DOJ offers Boeing plea deal

[YorkRailFan]

The U.S. Justice Department will criminally charge Boeing (BA.N), opens new tab with fraud over two fatal crashes and ask the planemaker to plead guilty or face a trial, two people familiar with the matter said on Sunday.
The Justice Department planned to formally offer a plea agreement to Boeing later in the day, which includes a financial penalty and imposition of an independent monitor to audit the company's safety and compliance practices for three years, the sources said.Justice Department officials plan to give Boeing until the end of the week to respond to the offer, which they will present as nonnegotiable, the sources said. Should Boeing refuse to plead guilty, prosecutors plan to take the company to trial, they said.
Boeing and the Justice Department declined to comment. Reuters was first to report the Justice Department's decision to prosecute Boeing and seek a guilty plea.The Justice Department decided to charge Boeing after finding it violated a 2021 agreement that had shielded it from prosecution over the fatal crashes involving 737 MAX jets. The deadly crashes took place in 2018 and 2019, killing 346 people.
The decision to move toward criminally charging Boeing deepens an ongoing crisis engulfing the planemaker, exposing the company to additional financial ramifications and tougher government oversight.A guilty plea could also carry implications for Boeing's ability to enter into government contracts such as those with the U.S. military that make up a significant portion of its revenue. Companies with felony convictions can receive waivers, and it remained unclear to what extent the Justice Department's proposed plea deal addresses the issue.
Justice Department officials revealed their decision to victims' family members during a call earlier on Sunday. The proposal would require Boeing to plead guilty to conspiring to defraud the U.S. Federal Aviation Administration in connection with the fatal crashes, the sources said.

https://www.reuters.com/legal/us-pushes-boeing-plead-guilty-connection-with-fatal-crashes-sources-say-2024-06-30/

Either way, its embarrassing and bad news for Boeing, both ways damage their already tarnished reputation and could hurt their defence business (which is responsible for more revenue than their commercial business is).

 

[GRALISTAIR]

Yes i saw that yesterday. They are a good portion of the US economy and their rivals Airbus are going to be major beneficiaries of this. I will be watching this space carefully as the saying goes. Boeing need 10 good years and a complete culture change to mend their tarnished reputation.

 

[randyrippley]

Any possibility this could result in the military businesses being hived off into a new company, while the remaining commercial rump takes the legal hit?

 

[GRALISTAIR]

Any possibility this could result in the military businesses being hived off into a new company, while the remaining commercial rump takes the legal hit?

I have seen that sort of maneuver before in the USA but in a slightly different setting. A chemical lawsuit looms so a new company is formed that is protected whilst the other bit is the sacrificial legal lamb so to speak. So your idea of the military bit being hived off is in my opinion, a distinct possibility. There is another thread about absorbing Spirit airline systems in Wichita KS. I think everything maybe connected. Whatever, a once great company - Boeing - is in a mess.

 

[YorkRailFan]

Any possibility this could result in the military businesses being hived off into a new company, while the remaining commercial rump takes the legal hit?

Dominic Gates in the Seattle Times believes otherwise.

Why U.S. government may still do business with Boeing, even as a felon

As Boeing continues to face the fallout from two fatal 737 MAX crashes, the company now meets yet another question: What happens to its government contracts?

www.seattletimes.com

As Boeing continues to face the fallout from two fatal 737 MAX crashes roughly five years ago, the company now meets yet another question about its future.

Could the Justice Department’s recent decision to offer Boeing a plea deal to resolve a criminal fraud charge curtail the company’s government contracts, including its billions in defense work?

Legally speaking, it’s still not clear.

The terms of the deal could provide the answer, or Boeing may separately reach agreements with individual agencies, according to Brandon Garrett, a law professor at Duke University.

Practically speaking, the plea deal is unlikely to bar Boeing from government work, according to five law professors and analysts who spoke with The Seattle Times in June. The government depends too much on Boeing, the experts said.

“I very much doubt that Boeing’s federal contracting work will be interfered with at all,” said Peter Reilly, a law professor at Texas A&M who represents families who lost loved ones in the MAX crashes in 2018 and 2019.

Boeing builds and maintains so many of the Air Force's aircraft that the Air Force cannot simply drop them.
Article continues:

On Sunday, the Justice Department said it would offer Boeing a plea deal to resolve the criminal charge, once again raising the question about what a guilty plea or fraud conviction would mean for one of the country’s largest defense contractors.

There is a statute that prevents defense contractors who have been convicted of certain felonies from winning future defense contracts, said John Coffee, a law professor at Columbia University. But, in this case, “that’s a hopeless dead end.”

“The government does not have an alternative to Boeing,” Coffee said.

If necessary, Reilly said, lawmakers would find a workaround. “Boeing is one of the most powerful companies in the world,” he said.

From military aircraft to weapons systems to satellites to the Starliner spacecraft, Boeing’s government contractors cover a range of research, production and modification services. Most of its federal contracts come from the Department of Defense, which paid Boeing $14.8 billion in 2022, according to the Congressional Research Service.

