Austal USA, a shipbuilder in Alabama renowned for constructing vessels for the U.S. Navy, has confessed to malpractice and has consented to pay a $24 million fine to resolve an investigation into accounting fraud, as declared by the U.S. Department of Justice on Tuesday. According to the department, between 2013 and July 2016, Austal USA collaborated to deceive shareholders and investors regarding the company’s financial status. The company has entered a guilty plea to one count of securities fraud and one count of obstructing a federal audit.
Austal USA has been accused of partaking in a prolonged plan to unlawfully inflate its profits on naval vessels being constructed for the U.S. Navy. The company allegedly provided misleading financial data to investors, financial institutions, and auditors. Nicole M. Argentieri, the principal deputy assistant attorney general and head of the Justice Department’s Criminal Division, stated that the company deliberately misrepresented its financial health.
Austal USA LLC, a division of Australia’s Austal Limited, crafts littoral combat ships for the Navy engineered to operate in shallow coastal waters. The Justice Department outlined that Austal lowered cost estimates artificially, disregarding the escalating costs of shipbuilding, to match its revenue targets. This led to a false portrayal of Austal USA’s profitability on the ships and Austal Limited’s earnings disclosed in its public financial reports.
Legal records reveal that the company has agreed to settle complaints brought by the Securities and Exchange Commission and the Justice Department, with a sentencing hearing scheduled for Nov. 25. The Justice Department noted that the appropriate criminal penalty would have been $73 million but was lessened due to Austal USA’s financial constraints. Alongside the $24 million criminal fine, the company is expected to pay an additional $24 million in restitution for shareholder losses.
Austal USA has further committed to engaging an independent compliance monitor over the next three years and introducing a compliance and ethics program. Additionally, three former Austal USA executives who were charged with accounting fraud last year are currently awaiting trial.
As of Tuesday evening, no immediate response was received to an email inquiry sent to a media representative for Austal Limited.
