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Boeing To Pay $2.5 billion in Penalties for 737 Max Misdeeds

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January 7, 2021,

Boeing has agreed with the U.S. Department of Justice to pay more than $2.5 billion in penalties to resolve a criminal charge of conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with its assessment of the 737 Max. Under the terms of a deferred prosecution agreement, the penalties consist of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 Max airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.

Boeing admitted in court documents filed in the Northern District of Texas that two of its 737 Max flight technical pilots deceived the FAA AEG about the airplane’s maneuvering characteristics augmentation system (MCAS), a malfunction of which investigators found led to both the crashes. According to the DOJ, in and around November 2016, Boeing’s then-737 Max chief technical pilot and another pilot who would later assume that role discovered information about an expansion of the MCAS’s operating range.

Rather than sharing information about the change with the FAA AEG, Boeing—through the technical pilots—concealed the information and deceived the FAA AEG about MCAS, said the DOJ. As a result, the FAA AEG deleted all information about MCAS from the final version of the 737 Max Flight Standardization Board Report published in July 2017. In turn, airplane manuals and pilot training materials for U.S.-based airlines lacked information about the MCAS.

While acknowledging the misconduct of the two former technical pilots, Boeing noted that the agreement recognizes that other Boeing employees did inform other officials and organizations within the FAA about the MCAS’s expanded operating range.

“The misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public,” said U.S. Attorney Erin Nealy Cox for the Northern District of Texas. “This case sends a clear message: the Department of Justice will hold manufacturers like Boeing accountable for defrauding regulators—especially in industries where the stakes are this high.”

As part of the agreement with the DOJ, Boeing has agreed to cooperate with the department’s fraud section on future investigations and prosecutions and report any evidence or allegation of a violation of U.S. fraud laws committed by its employees. The company has also agreed to strengthen its compliance program and to meet with the fraud section at least quarterly and to submit yearly reports on the status of its remediation efforts and compliance program testing results.

In return, the department agreed to defer prosecution and drop the charges against Boeing after three years, provided the company abides by the agreement and pays all penalties.

“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” said acting assistant attorney general David Burns of the Justice Department’s criminal division. “Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception. This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash-victims’ families and beneficiaries.”

1 Comment

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