U.S. Navy Shipbuilder Guilty Of Financial Fraud & Audit Obstruction Agrees To Pay $24 Million Penalty

A U.S. Navy shipbuilder has pleaded guilty to charges of financial fraud and obstructing a federal audit, agreeing to pay $24 million to resolve the probe by the Department of Justice.

The company, constructing vessels for the U.S. Navy and Coast Guard, was found guilty of falsifying financial records and misleading the Defense Contract Audit Agency during a financial capability audit.

The Department of Justice, in collaboration with the U.S. Securities and Exchange Commission, found that the shipbuilder was involved in a conspiracy to increase its profits on contracts for constructing Littoral Combat Ships for the U.S. Navy from 2013 to 2016.

The company intentionally suppressed the estimate at completion accounting figures, falsely overstating its profitability and the earnings reported by its parent company, an Australian entity listed on the Australian Securities Exchange.

The fraud was carried out using program challenges or falsified data to hide rising shipbuilding costs. The intention was to maintain and increase the parent company’s share price.

When the actual expenses were revealed to the market, the company was forced to write down over $100 million, resulting in a huge drop in stock value.

The Department of Justice termed the company’s actions a severe breach of trust with the U.S. military and the investing public.

U.S. Attorney Sean P. Costello for the Southern District of Alabama stated that upholding the country’s national security and military infrastructure should not compromise the integrity of its contracting processes.

Further investigation by the Naval Criminal Investigative Service (NCIS) and the Department of Defense Office of Inspector General (DoD OIG) revealed that the shipbuilder’s misconduct obstructed the Defense Contract Audit Agency’s financial audit.

The Department of Justice stated that the company only began cooperating with the investigation after a significant delay.

The company will pay a reduced fine of $24 million from the original fine of $73.5 million due to its inability to pay the total amount.

The company will also implement a comprehensive compliance and ethics program and retain an independent compliance monitor for three years.

Additionally, three former executives of the shipbuilder who were charged with conspiracy and wire fraud in March 2023 are awaiting trials.

The Department of Justice, the DCIS, and NCIS, involving other agencies, continue investigating the case.

The company is set to face additional penalties and a sentencing hearing on November 25, 2024, which includes three years of probation.

Reference: U.S. Department of Justice

U.S. Navy Shipbuilder Guilty Of Financial Fraud & Audit Obstruction Agrees To Pay $24 Million Penalty appeared first on Marine Insight – The Maritime Industry Guide

Source: Maritime Shipping News