Pennsylvania lawmakers are considering House Bill 1697 to create a statewide False Claims Act. The Pennsylvania Institute of Certified Public Accountants supports strong anti-fraud enforcement but opposes this bill as drafted because it would invite unprecedented private lawsuits over state and local tax matters.
Consider a small accounting firm that spends years helping a regional hospital navigate complex Medicaid billing rules. A disgruntled former employee partners with a contingency-fee attorney to file a qui tam lawsuit alleging false claims based on a disputed interpretation of billing requirements. No fraud needs to be proven. Yet the firm could face treble damages and penalties of up to $27,000 per claim.
The financial exposure is catastrophic. Litigation would cost more than the firm earns in a year, so they settle. The attorney and former employee pocket up to 30%, while the firm’s reputation is irrevocably damaged despite no finding of wrongdoing. That is the danger of HB 1697: a financial incentive for lawyers and bounty hunters that has nothing to do with real fraud.
The federal government and most states exclude tax matters from false claims laws because these cases can turn ordinary disputes over complex rules into profit-driven litigation. If lawmakers move forward with a False Claims Act, they should follow that example and exclude state and local tax matters. Fraud should be punished. Good-faith tax compliance should not.
JEN CRYDER
Philadelphia
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