Verizon leader: Fumo sought $50 million

After extracting $17 million in donations from Peco Energy, former State Sen. Vincent J. Fumo raised the ante with Verizon Pennsylvania, demanding more than $50 million in contributions to settle a legal dispute, Verizon's former president testified yesterday.

Fumo wanted Verizon to deposit $10 million in his family-owned bank. He wanted $2.5 million in legal work for his law firm. And he wanted $15 million to go to Citizens' Alliance for Better Neighborhoods - the nonprofit that is at the center of the federal indictment against Fumo.

Daniel Whelan, who was then the president of Verizon Pennsylvania, told the jury in Fumo's federal corruption trial that he rejected most of the demands.

"I consistently took the view we would not engage in something that had money going directly or indirectly to Sen. Fumo," Whelan said in some of the most pointed testimony in the multifaceted case.

Whelan said he became so concerned about the requests for money that he met in early 2000 with two of the top lawyers in Philadelphia, Arthur Makadon and David L. Cohen.

He said he was concerned that any contributions "could be interpreted that we were paying to have an elected official refrain from taking an action" or were "encouraging him to take an action."

But, he said, the pair only told him to work it out with Fumo.

Whelan said the contributions were to be part of an "off-books" - and unwritten - part of a settlement to resolve complex litigation in which Fumo was a party.

As both a citizen and a senator, Fumo was backing an effort to break up Verizon into wholesale and retail divisions, a split that would have cost the firm more than $2 billion, Whelan testified.

Before Whelan took the stand, the defense fought to block his testimony, pointing out that Fumo was not charged with any crimes for his alleged efforts to get contributions from Verizon. Prosecutors nonetheless explored his Verizon dealings to argue that such negotiations helped prompt his alleged coverup.

Fumo's lead defense attorney, Dennis J. Cogan, declined after court yesterday to comment on Whelan's testimony.

The testimony came at the start of the trial's 11th week.

Fumo, 65, a once-powerful Democrat in Harrisburg and Philadelphia, is charged with defrauding Citizens' Alliance by getting it to pay for all kinds of personal items, ranging from power tools to vacuum cleaners, and for renovations to his South Philadelphia district office.

Federal prosecutors contend that Fumo and his longtime aide and co-defendant, Ruth Arnao, routinely skimmed from the charity, causing a loss of about $1.4 million.

In deals struck with Peco starting in 1998, Fumo got the electric company to pay millions to Citizens' Alliance after he agreed to drop his legal challenges to the firm. Peco also agreed to a long freeze on rates.

Under questioning by Assistant U.S. Attorney Robert A. Zauzmer, Whelan said he discussed a memo from Fumo's office proposing that Verizon donate more than $50 million to Citizens' Alliance and several other nonprofits.

In addition to those donations, Fumo also proposed that Verizon pour $30 million into a three-year project to bury the phone and electric lines in his Spring Garden neighborhood.

Armed with this list, Whelan said, he met with Makadon and Cohen. Though Whelan testified that they urged him to work it out with the senator, Makadon said in a telephone interview last night that he only recalled telling the Verizon leader to try to win in court. Cohen could not be reached for comment.

After his meeting with Cohen and Makadon, Whelan said, he met directly with Fumo in the senator's basement office in South Philadelphia. There, he testified, Fumo told him the breakup of Verizon was only a "throwaway" item.

Instead, Whelan said, Fumo said he was most "interested in all the items" listed in a memo faxed by Christopher Craig, a lawyer in Fumo's Senate office. The list proposed donations to Fumo's pet interests.

Verizon was fighting to avoid a proposed breakup in Pennsylvania as the state Public Utility Commission and lawmakers, including Fumo, sought to inject competition in the market for local phone service.

Whelan finally struck a deal of sorts with Fumo, and regulators later dropped the move to split up his company.

In his dealings with Fumo, Whelan said he tried to uphold certain standards.

Unlike Peco, Whelan said he refused to donate money to Citizens' Alliance because it was so "closely aligned" to Fumo. And he said that was also the case with several other nonprofits for which Fumo had sought donations.

He said he ultimately approved donations to the Philly Pops - $500,000 over 10 years. Fumo is a close friend of Pops conductor Peter Nero.

But Whelan said he rejected numerous requests to give legal work to Fumo's law firm, Dilworth Paxson LLP.

Fumo is of counsel to Dilworth and has been paid as much as $1 million yearly to bring in clients.

"I consistently said I wanted to have real legal work done for normal prices at a full-service firm, but with the understanding that there would be no direct or indirect benefit in terms of money that went to Mr. Fumo," Whelan said.

He said he also rejected an alternative suggestion for the legal work to go to the law firm of Sprague & Sprague because he knew that Fumo and lawyer Richard A. Sprague were close friends at the time.

Whelan said he also originally agreed to hire the Cozen O'Connor law firm. But he nixed that after the firm informed Verizon it intended to split its fee with Fumo.

Finally, he said, Verizon agreed to give work to the firm of another Fumo ally, former City Controller Thomas A. Leonard, Obermayer, Rebmann, Maxwell & Hippel.

Though he bent on the matter of hiring Obermayer, Whelan rejected other Fumo proposals that included having Verizon put $10 million of its money into an account at PSB Bancorp. Fumo was then the biggest shareholder in PSB, the bank his grandfather founded.

He also rejected a Fumo suggestion that Verizon do bond deals with an arm of the former Commerce Bank.

Whelan is due back on the stand when trial resumes this morning before U.S. District Judge Ronald L. Buckwalter.