Indictment reveals multi-year scheme to manipulate financial statements and mislead investors.
A federal grand jury indicted three Alabama men on charges of orchestrating an accounting fraud scheme at Austal USA LLC, a prominent Mobile-based shipbuilder that constructs vessels for the U.S. Navy, including the Independence-class Littoral Combat Ship (LCS).
Austal USA is a subsidiary of Austal Limited, an Australian company traded in the United States and on the Australian Securities Exchange.
The indictment alleges that Craig Perciavalle, 52, Joseph Runkel, 54, and William Adams, 63, conspired with others from 2013 to 2016 to deceive Austal Limited’s shareholders and the investing public about the financial condition of Austal USA.
The defendants are accused of manipulating an accounting metric called “estimate at completion” (EAC) related to multiple LCS ships being built for the U.S. Navy. By suppressing EAC figures, the conspirators allegedly inflated Austal Limited’s reported earnings in its public financial statements.
The scheme reportedly involved using “program challenges,” which were ostensibly cost-saving goals but were in fact fraudulent devices to conceal growing expenses that should have been included in Austal USA’s financial statements and reflected in Austal Limited’s reported earnings. The defendants are said to have engaged in this fraud to maintain and increase Austal Limited’s stock price. When the true costs were eventually disclosed, the stock price took a significant hit, and Austal Limited wrote down over $100 million.
Perciavalle, Adams, and Runkel face multiple charges, including conspiracy to commit wire fraud and wire fraud affecting a financial institution. If convicted, they could each face up to 30 years in prison for the conspiracy count and each count of wire fraud affecting a financial institution, and 20 years for each count of wire fraud.
The Naval Criminal Investigative Service (NCIS) Economic Crimes Field Office are leading the investigation.
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