Shipmaker Austal announced Monday that it had accepted the resignation of Austal USA President Craig Perciavalle following U.S. and Australian investigations into “historical matters” in the Littoral Combat Ship program.
Employees at Austal USA’s Mobile shipyard were notified by text Monday afternoon that President Craig Perciavalle had resigned. A company spokesman confirmed the contents of the text, which also said that Austal USA Chief Financial Officer Rusty Murdaugh had been named interim president and would continue to serve as CFO, a post he has held four years.
Austal USA is one of the Mobile’s biggest employers, with a workforce of around 4,000 people. It currently builds two aluminum vessels for the U.S. Navy, the Independence-class Littoral Combat Ship and the multipurpose Expeditionary Fast Transport.
Law enforcement agents raided Austal USA offices in January 2019, though little information was released at the time or since. Austal USA said it was “working with the U.S. Navy on an open investigation.”
In the same time frame, Austal Ltd. Announced that it was the subject of an investigation by Australian authorities, related to actions affecting the stock market in 2016. An Australian news outlet, the West Australian, reported more specifically that the Australian Securities and Investments Commission was interested in market announcements made by Austal “leading up to its warning of a $122 million annual loss in June 2016.”
Monday’s announcement from Austal Ltd. Addresses “separate but related investigations” being conducted by regulatory authorities in the United States and Australia, plus an additional investigation conducted by “external lawyers in the U.S.” hired by Austal and Austal USA.
Austal Ltd. said regulators focused on certain financial reporting adjustments the company made in 2016 that were related to the LCS program as well as on “the procurement of certain ship components for use in connection with U.S. Government contracts and charging and allocation of labour hours.”
Austal said it had come to the conclusion that the 2016 financial announcements pertaining to the Australian Stock Exchange were correctly handled. However, it said it had found a series of problematic issues:
· “Prior to mid-2016, inaccuracies in Austal USA’s internally generated cost estimates underestimated the full costs to construct the LCS vessels, which delayed Austal Ltd.’s understanding of the magnitude of those costs and the need to change those estimates.”
· The company identified “isolated instances of misallocation of labour hours between vessels in the early stages of the LCS program” but said overall hours reported were substantially correct.
· Some valves installed on six ships, LCS-10 through LCS 20, did not meet all relevant military specifications. The Navy has since agreed to accept the valves so that they don’t have to be replaced, Austal said. The company said it has “resolved the U.S. Navy’s contractual claims … and is in discussions with U.S. regulatory authorities regarding these issues.”
Austal’s statement did not specifically assign responsibility to Perciavalle.
It said it was “engaging with the relevant U.S. regulatory authorities regarding these investigations” and could not predict what action they might take. “However, the Company is confident that the proactive steps it has already implemented to strengthen its internal reporting and compliance practices will be taken into account in determining whether there are any potential consequences arising from matters identified by the investigation, as well as ensuring such circumstances do not happen again.”
Austal said its relationship with the U.S. Defense Department “remains strong,” and cited a joint investment of $100 million that will help the company expand into steel vessels.
This story has been substantially updated with information from an Austal Ltd. corporate statement.
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