By Mike Spector and Chris Prentice
(Reuters) -The U.S. Justice Department will criminally charge Boeing (NYSE 🙂 with fraud over two fatal crashes and ask the plane maker to plead guilty or face trial, two people familiar with the matter said on Sunday. .
The Justice Department planned to formally offer a plea deal to Boeing later in the day that includes a financial penalty and the appointment 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 declines to plead guilty, prosecutors plan to take the company to trial, they said.
Boeing and the Justice Department declined to comment. Reuters was the first to report the Justice Department’s decision to prosecute Boeing and seek a plea.
The Justice Department decided to bring charges against Boeing after finding it had violated a 2021 agreement that had shielded it from prosecution over fatal crashes involving 737 MAX aircraft. The fatal crashes took place in 2018 and 2019 and killed 346 people.
The decision to file criminal charges against Boeing deepens the ongoing crisis affecting the aircraft manufacturer, exposing the company to additional financial ramifications and tighter government oversight.
A guilty plea could also have implications for Boeing’s ability to enter into government contracts such as those with the US military that account for a significant portion of its revenue. Companies with felony convictions can receive waivers, and it is unclear to what extent the Justice Department’s proposed plea deal addresses the issue.
Justice Department officials revealed their decision to victims’ families during a phone call on Sunday. The proposal would require Boeing to plead guilty to conspiring to defraud the U.S. Federal Aviation Administration in connection with the fatal crashes, the sources said.
The Justice Department’s push for Boeing to plead guilty follows another in-flight explosion in January that exposed continuing safety and quality problems at the planemaker.
A panel blew up a new Boeing 737 MAX 9 plane 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 over the fatal crashes in 2018 and 2019. Boeing has previously said it “complied with the terms” of the settlement and formally told prosecutors it disagrees with their finding that it violated the agreement.
The proposed settlement also includes a $487.2 million monetary penalty, of which Boeing would have to pay only half, they added. That’s because prosecutors are giving the company credit for a payment it made as part of the earlier settlement related to fatal crashes of Lion Air and Ethiopian Airlines flights. The fine is the maximum legally allowed under the charge.
Boeing could also be forced to pay damages under the terms of the proposal, the amount of which will be up to the judge’s discretion, the sources said. The offer also includes subjecting Boeing to three years of probation, they said.
The plea agreement would also require Boeing’s board of directors to meet with victims’ families, they said.
Relatives of the victims expressed anger toward Justice Department officials during the call, saying they believe the proposed plea deal does not hold Boeing accountable 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 more severe financial consequences, she said.
“737 MAX families strongly oppose the shameful new agreement between Boeing and the Department of Justice,” Applebaum said. He called the proposed financial penalty “negligible” and said the victims’ families will challenge the settlement in court.
The Justice Department declined to comment on the families’ reaction.
It is unusual for the Justice Department to inform other interested parties about its plans before notifying the company it is targeting, a third source said. But the Justice Department, led by Attorney General Merrick Garland, has sought to change its tactic after facing backlash from victims’ families over the original 2021 settlement. Victims’ families learned of the 2021 settlement only after it had been negotiated.
In June, U.S. lawmakers questioned Chief Executive Dave Calhoun about Boeing’s safety record. Lawyers for victims’ families cited criticism from Capitol Hill in pushing the Justice Department to prosecute the plane maker and impose a fine of up to $24.78 billion.
Boeing previously paid $2.5 billion as part of a deal with prosecutors that granted the company immunity from criminal prosecution on a fraud conspiracy charge related to the defective design of the 737 MAX.
Boeing had to comply with the terms of the deferred prosecution agreement for a three-year period ending Jan. 7. Prosecutors would then have been willing to ask a judge to dismiss the fraud conspiracy charge. But in May, the Justice Department concluded that Boeing had violated the agreement, opening the company up to prosecution.