The Alabama offices of Austal’s American subsidy, Austal USA, have been raided by US Navy investigators.
According to US media reports, officers from the Naval Criminal Investigative Service (NCIS), Defense Criminal Investigative Services (DCIS), and the US Department of Defense searched desks and computers for ‘several hours’ at the subsidiary’s headquarters in Mobile.
The raid came shortly after Austal filed an announcement through the ASX that it is “assisting an investigation by ASIC [Australian Securities Investment Commission] into market announcements by the Company with respect to earnings from its Littoral Combat Ship [LCS] program.”
Whilst initial reports on the weekend were unclear as to whether the US Navy and ASIC investigations are linked, Austal filed an ASX update on Tuesday confirming that the investigations are ‘separate but related’.
“[Austal’s] USA division is assisting US regulatory authorities with separate but related open investigations and any associated legal processes in relation to the LCS program,” Austal said in a statement.
“Austal USA is fully co-operating with the USA authorities so that its [sic] investigation may be completed as soon as reasonably possible.”
“Austal cannot provide additional information at this time, but will update shareholders of future developments.”
The market announcements under investigation refer to a warning made in 2016 revealing an annual loss suffered in relation to a cost blowout on the LCS program. Austal attributed the blow-out to the cost of meeting US shock rating standards, which measure a ship’s ability to withstand a local blast.
The news led to a sharp drop in the company’s share price and a trading halt.
Both of the US Navy’s LCS variants suffered a number of setbacks in 2016. The Independence-class USS Coronado had an engine breakdown during its maiden deployment, the Freedom-class USS Freedom suffered significant damage to its main diesel engine after seawater entered the engine lube oil system, and Freedom-class US Ships Fort Worth and Milwaukee suffered damage to clutch gears.
The Independence-class ships are built by Austal USA and the Freedom-class by Lockheed Martin and Marinette Marine.
The US raid coincided with the news the Austal has secured a US$21.1 million sustainment contract for the future USS Cincinnati.