US Navy shipbuilder Austal USA agrees to pay $24 million to settle accounting fraud probe
MOBILE, Alabama — Austal USA, an Alabama-based shipbuilder that builds vessels for the U.S. Navy, has pleaded guilty and agreed to pay a $24 million fine to settle an investigation into accounting fraud, 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 scheme for years to illegally inflate profits from ships it built for the U.S. Navy by reporting false financial results to investors, lenders and accountants,” Nicole M. Argentieri, principal deputy 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 designed for use in shallow coastal waters.
The Justice Department said Austal artificially lowered cost estimates, despite rising shipbuilding costs, to meet its revenue budget and projections. As a result, Austal USA’s profitability on its ships and Austal Limited’s earnings as reported in its public financial statements were improperly overstated.
Court documents show the company agreed to settle complaints from the Securities and Exchange Commission and the Justice Department. A hearing on the ruling is scheduled for Nov. 25.
The Justice Department said the appropriate criminal fine would be $73 million, but that was reduced due to Austal USA’s inability to pay. In addition to the $24 million criminal fine, the company is also responsible for $24 million in restitution for shareholder losses.
Austal USA has also agreed to engage an independent compliance monitor for three years and to implement a compliance and ethics program.
Three former Austal USA executives were charged last year on charges of accounting fraud. They are awaiting trial.
There was no immediate response to an email to a media representative from Austal Limited on Tuesday evening.