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 a 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 $243.6 million it paid under a previous agreement. So the new fine would be $243.6 million.

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.

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.

An independent compliance monitor would also be installed 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 U.S. prosecutors’ court filing late Sunday. The plea deal requires the approval of a federal judge to take effect.

Boeing also agreed for its board of directors to meet with crash victims’ family members.

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.

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 had told victims’ family members on June 30 that they planned to seek a guilty plea from Boeing, a plan family attorneys called “a sweetheart deal.”

Paul Cassell, a lawyer for victims’ family members, said he plans to ask the federal judge on the case to 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.”

Don’t miss these insights from CNBC PRO



Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

Newseum Global