Boeing Will Pay $2.5 Billion to Settle 737 MAX Fraud Conspiracy Charges
Today, Boeing reached a $2.5 billion settlement with the U.S. Department of Justice (DOJ) to answer criminal charges of conspiracy to defraud the Federal Aviation Administration (FAA) since first seeking approval for the now-infamous 737 MAX model. Flawed systems in the aircraft caused two deadly crashes in Indonesia in 2018 and Ethiopia in 2019, resulting in its global grounding in March 2019.
It took until mid-November 2020 for the plane to obtain FAA approval to fly again. The 737 MAX’s faulty software had to be thoroughly investigated by both officials and Boeing, then redesigned and installed, along with the development and implementation of new pilot-training protocols.
The Justice Department found that Boeing officials had concealed information about the faulty MCAS (Maneuvering Characteristics Augmentation System), the 737 MAX’s automated flight control software, BBC News reported. In the case of each crash, the malfunctioning system had overridden pilot commands based on erroneous data and forced the plane into a nosedive soon after take-off. The DOJ said that Boeing afterward failed to cooperate with investigators for six months.
The government’s filing against the major aircraft manufacturer identified at least two Boeing employees who had actively engaged in defrauding FAA regulators from late 2016, during the final stages of the jet’s initial approval, through late 2018, after the aircraft was already in worldwide operation and the first of the two crashes had occurred. Boeing has reportedly agreed to cooperate with any government prosecution of the individuals involved in this case.
“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, according to CNN. “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.”
“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 Erin Nealy Cox, U.S. Attorney 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.”
The majority of the settlement amount—$1.77 billion, some of which has already been paid—will go to Boeing’s airline customers, whose business operations were severely impacted when their 737 MAX planes were suddenly grounded. Roughly $500 million will be paid in compensation to the families of the 346 crash victims, though Boeing had already allocated $100 million to a fund for victims’ families. The company will also pay a criminal fine of $243.6 million.
“I firmly believe that entering into this resolution is the right thing for us to do—a step that appropriately acknowledges how we fell short of our values and expectations,” said Boeing President and CEO David Calhoun. “This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations.”
The Justice Department’s deal with Boeing includes deferment of any pursuit of criminal prosecution against the company for another three years, after which the DOJ will dismiss those charges if it sees no evidence of further wrongdoing on Boeing’s part.