Boeing criminal fraud case: Why has aerospace group made a plea deal?

Boeing has agreed to plead guilty to criminal fraud conspiracy charges brought by the federal government for its role in two fatal 737 MAX 8 jet crashes which happened off the coast of Indonesia in 2018 and in Ethiopia in 2019, killing a total of 346 people.

By pleading guilty, Boeing will not face charges in court of conspiracy to defraud the Federal Aviation Administration (FAA)’s Aircraft Evaluation Group over its evaluation of the safety of Boeing 737 MAX aeroplanes.

This week’s deal is related to a previous agreement Boeing had reached with the Department of Justice (DOJ) in 2021 to make safety changes following the two fatal jet crashes.

Last month, DOJ officials wrote to a US federal judge stating that Boeing had violated its obligations under that agreement by “failing to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the US fraud laws throughout its operations”.

As part of the settlement agreement reached this week, Boeing, which according to the latest official report had $14.8bn in Pentagon contracts in 2022, has been ordered to pay a fine of $243.6m.

Boeing has also committed to allocating more than $450m over the next three years towards the implementation of compliance and safety initiatives, and the company’s board of directors will meet the families of those who died in the two crashes. The agreement is to be formally filed on July 19.

So why has Boeing agreed to plead guilty and what happens next?

Why has Boeing made this deal with prosecutors?

The new plea deal would allow Boeing to avoid a criminal trial which legal experts say would be more costly to the aerospace giant and its reputation.

A Deferred Prosecution Agreement (DPA) was previously reached between the DOJ and Boeing in January 2021. Under that agreement, Boeing had agreed to pay the same amount of $243.6m to settle those charges.

The total settlement Boeing agreed to under that DPA amounted to $2.5bn, including a fine of $243.6m; $1.77bn in compensation to passengers whose flights were grounded as a result of the incidents; and a $500m fund for the families of victims from Lion Air Flight 610 which crashed off Indonesia and Ethiopian Airlines Flight 302.

Under that DPA, Boeing was also required to submit annual and quarterly reports to the DOJ disclosing any evidence of violations of US fraud laws being committed which had led to the fatal 737 MAX crashes. In addition, the company was required to submit reports on the status of remediation efforts that would ensure future compliance with FAA regulatory and safety standards.

However, in May this year, the DOJ found that Boeing had violated the terms of the 2021 DPA by failing to provide these reports in a timely manner and failing to implement compliance measures, resulting in more criminal charges.

What are families of the crash victims seeking?

Families of the victims, many of whom have filed lawsuits against Boeing, have criticised the plea deal.

“This sweetheart deal fails to recognise that because of Boeing’s conspiracy, 346 people died,” Paul G Cassell, a lawyer for a number of the families from countries including Kenya, Canada and Indonesia, told The New York Times.

As a result, Cassell and other lawyers for families have filed a notice with the Fort Worth court for the Northern District of Texas, opposing the plea deal.

“The families intend to argue that the plea deal with Boeing unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons,” the document said.

Families are calling for criminal accountability, including prosecutions of corporate leadership. They also want Boeing to openly admit that “it killed all 346 people by lying to the FAA”.

In addition, Robert Clifford, another lawyer working with Casell representing the crash victims’ families in ongoing civil cases against Boeing, said in a statement: “There is no accountability, no admission that Boeing’s admitted crime caused the 346 deaths, and the families will most certainly object before Judge Reed O’Connor and ask that he reject the plea if Boeing accepts.”

What other problems has Boeing encountered?

The beleaguered airline manufacturer has been plagued with technical and maintenance problems in recent years. In January, an Alaska Airlines Boeing 737 MAX 9 aircraft experienced a midair panel blowout, which led to rapid decompression. The aircraft was able to make an emergency descent and landed safely at Seattle-Tacoma International Airport. No injuries were reported among the passengers and crew.

On Monday this week, a Boeing United Airlines jet lost its wheel after takeoff at Los Angeles International Airport. The plane eventually landed safely at Denver International Airport. In March, a similar incident occurred when a Boeing 777 bound for Japan lost a tyre after departing from San Francisco, requiring an emergency landing. And, in May, two Boeing 737 passenger planes were involved in accidents in Senegal and Turkey on takeoff and landing.

Separately, on Monday, the FAA ordered inspections of 2,600 Boeing 737 passenger jets after multiple passenger complaints that oxygen masks had shifted out of position because of a strap retention failure. “The fault could result in an inability to provide supplemental oxygen to passengers during a depressurisation event,” the FAA stated.

Boeing’s technical woes are not just limited to their commercial aircraft. Two NASA astronauts are currently stuck in space as a result of major technical issues with Boeing’s new CST-100 Starliner spacecraft.

What’s next for Boeing?

Boeing must appear in federal court where the plea agreement will be formally presented on July 19. This will allow the company to plead guilty to the specified charges.

If the judge rejects the plea deal and sides with the families, Boeing and the DOJ will have to come to another agreement.

If the deal is approved by the judge, Boeing executives will set a time and place to meet families of the victims. The schedule and related terms of the meeting have yet to be clarified.

Also under the terms of the agreement, Boeing will enter a three-year probation period during which it must appoint an independent compliance monitor responsible for ensuring compliance and safety. This monitor, who must be an expert in aviation from outside the company, will be required to thoroughly evaluate Boeing’s quality control and production practices, providing recommendations for necessary improvements that Boeing will be obliged to adopt.