Boeing agrees to pay $2.5 billion to settle criminal charge over 737 Max crashes

The company admitted that it kept important information from the FAA.

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Boeing has reached an agreement with the Department of Justice to avoid prosecution over the two fatal 737 Max crashes that killed 346 people. The planemaker has been charged with one count of conspiracy to defraud the United States and has entered a deferred prosecution agreement by committing to pay $2.5 billion. In particular, the company has been charged for defrauding the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG) in connection with the organization’s evaluation of the 737 Max plane.

That amount includes $243.6 million in fines and $1.77 billion in compensation to Boeing’s airline customers, seeing as authorities grounded the plane for over a year and a half as they conducted an investigation into the incidents. It also includes a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives and legal beneficiaries of the the passengers who died in the Lion Air Flight 610 and Ethiopian Airlines Flight 302 crashes.

Lion Air Flight 610 crashed shortly after takeoff near Indonesia on October 29th, 2018, while Ethiopian Airlines Flight 302 crashed near Ethiopia on March 10th, 2019. In both instances, the FAA AEG determined that the 737 Max planes’ Maneuvering Characteristics Augmentation System (MCAS) activated during the flight and may have played a role in the crash.

Boeing admitted in court documents that it deceived the FAA about circumstances regarding MCAS. Apparently, two of Boeing’s 737 Max flight technical pilots discovered an important change to MCAS in November 2016, but the company chose to conceal the information instead of sharing it with the FAA AEG when it was evaluating the new plane. As a result, the AEG didn’t mention the system its report, and the plane’s manuals and pilot training materials lacked information about MCAS.

Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division said in a statement:

“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. 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. This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash-victims’ families and beneficiaries.”

Representative Peter DeFazio, the House Transportation and Infrastructure Committee chairman who oversaw the probe into the crashes, was unhappy with the resolution, though. He said:

“[The] settlement amounts to a slap on the wrist and is an insult to the 346 victims who died as a result of corporate greed. Not only is the dollar amount of the settlement a mere fraction of Boeing’s annual revenue, the settlement sidesteps any real accountability in terms of criminal charges.”

In addition to paying $2.5 billion, Boeing will have to continue cooperating with the FAA’s fraud section for any ongoing and future investigations. It’s required to report any evidence of fraud committed by its employees or agents, as well, and to submit yearly reports to the fraud section regarding the status of its remediation efforts.