Boeing will plead guilty to fraud related to fatal 737 Max crashes

Boeing agreed on Sunday to plead guilty to conspiring to defraud the government in a case linked to crashes of its 737 Max jets in Indonesia and Ethiopia that killed 346 people – a stunning turn for the aerospace giant after the Justice Department determined that Boeing failed to live up to terms of a 2021 deal to avoid prosecution.

Prosecutors alleged that two Boeing pilots concealed key information from the Federal Aviation Administration about a new automated control system on the Max. The system was implicated in both crashes, causing uncontrollable dives.

By agreeing to plead guilty to the single felony count just before a midnight deadline Sunday, the company will avoid going to trial in the high-profile case.

The Justice Department filed documents related to the deal in federal court in Texas late Sunday night, setting up a planned hearing where family members – who have criticized the pending agreement – will be permitted to speak out. The court subsequently must decide whether to accept the plea agreement.

Boeing had already agreed to $2.5 billion in penalties and payouts in 2021. As part of the new deal, the company will pay an additional $487.2 million in penalties, agree to oversight by an independent monitor, spend at least $455 million to strengthen compliance and safety programs and be placed on supervised probation for roughly three years, according to a Justice Department official.

The agreement also included one thing crash victims’ families long sought: a meeting with Boeing’s board of directors.

“This criminal conviction demonstrates the department’s commitment to holding Boeing accountable for its misconduct,” the Justice Department official said.

It is rare for a company of Boeing’s stature to plead guilty to a crime, and the moment marks another low point for the already-battered reputation of the century-old aircraft manufacturer. The plea underscores the long shadow of the deadly crashes and also comes at time when Boeing is trying to restore the trust of regulators and the flying public amid a fresh safety crisis that began in January when a panel flew off the side of a newer model Max midflight.

In a statement, Boeing confirmed that it had reached an “agreement in principle in terms of a resolution with the Justice Department subject to the memorialization and approval of specific terms.”

Sunday’s court filing did not include information about waivers that Boeing, with its myriad defense and space contracts, may need to seek if its conviction triggers contracting bans by federal agencies.

Paul Cassell, attorney for the families in the case and a professor at S.J. Quinney College of Law at the University of Utah, immediately filed an objection to the agreement on their behalf.

“Through crafty lawyering between Boeing and DOJ, the deadly consequences of Boeing’s crime are being hidden,” he said.

Added Erin Applebaum, a partner at Kreindler & Kreindler who has worked with Cassell in representing family members: “We are extremely disappointed that DOJ is moving forward with this wholly inadequate plea deal despite the families’ strong opposition to its terms.”

The criminal case delved back into the design of the Max, an updated version of the hugely popular single-aisle 737. Boeing was racing to get the plane into service in the 2010s, locked in competition with its European rival Airbus, which was also offering a new model. The automated system implicated in the crashes – which was supposed to push the nose of the jet down in limited circumstances – was needed because of new, larger engines on the Max.

Prosecutors have said the two technical pilots concealed information that the automated system could be triggered during a wider range of conditions from an FAA oversight office, leading mention of the system to be removed from a safety report. That meant airline pilots in the United States and around the world did not have to undergo expensive training on the new system. But it also meant pilots were not familiar with its operation. The FAA office only learned of the expanded scope of the system’s operation after the first crash, according to prosecutors.

In January 2021, the Justice Department and Boeing announced they had entered into a deferred prosecution agreement that would allow the company to avoid criminal prosecution.

Under the three-year deal, Boeing acknowledged its technical pilots mislead federal regulators about the software system and was charged with one count of fraud. One of those pilots was acquitted by a federal jury in 2022 on charges of lying to the Federal Aviation Administration about changes to the software system. His defense argued publicly before trial that the pilot, Mark Forkner, was being scapegoated.

Boeing agreed to pay $500 million to the families of those whose loved ones died, strengthen its internal programs to detect and prevent future incidents of fraud and cooperate with future investigations or prosecutions. The agreement expired two days after the midair blowout of a fuselage door panel on an Alaska Airlines 737 in January, an incident that remains under criminal investigation by federal authorities.

By May, federal prosecutors found Boeing violated the terms of the 2021 agreement in part by failing to create agreed-upon compliance and ethics programs.

The families of the crash victims were not consulted about the initial agreement between Boeing and the Justice Department. But they successfully fought in court for their right to be heard, and have received briefings from prosecutors on the case this year.

John C. Coffee, a professor of law and director of the Center on Corporate Governance at Columbia Law School, said the inclusion of an effective federal monitor will be key to ensuring Boeing meets its obligations under the agreement.

“I have long said that the greatest failure of the old (deferred prosecution agreement) is that it did not create an effective monitor,” he said via email. “But the two sides are likely to fight fiercely on what power the monitor should have.”

Relatives of crash victims have pushed prosecutors to take a harder line against the aerospace giant, particularly after the midair blowout earlier this year. Though no one was seriously injured in that accident, multiple investigations into that calamity – including those done by Boeing itself – uncovered myriad shortcomings in the company’s manufacturing and quality control systems.

A preliminary report by the National Transportation Safety Board, which is investigating what caused the Jan. 5 accident, found that bolts designed to hold the door panel were not replaced after the part was removed to make repairs to another portion of the jet as it moved through final assembly at Boeing’s Renton, Washington, factory. Boeing’s own internal investigation found that paperwork to document the removal of that portion of the aircraft was never created – a violation of company policy.

While the crashes of Lion Air jet in October 2018 and an Ethiopian Airlines flight five months later in March 2019 were linked to problems with the design of the Max, the January blowout has been tied to problems at Boeing’s manufacturing plant outside of Seattle.

The FAA audited the company’s production line and launched its own investigation, and has demanded fixes to ensure every plane rolling out of the factory is built to specifications. The agency has taken the unusual step of forbidding Boeing from increasing the number of 737 Max planes it makes each month, until regulators are satisfied that improvements have been put into place.

Boeing faced government fraud allegations previously. In 2006, the company settled a space launch contracting corruption case for $615 million in civil and criminal penalties. In that deal, the government agreed not to pursue criminal charges against Boeing after it said the company cooperated with its investigation.

As it seeks to recover from its current crisis, Boeing announced a deal in recent days to acquire Spirit AeroSystems, a supplier that makes the fuselage for the Max, in a bid to gain more control over its supply chain. But the work of rebuilding the company’s reputation will largely fall to a new chief executive. The current CEO, Dave Calhoun, is planning to step down from the job at the end of the year.