US to prosecute Boeing criminally, seek guilty plea, sources say

Reuters

July 1, 2024, 7:25 a.m.

Last modification: July 1, 2024, 07:41

Photos of relatives killed in the Boeing 737 Max 8 plane crashes are held up as Boeing CEO Dave Calhoun testifies before a Senate Homeland Security and Governmental Affairs Committee Investigations Subcommittee hearing on the safety culture at Boeing, on Capitol Hill in Washington, U.S., June 18, 2024. Photo: REUTERS/Kevin Lamarque

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Photos of relatives killed in the Boeing 737 Max 8 plane crashes are shown as Boeing CEO Dave Calhoun testifies before a Senate Homeland Security and Governmental Affairs Committee investigation subcommittee on safety culture at Boeing, on Capitol Hill in Washington, U.S., June 18, 2024. Photo: REUTERS/Kevin Lamarque

The U.S. Justice Department will charge Boeing with fraud in two fatal crashes and ask the planemaker to plead guilty or face trial, two people familiar with the matter said Sunday.

The Justice Department planned to formally offer a plea deal to Boeing later today, which includes a financial penalty and the imposition of an independent monitor to audit the company's safety and compliance practices for three years, the sources said.

Justice Department officials plan to give Boeing until the end of the week to respond to the offer, which they will present as non-negotiable, the sources said. If Boeing refuses to plead guilty, prosecutors plan to take the company to court, they said.

Boeing and the Justice Department declined to comment. Reuters first reported the Justice Department's decision to sue Boeing and seek a guilty plea.

The Justice Department decided to indict Boeing after finding that it violated a 2021 agreement that shielded it from prosecution for fatal crashes involving 737 MAX planes. The deadly crashes occurred in 2018 and 2019, killing 346 people.

The decision to pursue criminal charges against Boeing deepens the aircraft maker's current crisis, exposing the company to additional financial consequences and stricter government oversight.

A guilty plea could also affect Boeing’s ability to secure government contracts, such as those with the U.S. military, which account for a significant portion of its revenue. Companies convicted of crimes are eligible for waivers, and it’s unclear how the Justice Department’s proposed plea deal addresses that issue.

Justice Department officials revealed their decision to family members of the victims in a phone call earlier Sunday. The proposal would require Boeing to plead guilty to conspiracy to defraud the U.S. Federal Aviation Administration in connection with the fatal crashes, the people said.

The Justice Department's push for Boeing to plead guilty follows another mid-air explosion in January that exposed ongoing safety and quality problems at the aircraft maker.

A panel blew off a new Boeing 737 MAX 9 during an Alaska Airlines flight on Jan. 5, just two days before a 2021 deferred prosecution agreement with the Justice Department was set to expire.

That agreement had shielded Boeing from prosecution for the fatal crashes in 2018 and 2019. Boeing previously said it “complied with the terms” of the agreement and officially told prosecutors it disagreed with the conclusion that he had violated the agreement.

The proposed deal also includes a $487.2 million monetary penalty, of which Boeing would be required to pay only half, they added. That's because prosecutors are giving the company credit for a payment it made under a previous settlement related to the fatal crashes of Lion Air and Ethiopian Airlines flights. The penalty is the maximum legally allowed for the prosecution.

Boeing could also be forced to pay damages, under the terms of the proposal, the amount of which would be left to a judge's discretion, the people said. The offer also contemplates subjecting Boeing to a three-year probationary period, they added.

The plea agreement would also require Boeing's board of directors to meet with the victims' relatives, they said.

Relatives of the victims expressed anger toward Justice Department officials during the call, saying the proposed plea deal did not hold Boeing responsible for the fatal crashes, said Erin Applebaum, one of the attorneys. representing the relatives of the victims. Family members wanted the company to face additional charges and greater financial consequences, she said.

“737 MAX families vigorously oppose the shameful new deal between Boeing and the Department of Justice,” Applebaum said. She called the financial penalty in the proposed plea deal “negligible” and said the victims' families would oppose the deal in court.

The Justice Department declined to comment on the families' reaction.

It is unusual for the Justice Department to tell other interested parties about its plans before notifying the company in its sights, a third source said. But the Justice Department, led by Attorney General Merrick Garland, sought to change course after facing backlash from victims' families over the initial 2021 deal. Victims' relatives did not find out about the 2021 agreement until after its negotiation.

In June, U.S. lawmakers criticized Chief Executive Dave Calhoun over Boeing's tarnished safety record. Lawyers for victims' family members cited criticism from Capitol Hill when they pressured the Justice Department to sue the aircraft maker and fine it up to $24.78 billion .

Boeing had already paid $2.5 billion as part of a deal with prosecutors that gave the company immunity from criminal prosecution on a fraud conspiracy charge related to the flawed 737 MAX design.

Boeing was required to abide by the terms of the deferred prosecution agreement for a three-year period that ended Jan. 7. Prosecutors could have then asked a judge to drop the fraud conspiracy charge. But in May, the Justice Department ruled that Boeing had violated the agreement, exposing the company to legal action.