Boeing and the Department of Justice have announced a settlement of more than $2.5 billion and deferred prosecution agreement under which the company takes responsibility for “fraudulent and deceptive conduct by employees” in connection with the design of the 737 Max aircraft.
The monetary settlement includes “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.”
According to the terms of the agreement, the DOJ will charge Boeing with conspiracy to defraud the United States. However, prosecution of the charges will be deferred, and if Boeing complies with the settlement, the charges will be dismissed in about three years.
The two accidents were blamed in part on the aircraft’s Maneuvering Characteristics Augmentation System (MCAS). Input from a malfunctioning sensor caused the MCAS flight control system to mistakenly detect a stall, forcing the nose down and leading to a crash.
According to a statement from Boeing, there was an “intentional failure” on the part of some of its employees to inform the FAA about changes to the MCAS design.
Following the accidents, the 737 Max aircraft were grounded worldwide. In November last year the FAA rescinded its order, paving the way for the aircraft with redesigned systems to return to operations.
The aircraft was subsequently cleared for operation by other aviation authorities, and in December, both Brazil’s GOL and American Airlines resumed 737 Max flights. Other carriers, including Southwest, United and WestJet, have also announced plans to return the Max to their fleets.
In a statement, David L. Calhoun, Boeing president and CEO said, “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. 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.”
In announcing the agreement, Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division, said, “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.
“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.
“This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash-victims’ families and beneficiaries.”