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New charges could be factor in Fumo case

State Sen. Vincent J. Fumo's legal predicament worsened today when federal prosecutors disclosed that a longtime Fumo confidant, jammed up with his own criminal tax problem, had agreed to cooperate with the government.

State Sen. Vincent J. Fumo's legal predicament worsened today when federal prosecutors disclosed that a longtime Fumo confidant, jammed up with his own criminal tax problem, had agreed to cooperate with the government.

Howard J. Cain, 60, is expected to take the stand this fall as a key prosecution witness when Fumo stands trial in a sweeping federal corruption case.

Cain has agreed to plead guilty to a single count of tax evasion. In return for his cooperation, prosecutors have pledged to ask a judge for a reduction in Cain's sentence for failing to pay any income taxes for 16 years.

A top Philadelphia political strategist for decades, Cain is the only person from Fumo's famously loyal inner circle to defect and become a prosecution witness.

In court documents filed today, federal prosecutors said that while investigating Fumo, agents discovered that Cain hadn't filed federal tax returns back to 1991.

They said they couldn't reliably reconstruct earlier years, but that he owes $411,000 in back taxes on $1.6 million he made from 1997 through 2006.

Cain signed a plea agreement stating that he had "engaged in a conspiracy with Vincent J. Fumo" under which the State Senate paid Cain more than $500,000 since 2000 ostensibly to work on issues and deal with civic groups and officials, when he was actually engaged in political campaigns.

The allegation that Fumo defrauded the State Senate by illegally using taxpayer money for political work is one of the key charges against him.

Fumo is also charged with illegally extracting personal benefits, including luxury yacht cruises, maid service, and power tools and vacuums, from the State Senate and a pair of nonprofit organizations and with attempting to thwart the federal probe with a cover-up.

Cain is a large, amiable man respected for his political acumen and technical skill at polling, voter drives and campaign ads. Now alienated from Fumo, he had been one of the senator's closest friends and allies for years. Fumo once said: "Howard is family."

The State Senate was also Cain's biggest client, paying him as much as $88,000 yearly under contracts that date back to 1985, prosecutors said their court filings.

In addition, a nonprofit group whose funding was obtained by Fumo bankrolled a recycling organization that paid Cain $60,000 annually in recent years.

Cain's lawyer, Peter J. Scuderi, declined to comment today. So did Assistant U.S. Attorneys John J. Pease and Robert A. Zauzmer, beyond saying, in a statement, "We continue to prepare for trial in September on the larger conspiracy referenced in the plea agreement."

Fumo's lawyer, Daniel J. Cogan, also declined to comment.

Daniel Richman, a former federal prosecutor who teaches at Columbia University Law School, said that turning a close associate like Cain could provide the government with a "major advantage" at Fumo's trial.

Along with their intimate factual knowledge, Richman said, such cooperators can provide a kind of personal narrative that makes dry documentary evidence come to life, connecting the dots for a jury.

On the other hand, Richman said, Fumo's defense lawyers could argue that Cain's admitted status as tax cheat means that he shouldn't be trusted on the stand.

Moreover, he said, the defense was sure to focus on the incentives for Cain in his deal with prosecutors.

Under the deal, Cain is to plead guilty, probably within the next few weeks, to a single count of tax evasion. He could get up to 3 years in prison under sentencing guidelines. Prosecutors have pledged to seek a reduction in that in return for his cooperation.

He was not charged with the alleged fraud on the State Senate, but U.S. District Judge Michael M. Baylson may take that into account when imposing a sentence.

Cain agreed to pay back the $411,000 in taxes, plus at least $325,000 in interest. He could be fined up to $250,000.

According to the court documents, Cain got away with not paying federal taxes for so long by a fairly simple maneuver.

As an independent contractor, he had the State Senate and all his other clients pay his business, Venture Analysis, which he operated out of his home in Wayne. Venture Analysis - Cain was its sole employee - never filed federal 1099 tax forms or W-2s, thus leaving the IRS in the dark about Cain's income stream.

Indicted in early 2007, Fumo was originally scheduled to stand trial in February. He won a delay until September after he switched lawyers.

In the meantime, prosecutors, the IRS and the FBI have continued to gather evidence. The FBI and IRS raided Cain's home office in February, seizing thousands of pages of records documenting Cain's untaxed earnings and his spending.

Fumo is scheduled to stand trial starting Sept. 8. His codefendants in what could be a four-month trial are longtime former Fumo aide Ruth Arnao and two other former aides, Leonard P. Luchko and Mark Eister.