Boeing to plead guilty to fraud in 737 Max crash case

Boeing agreed on Sunday to plead guilty to conspiracy to defraud the government in a case related to crashes of its 737 Max jets in Indonesia and Ethiopia that killed 346 people. It is a stunning turn of events for the aerospace giant after the Justice Department found that Boeing breached the terms of a 2021 deal to avoid prosecution.

Prosecutors alleged that two Boeing pilots concealed key information from the Federal Aviation Administration about a new automated control system on the Max. The system was implicated in both crashes and caused uncontrollable nosedives.

By agreeing to an admission of guilt for the single misdemeanor charge just before the midnight deadline on Sunday, the company will avoid trial in this high-profile case.

The Justice Department filed documents related to the deal late Sunday night in a federal court in Texas, setting up a scheduled hearing where family members — who have criticized the pending agreement — will have a chance to speak. The court will then decide whether to accept the plea deal.

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

The agreement also included something the families of the crash victims had long hoped for: 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’s rare for a company of Boeing’s stature to plead guilty to a crime, and the move marks a new low for the century-old planemaker’s already battered reputation. The plea underscores the long shadow of the deadly crashes and also comes as Boeing tries to rebuild the confidence of regulators and the flying public amid a new safety crisis that began in January when a panel flew off the side of a newer-model Max during flight.

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

Sunday’s court filing did not include information about waivers that Boeing, with its numerous defense and aerospace contracts, might have to seek if its conviction leads to contract bans by federal agencies.

Paul Cassell, an attorney for the families in the case and a professor at the University of Utah’s S.J. Quinney College of Law, immediately filed an objection to the agreement on their behalf.

“Through devious legal proceedings 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 in representing family members, added: “We are extremely disappointed that the Department of Justice is moving forward with this grossly inadequate plea agreement despite the families’ strong opposition to its terms.”

The criminal case focused on the design of the Max, an improved version of the hugely popular single-aisle 737. Boeing pushed hard to get the plane into service in the 2010s, competing with its European rival Airbus, which was also launching a new model. The automated system involved in the crashes, which was supposed to push the nose of the jet down, limited circumstances — was necessary because of the new, larger engines on the Max.

Prosecutors have said the two technical pilots withheld information that the automated system could be activated under a wider range of circumstances from an FAA oversight agency, leading to the system’s removal from a safety report. That meant pilots in the United States and around the world would not have to undergo expensive training on the new system. But it also meant that pilots were not familiar with its operation. The FAA office only became aware of the expanded scope of the system’s operation after the first crash, prosecutors said.

In January 2021, the Justice Department and Boeing announced that they had reached an agreement to avoid criminal prosecution.

Under the three-year deal, Boeing acknowledged that its technical pilots misled federal regulators about the software system and was indicted on one count of fraud. One of those pilots was acquitted by a federal jury in 2022 on charges that he lied to the Federal Aviation Administration about changes to the software system. His defense publicly argued before trial that the pilot, Mark Forkner, was being made 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 fraud, and cooperate with any future investigations or prosecutions. The agreement expired two days after the mid-air blowout of a fuselage door panel on an Alaska Airlines 737 in January, an incident that remains under criminal investigation by federal authorities.

In May, federal prosecutors concluded that Boeing violated the terms of the 2021 agreement, including by failing to establish agreed-upon compliance and ethics programs.

The families of the crash victims were not consulted about the original settlement between Boeing and the Justice Department. But they successfully fought in court for their right to be heard, and have received briefings from prosecutors on the case this year.

John C. Coffee, a law professor and director of the Center on Corporate Governance at Columbia Law School, said the use of an effective federal regulator is essential to ensuring Boeing meets its obligations under the agreement.

“I have long said that the greatest failure of the old [deferred prosecution agreement] is that it has not created an effective monitor,” he said via email. “But the two sides will likely fight fiercely over what power the monitor should have.”

Families of victims of the crash have pushed prosecutors to take a tougher line against the aerospace giant, particularly after the mid-air blowout earlier this year. While no one was seriously injured in that accident, multiple investigations into the disaster — including one by Boeing itself — have revealed numerous shortcomings in the company’s production and quality control systems.

A preliminary report by the National Transportation Safety Board, which is investigating the cause of the Jan. 5 accident, concluded that bolts intended to hold the door panel in place were not replaced after the part was removed to make repairs to another part of the jet as it went through final assembly at Boeing’s Renton, Washington, plant. Boeing’s own internal investigation concluded that no paperwork was ever filed to document the removal of that part of the plane — a violation of company policy.

While the crashes of a Lion Air jet in October 2018 and an Ethiopian Airlines flight five months later in March 2019 Although the Max’s design problems in January were linked to problems at Boeing’s production plant outside Seattle.

The FAA has inspected the company’s production line and launched its own investigation, demanding repairs 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 This happens every month until the supervisors are satisfied that improvements have been made.

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

As it tries to recover from the current crisis, Boeing announced in recent days a deal to acquire Spirit AeroSystems, a supplier that makes the fuselage for the Max, in an effort to gain more control over its supply chain. But the work of repairing the company’s reputation will largely fall to a new CEO. Current CEO Dave Calhoun plans to step down at the end of the year.

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