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Boeing To Pay $2.5 Billion Settlement Over Deadly 737 Max Crashes

Jan 8, 2021
Originally published on January 8, 2021 11:01 am

Boeing will pay more than $2.5 billion to settle a criminal charge related to the two 737 Max plane crashes in 2018 and 2019 that killed 346 people.

The Justice Department has announced that it has reached a deferred prosecution agreement with Boeing to resolve a charge of criminal conspiracy to defraud the FAA.

Boeing admits to criminal misconduct for misleading regulators about the safety of the troubled jetliner, but the airplane manufacturer is not pleading guilty to the charge. If Boeing complies with the terms of the settlement, in three years the government will drop the criminal charge. That's important for Boeing, a huge federal defense contractor, because a criminal conviction would prohibit the company from getting future government contracts.

Under the terms of the deal, Boeing will pay a criminal penalty of $243.6 million, which is less than 10% of the $2.5 billion settlement. Most of the rest, $1.7 billion, will go to airlines that purchased 737 Max planes to compensate them for lost revenue during a lengthy grounding of the aircraft type while the cause of the crashes was investigated. Another $500 million will be paid into a fund to help compensate the families of those who were killed in the crashes.

The agreement protects only the company from further prosecution, not employees who may have engaged in misconduct.

Federal prosecutors say key Boeing employees "deceived the FAA," misleading the safety regulators about a new flight control system on the 737 Max called MCAS.

That system activated erroneously, contributing to the deadly crashes, by forcing the planes into nosedives that the pilots could not pull the aircraft out of.

A 737 Max-8 jetliner operated by Indonesia's Lion Air plummeted into the Java Sea shortly after taking off from Jakarta's airport on Oct. 29, 2018, killing all 189 people on board. Another 737 Max-8 operated by Ethiopian Airlines crashed in a similar way into a field shortly after taking off from the Addis Ababa airport on March 10, 2019.

The federal investigation found that Boeing employees misled the FAA about the significance of the MCAS system and didn't mention the flight control system in pilot training and flight deck manuals, so most pilots didn't even know the system existed before the first crash.

"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," said acting Assistant Attorney General David Burns in a statement announcing the agreement.

"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," Burns added.

"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," said the U.S. attorney for the Northern District of Texas, Erin Neely Cox, whose office led prosecution.

Boeing sought to downplay any corporate responsibility and placed blame instead on two former technical pilots who in documents uncovered during the course of investigations, were found to be mocking and misleading FAA officials. CEO David Calhoun said their conduct doesn't reflect Boeing employees as a whole or the character of the company.

"This is a substantial settlement of a very serious matter," Calhoun said in a message to company employees. "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."

Carl Tobias, a law professor at the University of Richmond who specializes in product liability law and who has reviewed the deferred prosecution agreement, said: "There's some really damning language in there about sacrificing safety, you know, for profit, basically, and that's troubling."

"It did not find widespread fraudulent behavior in the company but these two central employees did engage, according to the government, in very bad conduct," Tobias added.

But by singling out those two Boeing employees accused of deceiving FAA regulators, critics say the Justice Department is letting Boeing off the hook.

"I find this fine to be inadequate given the egregious nature of the offense," said Democratic Congressman Peter DeFazio of Oregon, who chairs the House Transportation Committee, in an interview with NPR. His committee's investigation into the design, development and initial certification of the 737 Max found widespread evidence of engineering and management failures at Boeing, as well as grossly insufficient oversight by the FAA.

"This settlement amounts to a slap on the wrist and is an insult to the 346 victims who died as a result of corporate greed," DeFazio added. "I hope the DOJ can explain its rationale for this weak settlement to the families, because from where I sit this attempt to change corporate behavior is pathetic and will do little to deter criminal behavior going forward."

Michael Stumo, whose 24-year-old daughter Samya Rose Stumo died in the Ethiopian Airlines crash, also sharply criticizes the deferred prosecution agreement.

"This is a Boeing protection agreement," Stumo told NPR. "There's nobody being held accountable, personally." Stumo added that the Justice Department "is letting the fraudsters off the hook."

Stumo dismisses the notion that only a couple of employees were responsible for misconduct in the rushed development of what was Boeing's most profitable commercial airliner in the history of the company.

"A couple of people could not have made this killer plane," said Stumo. "It took large organizational conduct."

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Boeing settled a charge of criminal conspiracy related to two 737 Max plane crashes. The company will pay $2.5 billion without pleading guilty.

Here's NPR's David Schaper.

DAVID SCHAPER, BYLINE: Federal prosecutors say key Boeing employees deceived safety regulators about a new flight control system on the plane that investigators say played a major role in both deadly crashes.

CARL TOBIAS: There's some really damning language in there about sacrificing safety, you know, for profit, basically.

SCHAPER: Carl Tobias is a law professor at the University of Richmond.

TOBIAS: It did not find widespread fraudulent behavior in the company. But these two central employees did engage, according to the government, in very bad conduct.

SCHAPER: Prosecutors say the deception by those two Boeing employees, quote, "impeded the government's ability to ensure the safety of the flying public." But by singling out just the two employees, critics say the Justice Department is letting Boeing off the hook.

PETER DEFAZIO: I find this fine to be inadequate given the egregious nature of the offense.

SCHAPER: Oregon Democrat Peter DeFazio chairs the House Transportation Committee, which found widespread evidence of management failures at Boeing. He calls the settlement a slap on the wrist and an insult to the 346 victims.

Twenty-four-year-old Samya Rose Stumo died in the Ethiopian Airlines crash in March of 2019. Her father is Michael Stumo.

MICHAEL STUMO: This is the Boeing protection agreement.

SCHAPER: Stumo points out that Boeing's criminal fine is just $243 million. Most of the rest, almost $1.8 billion, is compensation that Boeing has already agreed to pay airlines that purchase the 737 Max.

STUMO: There's nobody being held accountable personally.

SCHAPER: In a statement, Boeing CEO, Dave Calhoun, calls it a substantial settlement of a very serious matter that appropriately acknowledges how we fell short of our values and expectations.

David Schaper, NPR News. Transcript provided by NPR, Copyright NPR.