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Boeing to plead guilty in DOJ case linked to fatal 737 Max crashes
Boeing will plead guilty to conspiracy to commit criminal fraud in a Justice Department deal that casts the aviation giant as a corporate criminal but could resolve a major legal headache as Boeing tries to convince customers and investors it has its problems under control.
The charge and plea deal outlined by U.S. prosecutors in a court filing Sunday relate to actions Boeing took to mislead FAA regulators ahead of two fatal 737 MAX crashes late last decade.
Boeing will have to pay fines of up to $487.2 million, though a judge will decide the final amount. The Justice Department has asked that Boeing be credited for fines already paid, meaning the new amount could be $243.6 million.
The company will also have to operate a corporate monitor for the next three years and spend $455 million to improve its compliance and security.
“We can confirm that we have reached agreement in principle on the terms of a resolution with the Department of Justice, subject to memorialization and approval of specific terms,” Boeing said in a statement.
Boeing shares were virtually flat in premarket trading Monday.
The deal presents many new dangers to Boeing.
A plea deal could be rejected by a judge. Families of victims of two crashes in the past decade have vowed to oppose the deal. And perhaps the biggest danger is the effect a conviction could have on Boeing’s already battered bottom line.
Criminal convictions can bar or suspend a company’s right to contract with the federal government and frustrate its ability to secure loans, according to Eddie Jauregui, a white-collar defense attorney at Holland & Knight and a former federal prosecutor.
These consequences have particular significance for Boeing, which counts the federal government as its largest customer. It is also the country’s largest exporter.
The matter may end up in the hands of an executive agency known as Interinstitutional Suspension and Exclusion Committee (ISDC), which holds the power to discuss government-wide suspensions and bans that could terminate or disrupt a company’s business with the U.S. government.
“The considerations are many and weighty,” Jauregui said. “I think government contract work is probably an extremely important component for Boeing.”
Boeing is in this situation after DOJ officials decided to officially revoke the legal protections extended to Boeing in a January 2021 deferred prosecution agreement.
The earlier settlement followed investigations into two Max 737-8 crashes in 2018 and 2019 that killed 346 people.
The story continues
A Boeing 737 Max aircraft during a display in Farnborough, Britain, in 2022. REUTERS/Peter Cziborra/File Photo (Reuters/Reuters)
Boeing has previously admitted that two of its former Max test pilots misled the FAA about a flight control system called the Maneuvering Characteristics Augmentation System, or MCAS.
Prosecutors agreed to file an indictment alleging that Boeing conspired to defraud the federal government as Boeing spent three years designing, implementing and enforcing a compliance and ethics program for safer manufacturing practices and oversight.
Just days before the deal expired last January, Boeing found itself at the center of a new safety crisis as a result of a port plug burst aboard an Alaska Airlines plane (ALC) Boeing 737 Max 9.
Prosecutors told a judge in May that Boeing had violated a 2021 deferred prosecution agreement.
Boeing didn’t have many good choices as the DOJ weighed a new criminal charge. If Boeing chose not to plead guilty, the DOJ could take the company to trial, which would expose Boeing to more turmoil and public scrutiny.
“It’s never an easy decision for a company, especially one that is as closely tied to the U.S. government as Boeing is, to make the decision to plead guilty,” Jauregi said.
But even this new court settlement still faces challenges.
A law firm representing families of people killed in the Boeing 737 Max crashes said the families will ask the judge “not to accept the plea deal in its current form.”
Another law firm said the families would “certainly object” to what it called a “plea bargain” described to them by Justice Department officials.
Seal of the Department of Justice in Washington. (AP Photo/Andrew Harnik) (ASSOCIATED PRESS)
Boeing and the DOJ would indeed need court approval to settle a lawsuit. The two sides hope to file a final agreement by July 19.
If a deal were rejected, Boeing and the government could then go back to the drawing board to negotiate new terms, or the government could pursue charges.
Matthieu Goddeyne, a former assistant district attorney for New York County and a federal defense attorney for Gunster, said a guilty plea by Boeing still leaves the Justice Department with the difficult task of enforcing the law while also trying to defend victims’ rights and encourage safe aircraft manufacturing.
“I don’t necessarily think the government’s job is to try to bankrupt Boeing, or to try to put thousands of people out of work,” Goddeyne said. “I think their job is to try to bring justice, to do right by the victims and to try to effect some change within the company.”
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