Boeing to pay $2.5 billion in criminal probe into the 737 Max, $243.6 million in fines to avoid prosecution
Boeing, the giant airliner manufacturer, will pay more than $2.5 billion in fines and compensation as a settlement with the United States Department of Justice (DOJ). This is based on the two crashes that killed a total of 346 people and lead to the grounding of the 737 MAX jetliner.
The settlement which, allowed Boeing to avoid prosecution on criminal charges, includes a fine of $243.6 million, compensation to airlines of $1.77 billion and a $500 million crash-victim fund. All of this over fraud conspiracy charges related to the plane's flawed design.
Boeing replied to the news by saying it would take a $743.6 million charge against its fourth-quarter 2020 earnings to reflect a deferred prosecution agreement. This is a form of corporate plea bargain.
The Justice Department deal, announced after the market closed on Thursday, caps a 21-month investigation into the design and development of the 737 MAX following the two crashes, in Indonesia and Ethiopia, in 2018 and 2019 respectively.
Acting Assistant Attorney general David Burns said in a statement "The crashes exposed fraudulent and deceptive conduct by employees of one of the worlds leading commercial airplane manufacturers."
"Boeings employees chose the of profit over candor by concealing material information from the FAA concerning the operation of its 737 MAX airplane and engaging in an effort to cover up their deception." Burns went on to continued in the statement, referring to the Federal Aviation Administration (FAA).
The crashes have already cost Boeing $20 billion.
This strengthens civil litigation in Chicago, where Boeing is based, commented the lawyers for the victims of the Ethiopian Airlines crash. Boeing has already settled most of the lawsuits related to the Lion Air disaster in Indonesia.
Legislation has now been passed in the US Congress on how the FAA certifies new planes.
The 737 MAX was grounded in March 2019 and grounding was not lifted until November 2020, after a number of significant safety upgrades and improvements in pilot training were made to grounded jetliner.
Boeing is the largest U.S. airplane manufacturer and the world's second largest behind Europe's Airbus, following the grounding of the 737 MAX. The company was charged with on count of conspiracy to defraud the United States. It faces a three-year deferred prosecution agreement which the charge being dismissed if the company complies.
Boeing admitted in court documents that two of its 737 MAX technical pilots had deceived the FAA about a safety system called MCAS, whose gyrations have been tied to both crashes. The document say Boeing cooperated with the probe but only after initially "frustrated" the investigation.
Prosecutors for their part have acknowledged the steps Boeing has taken since the crashes, such as firing the previous chief executive in late 2019 and adding a permanent board level safety committee.
For many of the victims families, this is much to light of a consequence on the jetliner maker giant.
In a statement Michael Stumo, whose daughter died in the MAX crash in Ethiopia said, "This settlement is protection for Boeing rather than justice, as it is a continuation of Boeing evading accountability and transparency."
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