Boeing Co. has reached a settlement agreement with the Department of Justice to the tune of 2.5 billion dollars. This settlement comes after Boeing faced a criminal charge of defrauding the Federal Aviation Administration's Aircraft Evaluation Group (FAA AEG) after withholding information about the 737 Max airplane. The airplane in question was riddled with scrutiny after it was involved in two fatal crashes that resulted in the death of 346 passengers.

According to the Department of Justice, the charges against the aircraft company have been dismissed since Boeing entered into a Deferred Prosecution Agreement (DPA). The details of the DPA stipulate that Boeing will pay over 2.5 billion dollars in monetary compensation. Just under $244 million will go toward a criminal penalty. Another $1.77 billion will go toward payment for airline customers of the Boeing 737 Max. Lastly, $500 million will go toward establishing a fund for beneficiaries of victims in the Lion Air Flight 610 crash and the Ethiopian Airlines flight 302 crash.

In a statement put out by the Department of Justice, Acting Assistant Attorney General David P. Burns of the Justice Department's Criminal Division expressed, “The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers.” Burns added, “Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception. This resolution holds Boeing accountable for its employees’ criminal misconduct, addresses the financial impact to Boeing’s airline customers, and hopefully provides some measure of compensation to the crash victims’ families and beneficiaries.”

Along with its requirement to pay back monetary compensation to those harmed by the company's deception, Boeing has also agreed to give the Department of Justice quarterly updates about its operation efforts both legally and ethically. Because the charge of conspiracy to defraud the U.S. government has been dismissed, the company will be allowed to continue its federal contract so long as it does not run into any legal troubles for the next three years. Additionally, Boeing must comply with any investigations, including those conducted by international authorities regarding the crashes or otherwise.

Investigation Reveals Deception from a Limited Number of Boeing Officials

The settlement comes after an extensive two-year investigation about important safety information that was withheld from the government. The Department of Justice explains that Boeing misled officials about the aircraft’s maneuvering characteristics augmentation system MCAS, a crucial piece of technology that had an impact on this 737 Max’s flight control system.

The deception happened because two of the 737 Max flight technician pilots were aware of changes to the MCAS but did not disclose those changes to the FAA AEG. Because this information was not disclosed, the flight standardization board report (FSB report) that was issued in the summer of 2017 removed all information pertaining to the MCAS. This in turn led aircraft manuals and pilot training materials to omit necessary information that would provide optimal safety of the plane's performance.

The FAA AEG only learned of the omitted information after the first 737 Max crash. Lion Air Flight 610, which took off from the Java Sea near Indonesia on October 29th, 2018, crashed not long after takeoff with all 189 passengers on board perishing. During the investigation of the crash, it was revealed that the MCAS played a role in the aircraft crashing because it was activated during flight. As the investigation unfolded, the two 737 Max flight technical pilots continued to deceive FAA and Boeing Officials. Shortly after the first crash, Ethiopian Airlines Flight 302, on another Boeing 737 Max, crashed after it took off from Ejere, Ethiopia. The crash killed all 157 passengers on board. An investigation found that this crash was also due in part to the activation of the MCAS. After the second crash, the U.S. announced that it would indefinitely ground all flights that used a 737 Max.

After news of the settlement, stock prices for Boeing wavered at $210 per share. While analysts remain optimistic about the company's financial performance and future success, the pandemic and the grounding of the 737 Max squelched the company's performance over the past year. Since the FFA lifted the ban on the 737 Max and ungrounded the jet in November 2020, there is optimism that the aircraft and the company will return to its once prestigious standing.