Future murky for Citizens Alliance, the Fumo-founded nonprofit that owns property

The nonprofit group known as Citizens Alliance for Better Neighborhoods was a crown jewel in the political empire of former state Sen. Vince Fumo.

With that empire in ruins and Fumo likely heading to prison after being sentenced today on federal corruption charges, a big question remains:

What becomes of Citizens Alliance and all it came to own?

Consider Passyunk Avenue, the bustling and gentrifying South Philly stretch at the heart of the Citizens Alliance world. The nonprofit owns at least 14 properties on or near the avenue and has sold others after rehabilitating them for new businesses.

Lynn Rinaldi bought a double-property from Citizens Alliance in 2006 for her restaurant Paradiso, but still rents from the group for the nearby restaurant Izumi.

With Citizens Alliance in flux - Fumo was convicted in March, the state Attorney General's Office sued in April to break up the group and sell off its assets - leases are still being signed by residents and merchants.

Passyunk Avenue, revitalized with Fumo's help, is now moving on without him.

"I think if there was any concern, people wouldn't be signing leases," said Rinaldi, who hopes to buy the building where she opened Izumi if Citizens Alliance is broken up. "I'm not really concerned because I have a 10-year lease. As long as I send my rent check in, I think I'll be fine."

Lawrence Wang, who opened Philadelphia Scooters in a Citizens Alliance property on Passyunk Avenue, praised the group's effort to help the area.

"We just have a sort of wait-and-see attitude," Wang said about his lease. "There's nothing I can do in terms of what's happened."

Citizens Alliance was founded in 1991, initially to respond to complaints about inadequate trash removal in South Philly.

The nonprofit's coffers overflowed with $17 million from Peco Energy Corp. sought by Fumo to settle a case being heard by the Public Utility Commission.

With all that cash, Citizens Alliance turned to real estate. And not just on Passyunk Avenue. Through a series of holding companies, the nonprofit also owns Fumo's former state office building at 12th and Tasker streets and property on Fairmount Avenue that houses a state liquor store and a post office.

The group purchased a five-story building at Second and Spring Garden streets, hoping to give technology start-up businesses a place to grow. That property was sold in 2006 for $3.1 million.

With Fumo facing prison, the group he once directed from his state Senate offices now casts itself as a victim of his crimes.

Thomas "Buck" Riley Jr., an attorney for Citizens Alliance, testified in federal court last week that the nonprofit is not now and probably never will be what it once was.

"I doubt Citizens will ever get back to what it was doing before this train went off the track," Riley told U.S. District Judge Ronald Buckwalter during a presentencing hearing for Fumo.

Khalil Meggett, an accountant who filed federal tax forms for Citizens Alliance, identified himself in court as the group's acting executive director. He said that its mission is mostly "managing real estate," mainly along Passyunk Avenue and at property it leases to the Christopher Columbus Charter School, which Fumo helped start.

Meggett, who took over at Citizens Alliance after a board meeting last month, said that the state Attorney General's Office raised no objections about his new role.

"Since the FBI came in and took everything, the accounting became a mess," Meggett said.

Citizens Alliance IRS forms filed in November said that the group had $17,816,576 in assets and cash as of the end of 2007. Of that, $7 million was tied up in a for-profit corporation, CA Holdings Inc., which oversaw a web of subsidiaries that bought and sold properties.

The attorney general's suit in April said that Fumo and Ruth Arnao, convicted on corruption charges with him after working in his Senate office and then at Citizens Alliance, had wasted or mismanaged $1.9 million of the nonprofit's money. The suit says that IRS forms from prior years lay out more than $4 million in investments for Citizens Alliance but raise questions about $1.4 million of one of those investments being potentially lost.

The lawsuit calls for four things: Citizens Alliance to account for all its money; to "surcharge" Fumo, Arnao and the group's board for any waste or mismanagement; to revoke its corporate status; and to sell off its assets or distribute them to a successor.

Citizens Alliance, in a brief filed in the state's Commonwealth Court last week, challenged the legitimacy of the attorney general's suit. The nonprofit said that the attorney general has no right to inspect its records or demand an accounting, no legal basis for a surcharge, no authority to seek the board's removal and offers no evidence to prove any fraud to revoke its corporate status.

Kevin Harley, a spokesman for the Attorney General's Office, said that the suit's main concern is the original mission of Citizens Alliance to help neighborhoods. His agency is willing to consider having another group manage the Citizen Alliance assets.

"If there's another nonprofit with a similar mission, maybe it makes sense." Harley said. "If not, maybe it makes sense to sell off the assets." *

Staff writer Michael Hinkelman contributed to this report.