Boeing fined US$2.5 billion for mishandling 737 MAX MCAS issue

Boeing has agreed with the US Department of Justice to pay more than US$2.5 billion in fines to resolve a charge of conspiracy to defraud the FAA’s Aircraft Evaluation Group (FAA AEG) in relation to its assessment of the 737 Max. Under the terms of a deferred prosecution agreement, the penalties consist of a criminal monetary penalty of US$243.6 million, compensation payments to Boeing’s 737 MAX operators of US$1.77 billion, and the establishment of a US$500 million crash-victim beneficiaries fund to compensate relatives of both accidents.

Boeing admitted in court documents filed in the Northern District of Texas that two of its 737 MAX flight technical pilots deceived the FAA AEG about the airplane’s MCAS, a malfunction which led to both crashes. Reportedly the Department of Justice, in and around November 2016, Boeing’s then-737 MAX chief technical pilot and another pilot who would later assume that role discovered information about an expansion of the MCAS’s operating range. Rather than sharing information about the change with the FAA AEG, Boeing—through the technical pilots—concealed the information and deceived the FAA AEG about MCAS, said the Department. As a result, the FAA AEG deleted all information about MCAS from the final version of the 737 Max Flight Standardisation Board Report published in July 2017. In turn, the flight manuals and pilot training materials for US-based airlines had no information about the MCAS.

While acknowledging the misconduct of the two former technical pilots, Boeing noted that the agreement recognises that other Boeing employees did inform other officials and organisations within the FAA about the MCAS’s expanded operating range.

“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 US Attorney Erin Nealy Cox 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.”

Within the agreement the Department of Justice, Boeing will cooperate with the department’s fraud section on future investigations and prosecutions and report any evidence or allegation of a violation of fraud laws committed by its employees. Boeing also said it will strengthen its compliance approach to meet with the fraud section at four times a year and will submit annual reports on the status of its remediation efforts.

In return, the Department agreed to defer prosecution and drop the charges against Boeing after three years, provided the company abides by the agreement and pays all penalties.