Austal, a military shipbuilder based in Mobile, Alabama, has settled an accounting fraud investigation by agreeing to pay a $24 million penalty. The settlement also includes restitution to Austal shareholders, which will be paid from the penalty. Austal USA, a subsidiary of Australia-based Austal Limited, pleaded guilty to securities fraud and obstruction of a federal audit. The company’s former chairman, John Rothwell, stated that settling the action is the best outcome for Austal, and that new governance changes have been implemented to prevent similar issues from occurring in the future.
Austal builds littoral combat ships that are designed for operation in shallow waters. The investigation into the accounting fraud focused on conduct that occurred over 8 years ago, with the company emphasizing the need to focus on the future rather than the past. The Justice Department found that from 2013 to July 2016, Austal USA misled shareholders and investors about its financial condition by artificially lowering cost estimates to meet revenue budgets, despite increasing shipbuilding costs. This led to the false overstating of Austal USA’s profitability and Austal Limited’s earnings in public financial statements.
As part of the settlement, the U.S. Securities and Exchange Commission will oversee the distribution of funds to investors harmed by the fraud. Austal USA has also agreed to retain an independent compliance monitor for three years and implement a compliance and ethics program. Three former executives of Austal USA were indicted on accounting fraud charges last year and are currently awaiting trial. The company is focused on moving forward with a large order book of work ahead of them and ensuring that such issues do not happen again in the future.
The settlement with the Justice Department marks the conclusion of a significant legal issue for Austal, allowing the company to move forward with its shipbuilding projects. Despite the challenges of the accounting fraud investigation, Austal remains committed to delivering high-quality military vessels for its customers. The agreement to pay the penalty and provide restitution to shareholders is seen as a positive step in addressing the wrongdoing that occurred in the past. With new controls in place and a renewed focus on compliance and ethics, Austal is working towards ensuring transparency and accountability in its financial reporting practices.
The transparency and cooperation shown by Austal in resolving this issue with the Justice Department reflects the company’s commitment to upholding ethical standards and maintaining the trust of its stakeholders. Although the accounting fraud case represents a setback for Austal, the company is determined to learn from its mistakes and strengthen its internal controls to prevent similar incidents in the future. By acknowledging the wrongdoing, accepting responsibility, and taking steps to improve compliance practices, Austal is working towards rebuilding its reputation and restoring investor confidence. As it continues to fulfill its obligations under the settlement agreement, Austal is focused on regaining trust and moving forward with its business operations.
