Boeing to plead guilty in fraud case related to fatal 737 MAX crashes

The plea deal includes a $243.6 million fine and the appointment of a third-party monitor to oversee compliance.

Boeing has agreed to plead guilty to a criminal fraud conspiracy charge to resolve a US Justice Department investigation linked to two 737 MAX fatal crashes, the government said in court filing late on Sunday.

The plea, which requires a federal judge's approval, would brand the planemaker a convicted felon. Boeing will also pay a criminal fine of $243.6 million, the Justice Department (DOJ) said in a document filed in federal court in Texas that provided an overview of the agreement in principle.

The charge relates to two 737 MAX crashes in Indonesia and Ethiopia over a five-month period in 2018 and 2019 that killed 346 people and prompted the families of the victims to demand that Boeing face prosecution.

A guilty plea potentially threatens the company's ability to secure lucrative government contracts with the likes of the US Defense Department and NASA, although it could seek waivers. Boeing became exposed to criminal prosecution after the Justice Department in May found the company violated a 2021 settlement involving the fatal crashes.

Still, the plea spares Boeing a contentious trial that could have exposed many of the company's decisions leading up to the fatal MAX plane crashes to even greater public scrutiny. It would also make it easier for the company, which will have a new CEO later this year, to try to move forward as it seeks approval for its planned acquisition of Spirit AeroSystems.

A Boeing spokesperson confirmed it had "reached an agreement in principle on terms of a resolution with the Justice Department."

The planemaker also agreed to invest at least $455 million over the next three years to strengthen its safety and compliance programs, according to the filing.

The DOJ will appoint a third-party monitor to oversee the firm's compliance. The monitor will have to publicly file with the court annual reports on the company's progress. Boeing will also serve a probation, during which it commits not to violate any laws, until the end of the monitor's three-year term.

The DOJ on June 30 offered a plea agreement to Boeing and gave the company until the end of the week to take the deal or face a trial on a charge of conspiring to defraud the Federal Aviation Administration (FAA) in connection with a key software feature tied to the fatal crashes.

The Justice Department's push to charge Boeing has deepened an ongoing crisis engulfing Boeing since a separate January in-flight blowout exposed continuing safety and quality issues at the planemaker.

A panel blew off a new Boeing 737 MAX 9 jet during a Jan. 5 Alaska Airlines flight, just two days before the 2021 deferred prosecution agreement that had shielded the company from prosecution over the previous fatal crashes expired. Boeing faces a separate ongoing criminal probe into the Alaska incident.

The agreement only covers Boeing's conduct before the fatal crashes and does not shield the planemaker from any other potential investigations or charges related to the January incident or other conduct.

Boeing is set to plead guilty to making knowingly false representations to the Federal Aviation Administration about having expanded a key software feature used on the MAX to operate at low speeds. The new software saved Boeing money by requiring less intensive training for pilots.

The Maneuvering Characteristics Augmentation System (MCAS) is a software feature designed to automatically push the airplane’s nose down in certain conditions. It was tied to the two crashes that led to the FAA grounding the plane for 20 months, an action that cost Boeing $20 billion and was lifted by the government in November 2020.

As part of the deal, Boeing's board of directors will meet with relatives of those killed in the MAX crashes, the filing said.

DOJ officials modified their process for selecting an independent monitor in response to backlash from one of the lawyers representing victims' relatives, who argued the families should select the candidate instead of the government choosing from a pool of candidates Boeing would propose, according to the court filing.

US officials adjusted their plea offer to Boeing to stipulate they would select the pool of qualified candidates based on a public solicitation to which anyone can apply, including candidates the families support.

Lawyers for some of the families of the people killed in the two MAX crashes said they intended to exercise their right to oppose the deal.

"The families intend to argue that the plea deal with Boeing unfairly makes concessions to Boeing that other criminal defendants would never receive and fails to hold Boeing accountable for the deaths of 346 persons," they said in a separate court filing.

The agreement does not shield any executives, the DOJ filing said, though charges against individuals are seen as unlikely due to the statute of limitations. A former Boeing chief technical pilot was charged in connection with the Boeing fraud agreement but acquitted by a jury in 2022.

The agreed penalty will be Boeing's second fine of $243.6 million related to the fatal crashes — bringing the full fine to the maximum allowed. The company paid the fine previously as part of 2021's $2.5 billion settlement. The $243.6 million fine represented the amount Boeing saved by not implementing full-flight simulator training for MAX pilots.

Families of the victims of those crashes slammed the previous agreement and this year pressed the Justice Department to seek as much as $25 billion from Boeing.

This year, the DOJ has held several meetings to hear from the victims' families as they investigated Boeing's breach of the 2021 deal.

The DOJ and Boeing are working to document the full written plea agreement and file it in federal court in Texas by July 19, the DOJ said in the court filing.