Add Category
Boeing has agreed to plead guilty to a criminal fraud conspiracy charge to resolve a US Department of Justice (DOJ) investigation on two 737 MAX fatal crashes, according to a government court filing.
The plea, which requires a federal judge's approval, would brand the plane maker with a felony.
Boeing will also pay a criminal fine of $US243.6 million ($AU360.73 million), the DOJ said in a document in a Texas federal court.
A Boeing spokesperson confirmed it had "reached an agreement in principle on terms of a resolution with the Justice Department".
The charge relates to two 737 MAX crashes in Indonesia and Ethiopia which occurred over a five-month period in 2018 and 2019.
The crashes killed 346 people in total and prompted the families of the victims to demand Boeing face prosecution.
Faulty software caused crashes, FAA says
The two 737 MAX crashes under investigation have been attributed to a key software feature used to operate the jetliners at low speeds.
The Maneuvering Characteristics Augmentation System (MCAS) is a software feature designed to automatically push the airplane's nose down in certain conditions.
The software saved Boeing money by requiring less intensive training for pilots.
The Lion Air pilots in the first crash did not know about flight-control software that could push the nose of the plane down without their input.
The pilots for Ethiopian Airlines knew about it but were unable to control the plane when the software activated based on information from a faulty sensor.
After the crashes, Federal Aviation Administration (FAA) grounded the planes with the software for 20 months — an action that cost Boeing $US20 billion.
However, the government once again allowed them to fly in November 2020, when Boeing reduced the power of the software.
Boeing was charged before, but never prosecuted
The plane maker was initially charged in January 2021 with deceiving FAA regulators about the MCAS software, which did not exist in older 737 MAX planes, and about how much training pilots would need to fly the plane safely.
The department agreed not to prosecute Boeing at the time, however, if the company paid a $US2.5 billion settlement — including a $US243.6 million fine — and took steps to comply with anti-fraud laws for three years.
The $US243.6 million fine represented the amount Boeing saved by not implementing full-flight simulator training.
The DOJ also required the company to comply with certain conditions for three years.
Namely, Boeing agreed to overhaul compliance practices to prevent violation of US fraud laws and submit regular reports.
The plea deal covered only wrongdoing by Boeing before the crashes; it did not give the company immunity for other incidents.
Boeing, which blamed two low-level employees for misleading the regulators, tried to put the crashes behind it.
Alaska Airlines incident sparked more investigation
MAX jets logged thousands of safe flights and orders from airlines picked up, increasing to about 750 in 2021, about 700 more in 2022 and nearly 1,000 in 2023.
That changed in January, when a panel covering an unused emergency exit blew off a 737 MAX during an Alaska Airlines flight over Oregon.
Pilots landed the 737 MAX safely and no one was seriously injured, but the incident led to closer scrutiny of the company.
The incident occurred just two days before the 2021 deferred prosecution agreement that had shielded the company from prosecution over the previous fatal crashes expired.
The DOJ opened a new investigation, the FBI told passengers on the Alaska plane that they might be victims of a crime and the FAA said it was stepping up oversight of Boeing.
Boeing breached 2021 agreement, DOJ says
Prosecutors last month alleged Boeing had breached the terms of their 2021 agreement.
On June 30, the DOJ offered a plea agreement to Boeing and gave the company until the end of the week to take the deal or face trial on a charge of conspiring to defraud the FAA.
DOJ calls the charge "the most serious readily provable offense" in the case.
The plane maker initially told prosecutors it disagreed with their finding but said it "honoured the terms" of the settlement.
Now, Boeing has agreed to plead guilty.
DOJ and Boeing hammered out the new agreement in advance of a July 7 deadline for the government to decide whether to prosecute the company.
The DOJ and Boeing are working to document the full written plea agreement and file it in federal court in Texas by July 19, the DOJ said in their court filing.
Judge Reed O'Connor, who has criticised what he called "Boeing's egregious criminal conduct", could accept the plea and the sentence that prosecutors offered with it — or he could reject the agreement, likely leading to new negotiations between the DOJ and Boeing.
Lawyers for some of the victims' families said they planned to press Mr O'Connor to reject the deal.
In a separate document filed to the court, they cited Mr O'Connor's statement in a February 2023 ruling.
"Boeing's crime may properly be considered the deadliest corporate crime in US history," he said at the time.
The plea deal spares Boeing a contentious trial that could have exposed many of the company's decisions leading up to the fatal MAX plane crashes to even greater public scrutiny.
It will also make it easier for the company, expected to hire a new CEO later this year, to move forward as it seeks approval for its planned acquisition of Spirit AeroSystems.
