Friend tapped daughter's trust fund to give Fumo cash

In a trial thick with jaw-dropping moments, former State Sen. Vincent J. Fumo provided one of the biggest shocks of all when he blurted out that a close friend had given him a whopping gift: $1 million.

Now it turns out there is a lot more to tell about that seven-figure present, including a tale of private family discord - and a Fumo agreement to pay some of the money back.

Businessman Stephen C. Marcus, who made his fortune as a pioneer in direct mail, gave Fumo the money in 2000, a year or so after the pair first met. In court this month, Fumo said he had been given the money to help pay for his divorce settlement.

According to court files, probate records, and interviews, Marcus came up with the money for Fumo by improperly dipping into his own daughter's trust fund.

There is no indication that Fumo knew where Marcus had gotten the money. For years, the daughter, Julie Marcus Paul, did not realize that her father had reached into her fund.

She learned of it only after her father died at age 73 in 2005. She demanded the money back, and arbitrators agreed the $1 million should not have been taken from her trust fund.

On New Year's Eve 2007, Fumo signed a court paper giving her an additional $300,000 once he sells his 27-room mansion in Spring Garden, records show.

Fumo did not respond to a request for comment. His attorney, Dennis J. Cogan, declined to comment. Marcus Paul did not respond to multiple attempts to reach her. Calls to her home were not returned.

The saga of the gift is part of a larger story about a friendship between two powerful men, one a profane public figure, the other quiet and low-profile.

Marcus once told a friend that he was drawn to Fumo's power "like a moth was to a flame." Fumo told jurors that the relationship was strictly emotional, not physical.

But, he said in court, "We loved each other."

All of this became grist for the trial because federal prosecutors allege that Marcus played a bit part in Fumo's alleged cover-up schemes. They say Marcus provided an additional $35,000 to help mask Fumo's illegal use of farm equipment that belonged to a nonprofit group Fumo controlled.

After four months of testimony, closing arguments in the former state senator's federal corruption case are to start tomorrow.

On the stand this month, Fumo said he believed that Marcus had been worth $100 million or more.

Marcus may have had tens of millions at one point, but according to probate records in Montgomery County Court, his estate was worth less than $4 million when he died. He lost millions from bad bets on the stock market, someone close to the family said.

At probate, Marcus' estate was divvied up among his two daughters, his former wife, and others.

One daughter is Nancy Marcus Newman. She is married to Jonathan Newman, a former chairman of the Pennsylvania Liquor Control Board and the son of Sandra Schultz Newman, a former state Supreme Court justice.

Marcus Newman declined to comment, saying the matter was a family issue.

The younger daughter is Marcus Paul of Villanova, who is at the center of the controversy over the gift.

This article was pieced together from numerous interviews and court records. The record shows that Marcus in October 2000 transferred $1 million from a trust fund he had established for Marcus Paul. The money went to Fumo, sources said.

Sources said Marcus Paul had learned of the donation and transfer only months after her father died of pneumonia and liver disease.

In a 2007 complaint filed in U.S. District Court in Philadelphia by the fund's manager, Morgan Stanley, Marcus Paul said her father had made "unauthorized withdrawals" from her fund.

A panel of independent arbitrators, in a written decision issued in August 2007, faulted Morgan Stanley for its "failure to supervise and properly authorize the wire transfer of $1 million on Oct. 27, 2000."

The New York Stock Exchange appointed arbitrators, who said Morgan Stanley should repay Marcus Paul the $1 million, but that the Marcus estate should repay Morgan Stanley.

This month, Morgan Stanley paid Marcus Paul the missing million. The investment firm has been paid as well, according to probate records.

In addition, Marcus Paul, now 38, reached out through her attorneys to Fumo and asked for the money back, sources said.

Through negotiations, Fumo agreed to repay $300,000, records show.

Fumo suddenly disclosed the $1 million gift in his trial testimony Feb. 12. He did not mention that he had agreed to give some of the money back.

Fumo's pledge is embodied in a lien on his mansion, Philadelphia real estate records show.

The daughter will get the money as soon as Fumo sells his home, which has been on the market for 18 months. Despite cuts in its asking price, now $5.5 million, Fumo hasn't been able to unload it.

During his trial, Fumo's attorney asked him to talk about his ties to Marcus. Fumo then veered unexpectedly into tender territory, expounding to jurors about the nature of male bonding.

"Between men, you love men sometimes, not in a sexual way but an emotional way," Fumo said. "And we loved each other."

Talking of his relationship with Marcus, who was a dozen years older, Fumo added:

"Steve Marcus was the sweetest human being you would ever want to meet. He was a really nice guy. He was a philanthropist. Did a lot of anonymous philanthropy."

Along with the $1 million, Marcus' philanthropy included giving Fumo a jet-powered Hinckley Picnic Boat worth $500,000, a vessel known for its classic lines.

Someone close to the family said Marcus' daughters had not known their father had given Fumo the boat until they read about it in news coverage of Fumo's trial testimony.

Fumo testified that the friendship had developed quickly.

