Boeing charged with 737 MAX fraud conspiracy and agrees to pay over $2.5 billion
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Topics: BOEING
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The criminal information charges the company with one count of conspiracy to defraud the United States. Under the terms of the DPA, Boeing will pay a total criminal monetary amount of over $2.5 billion, composed of a criminal monetary penalty of $243.6 million, compensation payments to Boeing’s 737 MAX airline customers of $1.77 billion, and the establishment of a $500 million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of the 346 passengers who died in the Boeing 737 MAX crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302.
“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,†said Acting Assistant Attorney General David P. Burns of the Justice Department’s Criminal Division.
“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.â€
As Boeing admitted in court documents, Boeing—through two of its 737 MAX Flight Technical Pilots—deceived the FAA AEG about an important aircraft part called the Maneuvering Characteristics Augmentation System (MCAS) that impacted the flight control system of the Boeing 737 MAX.
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.
Boeing began developing and marketing the 737 MAX in or around June 2011. Before any U.S.-based airline could operate the new 737 MAX, U.S. regulations required the FAA to evaluate and approve the airplane for commercial use.
In connection with this process, the FAA AEG was principally responsible for determining the minimum level of pilot training required for a pilot to fly the 737 MAX for a U.S.-based airline, based on the nature and extent of the differences between the 737 MAX and the prior version of Boeing’s 737 airplane, the 737 Next Generation (NG).
At the conclusion of this evaluation, the FAA AEG published the 737 MAX Flight Standardization Board Report (FSB Report), which contained relevant information about certain aircraft parts and systems that Boeing was required to incorporate into airplane manuals and pilot-training materials for all U.S.-based airlines.
The 737 MAX FSB Report also contained the FAA AEG’s differences-training determination. After the 737 MAX FSB Report was published, Boeing’s airline customers were permitted to fly the 737 MAX.
Within Boeing, the 737 MAX Flight Technical Team (composed of 737 MAX Flight Technical Pilots) was principally responsible for identifying and providing to the FAA AEG all information that was relevant to the FAA AEG in connection with the FAA AEG’s publication of the 737 MAX FSB Report.
Because flight controls were vital to flying modern commercial airplanes, differences between the flight controls of the 737 NG and the 737 MAX were especially important to the FAA AEG for purposes of its publication of the 737 MAX FSB Report and the FAA AEG’s differences-training determination.
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.
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 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.
On Oct. 29, 2018, Lion Air Flight 610, a Boeing 737 MAX, crashed shortly after takeoff into the Java Sea near Indonesia. All 189 passengers and crew on board died. Following the Lion Air crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash.
The FAA AEG also learned for the first time about the change to MCAS, including the information about MCAS that Boeing concealed from the FAA AEG. Meanwhile, while investigations into the Lion Air crash continued, the two 737 MAX Flight Technical Pilots continued misleading others—including at Boeing and the FAA—about their prior knowledge of the change to MCAS.
On March 10, 2019, Ethiopian Airlines Flight 302, a Boeing 737 MAX, crashed shortly after takeoff near Ejere, Ethiopia. All 157 passengers and crew on board died.
Following the Ethiopian Airlines crash, the FAA AEG learned that MCAS activated during the flight and may have played a role in the crash. On March 13, 2019, the 737 MAX was officially grounded in the U.S., indefinitely halting further flights of this airplane by any U.S.-based airline.
As part of the DPA, Boeing has agreed, among other things, to continue to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions.
As part of its cooperation, Boeing is required to report any evidence or allegation of a violation of U.S. fraud laws committed by Boeing’s employees or agents upon any domestic or foreign government agency (including the FAA), regulator, or any of Boeing’s airline customers.
In addition, Boeing has agreed to strengthen its compliance program and to enhanced compliance program reporting requirements, which require Boeing to meet with the Fraud Section at least quarterly and to submit yearly reports to the Fraud Section regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced so that it is effective at deterring and detecting violations of U.S. fraud laws in connection with interactions with any domestic or foreign government agency (including the FAA), regulator, or any of its airline customers.
The department reached this resolution with Boeing based on a number of factors, including the nature and seriousness of the offense conduct; Boeing’s failure to timely and voluntarily self‑disclose the offense conduct to the department; and Boeing’s prior history, including a civil FAA settlement agreement from 2015 related to safety and quality issues concerning the Boeing’s Commercial Airplanes (BCA) business unit.
In addition, while Boeing’s cooperation ultimately included voluntarily and proactively identifying to the Fraud Section potentially significant documents and Boeing witnesses, and voluntarily organizing voluminous evidence that Boeing was obligated to produce, such cooperation, however, was delayed and only began after the first six months of the Fraud Section’s investigation, during which time Boeing’s response frustrated the Fraud Section’s investigation. ■