Boeing to plead guilty to criminal fraud charges stemming from 737 Max crashes

Rescue workers work at the site of an Ethiopian Airlines plane crash near Bishoftu, or Debre Zeit, south of Addis Ababa, Ethiopia, Monday, March 11, 2019.

Mulugeta Ayene | Reuters

Boeing has agreed to plead guilty to criminal fraud in connection with the deadly 737 Max crashes. The decision labels the U.S. aerospace giant a criminal but allows the company to avoid trial as it tries to end a safety and production crisis.

Boeing would face a maximum penalty of $487.2 million under the deal, though the Justice Department recommended that the court credit Boeing with half the amount it paid under an earlier agreement, resulting in a penalty of $243.6 million. The plea agreement requires approval from a federal judge to take effect.

If the deal is accepted, it could make it harder for Boeing to sell products to the U.S. government as a criminal offense, but the company could still apply for exemptions. About 32% of Boeing's nearly $78 billion in revenue last year came from its Defense, Space and Security division.

A Defense Department official said Monday that the department would review Boeing's remediation plans and its agreement with the Justice Department “to determine what steps are necessary and appropriate to protect the federal government.”

The plea agreement also installs an independent monitor to oversee Boeing's compliance during a three-year probationary period. Boeing would also have to invest at least $455 million in compliance and safety programs, according to a court filing.

Boeing also agreed to allow the board to speak with relatives of the crash victims.

The Justice Department announced the deal Sunday night, months after U.S. prosecutors said the airline giant violated a 2021 settlement that shielded the company from prosecution for three years.

The settlement offer forced Boeing to choose between an admission of guilt and the conditions attached to it or a lawsuit, just as the company was trying to turn around its production and safety crisis, choose a new CEO and acquire its planemaker. Spirit AeroSystems.

“We can confirm that we have reached an agreement in principle with the Department of Justice on the terms of a resolution, subject to the establishment and approval of specific conditions,” Boeing said in a statement after the court filing.

In May, the Justice Department said Boeing had violated a 2021 settlement. Under that deferred prosecution agreement, Boeing agreed to pay $2.5 billion, including a $243.6 million criminal fine, compensation to airlines and a $500 million fund for victims’ families.

That 2021 settlement would come two days after a door panel on a nearly new 737 Max 9, operated by Alaska Airlines on Jan. 5. Although there were no serious injuries, the accident created a new safety crisis for Boeing. A preliminary report by the National Transportation Safety Board concluded that the key bolts that hold the door panel in place were not attached to the plane.

Why Boeing Wants to Buy Back Spirit AeroSystems

The U.S. accused Boeing of conspiring to defraud the government by misleading regulators about the inclusion of a flight-control system on the Max that was later linked to two crashes: a Lion Air flight in October 2018 and an Ethiopian Airlines flight in March 2019. All 346 people on board the flights were killed.

U.S. prosecutors told relatives of the crash victims on June 30 that they planned to ask Boeing to plead guilty, in a move lawyers for the families called a “sweetheart deal.”

Shortly after the settlement was filed in federal court late Sunday night, families of the victims announced in a filing of their own that they would oppose the settlement, arguing that it “unfairly grants Boeing concessions that other criminal defendants would never receive and does not hold Boeing accountable for the deaths of 346 people.”

Paul Cassell, an attorney for victims' families, said the judge should reject the deal and “simply prepare the case for a public trial so that all the facts surrounding the case could be presented to a jury in a fair and open manner.”

The agreement requires that the regulator overseeing Boeing's trial be independent, an aspect of the agreement intended to address concerns raised by attorneys representing victims' families.

It also stipulates that there will be no cap on the compensation Boeing can pay to the victims' families. Still, lawyers have said Boeing should go to court.

“Boeing is a huge company,” said Erin Applebaum, another attorney for the family members. “Whatever check they write to the families, it's not going to bring the family members back.”

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