U.S. SECURITIES AND EXCHANGE COMMISSION
Litigation Release No. 25684 / March 31, 2023
Securities and Exchange Commission v. Craig D. Perciavalle, Joseph A. Runkel, and William O. Adams, No. 1:23-cv-00109 (S.D. Ala. filed March 31, 2023)
SEC Charges Three Executives At U.S. Navy Shipbuilder Austal USA with Accounting Fraud
Washington D.C., March 31, 2023 - The Securities and Exchange Commission today charged three executives of Mobile, Alabama-based shipbuilder, Austal USA, LLC, for orchestrating a fraudulent revenue recognition scheme that allowed its parent company to meet or exceed analyst expectations.
The SEC alleges that, from at least January 2013 through July 2016, Austal USA's former president, Craig D. Perciavalle, its current director of financial analysis, Joseph A. Runkel, and former director of the Littoral Combat Ships program, William O. Adams, engaged in a scheme to artificially reduce the cost estimates to complete certain shipbuilding projects for the U.S. Navy by tens of millions of dollars. The complaint alleges that Perciavalle, Runkel, and Adams knew that Austal USA's shipbuilding costs were rising and higher than planned, but they directed others to arbitrarily lower the cost estimates to meet Austal USA's revenue budget and revenue projections.
The complaint further alleges that Austal USA's parent company, Australia-based Austal Limited, prematurely recognized revenue and, as a result, met or exceeded analyst consensus estimates for earnings before interest and tax ("EBIT"), a key financial metric for the company.
The SEC's complaint, filed in the U.S. District Court for the Southern District of Alabama, alleges that Perciavalle, Runkel, and Adams violated Section 10(b) of the Securities Exchange Act of 1934 ("Exchange Act") and Exchange Act Rules 10b-5(a) and (c) thereunder, aided and abetted Austal USA's and Austal Limited's violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and seeks disgorgement plus prejudgment interest, civil money penalties, and officer and director bars.
The SEC's investigation was conducted by Kimberly Steckling, Kenneth Stalzer, and Donna Walker and supervised by Ian Karpel, Nicholas Heinke, and Jason Burt. The litigation is being led by Sharan Lieberman and Christopher Martin and supervised by Gregory Kasper.