A U.S. Navy Shipbuilder has pleaded guilty as part of a case that involved the possible obstruction of a Defense Department audit.
Austal USA LLC (Austal USA) is a shipbuilding company that has contractual obligations to the Defense Department. The company charges the U.S. Navy for the equipment and the ships that are the bulwark against sea-based threats. Their winning of these contracts is meant to uphold the integrity and standards of a contractor with important naval security implications.
The company, as part of a Justice Department investigation, has now agreed to pay $24 million to end the government watchdog’s hunt. This brings to an end a lengthy investigation into an Austal USA accounting fraud scheme and efforts to obstruct the Defense Contract Audit Agency (DCAA) during a vital financial capability audit.
Austral must pay $24 million to close accounting fraud case
According to the report by the Justice Department from 2013, to a period of three or so years, Austral USA and the co-conspirators involved attempted to cook the books around the key metric “estimate at completion” (EAC) around Littoral Combat Ships.
These illicit practitioners attempted to boost the visibility of the company’s profitability and expected earnings. This was not a reflection of the actual figures, and they blamed the extended estimate on what the report reflected as “program challenges.”
According to the Justice Department, “Austal USA did this to maintain and increase the share price of Austal Limited’s stock. When the higher costs were eventually disclosed to the market, Austal Limited wrote down over $100 million, and the stock price was significantly negatively impacted.”
Astral attempted several delaying tactics when providing information in the case but was “credited” for taking accountability for this serious breach and the misconduct at such senior levels. As a result, the agreement has been reached for the million-dollar penalty and acceptance of one count of securities fraud and one count of obstruction of a federal audit.
Interestingly, the Justice Department said, “The appropriate criminal penalty is $73,572,680.10. However, due to Austal USA’s demonstrated inability to pay the criminal fine, Austal USA and the department agreed, consistent with the department’s inability to pay guidance, that Austal USA would pay a criminal fine of $24 million and restitution of up to $24 million for losses to Austal Limited shareholders. The department has agreed to credit all of the criminal fine and restitution against amounts Austal USA will pay to resolve an investigation by the SEC for related conduct.”
“Defense contractors that engage in fraud erode the public’s trust in our Armed Forces,” said Director Omar Lopez of the Naval Criminal Investigative Service (NCIS). “NCIS and our investigative partners are determined to hold those accountable whose actions erode that trust. We are committed to rooting out economic crime that negatively impacts the readiness of the Department of the Navy.”
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