Tuesday, May 20, 2014

Judge Rules Fumo Must Pay Another $359,430 In Restitution; Angry Defense Lawyer Compares Prosecutor to King Louis XIV

By Ralph Cipriano
for Bigtrial.net

The judge asked the defendant if he had anything to say.

Vince Fumo stood up. He looked tired.

"It's been a long road," the 71-year-old former state senator told Judge Ronald L. Buckwalter.

He talked about his legal ordeal, which began with a federal investigation in 2003. Then came a massive indictment in 2007, followed by a nearly five-month-long trial that ended in 2009 when a jury convicted Fumo on all 137 counts.

"I spent four years in jail," Fumo told the judge who put him there. Fumo talked about the nearly $4 million in fines and restitution that he had to pay the government, plus the additional $4 million he spent on legal fees.

Now, Fumo told the judge, it's ten years later, "And I still don't know what my sentence is."

The judge agreed with Fumo that it had been an unusually long road, longer than anyone could have imagined. But what can you do, the judge seemed to be saying, when the government keeps appealing my rulings, and winning those appeals?

Then, acting on the government's latest successful appeal, the judge announced he was clipping Fumo for another $359,430 in restitution.

Back in 2009, Judge Buckwalter sentenced Fumo to 55 months in jail. The prosecutors appealed, and in 2011, Buckwalter amended that sentence to 61 months. He also increased the amount of Fumo's fines and restitution by $1.1 million, from $2.7 million to $3.8 million.

Fumo had already lost his job, his pension, and his law license.

But the feds still weren't satisfied. They appealed the judge's restitution order, specifically $1.5 million to repay money stolen from Fumo's nonprofit, the Citizens Alliance for Better Neighborhoods.

Judge Buckwalter ruled that the $1.5 million stolen from Citizens Alliance should be split evenly between Fumo and Ruth Arnao, his co-defendant who was the former executive director of the Citizens Alliance. Under Buckwalter's ruling, each defendant was to pay $783,284.

But prosecutors filed another appeal, saying Fumo should pay more, and last year the Third Circuit Court of Appeals agreed with the prosecutors. The appeals court sent the case back to Buckwalter and told him to amend his restitution order.

The prosecutors argued that while Fumo had paid his share, Ruth Arnao wasn't as rich as Fumo was. She could only afford to pay back that restitution at a rate of $1,000 a month. At that rate, Assistant U.S. Atty. Robert Zauzmer argued today, it would take 45 years for the government to collect full restitution from Arnao.

Why should the Citizens Alliance have to wait for that money when Fumo was loaded, Zauzmer said. He was clearly the more guilty party. The goal of restitution is to make the victim whole, and the victim in this case was the Citizens Alliance, Zauzmer argued. Why not make Fumo pay Arnao's tab as well?

Today's hearing was a grudge match between longtime combatants.

Zauzmer was one of the two prosecutors who convicted Fumo. He sat at the prosecution table with Vicki Humphreys, an FBI agent who led the four-year-long investigation of Fumo.

Defending the former state senator was Dennis Cogan, who represented Fumo during the trial. Also appearing on Fumo's behalf was Peter Goldberger, an appeals lawyer who has represented Fumo for years. And Mark E. Cedrone, a tax lawyer who represents Fumo in his battles with the IRS.

Zauzmer sparred frequently with Buckwalter, and often talked over the judge. The judge, in turn, seemed exasperated with the prosecutor. At one point, Judge Buckwalter looked up in the air and said to Zauzmer, "Ok, you and I can't agree on anything."

The hearing began with the testimony of Paul Levy, president and CEO of the Center City District. It was Levy who was asked by the state to take over the Citizens Alliance as an interim conservator.

Under Levy, the Citizens Alliance changed its name to the Passyunk Avenue Revitalization Corp. Levy told the court how he sold off properties and vehicles to balance the budget. He scaled down the organization's mission so that it could support itself on income from 22 rental properties worth $15.9 million.

In his testimony, Levy praised Fumo and the Citizens Alliance for revitalizing Passyunk Avenue.

"It's a very vibrant and thriving neighborhood," Levy said. About the alliance, Levy said, "I thought there was a great deal done extremely well and I wanted to preserve it."

While the Passyunk Avenue Revitalization Corp. is struggling to stay solvent, Levy said, it hasn't  received any restitution yet for the stolen $1.5 million. Levy said he didn't know if it ever would.

