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Austal USA, an Alabama-based shipbuilder that makes vessels for the U.S. Navy, has admitted wrongdoing and agreed to pay a $24 million fine to settle an accounting fraud investigation, the U.S. Department of Justice announced Tuesday.
From 2013 through July 2016, Austal USA conspired to mislead shareholders and investors about the company's financial condition, the department said. The company pleaded guilty to one count of securities fraud and one count of obstruction of a federal audit.
Austal USA “engaged in a years-long scheme to illegally inflate its profits on ships the company was building for the U.S. Navy, reporting false financial results to investors, lenders, and its auditors,” Nicole M. Argentieri, principal deputy assistant attorney general and head of the Justice Department’s Criminal Division, said in a statement.
Austal USA LLC is a subsidiary of Australia-based Austal Limited and builds littoral combat ships for the Navy that are designed to operate in shallow coastal waters.
The Justice Department said Austal artificially lowered cost estimates, despite rising shipbuilding costs, to meet its revenue budget and projections. That had the impact of falsely overstating Austal USA’s profitability on the ships and Austal Limited’s earnings reported in its public financial statements.
Court documents show the company agreed to settle complaints by the Securities and Exchange Commission and the Justice Department. A sentencing hearing is scheduled for Nov. 25.
The Justice Department said the appropriate criminal penalty would be $73 million, but that was reduced because of Austal USA’s inability to pay. In addition to the $24 million criminal fine, the company is also on the hook for $24 million in restitution for shareholder losses.
Austal USA has also agreed to retain an independent compliance monitor for three years and implement a compliance and ethics program.
Three former Austal USA executives were indicted last year on accounting fraud charges. They are awaiting trial.
An email to a media representative for Austal Limited was not immediately returned Tuesday evening.
