Prosecutors seek to increase Fumo's penalty by nearly $800,000

Imprisoned former State Sen. Vincent J. Fumo may well have to pay an additional $800,000 in restitution, judging from the tenor of questioning Friday by appellate judges considering a government appeal of Fumo's financial penalty.

The U.S. prosecutors who won his fraud conviction have challenged part of his punishment, in which the sentencing judge ordered a former Fumo aide to pay half the restitution to one of the victims in the fraud.

U.S. District Judge Ronald L. Buckwalter ordered Fumo and the convicted ex-aide, Ruth Arnao, to split evenly the payment of almost $1.6 million owed to a South Philadelphia civic organization once known as Citizens' Alliance for Better Neighborhoods.

But at a hearing Friday, Assistant U.S. Attorney Robert A. Zauzmer urged a three-judge panel from the U.S. Court of Appeals for the Third Circuit to stick Fumo with the whole bill.

Zauzmer and his colleague in the investigation, Assistant U.S. Attorney John J. Pease, say Fumo directed the rip-off of Citizens' Alliance and personally took in 96 percent of the ill-gotten gains.

"We're here to say that it was Mr. Fumo who took all the money," Zauzmer told the panel.

Moreover, the prosecutors argued, Arnao is far less wealthy than Fumo. Under a payment schedule Buckwalter approved, Arnao's half of the debt would not be paid off until 2077, they said.

With a net worth put at $11 million at the last accounting by court officials, Fumo could pay right away, the prosecutors said.

Their arguments appeared to gain traction with the judges.

For Arnao to resolve her debt, "she's going to have to live a very long time," Senior Judge Morton Ira Greenberg said.

Senior Judge Robert E. Cowen said leaving Buckwalter's ruling intact would mean the South Philadelphia group would never be made whole.

Along with defrauding Citizens' Alliance, Fumo was also convicted in 2009 of defrauding the state Senate and a second nonprofit organization, the Independence Seaport Museum. Fumo, 69, is on track to be released from a federal prison in Kentucky to a halfway house next summer.

His fiancee, Carolyn Zinni, attended Friday's hearing. She has been planning a Christmas party for Fumo's friends at the former senator's 33-room mansion in Philadelphia's Spring Garden section, with Fumo possibly addressing the gathering by phone or video.

Fumo, once the most powerful Philadelphian in the state legislature, has been ordered to pay almost $3.5 million in restitution, and now the government is seeking an appellate order that he pay $783,264 on top of that.

Fumo's lawyer, Peter Goldberger, urged the court to let Buckwalter's ruling stand.

To be sure, Goldberger said, Fumo got the lion's share of the gains.

"I don't dispute the 96 percent, give or take a minor amount," he said.

And when Judge Joseph A. Greenway asked whether Fumo had been the leader of the wrongdoing, Goldberger replied, "Of course. No one would disagree with that."

But Goldberger said Arnao, who was both a top Fumo aide and director of Citizens' Alliance, had nonetheless been a substantial player in the conspiracy.

Arnao is paying $1,000 a month toward her $783,000 debt, prosecutors said. That's a third of her $3,000 monthly take-home pay from a hospice company.

Goldberger said courts could increase her monthly payment, reflecting the wealth of her husband.

Arnao is married to businessman Mitchell Rubin, a former head of the Pennsylvania Turnpike Authority, who was also convicted as part of the Fumo case.

Prosecutors say Fumo's net worth is many times that of the Arnao/Rubin household. And Zauzmer told the appellate panel the government was barred from going after their joint assets unless their marriage was ended by death or divorce.

Cowen criticized Arnao and Fumo, but suggested Fumo should do the paying.

"She's no bargain. But compared to his conduct and what he did - he was the overwhelming dominant force in this criminal scheme," Cowen said. "Added to that, she has property, but he is a multimillionaire. She does not have near the funds that he has."

The judges are expected to issue their ruling by spring.

With a former member of Fumo's defense team contending that he is owed $403,000 and the IRS reportedly exploring going after him, Fumo has been facing a growing series of financial issues.

If he is ordered to pay more in restitution, the money would go to the Passyunk Avenue Revitalization Corp, the successor organization to Citizens' Alliance.

Though its treasury is depleted by Fumo's fraud and $3 million spent to hire lawyers for Arnao and others, the nonprofit is still cleaning sidewalks, planting trees, and nurturing shops and restaurants.