DOJ to Charge Boeing, Seek Guilty Plea From Planemaker (2)

The US Justice Department will charge Boeing Co. with criminal fraud, leaving the planemaker to choose between pleading guilty or taking the risk of going to trial, according to people familiar with the matter.

Boeing has until the end of the week to decide whether to plead guilty to the charge, the department told the families of victims of two fatal 737 Max crashes and their attorneys in a meeting Sunday, according to the people who asked not to be named discussing a confidential matter.

The department will inform Boeing it will have to pay an additional criminal fine of $243.6 million on top of the $243.6 million already paid with a 2021 deferred-prosecution agreement, bringing the total amount of fine close to $500 million, according to two of the people. The company will also have to hire a corporate monitor for three years, they said.

Officials from the Justice Department’s fraud section and the US Attorney’s Office for the Northern District of Texas attended the Sunday meeting, according to an email seen by Bloomberg.

Paul Cassell, an attorney representing the crash victims’ families, called the offer the department plans to make to Boeing a “sweetheart plea deal.”

“The deal will not acknowledge, in any way, that Boeing’s crime killed 346 people,” he said in an email. “The families will strenuously object to this plea deal.”

Read more: Boeing’s Plane Turmoil May Make Summer Travel Worse (Video)

The fine the department will seek falls far short of a nearly $25 billion fine the families requested — with the possibility of suspending $14 billion to $22 billion of that if Boeing devotes those funds to an independent corporate monitor and improvements to its safety programs.

The Justice Department declined to comment. Boeing declined to comment.

Bloomberg previously reported that the planemaker is in talks with the department to resolve potential charges stemming from the crashes, and that a settlement is expected to include the appointment of a corporate monitor.

Dave Calhoun, chief executive officer of Boeing Co., during a Senate Homeland Security and Governmental Affairs Permanent Subcommittee on Investigations hearing in Washington, DC, US, on Tuesday, June 18, 2024.

Photographer: Graeme Sloan/Bloomberg

A guilty plea to criminal charges would mark a low-point in Boeing’s century-long history and a stunning development for a company that was once renowned for its cautious, straight-laced culture. It raises concerns over US government contracts for the company at a time when Boeing needs its defense division to counteract plunging revenue at its commercial airplane business.

The meeting comes after the Justice Department determined the planemaker violated the 2021 deferred-prosecution agreement struck between Boeing and the government in the waning days of the Trump Administration. The deal allowed Boeing to avoid criminal prosecution as long as it met certain conditions.

But in May, the department concluded the company had failed to meet a requirement to implement an effective compliance program to prevent and detect violations of US fraud laws. Boeing told the DOJ that it disagreed with the finding.

The breach announcement came after a fuselage panel blew off a Boeing jet operated by Alaska Airlines Inc. mid-flight in January. US safety investigators determined the plane was missing four bolts meant to secure the so-called door plug in place — a revelation that helped to unearth a series of manufacturing and quality lapses at the company and prompted multiple investigations by lawmakers and government agencies, including the Justice Department.

Boeing has been in turmoil since the mid-air blowout. The company’s shares are down by about a third this year and it has warned that it’s on pace to burn through about $8 billion in cash during the first half of 2024 as it deals with a production slowdown in the aftermath of the near-catastrophe. In response to the January accident, the Federal Aviation Administration capped production of the 737 Max and required Boeing to submit a sweeping plan to address the quality issues at its factories.

At the same time, the planemaker is in the midst of a leadership shakeup as it searches for a new chief executive officer to take over for Dave Calhoun, who plans to step down from the role later this year.

As part of the 2021 deferred-prosecution agreement, Boeing paid a criminal fine and admitted to deceiving the FAA about an obscure flight control system linked to the crashes. The company also pledged to improve its internal safety controls and submit regular reports to the Justice Department. In return, the government would withdraw a criminal charge against the company after three years.

But the door plug blowout, which occurred just days before the deal was set to expire, prompted the department to consider throwing out the agreement.

(Updates with new details on fine, corporate monitor in third paragraph)

--With assistance from Julie Johnsson.

To contact the reporters on this story:
Allyson Versprille in Washington at aversprille1@bloomberg.net;
Chris Strohm in Washington at cstrohm1@bloomberg.net

To contact the editors responsible for this story:
Angela Moon at hmoon43@bloomberg.net

Sara Forden, Benedikt Kammel

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