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december 04, 2012 • 04:50 PM

U.S. says penalties under anti-fraud law hit record $5 billion

Settlements and court judgments under the U.S. government's primary anti-fraud law reached a record $5 billion in the most recent federal fiscal year, helped by cases against drugmakers, the Justice Department said on Tuesday.

The previous record for penalties under the False Claims Act was $3.1 billion, in the 2006 fiscal year, according to a search of prior department announcements.

First enacted in 1863 to root out fraud during the American Civil War, the False Claims Act allows individual whistleblowers to sue government contractors and suppliers for defrauding taxpayers. They can keep a slice of the penalty if successful.

The pharmaceutical and defense industries have been prime targets since Congress revived the law in 1986.

GlaxoSmithKline Plc agreed to the largest settlement during the fiscal year that ended on September 30. The company agreed to pay $1.5 billion under the False Claims Act for improperly promoting drugs such as Paxil - part of a $3 billion total settlement.

"Fraud against the government is not just a problem that affects us as taxpayers. It is a problem that affects us as parents and as patients," said Stuart Delery, head of the Justice Department's civil division, in a statement.

(Reporting by David Ingram; Editing by Mohammad Zargham)

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