Conover told the FBI that her boss originally agreed that Verizon would pay $500,000 a year for five years, but later upped the amount to $1 million for three years.

It was not clear how much the Obermayer firm received as a result.

Eric Rabe, a spokesman for Verizon, said yesterday that the firm would neither confirm nor deny that Whelan struck such a deal with Fumo. "I'm just not going to answer that question," he said.

Rabe did say Verizon had been using Leonard and the Obermayer firm before the 2001 negotiations with Fumo. Asked whether Leonard got more work as a result of the deal, he declined to respond.

Leonard and Conover could not be reached for comment. Wojdak declined to comment. Whelan, a former member of the School Reform Commission, left Verizon at the end of 2002. He and Nero could not be reached for comment.

Fumo's dealings with Peco and Verizon did not result in charges. Prosecutors contend that Fumo's destruction of documents - he also is charged with obstruction of justice - prevented them from finding out whether Fumo's negotiations amounted to extortion.

Prosecutors have been seeking to have Sprague & Sprague disqualified as Fumo's attorneys because they believe the firm has too many conflicts.

Lawyers for the firm have represented Fumo and Citizens Alliance; prosecutors believe the nonprofit is a victim in the case.

In his testimony, Wallace, a former Philadelphia police inspector who headed the department's organized crime squad, said he worked as a private eye for Fumo from 1997 to 2006. His contract paid him $45,000 annually from Senate funds.

According to Wallace, he started to become unsettled about his long relationship with Fumo when he was asked to continue doing electronic sweeps even though he knew a federal investigation was under way.

He said Fumo's aide told him that Fumo's lawyer, Richard A. Sprague, had advised that it was legal to keep doing such sweeps.

Asked about that after the hearing, Sprague said any citizen had a right "to see if Uncle Sam or anyone else had put in a bug or wiretap."

The key question, Sprague said, was what a person did once a bug was found. Sprague left his question unanswered.

On cross-examination, Sprague, one of the city's most respected and feared lawyers, still sharp and probing at age 81, asked Wallace, "You didn't charge the Senate for personal and political [investigative] work?"

Replied Wallace: "That's incorrect. I did charge them."

Sprague then confronted Wallace with the FBI's notes of an interview, quoting him as saying he was upset at having to do private and political investigations "free of charge."

Wallace said that the notes were inaccurate and that Fumo aides had instructed him several years ago not to itemize his services on bills.

Fumo lawyer Mark Sheppard declined to comment on yesterday's hearing. He is expected to challenge the government's version of events when the hearing resumes this morning and he cross-examines Humphreys.

Sheppard and Assistant U.S. Attorney Robert Zauzmer are expected to offer closing arguments to Senior U.S. District Judge William H. Yohn Jr.