Fumo challenges $3 million in new IRS levies

Imprisoned former Pennsylvania State Sen. Vincent J. Fumo on Thursday challenged the $3 million tax bill the IRS has newly levied against him, asking the federal courts to overturn the levy as unwarranted and unfair.

In the filing by lawyer Mark E. Cedrone, Fumo, 70, says he expects to be released from federal prison in Kentucky in August.

Fumo is fighting the IRS's claim that he owes about $2.1 million in back income taxes for the value of service he obtained in his crimes, $354,000 in penalties for abusing a nonprofit, and $503,000 in unpaid gift taxes on a big cash transfer to his son.

His filing objects to liens the IRS placed in March against a number of Fumo properties, including his Victorian mansion in Philadelphia's Spring Garden section and a farm near Harrisburg that Fumo sold for $10 to his fiancee, Carolyn Zinni.

In a series of property transfers in recent years, all for $10 or less, Fumo added his son, Vincent E., to the deed of the mansion, sold the farm outright to Zinni, and added her to the deed of his beach-block home in Margate, N.J.

The IRS has said Fumo seemed to be trying to put some of his assets out of its reach. Fumo says in Thursday's filing he made the transfers for reasons "completely unrelated to any prospective tax liabilities."

Fumo says he made the deals when he did for fear that Congress might be on the verge of increasing taxes on such transfers.

Once the most powerful Philadelphia Democrat in the legislature, Fumo was convicted of defrauding the Senate and two nonprofit organizations, and of trying to orchestrate a cover-up.

A federal jury found that Fumo ripped off the Senate by using taxpayer-paid staff as servants and campaign operatives.

It found Fumo had similarly abused a South Philadelphia neighborhood-improvement organization, using its money for political polls, for equipment for his farm, and to buy tens of thousands of dollars' worth of personal items.

In Thursday's filing, Fumo says the IRS needlessly took action to "freeze" his access to six bank accounts. The bulk of the frozen money was in Fumo's $2.5 million tax-deferred retirement account, it says.

Fumo says the new income-tax levies and penalties unfairly place a liability on him for the losses of the groups victimized in his scams.

The IRS is also demanding that Fumo pay $502,000 in gift taxes, saying that is due on $920,000 in cash he transferred to his son in 2009 after his conviction.

But Fumo's filing says the IRS misunderstood the transaction. Fumo "made no gift to his son," it says. Rather, the filing says, he granted him power of attorney and transferred money to him so the younger Fumo could take care of financial issues while his father was behind bars.

Shortly after his release in August, Fumo will face a resentencing hearing focused only on how much he must pay in restitution. He has already paid almost $4 million in restitution and fines, but a federal appeals court recommended he be ordered to pay almost $800,000 more.