Boeing reaches $2.5 billion 737 Max settlement with US

Bloomberg

Boeing Co reached a $2.5 billion agreement to settle a criminal charge that it defrauded the US government by concealing information about the 737 Max, the ill-fated jet model involved in two fatal crashes that killed 346 people.
The planemaker entered into a deferred prosecution agreement in the Northern District of Texas. In turn, the Justice Department will dismiss the charge against Boeing after three years if the company cooperates with the government, including by making current and former officials available to testify before a federal grand jury or in trials.
“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” David Burns, acting assistant attorney general of the Justice Department’s Criminal Division, said.
The settlement caps a two-year criminal investigation into the Max, which crashed twice in a five-month span and devastated Boeing’s reputation for engineering prowess. The company’s admissions are highly unusual and stand in stark contrast to decades of airline accident investigations.
While aircraft designs have often been cited as contributing to accidents, it’s extremely rare for such issues to be linked to intentional deception by company officials.
“Entering into this resolution is the right thing for us to do — a step that appropriately acknowledges how we fell short of our values and expectations,” Boeing Chief Executive Officer Dave Calhoun said in a message to employees. “This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations.”
Robert Clifford, a lawyer representing relatives of the crash victims, said family members were insulted by the pact. The settlement will have no bearing on pending civil litigation, he said.
“The allegations in the deferred prosecution agreement are just the tip of the iceberg of Boeing’s wrongdoing — a corporation that pays billions of dollars to avoid criminal liability while stonewalling and fighting the families in court,” Clifford said. The action is the latest to hit the planemaker’s bottom line. Boeing has estimated it faces more than $20 billion in Max-related expenses, while losing market share to rival Airbus SE as sales faltered during the jet’s lengthy grounding.

Settlement Funds
Most of the money in the settlement will go to airlines and lessors. Of the $2.5 billion, Boeing has already set aside $1.77 billion to reimburse Max customers. The company will also establish a $500 million fund for victims’ beneficiaries.
In addition, Boeing will pay a $243.6 million criminal penalty. That represents the money the company saved by avoiding the need to require 737 pilots to undergo full flight-simulator training before flying the Max, according to the deferred prosecution agreement. Sidestepping such training requirements was a key cost consideration as Boeing marketed the plane against an upgraded version of Airbus’s A320 jets.
With the penalty and the fund for relatives, Boeing said it expected to incur an additional $743.6 million charge for the fourth quarter of 2020.