Austal USA, a shipbuilder based in Alabama that constructs vessels for the U.S. Navy, has admitted to wrongdoing and agreed to pay a $24 million fine to resolve an accounting fraud investigation, as announced by the U.S. Department of Justice.
According to the Department of Justice, from 2013 to July 2016, Austal USA participated in a conspiracy to deceive shareholders and investors regarding the company's financial status. The company pleaded guilty to one count of securities fraud and one count of obstructing a federal audit.
The Justice Department revealed that Austal USA was involved in a long-term scheme to artificially inflate its profits on ships being built for the U.S. Navy. By providing false financial information to investors, lenders, and auditors, the company misrepresented its financial results.
Austal USA LLC, a subsidiary of Australia's Austal Limited, specializes in constructing littoral combat ships for the Navy, designed for operations in shallow coastal waters.
Documents from the court disclosed that Austal manipulated cost estimates to show lower expenses, despite increasing shipbuilding costs, in order to meet revenue targets and forecasts. This led to a false portrayal of Austal USA’s profitability on the ships and Austal Limited’s earnings in public financial statements.
The settlement includes resolving complaints from the Securities and Exchange Commission and the Justice Department, with a sentencing hearing scheduled for November 25. While the appropriate criminal penalty was determined to be $73 million, it was reduced due to Austal USA’s financial constraints.
In addition to the $24 million criminal fine, the company is obligated to pay $24 million in restitution for shareholder losses. Austal USA has also committed to retaining an independent compliance monitor for three years and implementing a compliance and ethics program.
Three former Austal USA executives, indicted last year on accounting fraud charges, are currently awaiting trial. As of now, there has been no response from a media representative for Austal Limited regarding this matter.
