The Justice Department has made some pretty serious allegations against Boeing. I’d say that this sounds very bad for the company, though let’s be honest — Boeing is too big to fail, and struggles with accountability, so this will probably be like everything else we’ve seen at the company in recent years.
In this post:
Boeing accused of breaching 737 MAX settlement
The Justice Department has just accused Boeing of violating the settlement that allowed the company to avoid criminal prosecution, following two deadly Boeing 737 MAX crashes (a Lion Air crash in 2018, and an Ethiopian Airlines crash in 2019).
In January 2021, Boeing reached a $2.5 billion settlement with the Justice Department, in order to avoid prosecution for fraud. The company could have been charged with misleading regulators who approved the plane, by withholding important information. Boeing ultimately managed to blame the deception on two employees, who weren’t very high up. The $2.5 billion settlement included a $243.6 million fine, a $500 million fund for the families of victims, and $1.8 billion in compensation for airlines that had their 737 MAXs grounded.
The Justice Department is now claiming that Boeing has violated the terms of the settlement by not making the promised changes to prevent violations of federal anti-fraud laws. Specifically, Boeing is accused of “failing to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations.”
This update means that Boeing could be prosecuted for any criminal violation of which the United States has knowledge, including the charge of fraud.
Boeing has of course been under increased scrutiny again in 2024, when the year started with the door plug of an Alaska Boeing 737 MAX blowing out shortly after takeoff from Portland. This has exposed a whole new series of failures at Boeing, particularly with the company’s oversight of quality control.
Will the Justice Department file charges?
While these allegations are bad, the question is how the Justice Department will proceed. The Justice Department has until July 7, 2024, to decide on next steps. Boeing has until June 13, 2024, to respond to the government’s accusations, and the Justice Department will use Boeing’s response to determine whether to pursue prosecution or not.
Here’s what a Boeing spokesperson had to say:
“We believe that we have honored the terms of that agreement, and look forward to the opportunity to respond to the Department on this issue. As we do so, we will engage with the Department with the utmost transparency, as we have throughout the entire term of the agreement, including in response to their questions following the Alaska Airlines 1282 accident.”
We’ll see how this all plays out, though the potential for criminal prosecution is significant. The 2021 settlement with Boeing really let the aircraft manufacturer off easy, though maybe this time will be different. I mean, I have to imagine the Justice Department wouldn’t mind making an example of Boeing, given the extent of the company’s mismanagement, plus public perception.
Bottom line
The Justice Department is accusing Boeing of violating an agreement that allowed the company to avoid criminal prosecution over the 737 MAX. Boeing is accused of not making changes to prevent violations of federal anti-fraud laws, and in the coming months we should learn whether criminal charges will be brought against Boeing.
Maybe corporate America would learn a thing or two if former Boeing executives were given some jail time rather than golden parachutes… I’m just saying.
What do you make of the Justice Department’s accusations against Boeing?
It's amazing how Americans eat their young in public.
If Europeans looked into Airbus transactions and safety with as much angst they'd be under the spotlight as well.
Agree with Exit Row Seat and Ole's comments. .....
Why comment? It's not like we can protest about it. It is too big to fail abd we really can't do anything about it.
Two things. First, Boeing execs enjoy the impunity that is a perk of being part of the US elite. If some of those responsible are fined and jailed until kingdom come, Boeing will get its act together before you say 'Boeing Boeing'. Second, $500 million for 346 victims? What an absolute pittance --- and much of it will be skimmed off by vulture lawyers in America. I know that some victims of Boeing's negligence are...
Two things. First, Boeing execs enjoy the impunity that is a perk of being part of the US elite. If some of those responsible are fined and jailed until kingdom come, Boeing will get its act together before you say 'Boeing Boeing'. Second, $500 million for 346 victims? What an absolute pittance --- and much of it will be skimmed off by vulture lawyers in America. I know that some victims of Boeing's negligence are resisting pressure and pursuing private lawsuits against this now-shameless company. Good on them.
This isn't even close to a "too big to fail" situation.
Boeing is doing fine and will continue to do so.
DOJ will have to play nice as long as DOD and DOS have their hands in the cookie jar.
As long as we are funding and sending weapons to our war hunger puppets, Boeing will be just fine.
