Boeing's Deferred Prosecution Agreement Over 737 Max Fraud Conspiracy

On January 7, 2021, Boeing entered into a deferred prosecution agreement (DPA) with the Department of Justice (DOJ) to resolve a criminal charge related to a conspiracy to defraud the Federal Aviation Administration’s Aircraft Evaluation Group (FAA AEG). This resolution stems from Boeing’s fraudulent conduct in the evaluation of its 737 MAX airplane.

As part of the DPA, Boeing will pay over $2.5 billion, including:

• A criminal monetary penalty of $243.6 million
• $1.77 billion in compensation payments to 737 MAX airline customers
• A $500 million crash-victim beneficiaries fund for the families of the 346 passengers who died in the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302

The Fraudulent Conduct

Boeing, through two of its 737 MAX Flight Technical Pilots, deceived the FAA AEG about changes to the Maneuvering Characteristics Augmentation System (MCAS), a critical flight control component. This deception led to the omission of key MCAS information from the FAA's Flight Standardization Board Report, which subsequently resulted in incomplete pilot training materials. This lack of information contributed to the crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302, which collectively claimed 346 lives.

Acting Assistant Attorney General David P. Burns stated that Boeing's conduct prioritized profit over transparency, significantly undermining aviation safety. U.S. Attorney Erin Nealy Cox emphasized that this case demonstrates the DOJ's commitment to holding manufacturers accountable for defrauding regulators. FBI Special Agent in Charge Emmerson Buie Jr. highlighted the severe consequences of Boeing's lack of candor with the FAA, while DOT-OIG Special Agent in Charge Andrea M. Kropf stressed the importance of safety, integrity, and transparency in the aviation industry.

Boeing's response to this crisis has involved significant reforms aimed at enhancing its compliance and ethical standards. Key measures include:

• Establishing a permanent aerospace safety committee within the Board of Directors
• Creating a Product and Services Safety organization
• Reorganizing its engineering function to ensure better oversight and accountability
• Implementing structural changes to its Flight Technical Team to improve supervision and communication with regulatory authorities

Boeing has also agreed to strengthen its compliance program, meet with the DOJ’s Fraud Section quarterly, and submit annual reports detailing its remediation efforts and compliance program effectiveness.

Risk Management Implications

This case underscores the critical importance of robust risk management practices. Boeing's failure to disclose the misconduct voluntarily and its delayed cooperation with the investigation exposed significant compliance and ethical deficiencies within the company. The financial, reputational, and operational impacts on Boeing highlight the necessity of maintaining transparency and integrity in regulatory communications to mitigate risks and uphold public trust.

The DOJ’s resolution with Boeing highlights the severe consequences of deceptive practices in the aviation industry and underscores the importance of prioritizing safety and integrity over profit. Boeing's commitment to implementing remedial measures and enhancing its compliance program is essential for preventing future lapses and restoring confidence among stakeholders, including regulators, airline customers, and the flying public.

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