Globally, Boeing ranked among the top five defense contractors, competing with companies like Lockheed Martin and Northrop Grumman, according to a 2023 ranking from trade publication DefenseNews.

 

[randyrippley]

I have seen that sort of maneuver before in the USA but in a slightly different setting. A chemical lawsuit looms so a new company is formed that is protected whilst the other bit is the sacrificial legal lamb so to speak. So your idea of the military bit being hived off is in my opinion, a distinct possibility. There is another thread about absorbing Spirit airline systems in Wichita KS. I think everything maybe connected. Whatever, a once great company - Boeing - is in a mess.

Resurgence of McDonnell Douglas maybe, with Vertol going to Sikorsky?

 

[GRALISTAIR]

Resurgence of McDonnell Douglas maybe, with Vertol going to Sikorsky?

I hadn’t thought of that. Possibly

 

[YorkRailFan]

Boeing has plead guilty:

Boeing has agreed to plead guilty to a criminal fraud conspiracy charge after the US found the company violated a deal meant to reform it after two fatal crashes by its 737 Max planes that killed 346 passengers and crew.

The Department of Justice (DoJ) said the plane-maker had also agreed to pay a criminal fine of $243.6m (£190m).

However, the families of the people who died on the flights five years ago have criticised it as a "sweetheart deal" that would allow Boeing to avoid full responsibility for the deaths.

By pleading guilty, Boeing will avoid the spectacle of a criminal trial - something that victims' families have been pressing for.

Boeing pleads guilty and will pay $243.6m in controversial deal - BBC News

Families of the people who died on the flights five years ago have criticised it as a "sweetheart deal".

www.bbc.co.uk

A severe impact on their defence business as the US Government can't award contracts to a convicted felon.

 

[66701GBRF]

A severe impact on their defence business as the US Government can't award contracts to a convicted felon.

It will have zero impact on their defence arm.

 

[YorkRailFan]

It will have zero impact on their defence arm.

How come? The US Government cannot sign a contract with a convicted felon (Boeing). I agree its not practical for USAF.

 

[66701GBRF]

The US government can issue a waiver against that particular point and you can bet they would/will with such an ingrained company.

 

[YorkRailFan]

Families of some of the 346 people killed in two fatal Boeing 737 Max crashes said on Wednesday a US judge should reject the planemaker’s proposed plea deal with the US Department of Justice and said the government should seek a much higher fine.

On 24 July, the global company finalized an agreement to plead guilty to a criminal fraud conspiracy charge and pay between $243.6m and $487m after breaching a 2021 deferred prosecution agreement.

In October 2018, 189 people were killed when Lion Air flight 610 fell into the sea off Indonesia. In March 2019, Ethiopian Airlines flight 302 crashed shortly after takeoff from Addis Ababa airport, killing 157 people.In 2021, federal prosecutors alleged Boeing committed conspiracy to defraud the government by misleading regulators about a flight-control system that was implicated in the crashes. However, they agreed not to prosecute if Boeing paid a penalty and completed a three-year period of increased monitoring.

However, a panel blew off a Max jetliner during an Alaska Airlines flight in January. Although no one was injured, there was a fresh rise in scrutiny of Boeing’s safety record and in May, the justice department found the company had violated the 2021 deal and decided to reopen the possibility of a prosecution.

Paul Cassell, a lawyer for some of the families, said in a court filing the fine “is inadequate – or, at the very least, rests on misleading accounting and inaccurate accounting”. He added the fine “fails to reflect that Boeing’s crime killed 346 innocent victims”. Cassell called that decision “not only inaccurate – it is morally reprehensible”.Adrian Vuckovich, another lawyer representing relatives, said in a separate filing: “We suggest that Boeing should be required to pay a substantial fine which recognizes the value of each of the 346 people killed, the substantial harm to others and pay a fine which is consistent with fines paid by other corporate criminal defendants.”

The families cited O’Connor’s statement in a February 2023 ruling: “Boeing’s crime may properly be considered the deadliest corporate crime in US history.”

Spokespeople for Boeing and the justice department did not immediately comment to Reuters on the families’ filings.

Families of victims in Boeing 737 Max crashes urge judge to reject plea deal

Relatives of 346 people killed in 2018 and 2019 crashes say planemaker should face a much higher fine

www.theguardian.com

Sadly, I think their cries will fall on deaf ears.

 

[YorkRailFan]

“Boeing senior executives prioritized the movement of aircraft through Boeing’s factories over reducing out-of-sequence work to ensure production quality,” the DOJ filing stated.

The DOJ noted Boeing’s failure to submit complete and accurate building records and its approval of non-compliant manufacturing and quality reports also breached the agreement, as they were considered anti-fraud risks.

The finalized plea deal pointed to the FAA opening an investigation at Boeing’s Charleston, South Carolina, plant after the aircraft maker reported one of its workers falsified inspection reports on some of its 787 planes, which the Associated Press initially reported in April. The DOJ said the employees did not understand, nor were they effectively trained on, Boeing’s stamping policy and its requirements.

