Austal USA Pleads Guilty to Accounting Fraud, Agrees to Pay $24 Million Settlement

Austal USA, a Mobile, Alabama-based shipbuilder for the U.S. Navy and Coast Guard, has pleaded guilty to securities fraud and obstruction of a federal audit.

The company has agreed to pay $24 million to resolve a Justice Department investigation into an accounting fraud scheme and efforts to obstruct the Defense Contract Audit Agency during a financial capability audit.

Austal USA is a subsidiary of Austal Limited, an Australian-based global shipbuilder and defence prime contractor.

The scheme, which ran from 2013 to 2016, involved artificially suppressing an accounting metric known as “estimate at completion” (EAC) for multiple Littoral Combat Ships being built for the U.S. Navy. The manipulation falsely overstated Austal USA’s profitability and Austal Limited’s earnings in public financial statements.

“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.

Under the plea agreement, Austal USA will pay a $24 million criminal fine and up to $24 million in restitution to Austal Limited shareholders. The company will also retain an independent compliance monitor for three years and serve three years of probation.

In a related development, three former Austal USA executives were indicted on March 30, 2023, on charges including conspiracy to commit wire fraud and wire fraud affecting a financial institution. They are currently awaiting trial.

The case is being investigated by the Naval Criminal Investigative Service and the Defense Criminal Investigative Service, with assistance from international authorities and the Defense Contract Audit Agency’s Office of Investigative Support.

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