Accountant says he questioned polls by Fumo-linked nonprofit

An accountant testified yesterday that his firm repeatedly raised questions about polling done by a South Philadelphia nonprofit tied to former State Sen. Vincent J. Fumo and tried - without success - to find out if the polls were connected to politics.

In 2004, Steven Kobasa told jurors in Fumo's corruption trial, he pushed to examine a set of polls, but Ruth Arnao, executive director of Citizens' Alliance for Better Neighborhoods, never provided them.

And in 2003, he testified Monday, Arnao told his firm that her charity's polling was to measure public interest in "community development services" that the nonprofit could perform. That was a lie, prosecutors allege.

Kobasa's firm, Stockton & Bates, was zeroing in on the issue because federal law forbids nonprofit organization from engaging in politics except in certain circumstances.

In fact, the $250,000 in polls surveyed the political strength of four Philadelphia City Council members, the political viability of Mayor John F. Street, as well as as the political climate in districts in the Philadelphia suburbs and even in counties north of Harrisburg.

In a 2003 filing with the IRS, Arnao left blank a space asking for any spending on political expenditures - an action that underpins one of the many criminal counts she and Fumo face.

The following year, the charity never filed its required annual report to the IRS - apparently frozen about precisely how to report the polling. When questions about the polling remained unanswered, Kobasa said, his firm resigned from the account in 2005.

"We were concerned," Kobasa testified. If the polls were not for Citizens' Alliance, he said he told the charity's leaders, then it should be reimbursed by whomever benefited.

Indeed, after news surfaced in 2004 that he was under FBI investigation, Fumo had one of his campaign funds pay back Citizens' Alliance for the polling.

Prosecutors have portrayed this as a step to conceal the misuse of the nonprofit's money. Defense lawyers say that the charity concluded that the law was hazy about whether it could spend money on the polls in question, so Fumo decided to reimburse out of an excess of caution.

Cross-examining Kobasa, Edwin J. Jacobs Jr., Arnao's lawyer, questioned him closely about the "precise prohibition" by the IRS.

Jacobs suggested that a charity could engage in a variety of political activity, provided it kept clear of backing a specific candidate in a specific race. Kobasa agreed.

Also under Jacobs' questioning, Kobasa agreed he had never schooled Arnao on what kind of charitable spending was permissible and what was not.

Fumo and his longtime friend Arnao, who is also a former legislative aide, are charged in a sprawling indictment that accuses them, in part, of illegally turning Citizens' Alliance into part of Fumo's political machine.

In all, they are charged with defrauding the charity of $1.4 million.

Fumo alone is also charged with a $2 million fraud on the state Senate, by using its employees and contractors as political operatives or personal servants.

Both he and Arnao face charges of trying to cover up their alleged crimes.

Jacobs also highlighted a string of errors made by Kobasa and his accountants as they worked on Citizens' Alliance returns.

For example, Jacobs noted that the accountants failed to include past grants to the charity in a section of an IRS filing dealing with the financial history of the organization.

"You weren't conspiring with with one another to trick the IRS, were you?" Jacobs asked at one point.

Jacobs appeared to be seeking to persuade the jurors that if highly trained professionals could make innocent mistakes on IRS filings, so could his client.