Sep 23, 2022 11:11
Boeing Co. will pay $200 million to settle civil charges brought by the U.S. Securities and Exchange Commission that it deceived investors about the 737 MAX, which was grounded for 20 months following two fatal disasters in which 346 people were killed, the agency stated Thursday.
According to the SEC's announcement of the settlement, Boeing (NYSE:BA) knew after the first crash that a flight control system posed a safety risk, but assured the public that the 737 MAX was "as safe as any that has ever flown the skies."
The SEC also claimed that former Boeing CEO Dennis Muilenburg had agreed to pay $1 million to settle allegations.
According to the SEC, Boeing and Muilenburg neither confirmed nor rejected the agency's findings. According to reports, a fund would be created for the benefit of concerned investors.
In after-hours trading, Boeing's stock rose 0.4%.
Gary Gensler, chairman of the Securities and Exchange Commission, stated in a statement, "In times of crisis and tragedy, it is particularly important for public firms and leaders to provide thorough, fair, and transparent disclosures to the markets.
He asserted that Boeing and Muilenburg "failed to achieve this most essential criteria."
The SEC has filed a lawsuit against Boeing and Muilenburg for "making materially misleading public statements following 2018 and 2019 Boeing aircraft crashes."
Boeing noted that "fundamental adjustments have strengthened our safety standards" and that the settlement was "part of the company's broader commitment to resolve remaining legal actions relating to the 737 MAX incidents in a proper manner."
The accidents were attributable to the Maneuvering Characteristics Augmentation System flight control system (MCAS). The SEC noted that "after the initial incident, Boeing and Muilenburg were aware that MCAS posed a continuous threat to airplane safety, but they assured the public that the 737 MAX was as safe as any other aircraft in the sky."
In October of 2018, an Indonesian Lion Air flight was engaged in the first crash.
After the second catastrophe, which occurred in Ethiopia in March 2019, the SEC noted, "Despite knowledge of contrary facts, Boeing and Muilenburg told the public there were no flaws or gaps in the MCAS certification process."
Boeing has settled the majority of litigation associated with the two fatal accidents. In 2018, the company was found liable for compensatory damages in claims filed by families of the 157 victims of the 2019 Ethiopian Airlines 737 MAX crash. In an effort to resolve disputes, a small number of trials will likely begin in 2023.
Before allowing the planes to return to service, the FAA required updated training for 737 MAX pilots to deal with MCAS as well as important new protections and other software modifications to the flight control system.
The crashes cost Boeing more than $20 billion and forced Congress to pass sweeping legislation modifying the FAA's certification process for new aircraft. Boeing has until December to get FAA approval for the 737 MAX 7 and 10 models; else, the company must meet additional cockpit-alert requirements.
Boeing agreed in January 2021 to pay $2.5 billion in fines and compensation to end a Justice Department criminal investigation into the 737 MAX crashes.
The agreement between Boeing and the Justice Department, which exempted the company from prosecution, includes a $243.6 million fine, $1.77 billion in compensation to airlines, and a $500 million fund for crash victims in relation to fraud conspiracy allegations regarding the defective design of the airliner.
The families of six Boeing crash victims have asked a judge to rule that the government's compensation violated their legal rights.
Boeing fired Muilenburg in December 2019 after a dispute with regulators over the 737 MAX's return to service. Muilenburg's counsel, who neither confessed nor denied wrongdoing, did not respond promptly to a request for comment.
Muilenburg left Boeing with $62 million in earnings and pension benefits, but no severance pay.
SEC Enforcement Director Gurbir Grewal stated, "Boeing and Muilenburg prioritized profits over people by misleading investors about the safety of the 737 MAX in an effort to rehabilitate Boeing's image after two tragic accidents that resulted in the loss of 346 lives and incalculable suffering for so many families."
In November 2017, Boeing's current and former board members reached a $237.5 million settlement with shareholders to resolve a lawsuit questioning the board's management of the 737 MAX's safety.
Sep 22, 2022 11:24
Sep 23, 2022 11:13