By Chris Prentice, Mike Spector, and David Shepardson
NEW YORK/WASHINGTON (Reuters) – Boeing Co has agreed to plead guilty to a criminal fraud conspiracy charge and pay a $243.6 million fine to settle a U.S. Justice Department investigation into two deadly crashes of its 737 MAX jetliner, the government said in a court filing on Sunday.
The plea deal requires a judge’s approval and would classify the aircraft maker as a convicted criminal in connection with five-month-long plane crashes in Indonesia and Ethiopia in 2018 and 2019 that killed 346 people.
The settlement was met with swift criticism from victims’ families, who wanted Boeing (NYSE:) to face trial and suffer harsher financial consequences.
The Justice Department’s push to bring charges against Boeing deepens the ongoing crisis that has gripped the company since a separate explosion on a plane in January exposed ongoing safety and quality problems at the planemaker.
A guilty plea could threaten the company’s ability to secure lucrative government contracts with entities such as the U.S. Department of Defense and NASA, although it may seek waivers.
Boeing is facing criminal prosecution after the Justice Department found in May that the company violated a 2021 settlement related to the fatal crashes.
But the admission spares Boeing a contentious trial that would have exposed the company’s decisions before the fatal crashes to greater public scrutiny. It also makes it easier for the planemaker, whose new CEO will take over later this year, to try to move forward with its bid to win approval for its planned takeover of Spirit Aerosystems Inc.
A Boeing spokesperson confirmed that the company “has reached a tentative agreement on the terms of the resolution with the Department of Justice.”
As part of the deal, the planemaker agreed to spend at least $455 million over the next three years to boost safety and compliance programs. The filing said Boeing’s board will have to meet with relatives of those killed in the Max crashes.
The deal also requires the appointment of an independent monitor, who will be required to submit annual public progress reports, to oversee the company’s compliance. Boeing will be on probation during the three-year monitoring period.
Lawyers for some of the victims’ families said they plan to lobby Judge Reed O’Connor, who was overseeing the case, to reject the deal.
In a separate document filed with the court, they cited O’Connor’s statement in a February 2023 ruling: “Boeing’s crime may be considered the most serious corporate crime in U.S. history.”
The agreement is a “slap on the wrist,” said Erin Applebaum, an attorney at Kreindler & Kreindler, which represents some of the victims’ relatives.
Boeing’s deepening crisis
On June 30, the U.S. Justice Department offered Boeing a plea deal, giving the company until the end of the week to accept the deal or face trial on charges of conspiracy to defraud the Federal Aviation Administration, which the Justice Department said in its court filing Sunday was “the most serious crime that can be easily proven.”
The scam centered around false statements Boeing made to the FAA about a new program that would save money by requiring pilots to train less intensively.
The Maneuvering Characteristics Augmentation System (MCAS) software feature is designed to automatically push the plane’s nose down under certain conditions. It has been linked to the two crashes that led the Federal Aviation Administration to ground the Max fleet for 20 months, a measure that cost Boeing $20 billion and was lifted by the government in November 2020.
A new Boeing 737 Max 9 exploded during an Alaska Airlines flight on Jan. 5, just two days before a 2021 deferral agreement that shielded the company from prosecution over previous fatal crashes was set to expire. Boeing faces a separate ongoing criminal investigation into the Alaska Airlines incident.
The agreement covers only Boeing’s conduct before the fatal crashes, and does not protect the planemaker from any further investigations or potential charges related to the January crash or any other conduct.
The Justice Department also said the deal does not protect any executives, though individual charges are unlikely due to the statute of limitations. A former Boeing technical chief was charged in connection with the fraudulent agreement with Boeing but was acquitted by a jury in 2022.
The agreed-upon penalty would be Boeing’s second $243.6 million fine related to the fatal crashes — making the full fine the maximum allowed. The company previously paid the fine as part of a $2.5 billion 2021 settlement. The $243.6 million fine represents the amount Boeing saved by not implementing full flight simulator training for Max pilots.
Last month, the victims’ families asked the Justice Department to seek compensation of up to $25 billion.
The Justice Department and Boeing are working to have the full written plea agreement documented and filed in federal court in Texas by July 19, the Justice Department said in its court filing.