Navy Shipbuilder Austal USA Faces $24 Million Fine for Fraud

Shipbuilding and the Navy haven’t had the best of relationships lately. Now, an ongoing fraud case is adding to the problems. Austal USA LLC out of Mobile, AL, is settling its accounting fraud for $24 million. While Austal USA is now having to cover a large fine, there are still leaders who may also face additional repercussions down the road.

Who Owns Austal USA?

Austal Limited is the parent company of Austal USA, a publicly traded company with its headquarters in Australia. The top five public owners are as follows:

• Tattarang Ventures Pty. Ltd.
• John Rothwell

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• UniSuper Limited
• The Vanguard Group, Inc.
• OC Funds Management Pty Ltd.

A $24 Million Fine and Ongoing Consequences

How shareholders react both short and long-term to the Austal USA news of fraud is still unfolding, yet the company responsible for helping bring littoral combat ships is working to rectify the issue. The Alabama-based firm is paying a $24 million fine to settle an investigation that discovered accounting fraud. Austal USA has also admitted it was wrong. This all stems from a period of 2013 through July 2016, where a conspiracy to mislead investors on the financial state of Austal USA took place. Simply put, the company made it seem like the profits it was making were larger than they actually were, leading to securities fraud and obstructing a federal audit. The cost of building ships is on the rise, an issue the U.S. Navy continues to face, but despite these economic trends, Austal USA continued to show lower costs than they were actually experiencing. By doing so, the company hit its projections and its revenue budget, which would ultimately raise flags with the Securities and Exchange Commission (SEC) and the United States Department of Justice (DOJ). The accounting fraud charges have been ongoing for quite some time and last year, three executives of the company were each indicted on the following:

• One count of conspiracy to commit wire fraud
• One count of wire fraud affecting a financial institution
• Two counts of wire fraud affecting a financial institution
• Five counts of wire fraud

As of this writing, Craig Perciavalle, Joseph Runkel, and William Adams are all still awaiting trial. Perciavalle held the position of the company’s president, which he would resign, once American and Australian authorities began investigating. Adams was the director helping lead the company’s littoral combat ships program, while Runkel worked as the company’s director of financial analysis.

Austal USA Fraud Comes at a Bad Time