Executives of Alabama-based Austal Shipbuilding Accused of Inflating Earnings

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Three current and former former executives of a shipbuilder that constructs vessels for the U.S. Navy have been indicted on accounting fraud charges accusing them of falsely inflating the company’s reported earnings, federal prosecutors said.

Craig Perciavalle, 52, Joseph Runkel, 54, and William Adams, 63, all of Mobile, Alabama, where Austal USA LLC is based, are accused of misleading shareholders and investors. They are each charged with one count of conspiracy to commit wire fraud and wire fraud affecting a financial institution, five counts of wire fraud, and two counts of wire fraud affecting a financial institution, the U.S. Department of Justice said in a news release Friday.

If convicted of the charges, the men could face more than 30 years in prison and fines of more than $1 million, according to the federal indictment.

Austal USA LLC is a subsidiary of Australia-based Austal Limited and builds littoral combat ships for the Navy. The ships are designed to operate in shallow coastal waters, but critics have charged for years that the program is flawed and too expensive.

Perciavalle resigned as Austal USA’s president in 2021 following an investigation by federal and Australian authorities into practices dating back more than four years, the company said at the time. Adams is the former director of the littoral combat ships program, according to the SEC. Runkel is the director of financial analysis.

Prosecutors alleged the three men manipulated an accounting metric to hide growing costs in order to maintain and increase the share price of Austal Limited’s stock, hurt U.S. investors. Beginning in 2013, the three executives and others knew that Austal’s shipbuilding program was underperforming and over budget, but provided false information to the company’s board of directors, an accounting firm and shareholders.

“Instead of disclosing the true extent of the rising LCS (combat ships) non-labor costs, Perciavalle, Runkel, Adams and others directed Austal USA employees working on the LCS program to improperly report suppressed and fictitious non-labor EAC (estimates at completion) numbers,” the indictment reads.

The U.S. Securities and Exchange Commission said in a news release that the three “engaged in a scheme to artificially reduce the cost estimates to complete certain shipbuilding projects for the U.S. Navy by tens of millions of dollars.”

Photo: The USS Gabrielle Giffords, built at the Austal USA shipyard in Mobile, Alabama, with the Mobile skyline in the background, in a 2016 photo. (AP Photo/Brynn Anderson)

Copyright 2023 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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