January 19, 2021
Boeing 737 MAX Policy Technology

Boeing charged with fraud over 737 Max, fined more than $2.5 billion

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Four Boeing 737 Max planes in the air.

Enlarge / Boeing 737 Max planes.

Misleading federal regulators who were investigating not one but two plane crashes turns out to be a bad idea. On Thursday, the Department of Justice announced that Boeing has been charged with a conspiracy to defraud a government agency that was evaluating the company’s 737 Max airplane.

As a result of “misleading statements, half-truths, and omissions communicated by Boeing employees” to the Federal Aviation Authority’s Aircraft Evaluation Group, Boeing has agreed to pay more than $2.5 billion as part of a deferred prosecution agreement—that includes a criminal penalty of $243 million, $500 million to compensate the heirs of 346 crash victims, and $1.77 billion in compensation to Boeing’s airline customers.

Boeing’s problem with its best-selling 737 Max began in October 2018 when Lion Air Flight 610 crashed into the Java Sea and killed 189 people. The following March, Ethiopian Airlines Flight 302 crashed after takeoff in Ethiopia, killing 157 people. Both crashes had the same cause—the plane’s Maneuvering Characteristics Augmentation System, or MCAS.

When Boeing designed the 737 Max, it added larger turbofan engines than had been used on earlier 737 variants, which changed the aerodynamic characteristics of the plane compared to older models. Rather than making pilots certify on a new type, Boeing used MCAS to allow the 737 Max to mimic the handling of previous 737s. Tragically, MCAS wasn’t nearly as safe as Boeing claimed, and a safety feature that would alert pilots to a potential sensor disagreement was an optional extra, one that neither Lion Air nor Ethiopian Airlines had purchased.

Countries around the world grounded the 737 Max as a result. Boeing apologized, and began work on a software fix. But that work was delayedmore than once—costing CEO Dennis Muilenburg his job and leaving Boeing looking for $10 billion in loans to see it through. The 737 Max was cleared for flight again by the FAA in November 2020.

“This case sends a clear message: the Department of Justice will hold manufacturers like Boeing accountable for defrauding regulators—especially in industries where the stakes are this high,” said US Attorney Erin Nealy Cox for the Northern District of Texas in a press release.