Boeing to pay $2.5B to settle a criminal lawsuit related to 737 Max airplane

Credits: Boeing CEO Dennis Muilenburg/ Twitter

The Boeing Company (NYSE: BA) entered into a deferred prosecution agreement (DPA) with the U.S. Department of Justice (DOJ) to settle a criminal lawsuit involving its 737 Max airplane.

The DOJ’s criminal lawsuit, which was filed in the Northern District of Texas, alleged that Boeing engaged in a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with agency’s assessment of the 737 Max airplane.

Under the DPA, Boeing agreed to pay a total of $2.5 billion in criminal monetary penalty to settle the DOJ’s criminal complaint. The payment includes $243.6 million in penalty and $1.77 billion in compensation payments for 737 Max airline customers.

The settlement also included 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 Boeing 737 MAX crashes involving Lion Air Flight 610 and Ethiopian Airlines Flight 302.

The company also agreed to continue cooperating with the DOJ’s Fraud Section in any or future investigations and prosecutions. It also agreed to strengthen its compliance program reporting requirements.

Boeing admitted deceiving the FAA AEG

Boeing admitted in court documents that through its two 737 Max Technical Pilots, it deceived the FAA AEG regarding the Characteristics Augmentation System (MCAS).  The company and its technical pilots did not disclose to the FAA AEG an information regarding a change in the 737 Max MCAS