Boeing pays $US2.5 billion to settle MAX fraud charge

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January 08, 2021
Boeing MAX fraud
Photo: Boeing

Boeing has agreed to pay more than $US2.5 billion to settle a criminal charge related to a conspiracy to defraud the US Federal Aviation Administration over safety issues on the 737 MAX.

A deferred prosecution agreement with the Department of Justice resolves an ongoing investigation that has stalked the company for two years.

It will see the aerospace giant pay a criminal penalty of $US243.6m as well as compensation to airline customers of $US1.77 billion. It will also see it establish a $US500m crash-victim to compensate people related to the 346 passengers who died in two Boeing 737 MAX crashes.

READ: Dreamliner defects see analysts slash Boeing outlook.

“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,” acting assistant attorney-general David P. Burns said in a statement.

“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.”

The DoJ said Boeing had admitted in court documents that two former 737 MAX technical pilots deceived the FAA’s Aircraft Evaluation Group (AEG) about the controversial Maneuvering Characteristics Augmentation System (MCAS) flight control software involved in the two crashes.

According to the DoJ statement, The AEG was principally responsible for determining the minimum level of pilot training required for the 737 MAX  and Boeing’s flight technical team for providing it with the relevant information.

“In and around November 2016, two of Boeing’s 737 MAX Flight Technical Pilots, one who was then the 737 MAX Chief Technical Pilot and another who would later become the 737 MAX Chief Technical Pilot, discovered information about an important change to MCAS,’’ it said.

“Rather than sharing information about this change with the FAA AEG, Boeing, through these two 737 MAX Flight Technical Pilots, concealed this information and deceived the FAA AEG about MCAS.

“Because of this deceit, the FAA AEG deleted all information about MCAS from the final version of the 737 MAX FSB (Flight Standardisation Board) Report published in July 2017.

“In turn, airplane manuals and pilot training materials for U.S.-based airlines lacked information about MCAS, and pilots flying the 737 MAX for Boeing’s airline customers were not provided any information about MCAS in their manuals and training materials.”

While the deferred prosecution agreement focused on the conduct of the two former employees, Boeing said it recognized that other company employees had informed other officials and organizations within the FAA about MCAS’s expanded operating range in connection with the certification of the MAX.

“I firmly believe that entering into this resolution is the right thing for us to do—a step that appropriately acknowledges how we fell short of our values and expectations,’’ Boeing chief executive David Calhoun said.

“This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations.”

The company told the Securities and Exchange Commission that it had taken a $US743.6 million charge as a result of the agreement.