Boeing To Pay $2.5 Billion Over 737 Max Fraud, Faces No Other Charges
Boeing will pay more than $2.5 billion to settle criminal charges that it repeatedly concealed and lied about the 737 Max's engineering problems that led to two catastrophic crashes claiming hundreds of lives.
The company admitted to one count of conspiracy to defraud the United States as part of the deferred prosecution agreement announced on Thursday and will face no further charges from the U.S. Department of Justice.
"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," Acting Assistant Attorney General David Burns of the Justice Department's Criminal Division, wrote in a statement.
Boeing, which is the country's second-biggest defense contractor behind Lockheed Martin, will pay the DOJ a criminal penalty of $243.6 million.
The families and legal beneficiaries of the 346 passenger victims who died in the Lion Air Flight 610 in Indonesia in October 2018 and the Ethiopian Airlines Flight 302 in Ethiopia five months later will be paid from a fund of $500 million. If split equally among them, that amounts to a little over $1.4 million for each family.
The vast majority of the settlement is allocated for airline companies that had purchased the faulty 737 Max aircraft and were subsequently forced to ground the planes following the crashes. Together they will receive $1.77 billion in compensation for their financial losses, according to the DOJ.
"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 added in the statement.
In both cases, the crashes were caused by changes to the jet's Maneuvering Characteristics Augmentation System that forced the nose of the 737 Max toward the ground and left pilots unable to control the planes.
In a note to employees, Boeing President and Chief Executive Officer David Calhoun said, "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."
He added: "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."
Internal Boeing documents revealed during a U.S.House panel's inquiry showedthat engineers notified the companyof the MCAS "egregious" problems as early as 2016.
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