Justice Department Looking Into Boeing Door Plug Blowout (2)

The US Justice Department is scrutinizing the midair blowout last month of a Boeing Co. door plug on an Alaska Air flight, in a move that could expose the company to criminal prosecution, according to a person familiar with the matter.

The DOJ is examining whether the incident falls under the government’s 2021 deferred-prosecution agreement with the company over two previous fatal crashes of its 737 Max jetliner, said the person, who asked not to be identified discussing a confidential matter.

If prosecutors determine that the door plug blowout constitutes a breach of that agreement, then Boeing could face criminal liability, the person said.

Boeing shares fell after Bloomberg reported on the DOJ’s actions late Wednesday, and were down 0.6% in premarket US trading. The planemaker has lost 21% of its market value this year, the worst performance on the Dow Jones Industrial Average, in the wake of the Alaska Air mishap.

Plastic covers the fuselage plug area of Alaska Airlines Flight 1282 Boeing 737-9 MAX on Jan. 7.

Photographer: NTSB/Getty Images

Under the terms of the $2.5 billion settlement, the company adopted a compliance program designed to prevent it from deceiving regulators, including the Federal Aviation Administration. Boeing agreed to comply with the settlement and cooperate with the government for a period of three years, after which the charge would be dismissed. The Alaska Air accident took place on Jan. 5, two days before the expiration of the deferred-prosecution agreement.

If prosecutors determine that Boeing’s handling of the door plug incident violated the 2021 agreement, they could tear it up and bring criminal charges against the company. The Justice Department has six months to determine whether Boeing satisfied the conditions of that deal and needs to seek court approval to dismiss the matter.

The Justice Department’s review is being handled by the fraud section along with the US attorney’s office in Seattle, which is near the company’s Renton production facility where Boeing assembles the 737 model.

The Justice Department and Boeing declined to comment.

Earlier: Boeing Blowout Came Hours Before Expiry of US Deal on 737 Max

Boeing disclosed in a filing earlier this year that the reporting period under the deferred-prosecution agreement expired in January. The Justice Department “is currently considering whether we fulfilled our obligations under the DPA and whether to move to dismiss the information, which motion will require court approval,” Boeing said in the filing.

Boeing has faced heightened scrutiny from regulators, lawmakers and customers after a fuselage panel covering an unused door flew off while an Alaska Air Boeing 737 Max 9 was airborne. All 171 passengers and six crew escaped without serious injury. Investigators later determined the jet was delivered without four bolts needed to lock the door plug in place.

The FAA issued an ultimatum to Boeing earlier Wednesday over the near catastrophic accident, giving the US plane manufacturer 90 days to devise a plan to fix what it called “systemic” quality-control issues. The deadline follows a blunt report mandated by Congress assessing shortfalls in Boeing’s safety culture. The report found that steps the planemaker had taken to bolster safety following the 737 Max crashes weren’t working as intended.

Read More: Boeing Gets 90-Day Ultimatum From FAA to Fix Its Safety Culture

The 2021 agreement not to prosecute Boeing over the 737 Max jetliner crashes, which was announced in the waning days of the Trump administration, sparked intense criticism, including from victims’ families. The deal absolved Boeing’s senior executives from responsibility for the two crashes, which killed 346 people. Of the $2.5 billion settlement, only $243.6 million was a criminal penalty, while $1.77 billion was reserved to reimburse Max customers and $500 million for victims’ beneficiaries. Prosecutors didn’t appoint an outside monitor.

Boeing faced a single criminal count for misleading US regulators who certified the Max’s design. The settlement focused narrowly on the actions of two former Boeing employees involved in drafting pilot manuals. One of them, Mark Forkner, was charged with lying to the FAA about whether modifications on the 737 Max would require airline customers to give their pilots additional training. Following a three-day trial, during which the defense claimed their client was being scapegoated by Boeing, Forkner was acquitted.

Read More: Boeing Seen Getting Off Easy in Fraud Settlement on 737 Max

Aviation accident investigations rarely lead to criminal charges in the US. The National Transportation Safety Board, an independent agency within the Transportation Department, holds primary responsibility for investigating accidents and lacks the power to levy charges. Criminal authorities such as the Justice Department get involved only when there is evidence of an intentional act.

A criminal probe has the potential to derail or delay the NTSB’s probe of the door plug incident. There have been multiple instances in recent decades that parallel criminal probes into transportation accidents resulted in roadblocks to the NTSB’s work. The NTSB’s mission to gather facts in the hope of preventing future accidents also depends to a large degree on the cooperation of witnesses, who could be less forthcoming if involved in a criminal investigation.

(Updates with Boeing premarket US trading in fourth paragraph)

--With assistance from Ryan Beene, Alan Levin and Julie Johnsson.

To contact the reporters on this story:
Chris Strohm in Washington at cstrohm1@bloomberg.net;
Greg Farrell in New York at gregfarrell@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Angela Moon, Anthony Palazzo

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