The fallout keeps coming from a door plug that blew off a Boeing Co. 737 Max plane in midair during an Alaska Airlines flight in January. Bloomberg News is reporting that the Justice Department will bring criminal fraud charges against the company, which can decide whether to fight them or take a deal that includes a $243.6 million fine, the cost of hiring a corporate monitor for three years and a guilty plea. The government contends that the door-plug incident violated a deferred prosecution agreement stemming from two fatal crashes.
The last part of the deal — the guilty plea — is a bit of a wild card right now in the fog of breaking news because it’s not clear whether that would impact Boeing in unrelated ways, such as limiting its defense unit’s ability to bid on government contracts. Boeing deserves the black eye of a guilty plea, but it would be counterproductive if constraints on government contracts reduced the company’s ability to get back on its feet, improve quality and deliver great airplanes to customers. For the US and for the global airline industry, it makes much more sense to fix Boeing than to kill it.
The families of passengers who died in the two crashes were seeking a $25 billion fine but were also willing to forgo a large part of that penalty if Boeing were to make safety improvements. That amount of uncertainty hanging over an already heavily indebted company could spell the planemaker’s demise.
Boeing could fight the charges and seek a jury trial. The company has an argument that the deferred prosecution agreement, which was announced in January 2021, was aimed at the engineering department that developed the 737 Max and specifically the Flight Technical Team that tested the plane. Two employees on that team deceived the Federal Aviation Administration by not informing the agency about a new software system that the company had installed and how it could affect flight controls. The cost savings that Boeing reaped from not having to carry out full flight-simulator training was calculated at $243.6 million, which was the original fine under the deferred prosecution agreement. Also as part of that deal, Boeing paid $1.77 billion to airline customers and established a $500 million fund to compensate the heirs and relatives of the 346 crash victims.
This door-plug incident was completely different and didn’t involve the engineering department. The panel blew off because workers forgot to install the bolts to hold it in place. This was a factory problem, not a design one. It’s a bit curious that the amount of the new Justice Department fine matches the earlier one, which had a precise calculation based on savings on pilot training.
Boeing may think it has a case against the charges, but that doesn’t matter. The potential damage from a jury conviction could be catastrophic. The arguments would be complex, and it would be easy for the tragedy of those two crashes to sway the jury to side with the families of the victims, who understandably are still seething and feel Boeing needs to be punished more.
The families will “strenuously object” to the deal, Paul Cassell, an attorney representing crash victims’ families, said in an email, according to Bloomberg. “The deal will not acknowledge, in any way, that Boeing’s crime killed 346 people.”
It doesn’t matter that the incident that spurred the government to reexamine the deferred prosecution agreement was unrelated to the crashes and in a different part of the company. It’s also unclear what kind of evidence the Justice Department may have in its back pocket.
Boeing should take this deal. But the black mark of pleading guilty shouldn’t be a backdoor way of hamstringing the company with limits on competing for defense and space contracts. It’s a painful time for the families of the crash victims. It’s a shameful time for Boeing. This deal will allow Boeing to move forward on a plan — under strict supervision of the FAA and now a corporate monitor — to overhaul its culture and rededicate itself to safety. The company needs to own up to its mistakes, but it doesn’t deserve crippling punishment, either. This deal strikes that balance.
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