Military shipbuilder Austal says a settlement in the investigation is in the company’s best interests

MOBILE, Alabama (AP) — Executives at military shipbuilder Austal said the settlement of an accounting fraud investigation, which included an agreement to pay a $24 million penalty, was the best outcome for the company and that new control measures have been put in place.

Austal USA, a subsidiary of Australia’s Austal Limited, pleaded guilty to securities fraud and obstructing a federal audit to resolve an accounting fraud case. According to the U.S. Department of Justice, Austal USA has agreed to pay a $24 million penalty.

Austal’s shareholders will also be paid compensation. However, the compensation will be paid from the fine, so the company will have to pay a total of $24 million.

“The settlement of this matter is the best outcome for Austal. When Austal became aware of this incident, the company conducted its own independent investigation. Those responsible are no longer with the company and we have made numerous changes to our corporate governance to prevent similar incidents from happening again,” John Rothwell, the former chairman of Austal Limited who now serves as a non-executive director, said in a company statement.

Austal builds littoral combat ships designed for use in shallow coastal waters.

“The investigations focused on conduct that occurred over eight years ago, and with a large backlog ahead of us, we need to focus on the future – not the past,” Rothwell added.

The Justice Department stated that from 2013 to July 2016, Austal USA misled shareholders and investors about the company’s financial condition. The Justice Department stated that despite rising shipbuilding costs, Austal USA artificially lowered cost estimates to meet its revenue budget and forecasts. This resulted in Austal USA’s profitability on the vessels and Austal Limited’s reported profits in its public financial reports being falsely overstated.

The US Securities and Exchange Commission (SEC) will take care of distributing the funds to affected investors, the Justice Department said.

Austal USA has also agreed to employ an independent compliance monitor for three years and to implement a compliance and ethics program.

Three former Austal USA executives were charged with accounting fraud last year and are awaiting trial.

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