The corporate regulator ASIC commenced proceedings against Liberal-linked shipbuilder Austal this morning for breaches of corporate law in relation to its US business, after a two-and-a-half-year investigation and a long battle by the company to claim legal privilege over masses of documents.
ASIC alleges that WA-based Austal, which is both a Liberal party donor and fundraiser host for the WA Liberals with links to Scott Morrison, Peter Dutton, Michaelia Cash, Linda Reynolds and Christian Porter, failed for nearly a month in 2016 to disclose a US$90 million writedown in its US business building warships for the US Navy. That provides more than 80% of the company’s revenue. Austal’s Mobile, Alabama facility was raided by US Securities and Exchange Commission agents as part of the investigation.
Austal has been attempting to prevent ASIC from accessing “a large number of documents” (in the words of its annual report) by claiming legal privilege, a claim rejected by ASIC. The corporate regulator is also alleging that Austal engaged in misleading or deceptive conduct by failing to withdraw its earlier earnings guidance about US revenue. Then-CEO David Singleton also faces proceedings.
ASIC argues that the company underestimated the costs of vessel construction and senior executives learnt that it faced a major writedown in early June 2016. They allegedly told Austal’s banks two weeks later and then their US and Australian boards. The company’s shares were placed in a trading halt on June 30. It was only on July 4 that investors learnt that there would be a US$115 million writedown. ASIC says investors should have been told at least by June 16 and perhaps by June 6.
Austal is also the subject of a separate scandal relating to its disastrous contract to build eight Cape Class patrol boats that the auditor-general slammed in 2018, which the Australian Commission for Law Enforcement Integrity (ACLEI) began investigating before the investigation was shut down in obscure circumstances following the replacement of the ACLEI’s Michael Griffin. The scandal renewed calls for a legitimate Commonwealth integrity body rather than the discredited ACLEI.
The alleged disclosure breach hasn’t harmed relations with the US Navy, however: this week the Americans handed the company a US$44 million contract for an autonomous vessel.