|Austal USA in Mobile, AL|
Former Alabama Gov. Bob Riley is the chief lobbyist for a Mobile ship-building company that federal investigators raided last week. Austal USA, with its international headquarters in Henderson, Western Australia long has been a pet project for Riley -- both while he was governor and since he left office.
Austal USA is one of Mobile's largest employers, with a workforce of about 4,000. It builds Littoral Combat Ships and Expeditionary Fast Transports for the U.S. Navy, and al.com reports it is competing in a selection process for a series of next-generation frigates.
The nature of the investigation remains unclear, but it appears to have grown from a financial probe in Australia. From a report at maritime-executive.com:
Australian ferry and defense shipbuilder Austal is cooperating with an Australian probe into market disclosures it made in 2015 regarding cost overruns on LCS-6, the Littoral Combat Ship USS Jackson. Austal builds one of the U.S. Navy's two LCS variants, the aluminum-hulled Independence-class ships.
In a filing released through the Australian Stock Exchange on Thursday, Austal confirmed that it is "assisting an investigation by ASIC (the Australian Securities and Investments Commission) into market announcements . . . with respect to earnings from its Littoral Combat Ship program." Its American division, Austal USA, confirmed Friday that it is also cooperating with the U.S. Navy in an unspecified investigation. Local media reported that officials from the Department of Defense, the NCIS and the Defense Criminal Investigative Service were spotted at the Austal USA yard in Mobile, Alabama.
A report at usni.org provides additional details about the possible focus of the investigation and the U.S. agencies involved:
Federal agents visited Littoral Combat Ship manufacturer Austal USA in its Mobile, Ala., shipyard as part of an unspecified investigation involving the U.S. Navy, according to local media.
“Department of Defense, NCIS and [the Defense Criminal Investigative Service] have been seen on site,” according to NBC 15 in Mobile, Ala. “Investigators are expected to be on site for several hours.”
In a brief Thursday statement, Austal said the company was cooperating with authorities but gave no additional details as to the nature of the inquiry.
“Austal USA is working with the U.S. Navy on an open investigation,” reads the statement. “We are unable to provide additional details due to the nature of the investigation. We are continuing business as usual, executing our existing and recently awarded contracts.”
Here is more from usni.org about Austal's operations in south Alabama and the company's unstable financial picture:
The Mobile shipyard employs 4,000 workers and builds the Spearhead-class Expeditionary Fast Transport and Independence-class Littoral Combat Ship for the Navy. Austal USA is the American branch of Australian aluminum shipbuilder Austal. Earlier Thursday, Australian media reported Austal was under investigation by the Australian Securities and Investments Commission over market updates related to losses around the Independence-class LCS.
The Australian authorities are said to be focusing on statements issued by Austal regarding the blow out, or sudden increase in costs, associated with finishing USS Jackson (LCS-6)
Jackson was a challenging ship in two respects. First, it was the first ship Austal USA had built as the prime contractor, whereas USS Independence (LCS-2) and USS Coronado (LCS-4) were built at the Austal yard with General Dynamics serving as the prime contractor on the project. Second, Jackson was the first LCS to be built under a block buy contract from the Navy. Austal implemented a new manufacturing process for the block buy ships meant to reduce cost and schedule down the line through serial production, but Jackson being the first serial production ship still meant there were lessons to be learned and procedural kinks to be worked out.
Austal's finances have been shaky since 2015-16, according to usni.org:
Austal officials conceded in the Dec. 2015 statement that their ability to boost LCS earnings through these new production processes did not live up to expectations. Savings on the LCS-8 and LCS-10 production were also more limited than anticipated, Austal officials said in the Dec. 2015 statement.
“Austal’s ability to apply lessons learnt and productivity enhancements from LCS 6 to vessels in advanced construction, namely LCS 8 and LCS 10, has been more limited than anticipated,” the statement said.
“The LCS program is maturing more slowly than we had expected, however we are working hard to manage the risks and expect an improvement across the program after delivery of LCS 10,” Andrew Bellamy, who then served as Austal’s chief executive, said in the December 2015 release. “Austal has a strong balance sheet and is generating good cash flow, which is enabling further investment in the business during the 2016 financial year to best position the Company to win additional contracts and service work to build our order book, revenue, and earnings into the future.”
However, according to Austal’s Fiscal Year 2016 annual report, the company reported a loss of A$84.2 million, compared to a profit of A$53.2 million in 2015.
Could this develop into a full-blown scandal, with Bob Riley at the center of it? It's too early to tell, but Riley (often in conjunction with one or both of his oily children -- Rob Riley and Minda Riley Campbell) has been tied to corruption for years. So far, the Rileys have managed to mostly dodge accountability. But if they are found to be involved in an international financial scam, involving misuse of U.S. defense funds . . . that tune could change.
Either way, Alabamians should be keeping a close eye on this story. Riley and his successor as governor, Robert Bentley, dumped millions of taxpayer dollars into Austal USA. Right now, it looks like that could have been a bad bet -- with everyday Alabamians being left holding the bag.
(To be continued)