Boeing To Pay $2.5 Billion Over MAX Fraud Conspiracy

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The willful misconduct of two former Boeing employees will cost the big United States aircraft manufacturer a hefty US$2.5 billion. This follows an agreement entered into between Boeing and the United Department of Justice (DOJ) to resolve a criminal charge. The charge was related to a conspiracy to defraud the FAA’s Aircraft Evaluation Group concerning their evaluation of the 737 MAX.

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Boeing has reached an agreement with the Department of Justice. Photo: Boeing

Two former employees cost Boeing a pretty penny

According to Boeing, two former Boeing employees intentionally failed to inform the FAA’s Aircraft Evaluation Group about changes to the Maneuvering Characteristics Augmentation System (MCAS). As a result, the Aircraft Evaluation Group did not have all the information about MCAS’s expanded operating range when it made its training determinations for the MAX. That saw Boeing charged with one count of conspiracy to defraud the United States.

“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,” says Boeing’s CEO, David Calhoun yesterday.

“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.”

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Information about a change to MCAS concealed

In and around November 2016, the DOJ says two of Boeing’s 737 MAX Flight Technical Pilots, one who was then the 737 MAX Chief Technical Pilot and another who would later become the 737 MAX Chief Technical Pilot, discovered information about an important change to MCAS.

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The two employees concealed this information and deceived the FAA’s Aircraft Evaluation Group about MCAS. As a result, the Aircraft Evaluation Group deleted all information about MCAS from the final version of the 737 MAX FSB Report published in July 2017. The DOJ says;

“Airplane manuals and pilot training materials for U.S.-based airlines lacked information about MCAS, and pilots flying the 737 MAX for Boeing’s airline customers were not provided any information about MCAS in their manuals and training materials.”

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Two Boeing employees concealed information about changes to MCAS. Photo: Boeing

A Boeing 737 MAX crashed into the Java Sea in October 2018. Six months later, another 737 MAX crashed in Ethiopia. After the second crash, the 737 MAX was grounded worldwide. Investigations later found MCAS had been activated in both cases. According to the DOJ, the two Boeing employees continued to mislead both Boeing and the FAA about their prior knowledge of the change to MCAS after the grounding.

The prosecution deferred as Boeing pays out

Under the terms of the agreement, the DOJ will defer prosecution of Boeing. But Boeing must abide by the obligations outlined in a three-year deferred prosecution agreement. After that time, the charge will be dismissed.

In total, Boeing will fork out US$2,513.6 million. That comprises a $243.6 million criminal monetary penalty. A further $500 million in additional compensation goes to the heirs and/or beneficiaries of those who died in the Lion Air and Ethiopian Airlines accidents. Plus, $1.77 billion goes to Boeing’s airline customers for harm incurred as a result of the grounding of the 737 MAX.

Boeing is also required to review its compliance program for the implementation of continuous improvement efforts and implement enhanced compliance reporting and internal control mechanisms.

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A Lion Air Boeing 737 MAX crashed in October 2018. Photo: Boeing

Department of Justice officials slam Boeing

“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,” says Acting DOJ Assistant Attorney General David Burns.

“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,” US Attorney Erin Nealy Cox said.

“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.” 

Boeing’s 737 MAX was recently cleared to fly again in the United States and is now resuming operations with several airlines.

What do you think? Is this a just result? Is the agreement fair? Should the DOJ have pushed harder? Post a comment and let us know.

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