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Boeing to Pay $2.5B to Settle With Justice Department Over 737 MAX Crashes

2021-01-11 13:33:43
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Boeing Co. will pay more than $ 2.5 billion in fines and damages after reaching a settlement with the United States Department of Justice over two plane crashes that killed a total of 346 people and led to the grounding of its 737 MAX jet airliner.

The settlement, which allows Boeing to avoid prosecution, includes a $ 243.6 million fine, $ 1.77 billion in airline damages and a $ 500 million fund for a crash victim for conspiracy fraud in due to the poor design of the aircraft.

Boeing said it would collect a $ 743.6 million charge on fourth-quarter 2020 earnings to reflect the deferred prosecution agreement, a form of corporate plea.

Boeing 737 Crash Victim: Families Still Suing After DOJ Settlement

CHICAGO, Jan. 7 (Reuters) – Families of victims of a Boeing 737 MAX crash on Ethiopian Airlines are continuing civil suits against the planners in Chicago, despite the settlement with the United States Department of Justice, plaintiffs' lawyers said Thursday.

With Boeing's $ 2.5 billion, $ 500 million is being earmarked for relatives of the 289 victims of the Ethiopian Airlines crash and a Lion Air crash five months earlier in a deal that lawyers say are the families' lawsuits against the planners alone. but reinforced.

(Reporting by Tracy Rucinski Editing by Chris Reese)

The Justice Department deal, announced after the market closed on Thursday, concludes 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.

The crashes "exposed fraudulent and deceptive behavior by employees of one of the world's leading commercial aircraft manufacturers," Acting Assistant Attorney General David Burns said in a statement.

"Boeing employees took the path of profit over candor by concealing material information from the FAA about the operation of its 737 MAX aircraft and making efforts to cover up their deception," Burns said, referring to the Federal Aviation Administration .

The crashes cost Boeing about $ 20 billion.

Lawyers for families of victims of the Ethiopian Airlines crash said the settlement strengthens civil suits in Chicago, where Boeing is based. Boeing has already settled most of the lawsuits related to the Lion Air disaster in Indonesia.

Due to the crashes, the U.S. Congress passed legislation in December that will reform the way the FAA certifies new aircraft.

Representative Peter DeFazio, chairman of the House Transportation and Infrastructure Committee, which oversaw a lengthy investigation into the crashes, said the "settlement amounts to a blow to the wrist and is an insult to the 346 victims who died as a result of business. greed. "

He added: “ Not only is the dollar amount of the settlement a mere fraction of Boeing's annual revenue, the settlement bypasses any real liability in terms of criminal charges. & # 39; & # 39;

Analysts noted that the $ 1.77 billion airline compensation was already covered by accounting provisions and some had already been paid, meaning the remaining expense was relatively small.

"At about 0.5% of Boeing's current market value, this portion of the payments should not be a significant issue for the stock," Bernstein analyst Douglas Harned said in a note.

The 737 MAX was grounded in March 2019, and grounding was not lifted until November 2020, after Boeing made significant safety upgrades and improvements in pilot training.

Boeing, the largest American aircraft manufacturer and the world's second-largest after the European Airbus after its run aground, was charged with one time conspiring to defraud the United States. It faces a three-year deferment of prosecution agreement, and the charges are dismissed if it suffices.

Data protection authorities are business advocates that typically allow a company to avoid criminal prosecution that could disrupt activities such as access to public procurement in exchange for a fine and admission of misconduct, as well as internal reforms.

Access to public procurement is crucial for defense companies, such as Boeing, which depend on public companies worldwide.

Regulator "Cheated"

Boeing admitted in court documents that two of its technical pilots of the 737 MAX had misled the FAA about a safety system called MCAS, the twists of which are linked to both crashes. According to the documents, Boeing cooperated with the probe too late, but only after the investigation was initially "frustrated". used to be.

In a note to employees, Boeing Chief Executive David Calhoun said the agreement "appropriately recognizes that we have not met our values ​​and expectations."

Reuters has reported https://tinyurl.com/y26h5xkv that Boeing executives told engineers working on the MAX, including MCAS, that their designs could not generate more elaborate training indications from the FAA.

Under the deferred prosecution agreement, one employee wrote to another in 2014 that if the FAA needed higher education, it would "cost Boeing tens of millions of dollars!"

Boeing has disclosed details about MCAS to some FAA personnel, but not to others responsible for determining pilot training.

"The purpose of the conspiracy was to defraud the FAA (Aircraft Evaluation Group) … to bring about financial gain for Boeing," the document said.

The $ 243 million fine, which the & # 39; bottom & # 39; of the penalties guidelines represents the amount Boeing saved by not conducting full flight simulator training.

Prosecutors acknowledged the steps Boeing had taken since the crashes, such as firing its previous CEO in late 2019 and adding a permanent board-level safety committee.

Boeing agreed to strengthen compliance measures and internal controls, but will not face the imposition of external monitors.

The response is insufficient for some family members.

"This settlement is more protection for Boeing than justice, as it is a continuation of Boeing's evasion of accountability and transparency," said Michael Stumo, whose daughter died in the MAX crash in Ethiopia.

(Reporting by David Shepardson, Eric Johnson, and Tracy Rucinski; additional reporting by Tim Hepher; edited by Chris Reese, Leslie Adler, and Barbara Lewis)

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