Why no one at Boeing will be jailed for 737 Max crashes criminal fraud

EXPLAINED

The guilty plea, which first requires judicial approval, would brand Boeing a convicted felon

Boeing’s logo on the side of a Boeing 737 MAX during the Farnborough International Airshow (Photo: John Keeble/Getty)

By Christian Oliver

July 8, 2024 

Despite Boeing agreeing to plead guilty to a criminal fraud conspiracy charge over two deadly 737 Max crashes, it appears almost certain no one within the company will face any jail time.

The US Justice Department said on Sunday night that it had reached a plea deal with the aircraft manufacturer over a crash in Indonesia in 2018 and another in Ethiopia in 2019. The crashes killed 346 people in total and prompted the families of victims to demand justice for the deaths, and for Boeing to ultimately face prosecution.

Following a years-long legal saga, the government determined the company violated an agreement that had protected it from prosecution and had sought to deceive regulators who approved its aeroplane and pilot-training requirements.

Prosecutors alleged that Boeing had committed conspiracy to defraud the US government by misleading regulators about a flight-control system implicated in the two crashes.

The Department of Justice reached a settlement with Boeing in January 2021 and agreed it would not prosecute as long as the company complied with certain conditions for three years. But prosecutors last month said Boeing had breached those terms.

Workers recover debris at the scene of the Ethiopian Airlines Boeing Max plane crash on March 11, 2019 (Photo: Mulugeta Ayene/AP)

What is the deal between Boeing and the Department of Justice?

The guilty plea first requires judicial approval.

Boeing will then have to pay a criminal fine of $243.6m (£190m). It will also be forced to agree to an independent monitor to oversee operations and spend at least $455m ($355m) on its compliance and safety programmes.

The planemaker had been offered the option of instead facing a trial on the felony criminal charge of conspiracy to defraud the US, but opted to take the guilty plea.

The deal does not give Boeing immunity for other incidents, including, among others, a panel blowing off mid-flight on a Max jetliner in January earlier this year.

But notably for the families of the 346 victims, the deal does not cover any current or former Boeing officials, only the corporation – meaning it is highly unlikely anyone will face jail time.

“This sweetheart deal fails to recognize that because of Boeing’s conspiracy, 346 people died. Through crafty lawyering between Boeing and DOJ, the deadly consequences of Boeing’s crime are being hidden,” a lawyer for some of the families, Paul Cassell, said.

Why will no Boeing official face jail time?

Collen Clark, founder and lawyer at Schmidt & Clark LLP, in Washington DC, told i that it was “important to understand that the plea deal is with the corporation of Boeing, not any individual within the company.”

He explained that legal proceedings would be directed at the company as a whole rather than any specific person.

“The plea deal covers only wrongdoing by Boeing before the crashes. It does not give Boeing immunity for other incidents,” he noted.

Mr Clark added that “the nature of corporate law often makes it difficult to hold individuals accountable”.

“In many cases, decisions within a corporation are made collectively, and it can be challenging to pinpoint responsibility on a single individual,” he explained. “This is especially true in large corporations like Boeing, where decisions are made at various levels of management.”

Samya Stumo’s mother, Nadia Milleron, has campaigned for justice together with the relatives of many other Boeing victims (Photo: Olivier Douliery/AFP)

The attorney also highlighted that the specific plea deal between Boeing and the Department of Justice was “designed to avoid a trial”.

“Boeing has agreed to plead guilty to a criminal fraud charge and pay a fine. This means that the company has accepted responsibility for its actions and is willing to pay a penalty,” he said, noting that this would not necessarily translate into jail time for any individuals.

“In essence, while the plea deal holds Boeing accountable for its actions, it does not necessarily mean that individuals within the company will face jail time. This is due to the nature of corporate law and the specifics of the plea deal itself.

“It’s a complex issue with many nuances,” he added, “and it’s a prime example of the challenges in holding corporations accountable in the legal system.”

