Boeing and its former chief executive Dennis Muilenburg have agreed to pay millions of dollars to resolve charges of misleading investors about two deadly crashes of the company’s 737 Max aircraft.
The aerospace manufacturer agreed to pay a penalty of $200mn to settle the allegations by the US Securities and Exchange Commission, while Muilenburg will pay $1mn. Boeing and Muilenburg neither admitted nor denied the SEC’s findings.
The settlements stemmed from a pair of crashes in 2018 and 2019 off the coast of Indonesia and in Ethiopia. Together, the accidents killed 346 people.
The cause was traced to a flight control system that erroneously and repeatedly pushed the nose of the Max downward. Boeing was later found to have deceived regulators and pilots about the new system as it attempted to win approval from the Federal Aviation Administration without triggering costly new training measures.
Boeing last year agreed to pay $2.5bn to resolve a criminal fraud charge brought by the US Department of Justice. The company admitted guilt as part of the deal to defer prosecution, meaning if the aircraft maker operates a compliance programme for three years, prosecutors will dismiss the case.
The settlement announced by the SEC on Thursday addressed statements made to Wall Street.
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair and truthful disclosures to the markets,” said SEC chair Gary Gensler. “The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation.”
Boeing issued a press release a month after Lion Air Flight 610 went down in the Java Sea in 2018. According to the SEC, Muilenburg read a draft and suggested cutting a reference to a “software update” to the faulty flight control system, which the company already had begun to redesign. He also directed employees to add portions of an Indonesian government report that “selectively highlighted” pilot error and poor aircraft maintenance as crash factors.
The chief executive also was aware of information “calling into question” the FAA process to certify the 737 Max following the Ethiopian Airlines Flight 302 crash in March 2019, the SEC said.
Boeing’s in-house lawyers told Muilenburg in January 2019 that then-chief technical pilot Mark Forkner had texted in 2016 that he had “lied to regulators (unknowingly)” about the flight control system’s characteristics. An internal committee had also raised questions about whether the company properly explained the system to FAA regulators.
Yet Muilenburg told reporters and analysts in April 2019 that “there was no surprise or gap . . . that somehow slipped through [the] certification process” for the 737 Max, the securities regulator said. Muilenburg added at the time that Boeing had “gone back and confirmed again . . . that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes”.
Muilenburg, who was fired from Boeing in December 2019, could not immediately be reached for comment.
Boeing said the company “will never forget” those killed in the crashes and that it had “made broad and deep changes across our company in response to those accidents — fundamental changes that have strengthened our safety processes and oversight of safety issues”.
The FAA cleared the Max to return to the skies in November 2020.