"He took a liking to me," Fumo said. "It was surprising to me in the beginning of the relationship how close we got. I was a little bit suspicious, quite frankly. And it just grew and grew and grew."

After Fumo realized he was under FBI scrutiny, prosecutors say, Marcus gave $35,000 to an old Fumo friend and ally, Michael Palermo. The plan was to have Palermo buy a bulldozer, a truck, and an ATV that Fumo allegedly was already using at no charge on his farm near Harrisburg, courtesy of Citizens' Alliance for Better Neighborhoods.

The indictment, among other charges, says Fumo defrauded Citizens' Alliance, a nonprofit organization in South Philadelphia.

Prosecutors introduced an e-mail in which Fumo and Marcus talked about the money going to Palermo.

On the stand, Fumo said that the $35,000 had been a loan and that there had been nothing improper about it.

Marcus, Fumo testified, was like a "father figure" to him. He said he'd had a similar relationship with famed Philadelphia lawyer Richard A. Sprague. Fumo, now 65, and Sprague, now 83, had a falling out in 2007, and the lawyer testified against his former friend last week as a key prosecution witness.

Fumo is an only child. His parents are dead. His father, Vincent E. Fumo, died in 1995 at age 85.

Fumo told jurors that he and Marcus had struck up their friendship after meeting on a plane. This apparently happened in the late 1990s. Both men had million-dollar summer homes in Florida - Fumo's on Jupiter Island and Marcus' in Boca Raton.

By then, Marcus was a wealthy man.

After graduating from what is now Drexel University with a business degree, Marcus founded Mars Graphic Services Inc. in 1973.

Marcus took it public in 1986. Three years after that, he merged it with DiMark Inc. In 1996, the new company was sold to Harte Hanks Inc. for $170 million.

In a few short years, Marcus became a satellite circling what one Fumo aide once called "the realm of Fumo-world":

Marcus became Fumo's biggest campaign contributor, giving the Democrat more than $400,000.

After Fumo introduced him to fellow Democrat Bob Casey, Marcus gave $250,000 to Casey's unsuccessful 2002 bid to win the Democratic nomination for governor. He was also Casey's largest contributor.

By 2000, Marcus was a board member of the bank founded by Fumo's grandfather. He was on the compensation committee that critics say gave Fumo huge paychecks, lavish stock options, and a multimillion-dollar golden parachute.

In 2002, Marcus joined Fumo as a board member of the Independence Seaport Museum. Prosecutors allege that Fumo defrauded the museum by taking $115,000 in free cruises on museum yachts.

In his defense, Fumo brought up the fact that he had gotten Marcus to join the museum's board.

According to people who knew both men, Marcus was an unpretentious man who came to enjoy basking in Fumo's fame.

At a major Fumo fund-raiser - Fumo's annual Harry Truman Dinner (he and Truman share a birth date) - the senator told the gathering that Marcus was "my long lost brother."

In 2001, the two friends took ownership of a $4 million jet - a nine-seat Cessna Citation Ultra 560.

According to a trial exhibit, Fumo and Marcus argued in January 2004 about the cost of the jet. Marcus was trying to economize, but his friend was insistent that he needed to use the Citation.

Fumo chided Marcus in an e-mail: "Remember your words: No one that I love is going to fly commercial."

The jet bore the tail number 888SV - the S evidently for Steve and the V for Vince.

The Picnic Boat was named just 888.

As Fumo explained to the jury, "888" was one of his favorite phrases because the numbers, when turned on their sides, mimic the X's and O's of hugs and kisses.

When Fumo's second marriage fell apart, Marcus stepped up in a big way, providing the $1 million gift. (Under federal law, Fumo owed no tax on the gift.)

The divorce was final in October 2000, the month Marcus wired money out of Marcus Paul's trust fund.

"He gave me the money to settle the divorce," Fumo testified. "He saw me agonizing through it and didn't want me to go through it."

The trial was the first time the public learned of the $1 million gift, or of the present of the $500,000 boat.

Unlike the rules for Congress, Pennsylvania law exempts public officials from disclosing gifts from friends.

Though Marcus is not known to have pursued any legislative agenda in Harrisburg, he did explore briefly taking part in a casino ownership group, sources say, but nothing ever came of it.

As Fumo returned to the dating scene, Marcus and he had a disagreement. Marcus said flatly that he disapproved of the senator's girlfriend, according to an e-mail introduced as evidence.

"I really don't like her and REALLY don't trust her," Marcus wrote Fumo in 2004.

In fact, Marcus told his friend, "I hope she doesn't ride in the plane."

For reasons that are unclear, some say, the two friends had a falling out in Marcus' final months. But, there is no doubt about their bond at its peak.

According to exhibits at the trial, Fumo signed messages to Marcus, "Love, Vince."

As for Marcus, the trial showed, he ended one e-mail to Fumo, "ILY - Steve."

The Inquirer's live blog from the Fumo trial is at http://go.philly.com/fumoblog

To read more about the former state senator, go to http://go.philly.com/fumo

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