Friday, March 31, 2023

Boeing to pay $ 2.5 billion to settle 737 Max fraud charge

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Boeing Co. has agreed to pay $ 2.5 billion to settle criminal charges that it defrauded the U.S. government by withholding information about the hapless 737 Max involved in two fatal crashes.

The U.S. aircraft maker on Thursday reached a deferred prosecution agreement in the Northern District of Texas, the Justice Department said in a press release.

“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 aircraft manufacturers,” Acting Deputy Attorney General said David P. Burns of the Criminal Division of the Department of Justice in a statement. .

Boeing shares fell less than 1% to $ 211.26 after regular trading in New York closed.

A design flaw in the Max contributed to the two crashes in about five months in 2018 and 2019, killing 346 people. Several investigative reports have revealed that the company had modified a flight control system, but did not fully explain the changes to Federal Aviation Administration inspectors.

“I firmly believe that concluding this resolution is the right thing to do for us – a step which rightly recognizes how far we have fallen short of our values ​​and expectations.” Boeing CEO Dave Calhoun said in a message to employees. “This resolution reminds us all how crucial our obligation to be transparent to regulators is and the consequences our business can face if one of us does not meet those expectations.”

The action is the last to reach the planner’s bottom line. The company’s inability to deliver planes to the ground and previous order cancellations have cost the company billions of dollars.

Of the $ 2.5 billion, Boeing has already set aside $ 1.77 billion to reimburse airlines and other Max customers. The company said it expects to incur an additional charge of $ 743.6 million for the fourth quarter of 2020 as it pays a penalty of $ 243.6 million and $ 500 million in additional compensation. for the families of the victims of the accident. Boeing is expected to release its results for the quarter on January 27.

The plane, Boeing’s best-selling model, was put on hold for 20 months, while the FAA and regulators in other countries oversaw design changes to address issues revealed in investigations. The FAA lifted its grounding on Nov. 18, provided the airlines completed a repair list and revamped pilot training.

A criminal investigation into the design and approval of the aircraft began after the October 29, 2018 crash off the coast of Indonesia of a Lion Air flight, but before the second crash near Addis Ababa.

“The misleading statements, half-truths, and omissions that Boeing employees communicated to the FAA have hampered the government’s ability to ensure the safety of the flying public,” said U.S. District Attorney Erin Nealy Cox of the North Texas District in A press release. “This case sends a clear message that the Justice Department will hold manufacturers like Boeing responsible for regulator fraud, especially in sectors where the stakes are so high.

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