After Levy got through testifying, Zauzmer launched into yet another unrelenting attack on Fumo.

Fumo, Zauzmer said, got 96 percent of the benefit of the stolen money, and Arnao, only 4 percent.

Fumo, Zauzmer repeatedly said, was the "mastermind of the fraud." It was Fumo who designed the fraud scheme and reaped the benefits, Zauzmer said. And now he's trying to stick Ruth Arnao, his loyal aide, with half the bill.

"What type of person does this?" Zauzmer asked.

The judge, however, wasn't buying it.

"I firmly believe that" Arnao "was culpable," the judge told the prosecutor.

The judge seemed ticked about the latest appeal.

"I couldn't believe the government was once again going to appeal this," the judge declared. "I should have known better."

Zauzmer kept bringing up the Third Circuit appeal decision in his favor. As a result of that decision, Zauzmer said, Judge Buckwalter now had "very narrow discretion."

The Third Circuit Court of Appeals has ruled that the two defendants had "clearly disproportionate culpability," and very different "economic circumstances," Zauzmer said. So it was time for Buckwalter to hit Fumo with the entire restitution bill for Citizens Alliance.

But, the judge told the prosecutor, the appeals court didn't specify how the issue should be settled, they sent it back to me to recalculate restitution.

"That leaves me to believe I have some discretion," the judge told the prosecutor.

Like a broken record, Zauzmer returned to his theme of Fumo as the criminal mastermind who helped himself to free tools, free vacuum cleaners, and free political campaigns to advocate his own causes. Even though Buckwalter was the judge who sat through nearly five months of such oratory from Zauzmer during the Fumo trial.

Any massive fraud scheme like that requires "mere minions" to implement, like Arnao, Zauzmer said.

The judge took issue with that, saying that Arnao was no "mere functionary."

But, the repetitive Zauzmer argued, Fumo was "the real mastermind behind the fraud." The judge, however, said his job was to figure out the issue of "culpability, who is to blame for this."

Zausmer talked about how wealthy Fumo was. He has $1.8 million in securities in the bank, Zauzmer said. The prosecutor ripped Fumo for claiming to the court that he had a "negative net worth," calling that claim a "fraud on the court."

"I have no question that he can pay it," the judge told the prosecutor about whether Fumo could pay any additional restitution order.

It would be "a miscarriage of justice" if Fumo didn't get stuck with the entire tab, Zauzmer argued. While it will take Ruth Arnao decades to pay, "We can collect that money from Mr. Fumo today," Zauzmer told the judge.

Zauzmer referred to Paul Levy as "the public servant that Vince Fumo could have been ... He wants to finish what Mr. Fumo started. There's really an elegance to that."

Next it was the defense's turn.

Peter Goldberger addressed the judge on the appeals court's decision. He told the judge that Fumo had already paid his $783,284 in restitution. Goldberger said he didn't understand why that money hadn't yet been forwarded to Levy.

Mark Cedrone, Fumo's tax lawyer, said he didn't think that Zauzmer understood the implications of what the IRS had done to Fumo.

While Fumo was still in prison, the IRS hit him with an extremely rare penalty known as a jeopardy assessment. The jeopardy assessment included a bill for $3 million allegedly owed the feds. In addition, the feds froze three of Fumo's bank accounts, including the one with that $1.8 million in securities that Zauzmer had referred to.

"He can't access that money," Cedrone told the judge about Fumo. Also, that $3 million levy by the IRS is a debt, said Cedrone. The tax lawyer objected to Zauzmer claim that Fumo's report of a negative net worth was a fraud on the court. Fumo's wealth, his lawyers argued, has precipitously declined since a pre-sentencing report in 2009 put his fortune at $11 million.

The last speaker on Fumo's behalf was Dennis Cogan. The veteran defense lawyer said he understood Zauzmer's "commitment to the case."

"I don't," the judge interjected. The judge said he had repeatedly told the prosecutor he had "fulfilled that commitment admirably," but Zauzer still wasn't done prosecuting Fumo.

Cogan charged that Zauzmer was misstating the facts of the case. Based on who's his audience, Cogan said, "he [Zauzmer] changes his position."

The defense lawyer took issue with Zauzmer's claim that Fumo had reaped the benefits of most of the money that the government said was stolen from Citizens Alliance.

How could that be, Cogan said, when out of that $1.5 million stolen from Citizens Alliance, about $570,000 was spent on improvements to a building that used to be Fumo's district office in South Philly, a building sold by the Citizens Alliance for a tidy sum.

