Boeing to plead guilty in criminal fraud case over 737 Max crashes, to pay $243.6 million fine

By Sunita Iyer | First Published Jul 8, 2024, 11:41 AM IST

Boeing will plead guilty to a criminal fraud charge related to the crashes of two 737 Max jetliners that resulted in the deaths of 346 people, according to the Justice Department on Sunday night.

Boeing will plead guilty to a criminal fraud charge related to the crashes of two 737 Max jetliners that resulted in the deaths of 346 people, according to the Justice Department on Sunday night. This decision comes after the government found that Boeing violated an agreement that had shielded it from prosecution for over three years.

Last week, federal prosecutors offered Boeing the option of pleading guilty and paying a fine as part of its sentence or facing a trial on a felony criminal charge of conspiracy to defraud the United States. The company is accused of deceiving regulators responsible for approving the airplane and its pilot-training requirements.

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The plea deal, pending approval from a federal judge, includes Boeing paying an additional $243.6 million fine, matching the amount paid under a 2021 settlement that the Justice Department claims Boeing breached. An independent monitor will be appointed to oversee Boeing's safety and quality procedures for three years. Furthermore, Boeing must invest a minimum of $455 million into its compliance and safety programs.

The plea deal pertains solely to Boeing's misconduct prior to the crashes, which resulted in the deaths of all 346 passengers and crew members on two new Max jets. It does not grant Boeing immunity for other incidents, such as the panel that detached from a Max jetliner during an Alaska Airlines flight in January, a Justice Department official stated. The agreement covers only the corporation, not any current or former Boeing officials.

Boeing confirmed in a statement that it had reached a deal with the Justice Department but provided no further comment.

In a court filing on Sunday night, the Justice Department indicated that it plans to submit the written plea agreement to the court by July 19. Lawyers representing some of the relatives of the crash victims have announced their intention to ask the judge to reject the agreement.

“This sweetheart deal fails to recognize 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,” Paul Cassell, a lawyer for some of the families, was quoted as saying in an AP news report.

Federal prosecutors accused Boeing of conspiracy to defraud the government by deceiving regulators about a flight-control system implicated in crashes in Indonesia in October 2018 and in Ethiopia less than five months later.

Under a January 2021 settlement, the Justice Department agreed not to prosecute Boeing if the company adhered to certain conditions for three years. However, prosecutors alleged last month that Boeing breached those terms.

Boeing's guilty plea will be entered in US District Court in Texas. The judge overseeing the case, who has condemned what he described as "Boeing's egregious criminal conduct," has the authority to accept the plea and the proposed sentence or reject the agreement, potentially prompting new negotiations between the Justice Department and Boeing.

The case traces back to the crashes in Indonesia and Ethiopia. In the first crash, Lion Air pilots were unaware of the flight-control software that could force the plane's nose down without their input. The Ethiopian Airlines pilots knew about the software but could not control the plane when it activated due to a faulty sensor.

In 2021, the Justice Department accused Boeing of misleading FAA regulators regarding the software, absent in older 737 models, and the required pilot training for the safe operation of new aircraft. To avoid prosecution, Boeing agreed to a $2.5 billion settlement, comprising a $243.6 million fine, and committed to adhering to anti-fraud laws for a three-year period.

Boeing, attributing the deception to two low-level employees, sought to move past the crashes. After a 20-month grounding of the Max jets, regulators allowed them to fly again following Boeing's reduction of the flight software's power. Since then, Max jets have completed thousands of safe flights, and orders from airlines have surged, reaching about 750 in 2021, approximately 700 more in 2022, and nearly 1,000 in 2023.

Based in Arlington, Virginia, Boeing serves numerous global airline customers, with major clients for its 737 Max including Southwest, United, American, Alaska, Ryanair, and flydubai.

However, this changed in January when a panel covering an unused emergency exit detached from a Max during an Alaska Airlines flight over Oregon. Although the pilots safely landed the 737 Max and there were no serious injuries, the incident prompted increased scrutiny of Boeing. The Justice Department launched a new investigation, the FBI notified passengers of potential victim status, and the FAA intensified its oversight of the company.

Legal experts suggest that a criminal conviction could endanger Boeing's status as a federal contractor. The recent plea deal announced on Sunday does not address this concern, leaving it up to individual government agencies to decide whether to restrict Boeing's contracts.

Boeing, which employs 170,000 people, derived 37% of its revenue last year from U.S. government contracts, primarily in defense, including military sales facilitated by Washington for other nations. The company also manufactures a capsule for NASA, but recent issues with its propulsion system have delayed astronauts' return from the International Space Station.

Relatives of the victims from the Max crashes are advocating for a criminal trial that could shed light on what individuals within Boeing knew about deceiving the FAA. They are also urging the Justice Department to prosecute senior Boeing officials, not just the corporation itself.

“Boeing has paid fines many a time, and it doesn’t seem to make any change,” Ike Riffel of Redding, California, whose sons Melvin and Bennett died in the Ethiopian Airlines crash, was quoted as saying in a AP news report. “When people start going to prison, that’s when you are going to see a change.”

During a recent Senate hearing, Boeing CEO David Calhoun defended the company's safety record, offering apologies to relatives of Max crash victims seated behind him for "the grief that we have caused."

Prior to the hearing, the Senate investigations subcommittee unveiled a 204-page report containing fresh allegations from a whistleblower. The whistleblower expressed concerns about potentially defective parts being installed in 737s. This report adds to a series of complaints raised by current and former Boeing employees regarding safety issues, along with claims of retaliation they faced for speaking out.

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