Alabama shipbuilder Austal to pay $24 million to settle accounting fraud probe

MOBILE, Ala. (AP) — Austal USA, an Alabama shipbuilder that makes ships for the U.S. Navy, has admitted wrongdoing and agreed to pay a $24 million fine to settle an accounting fraud investigation, it the US Department of Justice announced on Tuesday.

From 2013 to 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 obstructing a federal audit.

Austal USA “engaged in a years-long scheme to illegally inflate its profits on ships the company was building for the US Navy by reporting false financial results to its investors, creditors and auditors,” Nicole M. Argentieri, prosecutor principal deputy general. and head of the Justice Department’s Criminal Division, said in a statement.

Austal USA LLC is a subsidiary of Austal Limited, based in Australia, 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. This had the effect of falsely overstating Austal USA’s profitability on vessels and the earnings of Austal Limited reported in its public financial statements.

Court documents show the company agreed to settle complaints from the Securities and Exchange Commission and the Department of Justice. A sentencing hearing is scheduled for Nov. 25.

The Justice Department said the corresponding 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 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 press representative for Austal Limited was not immediately returned Tuesday evening.

Photo: Mobile’s skyline is seen behind the USS Gabrielle Giffords, a naval littoral combat ship built at Austal USA Shipyards on the Mobile River. (AP Photo/Brynn Anderson)

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