Did Fumo pick up that building and "put it in his pocket," Cogan asked the judge.

Cogan said that Zauzmer always portrayed Fumo as "the devil incarnate." Meanwhile, it was Arnao who dealt with the accountants at Citizens Alliance; it was Arnao who dealt with the lawyers.

It was Arnao who shared in the benefits of working for the former senator.

"Who is riding with him on the seat of power" Cogan asked.

It was Arnao, and her husband, Mitchell Rubin, whom Fumo got appointed as chairman of the Pennsylvania Turnpike Commission.

While the government was hounding Fumo for more money, Cogan said, the feds were turning a blind eye to the joint assets of Rubin and Arnao.

Rubin owns six cars, Cogan said, including a Mercedes. The joint salaries of Rubin and Arnao amounted to $891,000 in 2005; $1.7 million in 2006; and $952,000 in 2009. Yet the government does nothing to investigate whether they could recover any more money from Arnao, Cogan said.

Rubin sold his process serving company, B&R Services, for a nice sum, Cogan said. Why doesn't the government go after those assets? Then Cogan ripped Zauzmer for suggesting that with a few phone calls to the IRS, he could get some of Fumo's assets unfrozen.

Who the hell do you think you are, Cogan seemed to be saying. He compared Zauzmer to French King Louis XIV with his attitude of "L'Etat, c'est moi," as in "I am the state." The rhetorical flourish was a fitting capper on the day's legal fisticuffs.

When he stood to rebut the defense lawyer, prosecutor Zauzmer appeared stung by Cogan's remarks.

"That was pretty personal," Zauzmer said.

The prosecutor, however, seemed incapable of equating his own years of unrelenting personal attacks on Cogan's client with the defense lawyer's escalating rhetoric.

When he renewed his argument, Zauzmer denied that the feds could recover money from Rubin.

"We could not go to Mr. Rubin to get this debt," Zauzmer said. "He is not guilty here." The government can "only get assets in joint ownership."

Once again, the judge and prosecutor argued over Arnao's culpability.

"You're totally ignoring the fact that she committed a crime and should pay for it," the judge shouted at Zauzmer, before the prosecutor sat down.

Cogan wasn't done. In his rebuttal he took one more shot at Zauzmer. You're not looking at Mitchell Rubin's assets, Cogan said. But you're not done looking at Fumo's assets.

Cogan quoted a government filing in the case that charged that Fumo had engaged in "extensive shenanigans to shield his assets," by transferring ownership of various properties to his son, and Carolyn Zinni, Fumo's fiancee, who was sitting in the courtroom.

If Fumo married Zinni last night, Cogan said of the government, "they'd find a way" to go after what ever assets she had.

After a luncheon recess, Judge Buckwalter read his decision written out in longhand from the bench.

The judge reminded the government that Ruth Arnao collected $150,000 a year as the executive director of Citizens Alliance. While Fumo drew no salary from the alliance.

Arnao, the judge said, was no pawn. Instead, she was "a very capable person in her own right."

"Ruth Arnao enjoyed the lifestyle" she had while working for Fumo, the judge said. She was the person who day-to-day was responsible for what happened at Citizens Alliance.

"She wrote the checks," the judge said.

The judge announced he was going to split the $1.5 million in restitution this way: 75 percent or $1,165,317 would be paid by Fumo; 25 percent or $388,439 would be paid by Arnao.

Since Fumo had already paid $783,264 to Citizens Alliance, he still owed $359,264.

Arnao, who has paid $22,623 to date, still owes $361,264 in restitution.

The judge said he would give Fumo 60 days to pay.

After the case was over, Zauzmer told reporters he had no comment.

But Peter Goldberger walked up to Zauzmer, shook his hand, and said, "Next case, not this again."

The defense lawyer seemed to be saying to the prosecutor, hey, good fight, and now let's end this and move on. You're not going to file another appeal, right?

But prosecutor Zauzmer was having none of it.

"We'll see" was the only thing he said to Goldberger.

"I think the judge's hand was forced," Cogan said afterwards about Buckwalter. His client was going to have to live with the result. If there was a silver lining, Cogan said, it was that Buckwalter's decision would be hard to overturn on appeal, even for the prosecutors.

Maybe, Cogan said, after 11 years, this finally might be the end of the case.

But if it really is, then somebody will have to explain that to Bob Zauzmer.