to pay for political polls, a stealth lawsuit against a legislative enemy, a campaign to protect the ocean view at his shore home, for tools and consumer goods, and more.

The IRS case picks up on evidence presented during the marathon criminal trial, ranging from Fumo’s fondness for expensive Oreck vacuum cleaners to the audacious pressure he put on Peco Energy for a secret $17 million donation to the organization non-profit.

The IRS filed its claims in 2012 while Fumo was still serving his four-year prison sentence. Fumo challenged the agency’s tax bill and the case has since progressed, with a few years passing without any legal activity even before COVID-19 froze the lawsuit for the past two years.

Finally, Tax Court Judge Albert G. Lauber, who will preside over what could be a three-week trial and deliver the verdict, ruled that it must begin at 10 a.m. Monday in a courtroom in the US Customs House, Second and Chestnut Streets in Philadelphia

Nor is it the only tax case that Fumo faces. Separately, he is fighting another IRS claim that pays at least an additional $328,000 in unpaid gift tax on a $920,000 transfer to his son made shortly after Fumo went to jail. Fumo says the IRS misunderstands the transfer and no taxes are due. No trial date has been set.

The IRS won’t comment on the case, but in a recent pretrial memo, its battery of attorneys said Fumo had “omit a substantial amount of income on his multi-year tax returns.” The memo listed 80 witnesses the agency could call during the trial, including Fumo — and the former girlfriend he had been tracking by the private detective at Senate expense. It was the woman, Dorothy Sterling, who testified during the trial that Fumo’s motto was OPM – spending “other people’s money”.

The agency noted that 10 of the witnesses it may want to call have died since Fumo’s criminal trial. Instead, he wants to cite the transcripts of their trial.

Asked to comment on the IRS case, Fumo replied via email: “aren’t you ashamed!!!”

In an interview, Fumo’s longtime civil attorney Mark Cedrone said the lawsuit was fundamentally flawed because the money in question went to people other than Fumo. For example, Cedrone said, pollsters paid $256,000 went to them, not Fumo. Likewise, he said, the generous compensation of Fumo staff went to them, not the senator.

“The vast majority of what happened here, Vince got no advantage,” Cedrone said. “Yeah, he has tools. The vast majority of things he didn’t do.

Cedrone said the IRS is seeking about $3 million from Fumo as part of the state Senate and Citizens Alliance allegations. The levy, if he were to pay it, would be another big financial blow for Fumo.

While under investigation by the FBI, he gave up his $900,000-a-year job as a rainmaker bringing clients to the Dilworth Paxson law firm. After his conviction, he lost his annual state pension of $100,000 and his law license. He also had to pay around $4.5 million in restitution to his victims. By the time he began his prison sentence, Fumo’s net worth, once up to $11 million, had dropped to $3 million, according to court records.

Since his release from prison, Fumo has kept a low profile, sometimes attracting attention for his Facebook posts, such as one challenging Mayor Jim Kenney to an alley fight. Earlier this month, Fumo put his 29-bedroom Victorian mansion in the Spring Garden section of town up for sale, asking for nearly $4 million.

Fumo served in the Senate from 1978 to 2008 and was widely considered Philadelphia’s most powerful Democrat in the legislature.

Cedrone said the former senator was tired of seemingly endless legal battles.

“He’s sick of being a punching bag,” Cedrone said. “He would like to continue his life.”

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