Boeing has agreed to invest at least $US455 million over the next three years to strengthen its safety and compliance programs and pay a second $US243.6 million fine — bringing the full fine to the maximum allowed.
The judge can also still decide on whether the company should pay any additional restitution to the victims' families.
The DOJ will appoint a third-party monitor to oversee compliance. The monitor will have to publicly file annual reports with the court on the company's progress.
The court filing revealed DOJ officials modified their process for selecting an independent monitor in response to backlash from one of the lawyers representing victims' relatives, who argued the families should select the candidate instead of the government choosing from a pool of candidates Boeing would propose.
US officials adjusted their plea offer to Boeing to stipulate they would select the pool of qualified candidates based on a public solicitation to which anyone could apply, including candidates the families supported.
The DOJ under President Joe Biden has renewed the use of corporate monitors in its deals with companies to resolve charges of misconduct. The practice had fallen out of favour under the previous administration.
Companies typically fight against these terms. The outside firms, which are selected by the DOJ, act as the government's eyes and ears. The company foots the bill.
Boeing will also serve a probation, during which it commits not to violate any laws until the end of the monitor's three-year term.
The agreement does not shield any executives, the DOJ official says, though charges against individuals are seen as unlikely due to the statute of limitations.
A former Boeing chief technical pilot was charged in connection with the Boeing fraud agreement but acquitted by a jury in 2022.
As part of the deal, Boeing's board of directors will meet with relatives of those killed in the 737 MAX crashes.
Crash victims' families vow to challenge deal in court
The DOJ held several meetings this year to hear from the victims' families as they investigated Boeing's breach of the 2021 deal.
After being briefed last week on the DOJ's offer, a lawyer for some of the crash victims' families criticised it as a "sweetheart deal".
The deal is a "slap on the wrist", said Erin Applebaum, a lawyer representing some of the victims' relatives.
"This sweetheart deal fails to recognise that because of Boeing's conspiracy, 346 people died," Paul Cassell, a lawyer for some of the families, said.
"Through crafty lawyering between Boeing and DOJ, the deadly consequences of Boeing's crime are being hidden."
The families have vowed to oppose the deal in court. Earlier this year, they pushed the DOJ to seek as much as $US25 billion from Boeing.
"The families intend to argue that the plea deal with Boeing unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons," lawyers for the victims' families said in a separate court filing.
Families have also pushed for a criminal trial that might illuminate what people inside Boeing knew about deceiving the FAA.
They want the DOJ to prosecute top Boeing officials, not just the company.
"Boeing has paid fines many a time, and it doesn't seem to make any change," said Ike Riffel, whose sons Melvin and Bennett died in the Ethiopian Airlines crash.
"When people start going to prison, that's when you are going to see a change."
At a recent Senate hearing, Boeing CEO David Calhoun defended the company's safety record after turning and apologising to 737 MAX crash victims' relatives seated in the rows behind him "for the grief that we have caused".
Hours before the hearing, the Senate investigations subcommittee released a 204-page report with new allegations from a whistleblower who said he was worried defective parts could be going into 737 MAXs.
The whistleblower was the latest in a string of current and former Boeing employees who have raised safety concerns about the company and claimed they faced retaliation as a result.
Government contracts in the air after guilty plea
A criminal conviction could jeopardise Boeing's status as a federal contractor. The plea announced on Sunday does not address that question, leaving it to each government agency whether to bar Boeing.
The Air Force cited "compelling national interest" in letting Boeing continue competing for contracts after the company paid a $US615 million fine in 2006 to settle criminal and civil charges, including that it used information stolen from a rival to win a space-launch contract.
The company has 170,000 employees and 37 per cent of its revenue last year came from US government contracts.
Most of it was defence work, including military sales that Washington arranged for other countries.
Boeing had $US14.8 billion in US Defense Department contracts in 2022, according to a government report.
"In the world of government contracting, an indictment or finding of criminal liability can have a significant impact on a company," government contracts lawyer Franklin Turner says.
Boeing also makes a capsule for NASA. Two astronauts will remain at the International Space Station longer than expected while Boeing and NASA engineers troubleshoot problems with the propulsion system used to manoeuvre the capsule.
Even some Boeing critics have worried about crippling a key defence contractor.
"We want Boeing to succeed," Richard Blumenthal, a Connecticut Democrat, said during a Senate hearing last month on what he termed the company's broken safety culture.
"Boeing needs to succeed for the sake of the jobs it provides, for the sake of local economies it supports, for the sake of the American travelling public, for the sake of our military."
Reuters/ABC