Former Austal executives charged over US navy deals raising questions over future contracts
Australian ship builder Austal could be frozen out of future US Navy contracts after three former executives were charged by the US Securities and Exchange Commission with financial fraud.
Australia’s premier ship builder and defence contractor, Austal, could find itself frozen out of future lucrative US Navy contracts just at a time when Western nations are rebuilding their fleets, after the powerful SEC charged three former Austal US executives for allegedly making false and misleading financial statements.
The allegations of fraud against the Austal executives come as Australia, the US and Britain undertake their historic AUKUS submarine partnership – making it a sensitive diplomatic and operational time for the US securities regulator to launch its court actions against the Australian shipbuilder.
The SEC has alleged the former US-based executives of Austal – which is 19 per cent owned by Australian multi-billionaire Andrew Forrest – orchestrated a fraudulent revenue recognition scheme that allowed its parent company to meet or exceed analyst expectations.
The SEC alleges that, from at least January 2013 through to July 2016, Austal US’s former president, Craig D. Perciavalle, its current director of financial analysis, Joseph A. Runkel, and former director of the Littoral Combat Ships program, William O. Adams, engaged in a scheme to artificially reduce the cost estimates to complete certain shipbuilding projects for the US Navy by tens of millions of dollars.
Mr Runkel’s employment was terminated following the SEC move and all three executives are no longer at the company.
The complaint alleges that the executives knew that Austal US shipbuilding costs were rising and higher than planned, but they directed others to arbitrarily lower the cost estimates to meet Austal US revenue budget and revenue projections.
Austal said in a weekend statement that the allegations have been the subject of investigations since at least 2019.
“Austal USA has been co-operating fully with the Department of Justice, the SEC, and other agencies in their investigation into these issues, and will continue to do so if required until these matters are resolved,” Austal said.
Austal chief executive Paddy Gregg said Austal had invested significant time and resources to strengthen its compliance program since the investigations began.
“Importantly, despite the matters relating to the individuals charged and indicted, our customers remain strong supporters of Austal USA, with several new contracts worth billions of dollars awarded to the company since the commencement of the investigation – including one of the largest contracts in the company’s history – and a significant investment into the construction of Austal’s new steel shipbuilding facilities,” he said.
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