Boeing Charged With 737 MAX Airplane Fraud Conspiracy; Agrees to Pay Greater Than $2.5 Billion

The Boeing Company has entered into an official deferred prosecution agreement with the Department of Justice of the United States to resolve a criminal charge — which is related to a conspiracy to defraud the Aircraft Evaluation Group of the Federal Aviation Administration of the United States in connection with its evaluation of the Boeing 737 MAX airplane — by agreeing to pay a total of greater than $2.5 billion.

Boeing Charged With 737 MAX Airplane Fraud Conspiracy; Agrees to Pay Greater Than $2.5 Billion

The multinational corporation — which designs, manufactures, and sells commercial airplanes to airlines worldwide — was charged with one count of conspiracy to defraud the United States as a result of a criminal information which was filed in the Northern District of Texas on Thursday, January 7, 2021.

The Federal Aviation Administration of the United States had ordered the temporary grounding of Boeing 737 MAX airplanes which were operated by airlines in the United States or its territories effective as of Wednesday, March 13, 2019 at 3:00 in the afternoon after two crashes occurred.

A Boeing 737-8 MAX aircraft — which operated as Ethiopian Airlines flight 302 from Addis Ababa to Nairobi — crashed approximately six minutes after takeoff on Sunday, March 10, 2019 at 8:38 in the morning; and no survivors had been reported among the 149 passengers or eight members of the flight crew. The airplane was relatively new, as its inaugural flight occurred on Tuesday, October 30, 2018.

Only one day before that aforementioned inaugural flight, another Boeing 737-800 MAX airplane — which operated as Lion Air flight 610 from Jakarta to Pangkal Pinang as a domestic flight within Indonesia — crashed into the Java Sea approximately 35 nautical miles northeast of Jakarta on the morning of Monday, October 29, 2018 at 6:33 local time and killed all 181 passengers and eight members of the flight crew who were aboard.

No distinct correlation had been officially ascertained by any government agency at the time at which both incidents occurred — but investigations by the Aircraft Evaluation Group of the Federal Aviation Administration of the United States revealed that the activation of an important aircraft part called the Maneuvering Characteristics Augmentation System had impacted the flight control system of the Boeing 737 MAX and may have played a role in both incidents. Important information pertaining to this aircraft part was initially concealed by Boeing; and while investigations into the Lion Air crash continued, the two 737 MAX flight technical pilots continued to mislead others — including at Boeing and to the Federal Aviation Administration — about their prior knowledge of the change to the Maneuvering Characteristics Augmentation System, or MCAS.

“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”, according to this statement which was posted at the official Internet web site of the Department of Justice of the United States. “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.”

Because of their deception, a key document published by the Aircraft Evaluation Group of the Federal Aviation Administration lacked information pertaining to the Maneuvering Characteristics Augmentation System; and in turn, airplane manuals and pilot-training materials for airlines which are based in the United States lacked information about the Maneuvering Characteristics Augmentation System.

“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,” David P. Burns — who is the acting assistant attorney general of the criminal division of the Department of Justice of the United States — was quoted as saying in the aforementioned official 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.”

As part of the terms of the deferred prosecution agreement, Boeing will pay a total criminal monetary amount of greater than $2.5 billion — as well as be required to certain actions and protocols — which are composed of:

  • A criminal monetary penalty of $243.6 million
  • Compensation payments of $1.77 billion to airline customers of the Boeing 737 MAX airplane
  • 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
  • Continuing to cooperate with the Fraud Section in any ongoing or future investigations and prosecutions
  • Reporting any evidence or allegation of a violation of fraud laws in the United State committed by employees or agents of The Boeing Company upon any domestic or foreign government agency, regulator, or any of the airline customers of Boeing
  • Strengthening 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 fraud laws in the United States in connection with interactions with any domestic or foreign government agency, regulator, or any of its airline customers

Summary

Because Boeing engaged in remedial measures after the offense conduct, the Department of Justice of the United States ultimately determined that an independent compliance monitor was unnecessary based on a number of factors which are detailed in its official aforementioned statement.

Considering that a number of commercial airlines worldwide had retired entire fleets of different aircraft as a result of the current 2019 Novel Coronavirus pandemic, the Boeing 737 MAX airplanes can potentially dominate the skies around the world in the long term with their fuel efficiency as one of numerous reasons — assuming that no other safety issues are associated with them.

Despite the rescission of the initial order by the Federal Aviation Administration on Wednesday, November 18, 2020, passengers may not feel comfortable enough to board Boeing 787-8 and Boeing 787-9 airplanes because they may not have enough confidence that the problems associated with them have been resolved. I would not have an issue boarding one of those airplanes as a passenger in the future.

Still, the incidents — and the resulting investigations and resolutions — will serve as a invaluable learning experience which will help to prevent fraud and other potential incidents in the future. That a reputable entity such as The Boeing Company was even involved in something like this is shameful and embarrassing at best; and life-threatening at worst. As Andrea M. Kropf — who is the special agent in charge of the office of inspector general Midwestern Region of the Department of Transportation — was quoted as saying, “This landmark deferred prosecution agreement will forever serve as a stark reminder of the paramount importance of safety in the commercial aviation industry, and that integrity and transparency may never be sacrificed for efficiency or profit.” I certainly hope so — for the sake of commercial aviation in the future — and I am glad that The Boeing Company was held accountable for its role in both the tragic crashes and defrauding regulators.

Individuals who believe they may be an heir, relative, or legal beneficiary of one of the passengers of Lion Air Flight 610 or Ethiopian Airlines Flight 302 in this case should contact Victim Witness Unit of the Fraud Section vie e-mail message at: Victimassistance.fraud@usdoj.gov or call 888-549-3945.

Photograph ©2015 by Brian Cohen.

2 thoughts on “Boeing Charged With 737 MAX Airplane Fraud Conspiracy; Agrees to Pay Greater Than $2.5 Billion”

  1. Conway Park says:

    You should clarify for your readers that this 2.5 Billion number is misleading. MOST of that 2.5 Billion they had agreed to pay regardless of any criminal charges. They are only paying about 10% of that to get all the deferred prosecution! This is a slap on the wrist at best.

    1. Brian Cohen says:

      The article breaks down the numbers as according to the Department of Justice of the United States, Conway Park

      …and I wholly agree with you.

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