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Boeing criminally charged for lying about 737 Max crashes, fined $2.5 billion

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The Department of Justice says Boeing defrauded the United States by lying to the FAA

US-AVIATION-EARNINGS-BOEING Photo by OLIVIER DOULIERY/AFP via Getty Images

Boeing has been criminally charged with conspiracy to defraud the United States by the Department of Justice and will have to pay a $2.5 billion fine for lying to the Federal Aviation Administration before and after the fatal 737 Max crashes in 2018 and 2019.

The Justice Department announced the charges and fine, which were part of a deferred prosecution agreement, on Thursday. The $2.5 billion fine includes a $243.6 million “criminal monetary penalty,” $1.77 billion that will be paid out to airlines that were customers of the plane, and $500 million that will go to a fund to help families and relatives of the people who died in the two crashes.

Boeing previously announced a $100 million fund for families and loved ones of the 346 people who died in the crashes. Boeing generated $100 billion in revenue and $12 billion in profit in 2018.

“The 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,” US Attorney Erin Nealy Cox said in a statement. “This case sends a clear message: The Department of Justice will hold manufacturers like Boeing accountable for defrauding regulators – especially in industries where the stakes are this high.”

Boeing’s 737 Max was supposed to be a plane that helped the company keep pace with a new, more fuel-efficient offering from rival Airbus. But the company rushed the design, and as a result, the plane was susceptible to dangerous stalls in certain takeoff situations. Boeing created a piece of software to counteract this design flaw by automatically pushing the plane’s nose down. But the company never told the FAA, airlines, or pilots about the software in order to save time and money.

What’s worse, this software worked off of readings from a lone sensor on the plane’s exterior — meaning there was no way to know if it was acting with bad information if the sensor was damaged.

It was this series of design flaws and Boeing’s lack of candor that led to the two fatal 737 Max crashes, as was discovered in subsequent Congressional investigations and reporting. By not disclosing them to regulators or the airlines, Boeing left the pilots of Lion Air flight 610 and Ethiopian Airlines flight 302 fighting software they didn’t even know existed.

Some Boeing employees were well-aware that what they were doing was wrong, as was documented in internal chat messages and emails released by Congress in early 2020.

The 737 Max has since been allowed back into the air after Boeing worked to fix these problems, and airlines around the world are slowly reintroducing the plane to their fleets. But in a Senate report released just last month, it was discovered that Boeing and the FAA worked to manipulate some of the tests that were done during the recertification process. The FAA’s lax approach to regulation has also been blamed for contributing to the problems that led to the two fatal 737 Max crashes.

No individuals have been criminally charged in the government’s investigation into Boeing, which was led by the FBI and the Department of Transportation’s Office of the Inspector General. Dennis Muilenburg, who was CEO when the crashes happened, was ousted in late 2019. He left with more than $60 million in stock options and other assets, though Boeing did not give him a severance.

“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. 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,” Peter DeFazio (D-OR), the Chairman of the House Committee on Transportation and Infrastructure, said in a statement. “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.”

Update January 7th, 9:50PM ET: Added comment from Peter DeFazio.