“Because the build and quality records are the cornerstone of Boeing’s certification that aircraft conform to their approved type design, the lack of understanding by Boeing employees of the importance of and requirements for stamping integrity calls into question the effectiveness of Boeing’s anti-fraud compliance program,” the agency said in the July 24 plea deal.

Boeing put speed over safety: DOJ plea deal

The Justice Department criticized the company for failing to properly implement safety and compliance in its manufacturing.

www.manufacturingdive.com

I doubt this comes as a surprise to anyone, but it's just adding salt to the wound so to speak.

== Doublepost prevention - post automatically merged: 9 Aug 2024 ==

Aerospace veteran Robert "Kelly" Ortberg becomes Boeing's new CEO on Thursday with a singular mission: restoring the reputation of a U.S. manufacturing icon.

That enormous goal will involve thousands of daily decisions that will determine whether Boeing can earn back the trust of regulators, airlines and the public; end persistent production defects; deliver aircraft on time and consistently to customers large and small; and stop burning cash.

https://www.cnbc.com/2024/08/08/new-boeing-ceo-kelly-ortberg.html

Let's just say that I would not want to be in his shoes, he very much has an uphill battle, but I wish him all the best and hope he can turn around Boeing for the sake of the industry!

== Doublepost prevention - post automatically merged: 15 Aug 2024 ==

Unsurprisingly, the DOJ has defended the deal.

A plea deal struck with Boeing (BA.N), over a criminal charge related to software tied to two fatal 737 MAX crashes should be accepted, the U.S. Justice Department said on Wednesday, after some relatives of the 346 people killed in two crashes called for it to be rejected.

https://www.reuters.com/legal/boeing-plea-deal-should-be-accepted-us-doj-says-2024-08-14/

 

[YorkRailFan]

2 Democrat Senators are now pushing for the DOJ to prosecute Boeing executives:

Democratic Sens. Elizabeth Warren (Mass.) and Richard Blumenthal (Conn.) urged the Department of Justice (DOJ) to investigate Boeing executives in a letter Wednesday, accusing the company of putting profits over safety.

“For years, the federal government has accused Boeing of putting profits over passenger safety, without pursuing full accountability from the company or the company’s executives directly responsible for compromising passenger safety,” the lawmakers wrote to Attorney General Merrick Garland and Deputy Attorney General Lisa Monaco.[T]he combination of a relatively small fine coupled with a toothless commitment to improve aircraft safety has proven insufficient to effect real change at the company,” the duo added.

The lawmakers also noted that in the past six years, Boeing has cycled through three CEOs.

https://thehill.com/business/4915646-senate-democrats-justice-department-boeing-safety-culture/

Boeing got a slap on the wrist as a result of the MAX crashes, this is something we should've heard 5 years ago. But at least it's being said now.

 

[YorkRailFan]

The Plea Deal has been struck down by a Judge:

A Boeing plea deal intended to resolve a case related to two fatal crashes of its planes has been rejected by a US judge.

The plane maker agreed with the US government in July to plead guilty to one count of criminal fraud, face independent monitoring and pay a $243m (£191m) fine.

However, Judge Reed O'Connor struck down the agreement on Thursday, saying it undermined the court and that diversity requirements for hiring the monitor were "contradictory".

Family members of the 346 people killed in the crashes welcomed the ruling, describing the plea deal as a "get-out-of-jail-free card for Boeing".

The Department of Justice said it was reviewing the decision. Boeing did not immediately comment.

In his decision, Judge O'Connor said the government's previous years of overseeing the firm had "failed".

"At this point, the public interest requires the court to step in," he wrote.

He said the proposed agreement did not require Boeing to comply with the monitor's recommendations and gave the company a say in selecting a candidate.

Those issues had also been raised by some families of those killed on the flights, who had criticised it as a "sweetheart" arrangement that did not properly hold the firm to account for the deaths.

Judge O'Connor also focused on the deal's requirements that race be considered when hiring the monitor, which he said would undermine confidence in the person hired.

"In a case of this magnitude, it is in the utmost interest of justice that the public is confident this monitor selection is done based solely on competency," he wrote.

"The parties' DEI [diversity, equity and inclusion] efforts only serve to undermine this confidence in the government and Boeing's ethics and anti-fraud efforts."

Can Boeing turn it around?
Ike and Susan Riffel of California, who lost their two sons, Melvin and Bennett, said the judge had done "the right thing" in rejecting the proposed agreement.

"This deal didn't hold anyone accountable for the deaths of 346 people and did nothing to protect the flying public," they said in a statement supplied by their lawyer.

They said they hoped the ruling would pave the way for "real justice".

Boeing plea deal tied to two fatal 737 Max crashes rejected - BBC News

The deal undermines the court and involves "contradictory" diversity requirements, a judge ruled.

www.bbc.co.uk

Whilst I find DEI being a reason for this questionable, I certainly agree with the families that this deal wouldn't have held anyone accountable for the tragedies.