Boeing settles with Justice Department over 737 MAX charges

As part of a new settlement with the Justice Department over the 737 MAX program, Boeing has agreed to cooperate with the department's fraud section in any ongoing or future investigations, according to DOJ.

In an announcement today, the Justice Department said Boeing has agreed to pay more than $2.5 billion to resolve a criminal charge "related to a conspiracy to defraud the Federal Aviation Administration's Aircraft Evaluation Group . . . in connection with the FAA AEG's evaluation of Boeing's 737 MAX airplane."

Additionally, under the terms of the settlement, "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," DOJ added.

"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 Justice Department said.

According to DOJ, the more-than-$2.5 billion payment is composed of a criminal monetary penalty of nearly $244 million, compensation payments to airline customers of $1.8 billion and the creation of a $500 million crash-victim beneficiaries fund for the relatives of the 346 passengers who died in the two Boeing 737 MAX crashes.

Lion Air Flight 610 crashed in late 2018 and Ethiopian Airlines Flight 302 crashed in early 2019.

In a statement today, Boeing notes that as part of the resolution, the Justice Department has agreed to defer prosecution of the company, providing Boeing abides by the obligations in the three-year deferred prosecution agreement. At that point, the company adds, the charge will be dismissed.

"The agreement is based on the conduct of two former Boeing employees and their intentional failure to inform the FAA Aircraft Evaluation Group (AEG), the group within the FAA responsible for making pilot training determinations, about changes to the Maneuvering Characteristics Augmentation System," Boeing said.

David Calhoun, Boeing's chief executive, said in a note to employees that entering into the resolution is "the right thing for us to do."

"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," he added.

Boeing noted the company has taken a $744 million charge to earnings in connection with the agreement.