The plea agreement must still be approved by U.S. District Judge Stewart Dalzell. Dalzell said that he would not approve terms of the plea until he sees a presentence report by the probation office.
Palermo, who has no prior criminal record, remains free on $25,000 unsecured bond until sentencing in January.
The feds said in a plea memorandum that the proposed sentence was based on Palermo's age, health and the fact that he spared the government the time and expense of going to trial.
The feds agreed to $50,000 in restitution because Fumo was ordered to pay only $237,000 for the Palermo contracts when he was sentenced in July. Palermo is expected to make an initial $25,000 payment today.
Fumo was convicted by a jury in March of numerous fraud, tax and obstruction offenses and is serving a 55-month sentence at a federal prison in Kentucky.
Part of the conduct involved awarding contracts to cronies and others who did personal and political tasks for Fumo.
Palermo is an old friend of Fumo's and served as the chief of staff in Fumo's South Philadelphia district office until 1985, when he went to work for the Pennsylvania Turnpike Commission, the plea memo said.
In July 1999, the feds said that Fumo awarded a Senate Democratic Appropriations Committee contract to Palermo's consulting firm, M.P. Consulting, Inc., for $50,000, to advise Fumo on intrastate-transportation issues, to assist committee staff and to conduct research. The contract was renewed four times through June 30, 2004, for varying amounts.
Prosecutors said in the plea memo that Palermo had done no legislative-related work nor was there any written evidence of work Palermo did under the contract. Palermo told the feds during plea discussions that he had consulted with Fumo about highway projects and also had occasional conversations with the committee's chief of staff.
During Fumo's trial, three committee transportation analysts testified that they were not aware of Palermo's contract or any work he had done. Fumo testified at trial that he had relied on Palermo for advice regarding transportation matters.
The feds said in court papers that Palermo mostly performed personal tasks for Fumo, including helping him buy a 100-acre farm north of Harrisburg in 2003 and overseeing its development for the next two years.