A federal judge approved on Monday a plea agreement between federal prosecutors and the Alabama-based U.S. Navy shipbuilder Austal USA LLC, levying a $24 million fine for fraudulently valuing its ships to "mislead" its investors and shareholders.
Austal pleaded guilty in August and agreed to pay the $24 million fine to resolve an investigation by the Department of Justice (DOJ) related to an accounting fraud scheme and efforts to obstruct the Defense Contract Audit Agency (DCAA) during a financial capability audit.
On Monday, Chief U.S. District Judge Jeffrey Beaverstock agreed to the fine, placing Austal USA on a three-year probation. It also agreed to retain an "independent compliance monitor" for three years while implementing a compliance and ethics program at Austal USA designed to prevent and detect fraudulent conduct.
Austal USA pleaded guilty to one count of securities fraud and one count of obstruction of a federal audit. The DOJ initially determined that the appropriate criminal penalty was over $73 million. However, due to the shipbuilder's demonstrated inability to pay the criminal fine, Austal USA settled on a criminal fine of $24 million and restitution of up to $24 million for losses to Austal Limited shareholders.
Austal USA is a wholly owned subsidiary of Austal Limited, an Australian company publicly traded on the Australian Securities Exchange.
According to court documents, from around 2013 through at least July 2016, Austal USA and others conspired to mislead Austal Limited's shareholders, independent financial statement auditors and the investing public about Austal USA's financial condition.
The DOJ claims Austal USA "artificially suppressed" an accounting metric known as an "estimate at completion" (EAC) regarding multiple combat ships the company was building for the Navy.
"Suppressing the EACs had the effect of falsely overstating Austal USA's profitability on those shipbuilding efforts and Austal Limited's earnings reported in its public financial statements," the DOJ said. "Austal USA and its co-conspirators manipulated the EAC figures in part by using so-called' program challenges,' which were false plug numbers to hide growing shipbuilding costs that should have been incorporated into the company's financial statements. Austal USA did this to maintain and increase the share price of Austal Limited's stock. When the higher costs were eventually disclosed to the market, Austal Limited wrote down over $100 million, and the stock price was significantly negatively impacted."
In April 2023, the Defense Criminal Investigative Service (DCIS) and the Naval Criminal Investigative Service (NCIS) also charged three former Austal USA executives, Craig Perciavalle, Williams Adams and Joseph Runkel, with multiple accounts of wire fraud and conspiracy to commit wire fraud. The three are still awaiting trial.
To connect with the author of this story or to comment, email craig.monger@1819news.com.
Don't miss out! Subscribe to our newsletter and get our top stories every weekday morning.
