Boeing fined US$2.5bn for deceiving FAA MAX safety officials

The US Department of Justice has fined Boeing US$2.5 billion for deceiving FAA safety officials who initially cleared the 737 MAX to fly.

In a scathing statement, a series of senior figures accuse Boeing of “fraudulent and deceptive conduct”, “concealing material information” and “engaging in an effort to cover up their deception”.

Boeing chief executive David Calhoun said the huge penalty “appropriately acknowledges how we fell short of our values and expectations”.

The decision comes weeks after the MAX was once again cleared to fly after being grounded due to two fatal crashes in Ethiopia and Indonesia that killed 346 people.

Boeing has entered into a “deferred prosecution agreement” with the US Department of Justice related to a conspiracy to defraud the FAA’s Aircraft Evaluation Group (FAA AEG) in connection with its initial evaluation of  737 MAX.

Under the terms of the deal, Boeing will now pay US$2.5 billion, composed of a penalty of US$243.6 million, compensation payments to MAX airline customers of US$1.77 billion, and the establishment of a US$500 million crash-victim beneficiaries.

The Department of Justice said Boeing admitted to deceiving FAA safety officials about the crucial Maneuvering Characteristics Augmentation System (MCAS) software system that is better known as the stall-prevention system at the heart of the two crashes.

“Because of their deception, a key document published by the FAA AEG lacked information about MCAS, and in turn, airplane manuals and pilot-training materials for US-based airlines lacked information about MCAS,” said the Department of Justice in a statement.

“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” said Acting Assistant Attorney David P. Burns. “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.

“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.”

US Attorney Erin Nealy Cox for the Northern District of Texas was similarly scathing in her comments.

“The misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government’s ability to ensure the safety of the flying public.

This case sends a clear message: The Department of Justice will hold manufacturers like Boeing accountable for defrauding regulators – especially in industries where the stakes are this high.”

Other parts of the ruling mean Boeing has agreed to co-operate with any ongoing or future investigations and prosecutions into fraud.

“In addition, Boeing has agreed to strengthen its compliance program and to enhance compliance program reporting requirements, which require Boeing to meet with the Fraud Section at least quarterly and to submit yearly reports to the Fraud Section regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced so that it is effective at deterring and detecting violations of US fraud laws,” added the statement.

Boeing chief executive David Calhoun said: “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.

“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.”