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

Rescuers work at the scene of an Ethiopian Airlines flight 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 tied to the fatal 737 Max crashes, a decision that brands the U.S. aerospace giant a felon but allows it to avoid trial while it tries to turn the page from safety and manufacturing crises.

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

If the deal is accepted, it could complicate Boeing’s ability to sell products to the U.S. government as a felon, though the company could seek waivers. About 32% of Boeing’s nearly $78 billion in revenue last year came from its defense, space and security unit.

A Defense Department official said Monday the DOD would assess Boeing’s remediation plans and its agreement with the Justice Department “to make a determination as to what steps are necessary and appropriate to protect the Federal Government.”

The plea deal also installs an independent monitor to oversee compliance at Boeing for three years during a 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 for its board of directors to meet with crash victims’ family members.

The Justice Department unveiled the deal late Sunday, months after U.S. prosecutors said the aerospace giant violated a 2021 settlement that shielded it from prosecution for three years.

The plea deal offer forced Boeing to decide between a guilty plea and the attached terms, or going to trial, just as the company was seeking to turn a corner in its manufacturing and safety crises, pick a new CEO and acquire its fuselage maker, Spirit AeroSystems.

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

In May, the Justice Department said Boeing had violated the 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’ family members.

That 2021 settlement was set to expire two days after a door panel blew out of a nearly new 737 Max 9 operated by Alaska Airlines on Jan. 5. While there were no serious injuries, the accident created a fresh safety crisis for Boeing. A preliminary report from the National Transportation Safety Board found that key bolts that hold the door panel in place were not attached to the aircraft.

Why Boeing wants to buy back Spirit AeroSystems

The U.S. accused Boeing of conspiracy to defraud the government by misleading regulators about its inclusion of a flight-control system on the Max that was later implicated in the 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 family members of the crash victims on June 30 that they planned to seek a guilty plea from Boeing, a plan family attorneys called “a sweetheart deal.”

Shortly after the plea deal was filed in federal court late Sunday night, victims’ family members said in a filing of their own that they would oppose the plea deal, arguing it “unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons.”

Paul Cassell, a lawyer for victims’ family members, said the judge should reject the deal and “simply set the matter for a public trial, so that all the facts surrounding the case will be aired in a fair and open forum before a jury.”

The deal requires the corporate monitor who will oversee Boeing’s probation period to be independent, an aspect of the agreement that aimed to solve concerns from the attorneys representing victims’ family members.

It also stipulates there will be no cap on compensation Boeing can pay to the victims’ surviving loved ones. Still, attorneys have said Boeing should go to trial.

“Boeing’s a massive company,” said Erin Applebaum, another of the lawyers 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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