July 16, 2024

Boeing will plead guilty to a criminal fraud charge stemming from two crashes of 737 Max jetliners that killed 346 people, the US Justice Department said this morning, after the government determined the company violated an agreement that had protected it from prosecution for more than three years.

Federal prosecutors gave Boeing the choice last week of entering a guilty plea and paying a fine as part of its sentence or facing a trial on the felony criminal charge of conspiracy to defraud the US.

Prosecutors accused the American aerospace giant of deceiving regulators who approved the airplane and pilot-training requirements for it.

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The plea deal, which still must receive the approval of a federal judge to take effect, calls for Boeing to pay an additional US$243.6 million ($361.65 million) fine.

That was the same amount it paid under the 2021 settlement that the Justice Department said the company breached. An independent monitor would be named to oversee Boeing’s safety and quality procedures for three years. The deal also requires Boeing to invest at least US$455 million ($675.5 million) in its compliance and safety programs.

The plea deal covers only wrongdoing by Boeing before the crashes in Indonesia and in Ethiopia, which killed all 346 passengers and crew members aboard two new Max jets. It does not give Boeing immunity for other incidents, including a panel that blew off a Max jetliner during an Alaska Airlines flight over Oregon in January, a Justice Department official said.

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The deal also does not cover any current or former Boeing officials, only the corporation. In a statement, Boeing confirmed it had reached the deal with the Justice Department but had no further comment.

In a filing Sunday night local time, the Justice Department said it expected to submit the written plea agreement with a US District Court in Texas by July 19. Lawyers for some of the relatives of those who died in the two crashes have said they will ask the judge to reject the agreement.

“This sweetheart deal fails to recognise that because of Boeing’s conspiracy, 346 people died. Through crafty lawyering between Boeing and DOJ, the deadly consequences of Boeing’s crime are being hidden,” said Paul Cassell, a lawyer for some of the families.

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Federal prosecutors alleged Boeing committed conspiracy to defraud the government by misleading regulators about a flight-control system that was implicated in the crashes, which took place than less five months apart.

As part of the January 2021 settlement, the Justice Department said it would not prosecute Boeing on the charge if the company complied with certain conditions for three years. Prosecutors last month alleged Boeing had breached the terms of that agreement.

US District Judge Reed O’Connor, who has overseen the case from the beginning, has criticised what he called “Boeing’s egregious criminal conduct.” O’Connor could accept the plea and the sentence that prosecutors offered with it or he could reject the agreement, likely leading to new negotiations between the Justice Department and Boeing.

The case goes back to the crashes in Indonesia and in Ethiopia. The Lion Air pilots in the first crash did not know about flight-control software that could push the nose of the plane down without their input. The pilots for Ethiopian Airlines knew about it but were unable to control the plane when the software activated based on information from a faulty sensor.

The Justice Department charged Boeing in 2021 with deceiving FAA regulators about the software, which did not exist in older 737s, and about how much training pilots would need to fly the plane safely. The department agreed not to prosecute Boeing at the time, however, if the company paid a US$2.5 billion ($3.71 billion) settlement, including the US$243.6 million fine, and took steps to comply with anti-fraud laws for three years.

Boeing, which blamed two low-level employees for misleading the regulators, tried to put the crashes behind it. After grounding Max jets for 20 months, regulators let them fly again after the company reduced the power of the flight software. Max jets logged thousands of safe flights and orders from airlines picked up, increasing to about 750 in 2021, about 700 more in 2022 and nearly 1000 in 2023.

That changed in January, when a panel covering an unused emergency exit blew off a Max during the Alaska Airlines flight over Oregon.

Pilots landed the 737 Max safely and no one was seriously injured, but the incident led to closer scrutiny of the company. The US Justice Department opened a new investigation, the FBI told passengers on the Alaska plane that they might be victims of a crime and the FAA said it was stepping up oversight of Boeing.

A criminal conviction could jeopardise Boeing’s status as a federal contractor, according to some legal experts. The plea announced this morning does not address that question, leaving it to each government agency whether to bar Boeing.

The US Air Force cited “compelling national interest” in letting Boeing continue competing for contracts after the company paid a US$615 million ($913 million) fine in 2006 to settle criminal and civil charges, including that it used information stolen from a rival to win a space-launch contract.

The company based in Arlington, Virginia, has 170,000 employees and dozens of airline customers spanning the globe. The best customers for the 737 Max include Southwest, United, American, Alaska, Ryanair and flydubai.

But 37 per cent of its revenue last year came from US government contracts. Most of it was defence work, including military sales that Washington arranged for other countries.

Boeing also makes a capsule for NASA. Two astronauts will remain at the International Space Station longer than expected while Boeing and NASA engineers troubleshoot problems with the propulsion system used to maneuver the capsule.

Even some Boeing critics have worried about crippling a key defence contractor.

“We want Boeing to succeed,” Richard Blumenthal, a Connecticut Democrat, said during a Senate hearing last month on what he termed the company’s broken safety culture.

“Boeing needs to succeed for the sake of the jobs it provides, for the sake of local economies it supports, for the sake of the American travelling public, for the sake of our military.”

Relatives of the Max crash victims have pushed for a criminal trial that might illuminate what people inside Boeing knew about deceiving the FAA. They also want the Justice Department to prosecute top Boeing officials, not just the company.

“Boeing has paid fines many a time, and it doesn’t seem to make any change,” said Ike Riffel of Redding, California, whose sons Melvin and Bennett died in the Ethiopian Airlines crash.

“When people start going to prison, that’s when you are going to see a change.”

At a recent Senate hearing, Boeing CEO David Calhoun defended the company’s safety record after turning and apologising to Max crash victims’ relatives seated in the rows behind him “for the grief that we have caused.”

Hours before the hearing, the Senate investigations subcommittee released a 204-page report with new allegations from a whistleblower who said he worried that defective parts could be going into 737s. The whistleblower was the latest in a string of current and former Boeing employees who have raised safety concerns about the company and claimed they faced retaliation as a result.

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