Boeing will acknowledge the criminal conspiracy charges related to two fatal crashes of its 737 Max aircraft. This agreement has caused the famous American aircraft manufacturer's embarrassment, but it has avoided a fierce court confrontation as it attempts to recover from multiple crises.
Under the agreement reached with U.S. prosecutors, Boeing faces criminal fines of up to $4.872 billion - the highest amount allowed by law - but the actual amount will be determined by a judge, according to the Justice Department. The Justice Department has asked the judge to credit the previous fine paid by Boeing, which would bring the new fine down to $2.436 billion.
As part of the agreement, the company will install a corporate monitor and is required to spend at least $455 million over the next three years to strengthen its compliance and safety programs, subject to court approval. It will also be subject to a probationary period under court supervision.
What happened to Boeing?
The Justice Department ruled in May that Boeing had violated the deferred prosecution agreement related to the crash, which was reached in the final days of the Trump administration. Prior to this, on January 5th, the fuselage door of a 737 Max 9 aircraft came loose just days before the agreement was due to expire.
The plea marks a nadir in the company's century-long history, following two crashes of its 737 Max planes in 2018 and 2019 that killed 346 people and led to years of turbulence. As a major defense contractor and the manufacturer of Air Force One, the agreement could also complicate Boeing's interactions with the government, although the company may seek waivers or reversal to continue operations in these areas.
On the other hand, the deal will enable Boeing to avoid criminal trials as its financial situation is chaotic and leadership is uncertain. This American company has been in crisis for the past six months, culminating in a near-disastrous incident that led to the plea.
The Justice Department later concluded that Boeing had failed to meet the agreement's requirement to implement an effective compliance program to prevent and detect violations of U.S. fraud laws.
Boeing traded almost unchanged in pre-market trading and its value has fallen 29% this year.
The U.S. government and Boeing are still finalizing the agreement, which is expected to be submitted before July 19th.
As a result of a series of accidents, Boeing's top management has been in turmoil as the board of directors seeks a new CEO to replace Dave Calhoun at some point this year. The company's financial situation has also shown pressure to slow production since the January incident, as it strives to improve quality and retrain its workers under close supervision by the FAA.
The company said it could spend about $8 billion in cash in the first half of 2024.
Boeing confirmed in a brief statement that it has reached a tentative agreement on solution terms with the Justice Department, but specific terms require approval. The aircraft manufacturer had told prosecutors in June that it disagreed with the ruling on its violation of a previous agreement.
As part of the 2021 agreement, Boeing paid a criminal fine of $2.436 billion and admitted to deceiving the FAA on a vague flight control system related to the crash. The company also promised to improve its internal safety controls. In return, the government will drop criminal charges against it after three years.
"Very disappointed."
The agreement drew sharp criticism from families of crash victims, who were not consulted prior to its announcement. These families also promptly submitted a notice objecting to the latest agreement. As part of the new plea agreement, the Boeing board will meet with families of victims of air crashes - a demand previously made by the families of crash victims.
"Despite the strong opposition of the families of the crash victims, the Justice Department is still pushing this entirely inadequate plea agreement, and we are very disappointed with this," said Erin Applebaum, a Kreindler & Kreindler LLP partner representing the families of the air crash victims, in an email statement.
"While we are glad to see that Boeing will not be able to select its own monitor, this agreement is still a mere slap on the wrist and will not result in any meaningful change within the company," she said.
The agreement also stipulates that the government will select and oversee the corporate monitor to address families of victims' concerns about complete independence.
Boeing is also facing investigations by the SEC, Congress and a Seattle-area grand jury into the January Alaska Airlines plane crash.
Although many of us hoped to face harsher prosecution, pleading guilty to a serious crime is a major step forward.
Mark Lindquist, another attorney for the victim's family, said, "Boeing has reached a preliminary deferred prosecution agreement with the Justice Department, but Boeing has not yet taken responsibility."
"The company's next steps should include taking full responsibility for the civil cases and fully complying with the plea deal," he said in an email statement.
This is the case of USA v. Boeing, case number 21-cr-005, in the Northern District Court of Texas (Fort Worth).