‘Compelling national interest’ in letting Boeing continue

The criminal conviction for Boeing may not only harm its commercial sales but also its status as a federal contractor.

The plea deal does not exclude Boeing from selling to the government but that would be a decision for each federal agency.

Boeing is entrenched in several lucrative government contracts, including with the US Defence Department and Nasa.

While it is predominantly known for its commercial aircraft, Boeing’s defence and space unit is vital to its business. It made some $7bn (£5.5bn) in government contracts in first-quarter sales, up 6 per cent from a year ago.

It said in its annual report that US government contracts represented 37 per cent of its revenue last year – most of them with the Defence Department or Nasa.

When Boeing was last forced to pay a $615m (£479m) fine in 2006 to settle criminal and civil charges, the US Air Force cited “compelling national interest” in letting the defence giant continue competing for contracts.

'Sweetheart deal' for Boeing over deadly crashes slammed

By Associated Press

   Jul 9, 2024

Boeing will plead guilty to a criminal fraud charge stemming from two crashes of 737 Max jetliners that killed 346 people, the US Justice Department said this morning, after the government determined the company violated an agreement that had protected it from prosecution for more than three years.

Federal prosecutors gave Boeing the choice last week of entering a guilty plea and paying a fine as part of its sentence or facing a trial on the felony criminal charge of conspiracy to defraud the US.

Prosecutors accused the American aerospace giant of deceiving regulators who approved the airplane and pilot-training requirements for it.

Workers collect debris on March 12, 2019, at the scene where an Ethiopian Airlines Boeing 737 Max 8 crashed shortly after takeoff, killing all 157 on board, near Bishoftu, or Debre Zeit, south of Addis Ababa, in Ethiopia. (AP)

The plea deal, which still must receive the approval of a federal judge to take effect, calls for Boeing to pay an additional US$243.6 million ($361.65 million) fine.

That was the same amount it paid under the 2021 settlement that the Justice Department said the company breached. An independent monitor would be named to oversee Boeing's safety and quality procedures for three years. The deal also requires Boeing to invest at least US$455 million ($675.5 million) in its compliance and safety programs.

The plea deal covers only wrongdoing by Boeing before the crashes in Indonesia and in Ethiopia, which killed all 346 passengers and crew members aboard two new Max jets. It does not give Boeing immunity for other incidents, including a panel that blew off a Max jetliner during an Alaska Airlines flight over Oregon in January, a Justice Department official said.

Boeing has agreed to a plea deal with the US government. (AP)

The deal also does not cover any current or former Boeing officials, only the corporation. In a statement, Boeing confirmed it had reached the deal with the Justice Department but had no further comment.

In a filing Sunday night local time, the Justice Department said it expected to submit the written plea agreement with a US District Court in Texas by July 19. Lawyers for some of the relatives of those who died in the two crashes have said they will ask the judge to reject the agreement.

"This sweetheart deal fails to recognise that because of Boeing's conspiracy, 346 people died. Through crafty lawyering between Boeing and DOJ, the deadly consequences of Boeing's crime are being hidden," said Paul Cassell, a lawyer for some of the families.

Officials inspect an engine recovered from the crashed Lion Air jet in Jakarta, Indonesia, in November 2018. (AP)

Federal prosecutors alleged Boeing committed conspiracy to defraud the government by misleading regulators about a flight-control system that was implicated in the crashes, which took place than less five months apart.

As part of the January 2021 settlement, the Justice Department said it would not prosecute Boeing on the charge if the company complied with certain conditions for three years. Prosecutors last month alleged Boeing had breached the terms of that agreement.

US District Judge Reed O'Connor, who has overseen the case from the beginning, has criticised what he called "Boeing's egregious criminal conduct." O'Connor could accept the plea and the sentence that prosecutors offered with it or he could reject the agreement, likely leading to new negotiations between the Justice Department and Boeing.

