Boeing reaches $2.5 billion settlement with US over 737 Max

Boeing agreed to pay more than $2.5 billion in a legal settlement with the Justice Department stemming from the 737 Max debacle, the government said Thursday. The agreement resolves a criminal charge that Boeing conspired to defraud the Federal Aviation Administration, which regulates the company and evaluates its planes.

The Max was grounded worldwide in March 2019 after 346 people were killed in crashes in Indonesia and Ethiopia. The two accidents deeply damaged Boeing’s once-sterling reputation and hurt its relationships with airlines and aviation regulators around the world. The company eventually fired its CEO, and the scandal has cost it billions of dollars in fines, settlements, and lost orders.

With less than two weeks left in the Trump administration, the agreement takes the question of how a Biden Justice Department would view a settlement off the table. President Donald Trump had repeatedly discussed the importance of Boeing to the economy, even going so far last year to say he favored a bailout for the company.

There was never a real threat that prosecutors would have sought a criminal conviction. Such a move could have potentially put Boeing, one of the largest US manufacturers, out of business and cost tens of thousands of jobs at the planemaker, its suppliers and other businesses.

The criminal charge against the company centered on the actions of two employees who withheld information from the FAA about changes made to software known as MCAS. The software was later implicated in both crashes.

“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,” David Burns, acting assistant attorney general for the Justice Department’s criminal division, said in a statement. “This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash victims’ families and beneficiaries.”

As part of Thursday’s agreement, Boeing will establish a $500 million fund to compensate the families of those who died and pay a fine of nearly $244 million. The company will also pay $1.77 billion in compensation to its airline customers who were unable to use or take deliveries of the Max, which remains grounded in some parts of the world. American Airlines last week became the first U.S. carrier to resume flights aboard the plane after the FAA lifted its grounding in November, provided Boeing or airlines make certain modifications to the plane.

“I firmly believe that entering into this resolution is the right thing for us to do — a step that appropriately acknowledges how we fell short of our values and expectations,” David Calhoun, who was appointed Boeing’s CEO in January 2020, said in a note to employees. “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.”

Last January, Boeing said it expected the plane’s grounding to cost the company more than $18 billion. But that was before the coronavirus pandemic brought travel to a standstill, throwing the airline industry into disarray. In 2020, Boeing lost more than 1,000 aircraft orders, mostly for the Max, although more than 4,000 remain.

The Max is a mainstay of the global passenger airline fleet, used for domestic flights or short international trips. As a single-aisle jet, it is the kind of smaller plane airlines have increasingly preferred to use in recent years. It is also more fuel-efficient than its predecessors.

While the deal will resolve one of Boeing’s legal problems, others remain outstanding.

Lawyers representing the families of those killed aboard Ethiopian Airlines Flight 302 in March 2019 said the allegations in the agreement represent “the tip of the iceberg of Boeing’s wrongdoing.” Their clients are pursuing a separate civil case against the company.

“The FAA should not have allowed the 737 Max to return to service until all of the airplane’s deficiencies are addressed and it has undergone transparent and independent safety reviews — which to date still has not occurred,” the lawyers said in a statement.

The settlement will also not affect the criminal investigation into whether the Boeing employees broke the law in connection with knowingly misleading the FAA while the company was seeking approval for the Max. Their actions led the FAA to leave information about the MCAS software out of a final report, which in turn resulted in its omission from airplane and pilot training materials, according to the Justice Department.

That investigation appeared to have some momentum about a year ago as prosecutors had summoned several Boeing employees in front of a federal grand jury. But the speed of the investigation slowed in the months after the pandemic struck in March.

Prosecutors were examining whether a top pilot for the company, Mark Forkner, had intentionally lied to the regulator about the nature of new flight control software. The software, which could push down the nose of the plane, played a role in the two deadly crashes.

Lawyers for Forkner have previously said that he did not mislead regulators and would never put the safety of pilots or passengers at risk.

Deferred prosecution agreements are often used by the government in criminal cases against corporations. They effectively hold a prosecution in abeyance, allowing companies to temporarily avoid charges if they don’t commit wrongdoing for a period of time. In Boeing’s case, the charges will be dismissed after three years if Boeing complies with the agreement.