Austal USA: $24 Million Fine for Accounting Fraud

The American shipbuilder Austal USA, based in Alabama and known for its contracts with the US Navy, has admitted misconduct and agreed to pay a $24 million fine to settle an investigation into accounting fraud. This was announced by the US Department of Justice on Tuesday. From 2013 to July 2016, Austal USA allegedly misled shareholders and investors about the company's financial condition. The company pleaded guilty to securities fraud and obstruction of a federal audit. Nicole M. Argentieri, Deputy Assistant Attorney General of the Department of Justice, stated that Austal USA "engaged in a years-long strategy to illegally inflate its profits on shipbuilding projects for the US Navy and deceive investors, lenders, and auditors with false financial numbers." Austal USA is a subsidiary of Australian Austal Limited and builds Littoral Combat Ships (LCS) for the Navy, which are designed for operations in shallow coastal waters. According to the Department of Justice, Austal USA artificially lowered cost estimates to meet the planned revenue budget despite rising shipbuilding costs. This led to an inflated portrayal of Austal USA's profitability and Austal Limited's earnings in public financial reports. Court documents indicate that the company has agreed to settle complaints from the Securities and Exchange Commission and the Department of Justice. A sentencing hearing is scheduled for November 25. The appropriate criminal penalty was set at $73 million by the Department of Justice but was reduced due to Austal USA's inability to pay. In addition to the $24 million fine, the company must pay another $24 million as compensation for shareholder losses. Austal USA also committed to employing an independent compliance monitor for three years and implementing a compliance and ethics program. Three former executives of Austal USA were indicted last year for accounting fraud and are awaiting trial. An email to a media representative of Austal Limited was not immediately answered on Tuesday evening.