$2.5bn Boeing settlement? We just gave Israel and Ukraine more than that yesterday.
Or...
This isn't even close to a "too big to fail" situation.
Boeing is doing fine and will continue to do so.
DOJ will have to play nice as long as DOD and DOS have their hands in the cookie jar.
As long as we are funding and sending weapons to our war hunger puppets, Boeing will be just fine.
$2.5bn Boeing settlement? We just gave Israel and Ukraine more than that yesterday.
Or all those warships patrolling a puppet island thousands of miles away equiped with, you guessed it, hundreds of Boeing made anti ship missiles, also used by over 50 Western allies, most are
And no puppets even got their hands on our Boeing made intercontinental WMDs.
So whatever DOJ will do is merely a deception to show justice and confidence to the public while not really achieving anything significant.
Exactly like how we believe they got punished in 2021 but actually got away with it.
Lock them up
In a multi billion dollar arms deal and decade long Pentagon contracts.
The opening comment of "Too Big to Fail" is the key here.
If the government "really" wanted to punish Boeing, it would:
- claw back all bonuses and stock options for all in the C-Suite (past and present)
- get Lockheed Martin or Northrop Grumman to take over Boeing
- slap it with a prohibition of future defense & government contracts
However, this would be too disturbing to domestic and foreign...
The opening comment of "Too Big to Fail" is the key here.
If the government "really" wanted to punish Boeing, it would:
- claw back all bonuses and stock options for all in the C-Suite (past and present)
- get Lockheed Martin or Northrop Grumman to take over Boeing
- slap it with a prohibition of future defense & government contracts
However, this would be too disturbing to domestic and foreign airlines and suppliers and plays into China's hands. Just slap it with a hefty fine, get an outsider as the CEO or COO, and move more engineers to run the business for the next decade. The biggest issue is for Boeing to get its act together and get the MAX, B777X, and B787 back on track. This will cost a fortune, but would have been cheaper in the long run if done correctly in the beginning.
Folks talking about nationalization of Boeing and auto, financial industry in 2008 has no clue what nationalization is. In all those cases, government became the largest shareholder but nothing else changed. The only restriction government put was limit on executive compensation and bonus. Government sold off its stocks as soon as it could profitably. Government had no intention of running thise companies.
Basket case for nationalization is Air India. The Indian government forced Tatas out,...
Folks talking about nationalization of Boeing and auto, financial industry in 2008 has no clue what nationalization is. In all those cases, government became the largest shareholder but nothing else changed. The only restriction government put was limit on executive compensation and bonus. Government sold off its stocks as soon as it could profitably. Government had no intention of running thise companies.
Basket case for nationalization is Air India. The Indian government forced Tatas out, took over the day to day operations of the airline. That didn’t happen to any of the US companies and ain’t happening with Boeing either(though there’s an argument that government could run Boeing better than current management). We all know how stupid you guys are, you don’t need to come here and comment to prove it.
the feds did force executive replacements and the bailout saved hundreds of thousands of jobs and tax dollars as part of a GM chapter 11 fililng.
Boeing's liquidity is being stressed more than ever as Boeing has to keep discounting its products via customer compensation while investing more and more to get its models to market compounded by very slow deliveries.
Boeing shares are down 30% YTD. The company is very much on the...
the feds did force executive replacements and the bailout saved hundreds of thousands of jobs and tax dollars as part of a GM chapter 11 fililng.
Boeing's liquidity is being stressed more than ever as Boeing has to keep discounting its products via customer compensation while investing more and more to get its models to market compounded by very slow deliveries.
Boeing shares are down 30% YTD. The company is very much on the verge of being in a dire financial position.
Given the sheer size of Boeing and the fact that there are other players in the aerospace business that are doing better, it isn't at all out of the realm of possibility that Boeing could be forced into bankruptcy, the US Treasury helps bail the company out and then financially benefits as the company is retooled, potentially under new owners with different assets than they come into BK with.
But I'm guessing you are one of the many Boeing apologists that have repeatedly dismissed how severe BA's problems are.
