31 March 2023, Washington, DC
The Securities and Exchange Commission (SEC) charged three officials at Austal USA LLC, an Alabama-based shipbuilder, today for their roles in setting up a false revenue recognition scheme that helped the parent company meet or beat analyst expectations.
Austal USA LLC scams
The SEC says that Craig D. Perciavalle, Austal USA LLC’s former president, Joseph A. Runkel, the company’s current director of financial analysis, and William O. Adams, the company’s former director of the Littoral Combat Ships program, worked together to understate tens of millions of dollars how much it would cost to finish certain U.S. Navy ship construction initiatives.
According to the lawsuit, Perciavalle, Runkel, and Adams were aware that Austal USA’s shipbuilding costs were rising and would end up being greater than anticipated, but they still told others to arbitrarily lower the cost estimates so that Austal USA could stay within its revenue budget and projections.
Also, the complaint says that Austal Limited, which is the parent company of Austal USA, took in money early and either met or beat analyst consensus projections for earnings before interest and taxes (EBIT), which is a very important financial number.
Jason Burt, the head of the SEC‘s Denver office, said, “We say that Austal USA’s leaders lied about the company’s financial performance, hurting U.S. investors in the shares of Austal Limited, which is its parent company.”According to the complaint, “Austal Limited would have missed, by significant margins, analyst consensus projections for EBIT” if the defendants hadn’t illegally manipulated the cost estimates.
The SEC sued Perciavalle, Runkel, and Adams in the U.S. District Court for the Southern District of Alabama, saying that they had broken the Securities Exchange Act of 1934’s rules against fraud. The SEC wants the money to be paid back plus interest for the time before the judgment, as well as civil money penalties and bans on serving as an officer or director.
Kimberly Steckling, Kenneth Stalzer, and Donna Walker carried out the SEC inquiry under the direction of Ian Karpel, Nicholas Heinke, and Jason Burt. Gregory Kasper is overseeing the litigation that Sharan Lieberman and Christopher Martin are leading.