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Boeing agrees guilty plea over fraud charges linked to fatal 737 Max crashes

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Boeing agrees guilty plea over fraud charges linked to fatal 737 Max crashes
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Joe Petrie Editor & Chief | AviationPros

Boeing Co. has agreed to plead guilty to criminal conspiracy charges related to the two fatal crashes of its 737 Max aircraft. This agreement, reached with US prosecutors, labels Boeing as a felon but allows it to avoid a courtroom trial while it seeks recovery from multiple crises.

According to the Justice Department, Boeing could face a criminal fine up to $487.2 million, the maximum permitted by law. However, if approved by a judge, this amount may be reduced to $243.6 million due to credit for a prior fine paid by Boeing.

The company will also implement a corporate monitor and spend at least $455 million over three years to enhance compliance and safety programs. This deal is pending court approval and includes a period of court-supervised probation.

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The Justice Department found that Boeing violated a 2021 deferred-prosecution agreement connected to the crashes. This breach was identified following an incident involving a fuselage panel on January 5, just before the agreement was set to expire.

These developments mark a significant low point in Boeing's history after two crashes in 2018 and 2019 resulted in 346 fatalities. The plea deal could complicate Boeing's dealings with the government as it continues work as a defense contractor and builder of presidential aircraft.

Avoiding trial might benefit Boeing amid financial challenges and leadership uncertainties following recent incidents. The DOJ concluded that Boeing failed to implement an effective compliance program as required by the previous agreement.

Despite these issues, Boeing's stock showed little change in pre-market trading but has declined by 29% this year. Finalization of the plea agreement is expected by July 19.

Boeing confirmed reaching an agreement in principle with the Justice Department, though specific terms await approval. Previously, Boeing disagreed with findings that it breached the earlier deal from 2021 when it admitted deceiving the FAA about flight control systems linked to the crashes.

The initial agreement faced criticism from crash victims' families who were not consulted before its announcement. They have since objected to the latest plea deal as well.

Erin Applebaum of Kreindler & Kreindler LLP expressed disappointment with DOJ's decision: “We are extremely disappointed that DOJ is moving forward with this wholly inadequate plea deal despite the families’ strong opposition.” She added that while they welcomed independent oversight for selecting a corporate monitor, she viewed the deal as insufficient for meaningful change within Boeing.

Mark Lindquist, another attorney for victims' families, acknowledged: “While many of us would have preferred a more vigorous prosecution, a guilty plea to a felony is a serious step up in accountability from the initial Deferred Prosecution Agreement.”

Lindquist emphasized future steps should involve accepting full responsibility in civil cases and complying fully with conditions of the guilty plea.

Boeing also faces investigations from various bodies including the US Securities and Exchange Commission and Congress regarding events leading up to January's accident involving an Alaska Airlines plane.

The case is filed under US v. Boeing, 21-cr-005 in US District Court, Northern District of Texas (Fort Worth).

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