Late on Sunday (7th of July), Boeing agreed to plead guilty to a criminal fraud conspiracy charge relating to the two 737 MAX fatal crashes.
As we have seen, the January 737 MAX-9 door plug blowout had severe repercussions on Boeing. A 2021 deferred prosecution agreement relating to the two fatal 737 MAX-8 crashes meant that Boeing had to abide by certain conditions.
The U.S. Department of Justice believes that Boeing broke the terms of this agreement by failing to implement certain safety safeguards, among other reasons. Boeing maintains that it fulfilled the terms of the agreement.
Nevertheless, the DoJ pressed ahead with his criminal fraud conspiracy charge against Boeing last week. Boeing had until the end of the week to plead guilty or face trial. Boeing relented on Sunday. If a judge approves this deal, Boeing will formally become a convicted felon.
Under the terms of this criminal fraud conspiracy charge, Boeing will face a fine of $487.2 million, which is the legal maximum, according to some sources. However, payments for past fines cover part of this fine, leaving only an additional $243.6 million for Boeing to pay.
The criminal charge plea deal also puts Boeing under another three-year probation period. During this time, an independent court-appointed monitor will oversee and report on Boeing’s compliance with the DoJ deal.
A Slap on the Wrist?
Boeing’s board will also have to meet the families of the victims of the two 737 MAX crashes. These families are furious with the new deal. With Boeing now facing a criminal conspiracy charge, they expected Boeing to have to pay substantially more.
Their lawyers have described the terms of the latest DoJ deal as “a slap on the wrist” and as another “sweetheart deal.” They would have much preferred a trial, in which Boeing and its executives would have to answer specific questions about the decision-making that led to the two MAX crashes.
It’s hard to argue against these sentiments. In a Leeham News article, Scott Hamilton highlighted multiple fines and penalties that Boeing and Airbus had to pay over the years. They vary from breaches in the handling of sensitive information to trade violations and other scandals.
Unlike the criminal charge that Boeing looks set to plead guilty to, none of the events that triggered these fines or penalties relate to deaths – yet they all eclipse Boeing’s new fine AND the 2021 fine combined. The manufacturer will also have to invest another $455 million to improve safety in its manufacturing and operations.
The lawyers of the relatives have stated that they intend to ask the federal judge to throw away the latest deal. But in any case, the fact that Boeing agreed to this criminal charge doesn’t shield it from further charges and lawsuits.
Implications of Boeing Criminal Charge Plea
For now, the only thing Boeing avoids by pleading guilty is a trial. It will likely have to pay restitution once this case goes to a federal judge for approval. The manufacturer is also expected to face separate DoJ charges on last January’s MAX-9 blowout.
Elsewhere, accepting this criminal charge and becoming a felon will make it harder for Boeing to compete for U.S. government contracts. Boeing produces multiple military aircraft for the U.S. and formally contracts with the U.S. government for many foreign military sales, too.
In 2022, Boeing’s defense and other government contracts amounted to $14.8 billion, or approximately 37% of its revenue. The manufacturer also works with NASA on multiple projects, including Starliner and its latest X-66A truss-braced wing demonstrator.
Industry analysts widely expect Boeing to get waivers that will allow it to continue this work. However, this will be a complicated process, with each department having to make a separate decision on the matter.
The next step is to see what happens when Boeing and the DoJ take this criminal fraud conspiracy charge in front of a judge. Even if the deal goes ahead, the size of restitution and further charges could still bring radical changes to this case.
Sources: Reuters, Leeham News
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