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Aviation|Safety|System
Aviation|Safety|System
aviation|safety|system

Boeing to plead guilty to fraud for violating deal over 737 Max crashes

A Boeing 737 Max

A Boeing 737 Max

Photo by Bloomberg

8th July 2024

By: Bloomberg

  

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Boeing has agreed to plead guilty to criminal conspiracy to defraud the US after the Justice Department concluded the planemaker failed to adhere to an earlier settlement stemming from two fatal crashes of its 737 Max jetliner.

Under the agreement in principle with US prosecutors, Boeing faces a criminal fine of as much as $487.2-million, the maximum allowed by law, though the actual amount will be determined by a judge, according to the Justice Department. As part of the agreement filed late Sunday in a Texas court, the DOJ has asked the judge to credit Boeing for the prior fine it paid, which would bring the new penalty down to $243.6-million if approved.

The company will install a corporate monitor and be required to spend at least $455-million to bolster its compliance and safety programs over the next three years as part of the deal, which requires court approval. It would also be subject to a period of court-supervised probation. The US government and Boeing are still finalizing the pact and expect to file the final plea agreement by July 19.

The guilty plea marks a low point in the company’s century-long history after years of turmoil sparked by two crashes of its 737 Max aircraft in 2018 and 2019 that killed 346 people. The deal may also spare Boeing from the distraction of a criminal trial at a time when its finances are in disarray and its leadership is in limbo.

In a brief statement, Boeing confirmed it had reached an agreement in principle on terms of a resolution with the Justice Department, subject to the memorialization and approval of specific terms. The planemaker in June had told prosecutors that it disagreed with the finding that it had violated the earlier deal.

The Justice Department determined in May that Boeing breached a 2021 deferred-prosecution agreement tied to the crashes struck in the waning days of the Trump Administration.

As part of the 2021 deal, Boeing paid a criminal fine of $243.6-million and admitted to deceiving the Federal Aviation Administration about an obscure flight control system linked to the crashes. The company also pledged to improve its internal safety controls. In return, the government would withdraw a criminal charge against the company after three years.

The agreement was bitterly criticized by families of the crash victims, who were not consulted before it was unveiled. The families quickly filed a notice to object to the latest agreement, as well. As part of the new plea deal, Boeing’s board of directors will meet with the relatives of the crash victims — a request previously made by the families.

“We are extremely disappointed that DOJ is moving forward with this wholly inadequate plea deal despite the families’ strong opposition to its terms,” Erin Applebaum, a partner at Kreindler & Kreindler LLP who represents families of the crash victims, said in an emailed statement.

“While we’re encouraged that Boeing will not be able to choose its own monitor, the deal is still nothing more than a slap on the wrist and will do nothing to effectuate meaningful change within the company,” she said.

The agreement also stipulates that the government will select and oversee the corporate monitor, addressing a concern the families had raised about the monitor being entirely independent.

Just days before the 2021 deal was set to expire, a fuselage panel blew off a 737 Max 9 jet operated by Alaska Airlines on Jan. 5, engulfing the company in crisis. The DOJ later concluded Boeing failed to meet a requirement of that deal to implement an effective compliance program to prevent and detect violations of US fraud laws.

Boeing’s executive suite is in turmoil as its board searches for a new chief executive officer. The company’s finances are also showing the strain of a slowdown in production in the aftermath of the January accident, as it works to bolster quality and retrain workers under close supervision by the US Federal Aviation Administration. The company has said it would probably burn through about $8-billion in cash during the first half of 2024.

Boeing also faces investigations by the US Securities and Exchange Commission, Congress and a Seattle-area grand jury into the events that led to the near-catastrophic Alaska Airlines accident.

Edited by Bloomberg

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