Fumo aide was grilled on expenses, trial told

In 2004 while reviewing the books for Citizens Alliance for Better Neighborhoods, an auditor uncovered polling expenditures he suspected may have been prohibited political activity, according to testimony yesterday at former state Sen. Vince Fumo's federal corruption trial.

The auditor asked his partner, accountant Steve Kobasa, to set up a meeting with Fumo's co-dedendant, Ruth Arnao, who was Citizens Alliance's executive director, to discuss the polling expenses, Kobasa said yesterday.

At the meeting, in March 2004, Kobasa and his partner asked Arnao what the polling expenditures were for but she said she didn't know and would get back to them with answers, Kobasa testified.

Kobasa, who had prepared Citizens Alliance tax returns since 1999, said Arnao never replied to their questions, adding that he could not recall another instance in which Arnao was unable to answer his questions or obtain information when he requested it.

Tax-exempt nonprofit organizations such as Citizens Alliance are barred from participating in political activity except in limited circumstances.

The 2003 return for Citizens Alliance still hasn't been filed, Kobasa told jurors.

Kobasa testified that he and his partner also had questions about polling expenses in 2002 and that Arnao had replied in May 2003 that the polls had been done to gauge support for "community development services" Citizens Alliance performed.

In response to a question from Assistant U.S. Attorney John Pease, Kobasa said he accepted Arnao's explanation as truthful.

On its 2002 tax return, which Arnao signed on May 15, 2003, Citizens Alliance said it had not made any direct or indirect political expenditures.

On a second return for the nonprofit's for-profit subsidiary, CA Holdings, the company declared a deduction for $151,425 for "community development consulting."

The indictment alleges that Arnao filed false tax returns in 2002 for Citizens Alliance and CA Holdings and that Fumo assisted in the filings.

Government witnesses have previously testified that Citizens Alliance funds were used to gauge the strength of various Fumo-backed candidates for public office, in addition to drumming up support for a referendum in Ventnor, N.J., opposing construction of dunes on the beach. (Fumo owned property near the beach in Ventnor.)

Kobasa said his firm resigned from its engagement with Citizens Alliance in 2005. He has yet to be cross-examined.

Earlier yesterday, the chairman of the board of Independence Seaport Museum testified that he was not aware that the board had ever authorized Fumo to use its luxury yachts for free or for vacation.

Peter McCausland, who began serving on the board in 1995 and became its chairman in 2005, also said he wasn't aware of any compensation paid to Fumo to obtain funding for the museum.

The defense has suggested that the free use of museum yachts by Fumo was encouraged by the museum to "develop" him as a benefactor.

The feds allege that Fumo defrauded the museum of more than $100,000 in connection with free cruises he and close friends took on its yachts from 1996 to 2003.

McCausland also testified that he occasionally chartered cruises on museum yachts but paid for the full cost of the cruises.

"Didn't you get a cruise for free?" defense attorney Stephen LaCheen asked on cross-examination.

McCausland said there was one instance in which he paid the yacht's crew gratuities at the request of the museum's then-chief executive in lieu of a payment to the museum for the full cost. *