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Here's What to Know About Boeing Agreeing to Plead Guilty to Fraud in 737 Max Crashes
gvw_ap_news
By Associated Press
Published 2 weeks ago on
July 8, 2024

Boeing is set to plead guilty to fraud in relation to the approval of its 737 Max, which was involved in two fatal crashes, marking a significant shift in the company's legal strategy. (AP File)

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Boeing will have a felony conviction if it follows through on an agreement with prosecutors to plead guilty to fraud in connection with approval of its 737 Max before two of the planes crashed, killing 346 people off the coast of Indonesia and in Ethiopia.

The American aerospace giant has apparently made the calculation that admitting to a crime is better than fighting the charge and enduring a long public trial.

The plea deal is not yet a sure thing, however. Relatives of some of the passengers who died have indicated they will ask a federal judge in Texas to throw out the agreement, which they say is too lenient considering the lives that were lost. They want a trial, they want a huge fine, and they want Boeing leaders to face charges.

In a legal filing late Sunday — minutes before a midnight deadline — the Justice Department disclosed the agreement and said the fraud charge was “the most serious readily provable offense” it could bring against Boeing. Prosecutors say Boeing will pay another $243.6 million fine, matching a fine it paid in 2021 for the same crime.

The Justice Department says a conviction for fraud will hold Boeing accountable for “misstatements” it made to regulators who certified the 737 Max in 2017. The crashes took place less than five months apart in 2018 and 2019.

The company still faces investigations into the blowout of a panel from an Alaska Airlines Max in January, increased oversight by the Federal Aviation Administration, and accusations from current and former employees about poor workmanship and retaliation against whistleblowers.

What Did Boeing Admit?

Boeing agreed to plead guilty to conspiracy to defraud the United States — in this case, deceiving the Federal Aviation Administration.

The Justice Department first filed that charge in 2021, but it agreed not to prosecute Boeing if it paid a fine and successfully completed three years of a form of corporate probation under what is called a deferred-prosecution agreement.

In May, however, the department determined that Boeing had not lived up to that agreement, setting in motion the events that led to Sunday’s plea deal.

The plea deal could help Boeing resolve a black mark on its reputation — the felony charge that the American aerospace giant deceived regulators who approved the airplane and the pilot-training requirements to fly it safely.

What Did Boeing Agree to Do?

Boeing will pay another fine, bringing the total to $487.2 million, which the Justice Department says is the legal maximum for the fraud charge. The deal also requires the company to invest at least $455 million to improve safety. It will be on court-supervised probation for three years, and the Justice Department will name an independent monitor to oversee Boeing’s compliance with terms of the plea agreement.

Boeing’s board of directors will be required to meet with families of the victims.

Can the Judge Block the Deal?

Yes. There will be a hearing before U.S. District Judge Reed O’Connor in Fort Worth, Texas. He can accept the agreement, in which case he can’t change terms of Boeing’s punishment. Or he can reject it, which would likely lead to new negotiations between Boeing and prosecutors. A date for the hearing has not been set.

Deals in which the defendant and the federal government agree on a sentence are controversial in legal circles.

“Judges don’t like them. They feel that it usurps their authority,” said Deborah Curtis, a former Justice Department lawyer.

O’Connor, however, has shown deference before to the Justice Department’s power. When families of the crash victims tried to undo the 2021 deferred-prosecution agreement, the judge criticized what he called “Boeing’s egregious criminal conduct” but ruled that he had no authority to overturn the settlement.

How Are Relatives of the Crash Victims Reacting?

Many are outraged by the agreement.

Zipporah Kuria, a 28-year-old London woman whose father, Joseph, was on the Ethiopian Airlines Max that crashed in March 2019, wanted a trial that she thinks would have unearthed new details about what led up to the crashes.

Now, with the likelihood that there will never be a trial, “the opportunity to continue digging, the opportunity to continue finding out what has gone wrong here and what is wrong, is kind of taken away from us,” Kuria said. “So yet again, they (the victims) have been robbed of their dignity, and we have been robbed of our closure.”

Javier de Luis, an MIT aeronautics lecturer whose sister, Graziella, died in the Ethiopia crash, also finds the punishment for Boeing to be inadequate.

“If you look at the elements that make up this plea agreement, they’re pretty much typical for what you would expect to see in a white-collar fraud investigation – not in the case of a crime that led directly to the deaths of 346 people,” he said.

Nadia Milleron, a Massachusetts resident whose 24-year-old daughter, Samya Stumo, died in the same crash, wants Boeing’s current and previous CEOs to face charges.

“After the Indonesian crash, they knew that something was wrong with this plane, and they knew it could crash,” she said. “They gambled with people’s lives, and they are gambling right now.”

What Effect Would a Conviction Have on Boeing?

Boeing’s business has never fully recovered from the crashes. After the renewed scrutiny that followed the Alaska Airlines incident, the company failed to book any new orders for the Max in April and May. It has fallen even farther behind European rival Airbus in production and deliveries of new planes, which means less revenue is coming in.

All of this is happening while Boeing looks for a new CEO to replace David Calhoun, who says he will step down at the end of the year.

That said, the share price of the company’s stock rose slightly Monday.

Will Boeing Lose Government Contracts?

Probably not.

Government contractors can be suspended or disbarred for criminal convictions, but agencies generally have leeway to grant exceptions.

Pentagon press secretary Maj. Gen. Pat Ryder said the Justice Department notified the Defense Department about Boeing’s plea deal.

The Defense Department “will assess the company’s remediation plans and agreement with the Department of Justice to make a determination as to what steps are necessary and appropriate to protect the federal government,” Ryder said.

In 2006, the Air Force cited “compelling national interest” to let Boeing keep competing for contracts even after the company admitted charges that included using stolen information to win a space-launch contract and paying a $615 million fine.

Does the Plea Affect Other Investigations into Boeing?

It would only resolve the fraud charge filed after the two deadly crashes. The FBI told passengers on the Alaska Airline Max that suffered a panel blowout while flying over Oregon that they might be victims of a crime.

The National Transportation Safety Board is also investigating that incident, and the Federal Aviation Administration is looking into Boeing’s manufacturing quality.

What Happened in the Crashes?

Boeing added new flight-control software to the Max that could push the nose of the plane down if a sensor indicated the plane could be approaching an aerodynamic stall. It didn’t initially tell pilots or airlines about the software, known by the acronym MCAS.

The system activated before both crashes based on faulty readings for the single sensor on each plane, according to investigations of the Oct. 29, 2018, crash of a Lion Air Max off the coast of Indonesia and the March 10, 2019, crash of an Ethiopian Airlines Max near Addis Ababa. Other factors contributed to the Lion Air crash, and the Ethiopian pilots were aware of MCAS but still couldn’t regain control after the nose began pitching down without their input.

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