Shipbuilding execs indicted on fraud charges involving Navy's Littoral Combat Ships

Former and current executives at an Alabama-based shipbuilding company are accused of manipulating cost estimates for the Navy’s troubled Littoral Combat Ship program to help the company meet revenue projections.

Federal prosecutors said Craig D. Perciavalle, 52; Joseph Runkel, 54; and William Adams, 63, misled shareholders and investors of Austal USA, a subsidiary of the Australian shipbuilding company Austal Limited. From January 2013 through July 2016, they schemed to artificially reduce cost estimates for the LCS by tens of millions of dollars, an indictment says. 

They knew the company’s shipbuilding costs were rising higher than planned but directed others in the company to arbitrarily lower cost estimates to meet Austal USA’s revenue budget, according to officials with the Securities and Exchange Commission. They did it to increase the share price of Austal Limited’s stock artificially, prosecutors said.

“When the higher costs were eventually disclosed to the market, the stock price was significantly impacted, and Austal Limited wrote down over $100 million in previously wrongly booked profits,” the Justice Department said Friday.

Last week, a federal grand jury in Alabama indicted all three men on one count of conspiracy to commit wire fraud, five counts of wire fraud and two counts of wire fraud affecting a financial institution.

If convicted, they each face 30 years in prison on the conspiracy charge and 20 years in prison for each count of wire fraud, the Justice Department said.

The controversial LCS program was to provide the Navy with warships capable of fighting close to the shore, known as the littorals. For years, the Navy has struggled to find a mission for the LCS ships. However, they have been plagued with problems since the start, including cost overruns and major mechanical problems.