Heads must roll in tax incentive fraud

Heads must roll in tax incentive fraud

A statewide grand jury report alleges an expansive fraud against two of Pennsylvania’s largest tax incentive programs for businesses.

But it is as much an indictment against the accused perpetrators as it is against the programs they are charged with bilking.

Wing-Tat Chiu and Ivy Li are accused in an elaborate scheme of cheating the Keystone Innovation (KIZ) and Research & Development (R&D) programs out of $10.6 million over nearly six years.

And this was no small operation. State investigators say the husband and wife team, believed to have fled to Hong Kong, sold 64 of the fraudulently obtained credits to third parties and pocketed the money.

As the Tribune-Review reports, Pennsylvania Attorney General Josh Shapiro said the pair’s scheme exploited glaring weaknesses and insufficient oversight by both the state Department of Revenue and the state Department Community and Economic Development (DCED).

How bad were these departments’ lapses? So bad that it took them six years to discover the fraud. How easy would it have been to prevent such a massive scheme? Quite, it turns out.

Shapiro says none of the 20 sham companies, including five in Southwestern Pennsylvania, concocted by the accused even met the requirements for receiving those tax credits.

Heck, one of the bogus companies listed an address that was a UPS Store in downtown Pittsburgh.

Amazingly, the tax credits did not require independent audits before being awarded. Neither were reviews of receipts, account statements or other financial records necessary.

And not only was there never a face-to-face meeting with the applicants, there was no follow-up in the form of any kind of annual report to document how the money was used.

Tragically, this appears to have been standard operating procedure for the DCED.

Of course, exposure of this embarrassing pilfering of taxpayer dollars has brought the usual contrition from the snookered and promises that oversight will be tightened.

But talk will not eradicate this rot. Government does not become nonfeasant on its own. The heads of the government officials responsible must roll.

Colin McNickle is communications and marketing director at the Allegheny Institute for Public Policy (cmcnickle@alleghenyinstitute.org).