Boeing Charged with 737 Max Fraud Conspiracy, Will Pay $2.5 Billion
Boeing has entered into an agreement with the Department of Justice to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with the FAA AEG’s evaluation of Boeing’s 737 MAX airplane. The aircraft just recently started flying again, after nearly two years of being grounded.
The company entered into a deferred prosecution agreement (DPA) in connection with a criminal information filed in the Northern District of Texas. The criminal information charges the company with one count of conspiracy to defraud the United States. Under the terms of the DPA, Boeing will pay a total criminal monetary amount of over $2.5 billion, composed of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 MAX airline customers of $1.77 billion, and 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 of Lion Air Flight 610 and Ethiopian Airlines Flight 302. The information was posted in a press release from the Department of Justice.
“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,” said Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division.
“The substantial penalties and compensation Boeing will pay, demonstrate the consequences of failing to be fully transparent with government regulators. The public should be confident that government regulators are effectively doing their job, and those they regulate are being truthful and transparent,” said Special Agent in Charge Emmerson Buie Jr. of the FBI’s Chicago Field Office.
As Boeing admitted in court documents that former employees deceived the FAA AEG about an important aircraft part called the Maneuvering Characteristics Augmentation System (MCAS) that impacted the flight control system of the Boeing 737 MAX. Because of their deception, a key document published by the FAA AEG lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for U.S.-based airlines lacked information about MCAS.
As part of the DPA, Boeing has agreed, among other things, to continue to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions. As part of its cooperation, Boeing is required to report any evidence or allegation of a violation of U.S. fraud laws committed by Boeing’s employees or agents upon any domestic or foreign government agency (including the FAA), regulator, or any of Boeing’s airline customers.
In addition, Boeing has agreed to strengthen its compliance program and to enhanced compliance program reporting requirements, which require Boeing to meet with the Fraud Section at least quarterly and to submit yearly reports to the Fraud Section regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced so that it is effective at deterring and detecting violations of U.S. fraud laws in connection with interactions with any domestic or foreign government agency (including the FAA), regulator, or any of its airline customers.