State Sen. Vincent J. Fumo's legal predicament worsened yesterday 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 as a key prosecution witness this fall if Fumo goes on trial as scheduled 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 reduced 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 yesterday, federal prosecutors said that while investigating Fumo, agents had discovered that Cain had not filed federal tax returns going back to 1991.

They said that they could not reliably reconstruct earlier years, but that he owed $411,000 in taxes on $1.6 million he made from 1997 through 2006.

Cain signed a plea agreement stating 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 but actually to engage in political campaigns.

The agreement provides no further details on the alleged conspiracy. One of the key charges against Fumo is that the Philadelphia Democrat defrauded the Senate by illegally using taxpayer money for political work.

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

Cain is an 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 Senate was also Cain's biggest client, paying him as much as $88,000 yearly under contracts that date from 1985, prosecutors said in their court filings.

In addition, a nonprofit 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 yesterday. So did the Fumo prosecutors, 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 attorney, Dennis J. Cogan, also declined to comment.

Daniel Richman, a former federal prosecutor who teaches at the Columbia University School of Law, said 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 lawyers could argue that Cain's admitted status as a tax cheat means he shouldn't be trusted on the stand.

Moreover, he said, the defense is 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. He could get up to three years in prison under sentencing guidelines, but prosecutors have pledged to seek a reduction in return for his cooperation.

Cain was not charged with the alleged fraud on the Senate, but he agreed that U.S. District Judge Michael M. Baylson could take this "uncharged criminal conduct" 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 also be fined up to $250,000.

According to the court documents, Cain got away with not paying federal taxes for so long using a fairly simple maneuver. As an independent contractor, he had the Senate and all 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 W2s, 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 go on trial Sept. 8. His codefendants in what could be a four-month trial are longtime former aide Ruth Arnao and two other former aides, Leonard P. Luchko and Mark Eister.

Contact staff writer Emilie Lounsberry at 215-854-4828 or elounsberry@phillynews.com.