While disagree with the way Boeing's board has been criminally mismanaging a once-great company with the grand goal of enriching key Wall Street stockholders, Ole is right in that nationalization isn't the simple cure that many of you seem to think. In fact, it is indeed a recipe for disaster. If you want to see inefficacy, look no further than a government-run "business". Alitalia comes to mind. No, the solution has to different is is...
While disagree with the way Boeing's board has been criminally mismanaging a once-great company with the grand goal of enriching key Wall Street stockholders, Ole is right in that nationalization isn't the simple cure that many of you seem to think. In fact, it is indeed a recipe for disaster. If you want to see inefficacy, look no further than a government-run "business". Alitalia comes to mind. No, the solution has to different is is thus more complicated. In brief, to flush out all of the old McDonnell Douglas/Jack Walsh mindset from the Boeing c-suite. And to find people to run the company who had a similar vision to that which the pre MD version of Boeing had.
It won't be easy, but that's what should happen. If the government encourages and enables such a thing, I'd be ok with that - though I have a lack of faith in the government, to be honest.
AZ was mismanaged for years under government control and has only let go of that control because the EU forced them to.
The US has nationalized companies - as has most other capitalist countries - but returned them to the private sector fairly quickly.
It is ironic that you and others forget how much the federal government did to support business and esp. airlines after multiple macroeconomic and geopolitical disasters including covid and 9/11.
...
AZ was mismanaged for years under government control and has only let go of that control because the EU forced them to.
The US has nationalized companies - as has most other capitalist countries - but returned them to the private sector fairly quickly.
It is ironic that you and others forget how much the federal government did to support business and esp. airlines after multiple macroeconomic and geopolitical disasters including covid and 9/11.
The government made money on those interventions and most certainly did effect change in those industries because of their financial involvement.
It is beyond naive to think that nationalization hasn't happened in the US and can't happen again if Boeing can't right its own ship.
The US and world needs Boeing to succeed. They have to figure this mess out post haste.
@Tim Dunn - I am not a Boeing apologist. The company is in a rut, has no motto, objective or principle left. Is morally, ethically, and criminally corrupt to the core. My comment is on 1 - clarify what true nationalism is; 2 - as much as people will want (not me), Boeing will never be nationalized.
The fix for Boeing is not bankruptcy or nationalization. It is to replace the whole board, and all...
@Tim Dunn - I am not a Boeing apologist. The company is in a rut, has no motto, objective or principle left. Is morally, ethically, and criminally corrupt to the core. My comment is on 1 - clarify what true nationalism is; 2 - as much as people will want (not me), Boeing will never be nationalized.
The fix for Boeing is not bankruptcy or nationalization. It is to replace the whole board, and all C-executives. They all along with previous CEOs are criminally responsible for the 350 deaths. They all need to be criminally prosecuted for the deaths, recklessness, fraud, fiduciary negligence.
if you put all of the execs in jail, you need someone else to run the company.
Conviction of large numbers of Boeing execs - which I'm not arguing is out of order - requires stabilizing the company and providing the resources it needs to succeed.
simply punishing people and not resetting the company to succeed will lead to its failure - which is the opposite of what we need
This would be a great excuse for the feds to nationalize Boeing so that it is owned by The People. Make Boeing pay their fair share and make affordable housing and free healthcare for all! Yes to $29/hour minimum wage (already proposed for one city)
The entire concept of allowing Boeing to self-certify large portions of its work is the root of the issue; it was built on trust and a belief that a regulator didn't have to be standing over Boeing's shoulder for every task. Given human nature, neither Boeing or the government should have believed such a system would work.
The real harm comes to airlines that were and are heavily or totally dependent on Boeing -...
The entire concept of allowing Boeing to self-certify large portions of its work is the root of the issue; it was built on trust and a belief that a regulator didn't have to be standing over Boeing's shoulder for every task. Given human nature, neither Boeing or the government should have believed such a system would work.
The real harm comes to airlines that were and are heavily or totally dependent on Boeing - Southwest (which is still waiting for certification of the MAX 7) and United (MAX 10); even airlines that have switched to other models as WN and UA have done cannot get planes fast enough. Boeing delivered just 24 planes in April across all models. There is no way that Boeing will ever be able to catch up to its commitments. While some airlines like B6 and NK are financially struggling even w/o Boeing products, the very life of some airlines is at risk because of the Boeing issues which will take far, far longer to resolve than 9/11, covid or any other macroeconomic event.
