Boeing (BA) has agreed with the Justice Department to pay over $2.5 billion to settle fraud charges related to its 737 Max jet. Boeing stock fell Thursday.
The aerospace giant was charged with one count of conspiracy to defraud the U.S. related to the 737 Max’s certification.
Under terms of the deferred prosecution agreement, Boeing will pay a criminal monetary penalty of $243.6 million, compensation payments of $1.77 billion to 737 Max airline customers, and $500 million for a crash-victim beneficiaries fund to compensate the relatives of 737 Max crash victims.
“Boeing’s employees chose the path 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,” said Acting Assistant Attorney General David Burns of the Justice Department’s Criminal Division, in a statement.
Boeing Stock Falls Late
Shares fell 0.6% to 211.40 in after-hours trading on the stock market today. Boeing stock closed up 0.8% before the news broke. Max supplier Spirit AeroSystems (SPR) finished 0.7% higher, and engine maker General Electric (GE) closed down 0.8%.
“I think that the charges and their settlement would be beneficial to plaintiffs who are pursuing civil cases, because the conduct alleged is so bad and the damage inflicted is so great that juries will be more inclined to find Boeing liable and to award larger damages,” said Carl Tobias, the Williams Chair in Law at the University of Richmond School of Law, via email.
Problems with the Maneuvering Characteristics Augmentation System automated flight-control software contributed to the Ethiopian Air crash in March 2019 as well as the October 2018 Lion Air crash. Combined, the two crashes killed 346 people.
Boeing has faced several investigations following the deadly crashes.
Concluding an 18-month probe in September 2020, the final House Committee on Transportation and Infrastructure’s 245-page report found that “Boeing failed in its design and development of the MAX, and the FAA failed in its oversight of Boeing and its certification of the aircraft.”
The jet was grounded for 20 months before returning to service in December. The grounding, suspension of deliveries, and production halt have been costly for Boeing. Combined with charges booked in 2019, 737 Max-related costs are over $20 billion.
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