Shipbuilder Austal backs SEC giving penalty to shareholders

Austal Ltd. said it supports a plan by the Securities and Exchange Commission to distribute a $24 million penalty it’s been hit with to shareholders “who could show they suffered” a loss as a result of an accounting scheme designed to inflate earnings from its shipbuilding for the U.S. Navy.

SEC investigations “focused on conduct that occurred over eight years ago, and with a large order book of work ahead of us, we need to concentrate on the future — not the past,” Austal non-executive director John Rothwell said in a statement Wednesday.

Three former executives of the Australian company’s U.S. subsidiary, Alabama-based Austal USA LLC, were charged with fraud in 2023 and are awaiting trial. 

Austal USA, which builds vessels for the U.S. Navy and Coast Guard, overstated the profitability of its operations to prop up the share price of its publicly traded Australian parent company, the U.S. Justice Department said in a statement Tuesday. 

According to the Securities and Exchange Commission, which filed a parallel lawsuit, Austal and its parent company artificially reduced the estimated costs of finishing projects for the Navy by tens of millions of dollars, despite knowing costs were increasing. When the higher costs were eventually disclosed, the company was forced to write down more than $100 million. 

The company said it’s also “in advanced discussions with the U.S. Navy” on an agreement setting out “the remedial measures taken by the company to date” and “ongoing commitments to compliance,” including an independent monitor.