Austal USA LLC, a Mobile, Alabama-based shipbuilder constructing vessels for the U.S. Navy and U.S. Coast Guard, pleaded guilty today to charges related to an accounting fraud scheme and efforts to obstruct a Defense Contract Audit Agency (DCAA) financial capability audit. The company has agreed to pay $24 million as part of the resolution with the Justice Department. Austal USA is a subsidiary of Austal Limited, an Australian company publicly traded on the Australian Securities Exchange.
The Justice Department's criminal resolution was coordinated with the U.S. Securities and Exchange Commission (SEC). Separately, Austal USA also settled claims under the False Claims Act with the department’s Civil Division for knowingly providing non-compliant parts to the U.S. Navy.
“Austal USA, a shipbuilder for the U.S. military, 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,” said Principal Deputy Assistant Attorney General Nicole M. Argentieri of the Justice Department’s Criminal Division.
“Maintaining our national security and military infrastructure cannot come at the cost of the integrity of our contracting processes,” said U.S. Attorney Sean P. Costello for the Southern District of Alabama.
From around 2013 through July 2016, Austal USA conspired to mislead shareholders and auditors about its financial condition by artificially suppressing an accounting metric known as "estimate at completion" (EAC) on multiple Littoral Combat Ships built for the U.S. Navy. This suppression falsely overstated Austal USA’s profitability and Austal Limited’s earnings in public financial statements.
“Defense contractors that engage in fraud erode the public’s trust in our Armed Forces,” said Director Omar Lopez of Naval Criminal Investigative Service (NCIS).
“This case is a direct result of superb dedication from investigative and prosecution teams,” said Director Kelly P. May of Defense Criminal Investigative Service (DCIS).
Austal USA received credit for affirmative acceptance of responsibility but limited credit for cooperation due to delays in providing relevant facts and documents during investigations.
Under terms yet to be accepted by court, Austal USA pleaded guilty to one count each of securities fraud and obstruction of a federal audit with penalties totaling $73,572,680.10 based on Sentencing Guidelines; however, due to inability-to-pay considerations, agreed penalties are set at $24 million plus restitution up to $24 million for shareholder losses.
Austal USA will retain an independent compliance monitor for three years while continuing compliance program implementation designed to prevent fraudulent conduct throughout operations.
Three former executives—Craig Perciavalle, Williams Adams, and Joseph Runkel—were indicted on March 30, 2023; they await trial.
NCIS and DCIS are investigating this case with assistance from international authorities including DCAA's Office of Investigative Support.
Assistant Chief Kyle Hankey along with Trial Attorneys Laura Connelly and Spencer Ryan from Fraud Section plus Assistant U.S Attorney Christopher Bodnar are prosecuting this case.
Victims can contact Fraud Section’s Victim Witness Unit toll-free at (888) 549-3945 or via email at victimassistance.fraud@usdoj.gov; updates available at www.justice.gov/criminal/criminal-vns/case/austal-usa-llc
The SEC will handle fund distribution among harmed investors; updates available on SEC's Harmed Investors page.
An indictment is merely an allegation; all defendants are presumed innocent until proven guilty beyond reasonable doubt in court.