The aerospace giant will pay a $243.6 million criminal penalty plus $1.77 billion in compensation for airline customers and $500 million for a crash victim fund.
FORT WORTH, Texas (CN) — Federal prosecutors announced Thursday that Boeing will pay over $2.5 billion to settle criminal accusations that it misled the government about the 737 Max’s flight control software before two crashes that killed 346 people.
Filed in Fort Worth federal court, the criminal information alleging conspiracy to defraud the U.S. claims two of the Chicago-based company’s 737 Max pilots deceived the Federal Aviation Administration in 2017 about the Maneuvering Characteristics Augmentation System. The system is designed to push the nose of the airplane down in order to prevent stall.
“Through this deception, the company interfered with the FAA [Aircraft Evaluation Group’s] lawful function to evaluate MCAS and to include information about the MCAS in the 737 Max FSB report, and fraudulently obtained from the FAA AEG a differences-training determination for the 737 Max that was based on incomplete and inaccurate information about MCAS,” the 58-page deferred prosecution agreement states.
The 737 Max is Boeing’s latest variant of its highly successful line of 737 narrow-body commercial aircraft. It was grounded by the FAA on March 13, 2019, after the deadly crashes of Lion Air Flight 610 five months earlier and Ethiopian Airlines Flight 302 three days earlier. The FAA allowed the 737 Max to return to service on Nov. 18, 2020.
“Because of their deception, a key document published by the FAA AEG lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for U.S.-based airlines lacked information about MCAS,” federal prosecutors said in a written statement.
Under the agreement, Boeing agrees to pay a criminal penalty of $243.6 million, $1.77 billion in compensation for airline customers and establish a $500 million crash victim fund.
Boeing did not immediately respond to an email message requesting comment Thursday afternoon.
Erin Nealy Cox, U.S. attorney for the Northern District of Texas, blasted the Boeing pilots for “misleading statements, half-truths, and omissions” that hindered the federal government from protecting the flying public.
Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division echoed that frustration.
“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,” Burns said. “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.”
Prosecutors said Boeing only received “partial credit” for its cooperation with the investigation, stating cooperation “was delayed and only began after the first six months of the Fraud Section’s investigation, during which time the company’s response frustrated the Fraud Section’s investigation.”
Shares of Boeing dipped over 1.1% in after-hours trading Thursday evening after the settlement was announced.
The criminal case comes after the pilots union for Southwest Airlines sued Boeing in Dallas County District Court in October 2019, claiming it “deliberately misled its customers, pilots and the public about the true scope of design changes” to the 737 Max from earlier variants. Southwest has exclusively operated a fleet of 737 aircraft since it began flying in 1971.
The union claims the MCAS is the result of Boeing’s decision to use the newer, larger LEAP1-B engines on the 737 Max. This required the engines to be mounted higher up and father forward on the wing, which changed the plane’s “aerodynamic center of gravity, decreased aircraft stability, created a greater pitch-up tendency at elevated angles of attack, and negatively affected the flight handling characteristics, making the 737 Max more susceptible to the catastrophic risk of stall,” according to the complaint.
The union later urged Southwest management in an effort to force the airline to stop buying 737 Max aircraft, opening the door for Boeing’s primary competitor Airbus and its A320 narrow-body aircraft.