By Chris Prentice, Mike Spector and David Shepardson
NEW YORK/WASHINGTON (Reuters) – Boeing has agreed to plead guilty to one count of conspiracy to commit criminal fraud to resolve a U.S. Justice Department investigation into two fatal 737 MAX crashes, a government official said on Sunday.
The declaration, which requires approval by a federal judge, would label the plane maker a convicted felon. Boeing will also pay a $243.6 million criminal fine, a Justice Department official said.
The charge relates to two 737 MAX crashes in Indonesia and Ethiopia over a five-month period in 2018 and 2019 that killed 346 people and prompted victims’ families to demand Boeing be prosecuted.
A guilty plea could threaten the company’s ability to secure lucrative government contracts with entities such as the U.S. Department of Defense and NASA, though it could seek waivers. Boeing was exposed to criminal prosecution after the Justice Department found in May that the company violated a 2021 settlement related to the fatal crashes.
Still, the guilty plea spares Boeing a contentious trial that could have exposed many of the company’s decisions that led to the fatal MAX crashes to even greater public scrutiny. It would also make it easier for the company, which will have a new chief executive later this year, to try to move forward in seeking approval for its planned acquisition of Spirit AeroSystems (NYSE:).
Boeing declined to comment.
Boeing has also agreed to spend at least $455 million over the next three years to strengthen its safety and compliance programs, the official said. The Justice Department will appoint an outside monitor to oversee the company’s compliance. The monitor will be required to publicly file annual reports with the court on the company’s progress.
On June 30, the Justice Department offered Boeing a plea deal and gave the company until the end of the week to accept the deal or face trial on one count of conspiring to defraud the Federal Aviation Administration over a key software feature linked to the fatal crashes.
After being briefed last week on the Justice Department’s offer, a lawyer for some of the families criticized it as a “sweetheart deal.” They have vowed to fight the deal in court.
The Justice Department’s move to charge Boeing has deepened an ongoing crisis that has plagued Boeing since a mid-air explosion in January exposed ongoing safety and quality problems at the planemaker.
A panel blew up a new Boeing 737 MAX 9 jet during an Alaska Airlines flight on Jan. 5, just two days before a 2021 deferred prosecution agreement that had protected the company from prosecution over the earlier fatal crashes was set to expire. The agreement only covers Boeing’s conduct before the fatal crashes and does not protect the planemaker from any other potential investigation or prosecution related to the January incident or other conduct.
Boeing pleads guilty to making false statements to the Federal Aviation Administration about expanding a key software feature used on the MAX to work at low speeds. The new software allowed Boeing to save money by requiring less intensive training for pilots.
The maneuvering characteristics augmentation system (MCAS) is a software feature designed to automatically push the plane’s nose down under certain conditions. It was linked to the two crashes that led the FAA to ground the plane for 20 months, a measure that cost Boeing $20 billion and which the government lifted in November 2020.
As part of the agreement, Boeing’s board of directors will meet with the families of those killed in the MAX crashes, the official said.
The settlement does not shield any executives, the Justice Department official said, though charges against individuals are considered unlikely because of the statute of limitations.
The agreed fine will be Boeing’s second $243.6 million fine related to the fatal crashes, bringing the total fine to the maximum allowed. The company previously paid the fine as part of the $2.5 billion 2021 settlement. The $243.6 million fine represented the amount Boeing saved by not implementing full-flight simulator training.
Families of victims of those crashes criticized the earlier settlement and earlier this year pushed the Justice Department to seek up to $25 billion from Boeing.
This year, the Justice Department has held several meetings to hear from victims’ families as it investigates Boeing’s failure to comply with the 2021 agreement.