It is tragic to watch but represents what happens when something as big as Boeing is not fixed early enough.
Boeing may be big enough not to fail but it isn't out of the realm of possibility that the federal government will take it over, bring in other experts to run it, and then sell the pieces off at a profit later.
“… but it isn't out of the realm of possibility that the federal government will take it over, bring in other experts to run it, and then sell the pieces off at a profit later.”
LOL
That is completely out of the realm of possibility.
you do realize that the feds nationalized 2/3 of the US headquartered auto industry and then sold it off?
you do realize that the feds are now going to sell the stock warrants they obtained from US airlines in return for federal covid aid?
As much as many embrace capitalism, the government loves to step in when it thinks something is broken. If there are smart people at the table, they allow the US people...
you do realize that the feds nationalized 2/3 of the US headquartered auto industry and then sold it off?
you do realize that the feds are now going to sell the stock warrants they obtained from US airlines in return for federal covid aid?
As much as many embrace capitalism, the government loves to step in when it thinks something is broken. If there are smart people at the table, they allow the US people to benefit from federal intervention.
Boeing is broken. Getting them back on their feet might well involve taking control of the company, throwing out current leadership - all of them, allowing other companies to turn the company around and carve up the pieces, and allowing the public and those other companies to benefit.
The notion that Boeing is too big to fail is a copout for not having a solution to not just punish the company but to turn it around so it not just survives but also thrives once again.
@Tim Fluff
Neither of them 'sell the pieces off at a profit later'. No one picked up the pieces that wasn't reorganized.
You do realize that the feds nationalized 2/3 of the US headquartered auto industry and then sold it off AT A LOSS.
If there are smart people at the table, they allow the US people to benefit from federal intervention.
Where did all the 'smart people' go? Because most 'US people' for...
@Tim Fluff
Neither of them 'sell the pieces off at a profit later'. No one picked up the pieces that wasn't reorganized.
You do realize that the feds nationalized 2/3 of the US headquartered auto industry and then sold it off AT A LOSS.
If there are smart people at the table, they allow the US people to benefit from federal intervention.
Where did all the 'smart people' go? Because most 'US people' for hell sure didn't benefit from the auto makers.
Your 'smart people' only cares about voters, which is exactly what Sleeping Granpa's EV tariff is doing. Rather than 'US people' can benefit from buying a $20k EV from China, US auto workers get to keep their jobs and we're stuck with buying a $35k ICE $50k EV.
Boeing is all politics and national security. Don't fall for the free market capitalism trap.
Willy, I’m curious why you state it’s totally outside the realm of possibility? I don’t by any stretch think it is the *most likely* thing to happen but I think it’s probably possible.
That Jim McNerney (and many of his underlings) aren't in jail right now, for the deaths of nearly 350 people, on pain of criminal negligence, is a total miscarriage of justice.
Instead, he was let off with a bonus.
You're naive.
If you think MAX should be held responsible for the deaths.
Boeing's munitions easily topped that number in Israel and Ukraine in a week. Especially when many are questioning it's 'legal' use in the war.
Instead, he was let off with a bonus.
Uh, what? You just segued between three different topics, with no rhyme nor reason between them.
"Too big to fail" is a copout for not putting anti-trust laws into effect against monolithic corporations.
How is this an antitrust issue? If you want to start making airplanes, I don't think Airbus or Boeing will stop you. It's just that the business takes an incredible amount of capital and expertise to start. See Mitsubishi, eg.
Boeing is really looking down on the US government and us government is doing nothing....I don't think doj will actually charge Boeing criminally but let's see. Unless there is a serious consequence for those who lead this company it will come back again and again. But money involved is quite big too.
There is something called the COSO Framework of Internal Controls. It is broadly known among corporate executives, accountants, and compliance professionals. The leading principle is "tone at the top." This tone filters down through the layers of the organization. If compliance were truly a priority, the "two lower-level" employees should have had no pressure to do anything other than comply.
Criminal liability at Boeing really starts at the very top. They were let off too easy. The DoJ should reopen the case with top executives on the hook for prison time.