Former Austal CEO, two others indicted for accounting fraud

WASHINGTON — The Justice Department on Friday announced an indictment for three former executives of Navy shipbuilder Austal USA, in what the government says was a multimillion dollar “accounting fraud scheme.”

The men indicted include former Austal CEO Craig Perciavalle; Joseph Runkel, identified by the AP as a member of the finance team, and William Adams, whose LinkedIn lists him as a former executive on the company’s Littoral Combat Ships program. The Justice Department said in a statement the men “allegedly conspired to mislead Austal Limited’s shareholders and the investing public about Austal USA’s financial condition.”

“Specifically, the defendants are alleged to have artificially reduced and suppressed an accounting metric known as ‘estimate at completion’ in relation to multiple [Littoral Combat Ships] that Austal USA was building for the U.S Navy,” according to the Justice Department statement.

The men allegedly manipulated the EAC figures in part by using so-called ‘program challenges’ – ostensibly cost-savings goals – but which in reality were ‘plug’ numbers and fraudulent devices to hide growing costs that should have been incorporated into Austal USA’s financial statements, and ultimately reflected in Austal Limited’s reported earnings,” the Justice Department continues. “The defendants allegedly did this, among other reasons, to maintain and increase the share price of Austal Limited’s stock. When the higher costs were eventually disclosed to the market, the stock price was significantly negatively impacted and Austal Limited wrote down over $100 million.”

If convicted, the men face a maximum penalty of 30 years in prison for the conspiracy count and each count of “wire fraud affecting a financial institution,” the statement continued, plus an additional 20 years for general wire fraud.

Austal USA, based in Mobile, Ala., is the subsidiary of eponymously named Australian shipbuilder and is the prime contractor for the Navy’s Independence-class Littoral Combat Ship. The vessels were designed to be  high-speed, agile, surface combatants capable of operating in the shallowest waters between the open ocean and the shore, known as the littorals. A spokeswoman for Austal in a statement said the company is “aware” of the indictments against its former employees.

“These actions stem from investigations that have been ongoing since at least 2019 and relate to actions allegedly taken between 2013 and 2016,” the spokeswoman said. Austal has “been cooperating with the DoJ and [the Security Exchange Commission] in their investigations and will continue to do so until these matters are fully resolved.”

“Austal USA has invested significant time and resources to strengthen its compliance program since the investigations began,” Austal’s statement continued. “While significant changes have been implemented, a review of its current compliance programs and practices is continuing to ensure that it maintains a significantly enhanced compliance program and conducts business with the highest level of integrity.”

Perciavalle resigned as Austal USA’s CEO in 2021 and currently works as an executive at competing shipbuilder, Fincantieri Marinette Marine, which is not accused of any wrongdoing in the Justice Department’s statement.

“We are aware of a Department of Justice indictment filed last week against an employee, Craig Perciavalle, related to his previous employment at a different shipyard. We understand that this matter predates his employment with our company,” a Fincantieri spokesman told Breaking Defense.