US Navy shipbuilder to pay $24 million to settle settlement investigation

MOBILE, Alabama: Austal USA, an Alabama-based shipbuilder that builds ships for the U.S. Navy, has agreed to pay a $24 million fine to settle an accounting fraud case, the U.S. Department of Justice said.

From 2013 to 2016, Austal USA misled shareholders and investors about its financial condition, pleading guilty to securities fraud and obstructing a federal audit. The company admitted to inflating profits from ships it built for the Navy by reporting false financial results to investors, lenders and auditors.

Austal USA LLC, a subsidiary of Austal Limited based in Australia, builds shallow-water combat ships. The Justice Department has revealed that Austal USA lowered cost estimates to misrepresent profitability, which affected Austal Limited’s earnings in its public financial statements.

Court documents indicate Austal USA will resolve the complaints from both the Securities and Exchange Commission and the Justice Department. A sentencing hearing is scheduled for November 25.

Although the Justice Department initially recommended a criminal penalty of $73 million, it was reduced due to Austal USA’s inability to pay. In addition to the $24 million criminal penalty, the company will pay $24 million in restitution to compensate shareholders. Austal USA also agreed to hire an independent compliance monitor for three years and implement a compliance and ethics program.

Three former Austal USA executives were charged with accounting fraud last year and are awaiting trial. An email to Austal Limited’s media representative seeking comment was not immediately returned.