Boeing to plead guilty to fraud in 737 Max crash case

Boeing to plead guilty to fraud in 737 Max crash case

Boeing to plead guilty to fraud in 737 Max crash case

Boeing reached an agreement on Sunday Boeing has pleaded guilty to conspiring to defraud the government in a case related to the crashes of its 737 Max jets in Indonesia and Ethiopia that killed 346 people, a stunning turn for the aerospace giant after the Justice Department determined Boeing breached the terms of a 2021 agreement to avoid prosecution.

Prosecutors said two Boeing pilots withheld key information from the Federal Aviation Administration about a new automatic control system for the Max. The system was implicated in both crashes, causing uncontrolled falls.

By agreeing to plead guilty Because the lone felony charge was filed just before Sunday’s midnight deadline, the company will avoid going to trial in the high-profile case.

The Justice Department filed documents related to the plea agreement in a Texas federal court on Sunday night, setting up a hearing at which family members, who have criticized the pending settlement, will be allowed to speak. The court must then decide whether to accept the plea deal.

Boeing had already agreed to $2.5 billion in fines and payments in 2021. As part of the new deal, the company will pay an additional $487.2 million in fines, agree to oversight by an independent monitor, spend at least $455 million to strengthen compliance and safety programs and be placed on supervised probation for about three years, according to a Justice Department official.

The settlement also included something the families of the crash victims had long sought: a meeting with Boeing’s board of directors.

“This criminal conviction demonstrates the department’s commitment to holding Boeing accountable for its misconduct,” the Justice Department official said.

It is rare for a company of Boeing’s stature to plead guilty to a crime, and the timing marks another low point for the century-old planemaker’s already battered reputation. The plea underscores the long shadow of deadly crashes and also comes as Boeing is trying to regain the trust of regulators and the flying public amid a new safety crisis that began in January when a panel broke off the side of a newer Max model in flight.

In a statement, Boeing confirmed that it had reached an “agreement in principle on a resolution with the Department of Justice subject to the formalization and approval of specific terms.”

Sunday’s court filing did not include information about waivers that Boeing, with its myriad defense and space contracts, might need to seek if its conviction triggers contracting bans by federal agencies.

Paul Cassell, an attorney for the families in the case and a professor at the University of Utah’s SJ Quinney School of Law, immediately filed an objection to the settlement on behalf of the families.

“Through a skillful legal negotiation between Boeing and the Department of Justice, the deadly consequences of Boeing’s crime are being hidden,” Cassell said.

Erin Applebaum, a partner at Kreindler & Kreindler who has worked with Cassell representing family members, added: “We are extremely disappointed that the Department of Justice is moving forward with this wholly inadequate plea agreement despite the families’ strong opposition to its terms.”

The criminal case centered on the design of the Max, an updated version of the hugely popular single-aisle 737. Boeing was racing to put the plane into service in the 2010s, in competition with European rival Airbus, which was also offering a new model. The automated system involved in the crashes, which was supposed to push the nose of the plane down in limited circumstances — was necessary because of the Max’s new, larger engines.

Prosecutors have said the two technical pilots withheld information that the automated system could be activated under a wider range of conditions from an FAA oversight office, resulting in mention of the system being removed from a safety report. That meant airline pilots in the United States and around the world did not have to undergo costly training on the new system. But it also meant that pilots They were not familiar with how it worked. The FAA office has only just learned of the system’s expanded scope of operation. after the first accident, according to prosecutors.

In January 2021, the Justice Department and Boeing announced that they had entered into a deferred prosecution agreement that would allow the company to avoid criminal prosecution.

Under the three-year settlement, Boeing acknowledged that its technical pilots misled federal regulators about the software system and was charged with one count of fraud. One of those pilots was acquitted by a federal jury in 2022 of charges that he lied to the Federal Aviation Administration about changes to the software system. His defense argued publicly before the trial that the pilot, Mark Forkner, was being used as a scapegoat.

Boeing agreed to pay $500 million to the families of those whose loved ones died, strengthen its internal programs to detect and prevent future incidents of fraud and cooperate with future investigations or prosecutions. The agreement expired two days after the mid-air explosion of a fuselage door panel on an Alaska Airlines 737 in January, an incident that remains the subject of a criminal investigation by federal authorities.

In May, federal prosecutors found that Boeing violated the terms of the 2021 settlement in part by failing to create agreed-upon ethics and compliance programs.

Families of the crash victims were not consulted in the initial settlement between Boeing and the Justice Department, but they successfully fought in court for their right to be heard and received briefings from prosecutors about the case this year.

John C. Coffee, a law professor and director of the Center on Corporate Governance at Columbia Law School, said the inclusion of an effective federal monitor will be key to ensuring Boeing meets its obligations under the agreement.

“I have long said that the biggest failure of the old[deferred prosecution agreement]is that it did not create an effective watchdog,” he said by email. “But the two sides are likely to fight fiercely over what power the watchdog should have.”

Relatives of the crash victims have been pushing prosecutors to take a tougher stance against the aerospace giant, particularly after the mid-air explosion earlier this year. Though no one was seriously injured in that crash, multiple investigations into that calamity — including those by Boeing itself — uncovered myriad deficiencies in the company’s manufacturing and quality control systems.

A preliminary report by the National Transportation Safety Board, which is investigating the cause of the Jan. 5 crash, concluded that bolts designed to hold the door panel in place were not replaced after the piece was removed to make repairs elsewhere on the plane while it was undergoing final assembly at Boeing’s factory in Renton, Wash. Boeing’s own internal investigation concluded that paperwork was never created to document the removal of that part of the plane, a violation of company policy.

While the crashes of a Lion Air plane in October 2018 and an Ethiopian Airlines flight five months later in March 2019 were linked to problems with the design of the Max, the January explosion was linked to problems at Boeing’s manufacturing plant outside Seattle.

The FAA audited the company’s production line and launched its own investigation, and has demanded fixes to ensure that every plane leaving the factory is built to specifications. The agency has taken the unusual step of banning Boeing from increasing the number of 737 Max planes It does this every month, until regulators are satisfied that improvements have been implemented.

Boeing has faced allegations of fraud from the government before. In 2006, the company settled a corruption case involving space launch contracting, paying $615 million in civil and criminal penalties. In that settlement, the government agreed not to pursue criminal charges against Boeing after it said the company had cooperated with its investigation.

In an attempt to recover from its current crisis, Boeing announced in recent days a deal to acquire Spirit AeroSystems, a supplier that makes the Max fuselage, in an attempt to gain more control over its supply chain. But the task of rebuilding the company’s reputation will largely fall to a new chief executive. Current CEO Dave Calhoun is scheduled to step down at the end of the year.