Boeing (BA) will soon know whether its horrible 2024 is about to get much worse.
Justice Department officials have to decide by July 7 whether to criminally charge Boeing, which would be a devastating blow for a giant manufacturer, or reach some sort of settlement.
The question is whether Boeing’s actions leading up to a January door plug blowout aboard an Alaska Airlines Boeing 737 Max 9 will cause the DOJ to revoke legal protections it extended to Boeing in a January 2020 deferred prosecution agreement.
Prosecutors told a judge in May that Boeing had violated that three-year agreement, which allowed Boeing to avoid fraud charges alleging that its misleading communications with regulators led to catastrophic crashes of two 737 Max planes in 2018 and 2019.
Reports have varied about which way this could go. Reuters reported earlier this month that US prosecutors are in fact recommending to senior Justice Department officials that criminal charges be brought against Boeing.
But the New York Times separately reported that the Justice Department was considering allowing Boeing to avoid criminal prosecution and instead negotiate a plea deal where the company admits to some wrongdoing.
Bloomberg reported Friday that Boeing was in talks with DOJ about resolving the charges with a settlement that could include the appointment of a corporate monitor.
Boeing said it had no comment about the pending decision.
High stakes
The decision is a high-stakes matter for both sides.
The challenge for the Justice Department in considering a guilty plea or prosecution is that a criminal conviction could further hobble an iconic American company central to the nation’s transportation, economic, and military sectors.
Not only is Boeing a major employer of 140,000 people and supplier of jets to nearly all large US airlines, but it is also America’s single largest exporter.
Boeing’s conduct is the kind that “normally cries out for criminal prosecution,” said Jacob Frenkel, a lawyer with Dickenson Wright and chair of the law firm’s government investigations practice.
Yet prosecutions of major corporations, and guilty pleas, he added, lead to the question of whether a criminal conviction disqualifies a company from certain government business.
For Boeing, charges would also force the company to manage the financial and reputational burdens of a criminal defense on top of existing government-mandated production slowdowns put in place after its third critical 737 Max aircraft failure in January.
And that’s all while it searches for a new CEO and tries to convince customers, investors, and the American public that it has its many problems under control.
Frenkel said it’s possible that the DOJ could not only resurrect its charges of conspiracy against Boeing tied to the 737 Max crashes, but also bring new claims in response to the Alaska Airlines accident.
“If we wanted to just simply talk about the [Alaska Airlines] door coming off in flight, I would tell you it’s potentially prosecutable under a theory of conspiracy to defraud the United States, making false statements, and wire fraud,” Frenkel said.
Boeing previously admitted in court documents that two of its 737 Max test pilots deceived FAA officials about the existence of a new flight control system called Maneuvering Characteristics Augmentation System and omitted the system from the aircraft’s manuals and pilot-training materials.
The first 737 Max crash, in October 2018, involved a newly delivered Boeing 737 Max 8 flown by Lion Air that crashed into the Java Sea shortly after takeoff from Jakarta, Indonesia.
Months later another 737 Max 8 flown by Ethiopian Airlines similarly crashed shortly after takeoff from Addis Ababa.
In exchange for its protection from prosecution, Boeing was also required to continue cooperating with the DOJ on future investigations and prosecutions and to report any evidence or allegation that its employees violated US fraud laws.
Other challenges
Defrauding aviation regulators isn’t Boeing’s only entanglement with the US government.
Last Wednesday, the National Transportation Safety Board announced sanctions against Boeing for “blatantly” violating the agency’s investigative regulations that prohibit sharing non-public investigative information with members of the media.
“We deeply regret that some of our comments, intended to make clear our responsibility in the accident and explain the actions we are taking, overstepped the NTSB’s role as the source of investigative information,” Boeing said in a statement emailed to Yahoo Finance.
Boeing also responded on Wednesday to a claim from a mechanic who worked as a subcontractor for Boeing supplier Spirit AeroSystems. He said he was fired for raising concerns over improperly drilled holes on the bulkheads of Boeing’s 787 Dreamliner planes.
“Engineering analysis determined that the issues raised did not present a safety concern and were addressed,” Boeing said. “We are reviewing the documents released today and will thoroughly investigate any new claim. We are not involved in personnel decisions of subcontractors.”
In February, Boeing also agreed to a $51 million fine in an administrative settlement with the US State Department over the government’s claims that Boeing exported technical data to the People’s Republic of China in violation of the International Traffic in Arms Regulations.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
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