Trust Betrayed: DOJ Made Them Pay 10’s of Millions

Trust betrayed

A major shipbuilder for the U.S. Navy has confessed to manipulating records, inflating expenses, and falsely certifying materials, leaving national security at risk.

At a Glance

  • Austal USA LLC, a shipbuilder for the U.S. Navy and Coast Guard, pleaded guilty to financial accounting fraud and obstructing a Defense Department audit.
  • The company agreed to pay $24 million to resolve the investigation by the Justice Department.
  • Austal USA is a subsidiary of Austal Limited, an Australian publicly traded company.
  • The Justice Department coordinated with the U.S. Securities and Exchange Commission (SEC) on the criminal resolution.
  • Austal USA also settled a False Claims Act case for providing non-compliant parts to the U.S. Navy.

U.S. Navy Shipbuilder Admits to Fraud in Major DOJ Case

Austal USA LLC, a prominent defense contractor and shipbuilder for the U.S. Navy and Coast Guard, has pleaded guilty to a wide-ranging financial accounting fraud scheme and obstruction of a Defense Department audit. This admission came as part of a case that has highlighted significant lapses in accountability within the defense sector.

From 2013 to 2016, Austal USA engaged in a scheme to manipulate its financial records. The company artificially suppressed key accounting metrics and falsely overstated profitability. These deceptive practices misled shareholders, auditors, and key Defense Department officials, compromising the transparency expected from defense contractors. The scheme’s exposure forced Austal Limited, the Australian parent company, to write down over $100 million, significantly affecting its stock price.

Obstructing Audits and Inflating Costs

Austal USA’s fraudulent activities extended beyond mere accounting manipulations. The company actively obstructed Department of Defense audits to hide the true costs associated with its shipbuilding programs. By using the term “program challenges,” Austal USA concealed growing shipbuilding expenses, further inflating its reported profits.

“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, head of the Justice Department’s Criminal Division. “The investing public, the U.S. Navy, and the Defense Contract Audit Agency relied on Austal USA to tell the truth about its financial condition and its performance on U.S. Navy contracts. Today’s guilty plea underscores the Department of Justice’s commitment to holding U.S. government contractors accountable for their criminal misconduct and ensuring that they engage honestly with the U.S. government.” – Nicole M. Argentieri

To address the consequences of its actions, Austal USA agreed to a plea deal that includes a $24 million fine and restitution up to $24 million to Austal Limited shareholders. Additionally, the company will undergo three years of probation and must implement a rigorous compliance and ethics program overseen by an independent monitor.

Investigations and Future Accountability

The extensive investigations into Austal USA’s conduct were carried out by the Naval Criminal Investigative Service (NCIS) and the Defense Criminal Investigative Service (DCIS). These probes were supported by the Justice Department’s Office of International Affairs and Australian authorities. The depth of the case has shown the importance of international cooperation in maintaining the integrity of defense contracting.

“Maintaining our national security and military infrastructure cannot come at the cost of the integrity of our contracting processes,” said U.S. Attorney Sean P. Costello for the Southern District of Alabama. “Today’s actions ensure accountability and promote the rule of law in this critical arena.” – Sean P. Costello

Three former Austal USA executives, Craig Perciavalle, Williams Adams, and Joseph Runkel, have been indicted on multiple counts of wire fraud and are awaiting trial. The Justice Department, in coordination with the SEC, remains committed to distributing funds to harmed investors and holding those accountable for their misconduct.

RELATED ARTICLESMORE FROM AUTHOR