Boeing to plead guilty in fraud case related to fatal 737 MAX crash

Boeing has agreed to plead guilty to one count of criminal fraud for conspiring to solve a US Justice Department investigation related to two fatal 737 MAX crashes, the government said in a court filing late Sunday.

The plea, which requires the approval of a federal judge, would label the plane maker as a convicted felon. Boeing will also pay a criminal penalty of $243.6 million, the Department of Justice (DOJ) said in a document filed in federal court in Texas, which provided an overview of the agreement in principle.

The charge relates to two 737 MAX crashes in Indonesia and Ethiopia over a five-month period in 2018 and 2019 that killed 346 people and prompted the victims’ families to demand that Boeing face criminal charges.

The guilty plea potentially threatens the company’s ability to secure lucrative government contracts with the US Department of Defense and NASA, although it could seek waivers. Boeing faced criminal charges after the Justice Department in May found that the company violated a 2021 agreement dealing with fatal crashes.

But the plea spares Boeing a controversial lawsuit that could have exposed many of the company’s decisions that led to the fatal crash of the MAX plane to even greater public scrutiny. It would also make it easier for the company, which will have a new chief executive later this year, to try to move forward as it seeks approval for its planned acquisition of Spirit AeroSystems.

A Boeing spokesman confirmed that it “has reached an agreement in principle on the terms of a resolution with the Department of Justice.”

The plane maker also agreed to invest at least $455 million over the next three years to strengthen its safety and compliance programs, according to the filing.

The DOJ will appoint a third-party monitor to oversee the company’s compliance. The monitor should publicly submit annual reports on the company’s progress to the court. Boeing will also serve a probationary period, during which it pledges not to break any laws, until the end of the monitor’s three-year term.

The DOJ on June 30 proposed a waiver agreement to Boeing and gave the company until the end of the week to enter into a deal or face trial on charges of conspiring to defraud the Federal Aviation Administration (FAA) over a key software feature tied to the fatal traffic accident.

The Justice Department’s push to charge Boeing has deepened an ongoing crisis engulfing Boeing after a separate January in-flight explosion exposed ongoing safety and quality issues at the plane maker.

A panel blasted a new Boeing 737 MAX 9 jet during an Alaska Airlines flight on Jan. 5, just two days before the expiration of a 2021 deferred prosecution agreement that had shielded the company from prosecution over previous fatal crashes. Boeing faces a separate ongoing criminal investigation into the Alaska incident.

The agreement covers only Boeing’s conduct before the fatal crash and does not protect the plane maker from other potential investigations or charges related to the January incident or other conduct.

Boeing is set to plead guilty to knowingly making false statements to the Federal Aviation Administration about expanding a key software feature used in the MAX to operate at low speeds. The new software saved Boeing money by requiring less intensive training for pilots.

The Maneuvering Characteristic Augmentation System (MCAS) is a software feature designed to automatically push the nose of the airplane down in certain conditions. It was linked to the two crashes that led to the FAA grounding the plane for 20 months, an action that cost Boeing $20 billion and was lifted by the government in November 2020.

As part of the deal, Boeing’s board will meet with relatives of those killed in the MAX crashes, the filing said.

DOJ officials modified the process for selecting an independent monitor in response to backlash from one of the lawyers representing the victims’ relatives, who argued that the families should choose the nominee instead of the government choosing from a pool of candidates it would recommend Boeing, according to the court. archiving.

U.S. officials adjusted their offer to Boeing to specify that they would select the pool of qualified applicants based on a public invitation to which anyone can apply, including family-sponsored applicants.

Lawyers for some of the families of people killed in the two MAX crashes said they intended to exercise their right to oppose the deal.

“The families intend to argue that the Boeing settlement unfairly makes concessions to Boeing that other defendants would never receive and fails to hold Boeing responsible for the deaths of 346 people,” they said in a separate court filing.

The agreement does not shield any executives, the Justice Department filing said, although charges against individuals are considered unlikely because of the statute of limitations. A former Boeing chief technical pilot was charged in connection with the Boeing fraud deal, but was acquitted by a jury in 2022.

The agreed penalty would be Boeing’s second fine of $243.6 million related to the fatal crashes — bringing the full fine to the maximum allowed. The company previously paid the fine as part of the $2.5 billion 2021 settlement. The $243.6 million fine represented the amount Boeing saved by not implementing full-flight simulator training for MAX pilots.

The families of the victims of those crashes criticized the previous settlement and this year pushed the Justice Department to seek up to $25 billion from Boeing.

This year, the Justice Department held several meetings to hear from victims’ families as they investigated Boeing’s breach of the 2021 deal.

The Justice Department and Boeing are working to document the full written agreement and file it in federal court in Texas by July 19, the DOJ said in the court filing.