Boeing (BA.N) has finalized a guilty plea to a criminal fraud conspiracy charge, agreeing to pay at least $243.6 million after breaching a 2021 agreement with the U.S. Justice Department (DOJ). This agreement follows revelations of potentially risky work practices and incomplete record-keeping at Boeing's factories, contributing to a critical review of the company's operations.
Background and Breach of Agreement
In a detailed court filing on Wednesday, the DOJ outlined Boeing's violations of the 2021 deferred prosecution agreement. These violations were linked to misrepresentations about the 737 MAX's key software, which played a role in two fatal crashes in 2018 and 2019, resulting in 346 deaths. The January incident involving an in-flight panel blowout on an Alaska Airlines 737 MAX highlighted ongoing safety and quality issues, prompting the DOJ to take further action just before the 2021 agreement's expiration.
Key Failings and Safety Lapses
The Justice Department highlighted several critical lapses in Boeing's manufacturing and documentation processes:
Incomplete Documentation: Boeing failed to ensure proper documentation of part removals during aircraft manufacturing. Mechanics and inspectors were found to have falsely stamped work as completed.
Misconduct at South Carolina Plant: False stamping by employees at Boeing's 787 plant in South Carolina, claiming tests were completed without actually performing them, was disclosed by Boeing in April.
Out-of-Sequence Work: Boeing prioritized moving aircraft through factories over reducing out-of-sequence work, increasing the risk of manufacturing defects.
Financial Penalties and Compliance Measures
As part of the guilty plea deal, Boeing agreed to several financial and operational commitments:
Financial Penalties: Boeing will pay the maximum fine of $487.2 million, with a DOJ recommendation to credit the previous 2021 payment of $243.6 million.
Safety and Compliance Investments: Boeing will invest at least $455 million over the next three years to enhance safety and compliance programs, a 75% increase over previously planned expenditures.
Family Restitution and Independent Monitoring
Families of the victims from the MAX crashes will have the opportunity to file objections before Judge Reed O'Connor, who will decide on the deal's acceptance and potential restitution to victims' relatives. Boeing's board must meet with the victims' families within four months of sentencing. An independent monitor will be appointed to oversee Boeing's compliance, with annual progress reports publicly filed. Boeing will be on probation for three years, extendable by a year if non-compliance occurs.
Boeing's Response and Future Commitments
Boeing confirmed the plea agreement with the DOJ, stating, "We will continue to work transparently with our regulators as we take significant actions across Boeing to further strengthen our safety, quality, and compliance programs." The company remains committed to reinforcing its global leadership in aviation safety and compliance.
This plea deal marks a significant step in addressing the lapses that led to the tragic 737 MAX crashes and reflects Boeing's commitment to improving its practices and restoring trust in its operations.
Source: Reuters
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