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.

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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

Because of their deception, the agency published an important document that lacked information about MCAS, , a critical aircraft part that affected the flight control system of the 737 Max airplane.

In a statement, DOJ Criminal Division Acting Assistant Attorney General David Burns said the tragic crashes of both 737 Max airplanes “exposed fraudulent and deceptive conduct” by Boeing’s employees.

According to Burns, the company’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.”

He added that the DPA “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.”

On the other hand, U.S. Attorney Erin Nealy Cox for the Northern District of Texas said, “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. 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.”

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