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Boeing Agrees to Pay $2.5 Billion to Settle 737 MAX Fraud Case

Jan. 8, 2021
Justice Dept. says two Boeing test pilots concealed information about the MCAS anti-stall system from the FAA.

The Justice Department announced January 7 that Boeing had signed on to a deferred prosecution agreement for one count of conspiracy to commit fraud. Per the agreement, the aviation company will pay penalties of over $2.5 billion in fines and strengthen its compliance program by meeting with the Department’s fraud section quarterly.

Boeing admitted in court documents to deceiving the Federal Aviation Administration’s Aircraft Evaluation Group about the plane’s MCAS anti-stall system blamed for two lethal crashes.According to the Justice Department, two of Boeing’s flight technical pilots “discovered information about an important change to MCAS” which should have been reported to the aircraft evaluation group. Instead, Boeing and the pilots “concealed” that information from the AEG, which subsequently left any mention of MCAS out of pilot training documents.

The FAA reportedly only came to know of the changes made to the system after the October, 2018 crash of Lion Air Flight 610 that killed 189 people. But even as the FAA was investigating the changes made to MCAS and the system’s role in the accident, Boeing and its pilots “continued misleading others—including at Boeing and the FAA” about their prior knowledge of the system changes. The 737 MAX was grounded March 13, 2019, three days after Ethiopian Airlines Flight 302 crashed, killing 157.

Acting Attorney General David Burns had harsh words for the Chicago-based aviation manufacturer: “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,” he said in a statement.

The current CEO of Boeing, David Calhoun, who replaced Boeing’s previous CEO after the fallout of the crashes, said in a note to employees that entering the Justice Department agreement “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 an one of us falls short of those expectations,” he wrote.

Boeing was not the only group caught in the fallout. The FAA also endured criticism for entrusting too many of its regulatory capacities to Boeing, the largest aviation manufacturer in the country. In June 2020, in a hearing with the Senate’s Committee on Commerce, Science, and Transportation, FAA Administrator Steve Dickson testified to that his agency had also “made mistakes” in its oversight of the aircraft.

As part of the settlement, Boeing will pay a criminal penalty of $243.6 million, $1.77 billion in compensation to 737 MAX customers, and $500 million to a fund for relatives of those killed in the crashes. It will also be required to meet with the Justice Department’s fraud section on a quarterly basis and submit yearly reports on its compliance efforts. If Boeing abides by the obligations of the three-year agreement, the initial criminal charges will be dismissed.

The Boeing 737 MAX, newly modified and recertified by the FAA in December 2020, has already returned to commercial use. It took its first post-grounding U.S. commercial flight December 29, 2020, from Miami to New York.

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