With protesters in the audience, Boeing CEO Dave Calhoun waits to testify before the Senate Homeland Security and Governmental Affairs Subcommittee on Investigations at the Capitol in Washington, in June this year. (AP)

The case goes back to the crashes in Indonesia and in Ethiopia. The Lion Air pilots in the first crash did not know about flight-control software that could push the nose of the plane down without their input. The pilots for Ethiopian Airlines knew about it but were unable to control the plane when the software activated based on information from a faulty sensor.

The Justice Department charged Boeing in 2021 with deceiving FAA regulators about the software, which did not exist in older 737s, and about how much training pilots would need to fly the plane safely. The department agreed not to prosecute Boeing at the time, however, if the company paid a US$2.5 billion ($3.71 billion) settlement, including the US$243.6 million fine, and took steps to comply with anti-fraud laws for three years.

Boeing, which blamed two low-level employees for misleading the regulators, tried to put the crashes behind it. After grounding Max jets for 20 months, regulators let them fly again after the company reduced the power of the flight software. Max jets logged thousands of safe flights and orders from airlines picked up, increasing to about 750 in 2021, about 700 more in 2022 and nearly 1000 in 2023.

Protesters with palms painted red to resemble blood hold their hands up during the Senate hearing. (AP)

That changed in January, when a panel covering an unused emergency exit blew off a Max during the Alaska Airlines flight over Oregon.

Pilots landed the 737 Max safely and no one was seriously injured, but the incident led to closer scrutiny of the company. The US Justice Department opened a new investigation, the FBI told passengers on the Alaska plane that they might be victims of a crime and the FAA said it was stepping up oversight of Boeing.

A criminal conviction could jeopardise Boeing's status as a federal contractor, according to some legal experts. The plea announced this morning does not address that question, leaving it to each government agency whether to bar Boeing.

A door plug area of an Alaska Airlines Boeing 737 Max 9 aircraft awaiting inspection is pictured with paneling removed at the airline's facilities at Seattle-Tacoma International Airport in January. (AP)

The US Air Force cited "compelling national interest" in letting Boeing continue competing for contracts after the company paid a US$615 million ($913 million) fine in 2006 to settle criminal and civil charges, including that it used information stolen from a rival to win a space-launch contract.

The company based in Arlington, Virginia, has 170,000 employees and dozens of airline customers spanning the globe. The best customers for the 737 Max include Southwest, United, American, Alaska, Ryanair and flydubai.

But 37 per cent of its revenue last year came from US government contracts. Most of it was defence work, including military sales that Washington arranged for other countries.

A Boeing 737 MAX aircraft is shown on the assembly line. (AP)

Boeing also makes a capsule for NASA. Two astronauts will remain at the International Space Station longer than expected while Boeing and NASA engineers troubleshoot problems with the propulsion system used to maneuver the capsule.

Even some Boeing critics have worried about crippling a key defence contractor.

"We want Boeing to succeed," Richard Blumenthal, a Connecticut Democrat, said during a Senate hearing last month on what he termed the company's broken safety culture.

"Boeing needs to succeed for the sake of the jobs it provides, for the sake of local economies it supports, for the sake of the American travelling public, for the sake of our military."

Relatives of the Max crash victims have pushed for a criminal trial that might illuminate what people inside Boeing knew about deceiving the FAA. They also want the Justice Department to prosecute top Boeing officials, not just the company.

"Boeing has paid fines many a time, and it doesn't seem to make any change," said Ike Riffel of Redding, California, whose sons Melvin and Bennett died in the Ethiopian Airlines crash.

"When people start going to prison, that's when you are going to see a change."

At a recent Senate hearing, Boeing CEO David Calhoun defended the company's safety record after turning and apologising to Max crash victims' relatives seated in the rows behind him "for the grief that we have caused."

Hours before the hearing, the Senate investigations subcommittee released a 204-page report with new allegations from a whistleblower who said he worried that defective parts could be going into 737s. The whistleblower was the latest in a string of current and former Boeing employees who have raised safety concerns about the company and claimed they faced retaliation as a result.