Third Austal Executive Resigns
The chief financial officer of Australian shipbuilder Austal Limited has resigned "to take an extended break," the company announced Thursday.
CFO Greg Jason began working with Austal almost 15 years ago, and he has served in both finance and operational roles, including nine years in his current position. He will depart Austal in December, and in the interim, he will assist in the search and transition process to appoint a new CFO.
"Helping establish shipbuilding operations in Asia and overseeing Austal’s dynamic operations across several continents over a prolonged period of time has been a fulfilling journey," he said in a statement. "The time is now right to take a break and spend some time with my family before assessing and pursuing new opportunities."
Among other projects, Jason worked on Austal Limited's entry into the U.S. market with subsidiary Austal USA. The Gulf Coast shipbuilder specializes in two classes of aluminum-hulled fast vessels for the U.S. Navy, the Independence-class Littoral Combat Ship and the Spearhead-class expeditionary fast transport, a militarized ro/pax design.
Austal USA is under investigation by the U.S. Department of Justice, the Securities and Exchange Commission and the Australian Securities and Investments Commission in connection with a large loss it booked in 2016. In February 2021, the company admitted that it had underestimated the cost needed to build the LCS early in the program, forcing it to write down the value of its work in progress in mid-2016. This led to an unexpected full-year loss of $120 million, down from a profit of $86 million the year before.
In addition, Austal USA said that U.S. authorities were looking into irregularities with "the procurement of certain ship components for use in connection with U.S. government contracts and charging and allocation of labor hours."
Shortly after these revelations, Austal USA President Craig Perciavalle resigned, and he was replaced by Austal USA CFO Rusty Murdaugh on an interim basis.
The unanticipated LCS build costs came after an initial round of U.S. Navy shock trials in 2016. After detonating large quantities of explosives near a test ship, the Navy found signs that the class would need to be upgraded for survivability. "Some mission systems were removed, other equipment was modified to improve shock resistance, and construction deficiencies were corrected" in order to "further mitigate potential equipment damage and personnel injury," testified Pentagon director of operational test and evaluation J. Michael Gilmore in 2016. The vessels have never been shock-tested to the full strength Navy standard due to concerns that they might sustain excessive damage.
In June 2021, Australian corporate regulator ASIC launched enforcement proceedings against Austal Limited and its former CEO, David Singleton, for allegedly failing to disclose the LCS losses to investors for more than a month. ASIC also alleges that Austal Limited "engaged in misleading or deceptive conduct" by failing to fix its previous earnings guidance during that one-month period. Singleton left the company on January 1, 2021 and has not announced a new role.
Austal Limited is also under investigation by the Australian Commission for Law Enforcement Integrity (ACLEI) in a related corruption probe. ACLEI is examining whether Australia's Border Force improperly paid Austal $28 million in milestone fees for a series of allegedly defective patrol ships, propping up the firm's finances at a time of difficulty. The fees were paid during 2015-2016, including a $5.8 million tranche reportedly paid the day before Austal announced its challenges with the LCS program.