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Boeing Settles 737 MAX Fraud Case in $2.5B Deal

Jan. 8, 2021
The jet builder faced a criminal charge brought by the U.S. Dept. of Justice over “fraudulent and deceptive conduct by employees” to conceal information about the aircraft’s flight-control system from FAA inspectors.

The Boeing Co. has agreed to pay $2.5 billion to settle a criminal charge brought by the U.S. Dept. of Justice concerning a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (AEG) in connection with FAA’s initial certification of 737 MAX aircraft, in 2017. The details of the case were announced by DoJ in a summary of the deferred prosecution agreement (DPA) it agreed to with Boeing.

Boeing will pay a criminal monetary penalty of $243.6 million, compensate 737 MAX customers (airlines) with a total of $1.77 billion, and establish a $500-million crash-victim beneficiaries fund to compensate the heirs, relatives, and legal beneficiaries of 346 passengers killed in two crashes of 737 MAX, in October 2018 and March 2019.

“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,” stated acting assistant attorney general David P. Burns. “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.”   

Boeing admitted — through two of its 737 MAX Flight Technical Pilots — that it deceived the FAA AEG about the Maneuvering Characteristics Augmentation System (MCAS), part of the 737 MAX flight-control program identified as the cause of both crashes. “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,” DoJ summarized.

During 20 months of grounding following the second crash, as Boeing revised the MCAS, reports emerged that Boeing had pressured FAA-appointed inspectors to overlook details that would have delayed the initial airworthiness certification, issued in 2017.

In September 2020, an inquiry by the U.S. House Committee on Transportation and Infrastructure led to a report that blamed both crashes on a series of design mistakes in the 737 MAX, as well as failure by the Federal Aviation Administration to properly oversee the aircraft's certification process.

In November 2020 FAA recertified the 737 MAX aircraft to resume commercial service. American Airlines resumed domestic flights with the 737 MAX in late December.

In December, new legislation was enacted that expands FAA’s technical staff, ends employee compensation based on manufacturer-driven goals, and imposes civil penalties on individuals accused of coercing aircraft inspectors.

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