House Judiciary Committee votes to report bill creating Taxpayer Protection Against Fraud Act

The House Judiciary Committee voted to report House Bill 1697, the Taxpayer Protection Against Fraud Act, by a 14-12 margin, sending the measure out of committee for further consideration.

Committee counsel described the legislation as one that “establishes the Taxpayer Protection Against Fraud Act in the human services code,” and said the bill would allow the attorney general to investigate and represent the Commonwealth and permit private qui tam plaintiffs to bring civil actions to combat waste, fraud and abuse.

The bill would allow the Commonwealth to recover treble damages — three times the amount of damages sustained — plus a civil penalty for each violation if a person knowingly commits fraud or submits false claims. The attorney general would receive 20% “off the top” of recoveries in actions the office prevails in to cover costs and enforcement, counsel said. Qui tam plaintiffs must serve a copy of their complaint and supporting evidence on the attorney general; the attorney general then has the option to intervene. The legislation sets recovery caps for qui tam plaintiffs depending on their level of engagement, counsel said.

Under the bill, complaints would be filed under seal and not served on defendants for at least 60 days, and courts could dismiss suits if substantially the same allegations were already publicly disclosed in the news media, a criminal trial or an administrative hearing in which the Commonwealth is or was a party. Counsel also said the attorney general would have subpoena power and could issue civil investigative demands; the bill permits investigators, law enforcement officers or other authorized individuals to serve those demands. The attorney general may grant witnesses immunity to secure cooperation.

The bill sets a 10-year statute of limitations to bring a claim, provides that all elements of the cause of action must be proved by a preponderance of the evidence, and preserves the right to a jury trial. It would establish a Fraud Prevention and Recovery Court, require an annual report, and direct the attorney general to promulgate implementing regulations. Counsel said the attorney general must submit a copy of the article to the Office of Inspector General of the U.S. Department of Health and Human Services within 30 days for a determination on whether the article meets requirements of the Social Security Act to qualify the Commonwealth for an increased share of recoveries.

The measure also includes employee whistleblower protections. Counsel said employers could not adopt or enforce rules that prohibit employees from disclosing information to government agencies or law enforcement investigating false claims, and that a retaliated-against employee could be entitled to relief to make them whole, including reinstatement and twice the amount of back pay plus interest and special damages. An employee would have three years to bring a retaliation suit in the court of common pleas and must prove the elements of the claim by a preponderance of the evidence.

Representative Kaufman, the committee’s minority chair, criticized the timeline and said he was not ready to support the bill. “This feels like a Friday afternoon document dump,” Kaufman said. “I am not prepared to vote, in the affirmative on this legislation today.”

A roll call followed. Chairman Briggs, Representative Carroll, Donahue, Hambidge, Hohenstein, Howard, Kenyatta, Kinkade, Mays, Miller, Piali, Raab, Sanchez and one other member voted yes. Several other members, including Representative Kaufman and Representative Shalaba, voted no; committee staff recorded the final tally as 14 yes, 12 no. House Bill 1697 was reported as committed.

The committee chair reminded members that the House Judiciary Committee will hold another voting meeting on Wednesday at 10 a.m. in the same room and then adjourned the session.