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Shipbuilding defence prime Austal will pay a penalty of US$24 million in an agreement reached with the US Department of Justice and US Securities and Exchange Commission.
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The fine was announced by Austal on 27 August following the resolution of the US regulatory investigation process and previous investigations.
The previous investigations focused on the actions between 2013 and 2016 of former Austal USA (AUSA) employees to misstate Austal USA’s performance and financial condition in Austal USA’s financial statements that were consolidated into the consequential statements and financial reports of Austal Limited in July 2016.
“AUSA will pay a penalty of US$24 million. This amount will be made available by the SEC to distribute to shareholders who demonstrate that they suffered loss in the relevant period,” Austal said.
“Details of how the distribution arrangements will work will be published by the SEC in due course. AUSA has entered into plea agreement with the DOJ to resolve criminal charges.
“Austal Limited was not charged in this matter but, with AUSA, has agreed to certain compliance and compliance reporting obligations.
“Austal and Austal USA have settled with the SEC by consenting to the entry of a final judgment that permanently restrains and enjoins them from violating certain provisions of the US federal securities laws.
“As part of the SEC resolution, Austal Limited does not admit or deny the SEC’s allegations; and Austal USA has agreed to engage an independent monitor for a period of three years to assess and monitor compliance with the DOJ plea agreement and confirm the effectiveness of its compliance program and internal controls.”
Austal is also in advanced discussions with the US Navy regarding the impact of these issues and is seeking to enter into an associated administrative agreement with the US Navy.
The company hopes to maintain its standing as a presently responsible contractor to the US government – a requirement for eligibility to undertake contracts for the US Navy and Coast Guard.
The US global resolution, once approved, ends all investigations into the events leading up to the July 2016 write-back. In September 2022, Austal resolved an investigation by the Australian Securities and Investment Commission, agreeing to a civil contravention and a AU$650,000 penalty. As the incident occurred from 2013 to 2016, the limitation period for further civil action in Australia has expired.
“Settling this action is the best outcome for Austal. Upon learning of this issue, Austal conducted its own independent investigation. The responsible individuals are no longer with the company, and we have made numerous governance changes to prevent similar issues from occurring again. Austal is committed to maintaining strong financial systems and controls,” Austal non-executive director and immediate past chairman John Rothwell said.
“The 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.”
Rothwell said that Austal had kept its customers informed of the issue, and they had remained supportive throughout, ordering billions of dollars’ worth of vessels.
“Our customers have been understanding that the actions of a few do not represent the values of Austal and the 5,000 people it employs,” he said.
“Prior to resolving this action we satisfied ourselves, through discussions with our main customers, that it would not affect current or potential build programs. The administrative agreement being discussed with the US Navy contributed to that view.”
In regard to financial impact on Austal, the penalty is payable in instalments over the 12 months following court approval. The financial settlement is considered an abnormal item and does not impact Austal’s underlying operations.
A US$32 million (AU$48.1 million) provision will be booked in Austal’s FY2023–24 accounts, which includes the fine/restitution, some legal costs and expected costs of complying with other terms of the settlement.
