Boeing 737 Max Recertification Testing - Finally.

[Easy Street]

A good time to bury bad news? Or avoiding harsher treatment under the incoming administration?

Boeing agrees to pay $2.5B+ to settle criminal fraud charges over 737 MAX

[GlobalNav]

Yes, to both I’m afraid.

Reminds of a quote from Sen Dirksen (Rep, Illinois) (many years ago) concerning the federal budget. “ A billion here, a billion there, and pretty soon you’re talking real money.”

[WillowRun 6-3]

Even anticipating it, still this is difficult to realize

So the subject matter of another of the several sub-threads takes a turn for resolution. Here is the statement issued by the U.S. Department of Justice, without any further elaboration or additional comment from this SLF/attorney....for now.

Boeing Charged with 737 Max Fraud Conspiracy and Agrees to Pay over $2.5 Billion | OPA | Department of Justice

Added: Ahem..... with a nod to the courtly custom of saying, "I pass the witness", as well as the assertion (evidentiary or not) that the document speaks for itself, I can say only that, this is one marvelously fine and outstanding piece of legal writing. Because it tells the story, across many issues and events, succinctly, yet with walloping punches that pummel the legal issues into....well, into a deferred prosecution outcome.
Nothing further.

[etudiant]

Easy Street

Think the civil suits will remain, this is just the DoJ on behalf of the US government. Sadly the USG obviously does not have the stomach to put down the hammer, despite real crimes of misleading and omission.
I compare this very unfavorably to the Chinese response to Jack Ma's effort to upend their banking system, they smacked it down hard.

[India Four Two]

... this is one marvelously fine and outstanding piece of legal writing.

I have to agree. A stunning document.

This should change Boeing's culture, as long as they don't just pay lip service to the requirements:

In addition, Boeing has agreed to strengthen its compliance program and to enhanced compliance program reporting requirements, which require Boeing to meet with the Fraud Section at least quarterly and to submit yearly reports to the Fraud Section regarding the status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced so that it is effective at deterring and detecting violations of U.S. fraud laws in connection with interactions with any domestic or foreign government agency (including the FAA), regulator, or any of its airline customers.

[WillowRun 6-3]

There are a number of civil suits and no, this deferred prosecution agreement does not in any way terminate, defer, or otherwise call a halt to those actions. Having been a very little bit involved in one of the civil suits (not as counsel of record) I wish I could add some vehemence, but my NDA would not be something I should like to chance testing. (There could be one possible exception to a slight extent -- I haven't kept tabs recently on the document disclosure suit, that is the Freedom of Information Act lawsuit, brought against the FAA by the Flyers' Rights group in which Capt. Sullenberger is a participant. I think it's still going strong but I can't say for sure.) Actually, evidentiary questions on a more detailed level omitted here, the contents and tone of the DPA will very likely boost the civil cases.

The criminal information, in other words the charging document, filed in federal district court is linked in the press release from Dept of Justice. Likewise, the Deferred Prosecution Agreement itself.

I'm not going to assert anything (for now anyway) about how the recently enacted FAA re-reauthorization legislation (reform legislation, to be fair) might result in holding Boeing's feet to the proverbial fire. Too much uncertainty in official Washington at the moment.....

Yet something isn't uncertain. The individuals who were at least subjects of interest for the criminal investigation are not saved from potential charges by the agreement Boeing struck. Whether it would make better sense to assault the corporate entity to inflict much greater scope and depth of financial, reputational and organizational (and even operational) pain is something I'm skeptical about. What the PRC does to Jack Ma doesn't weigh into the equation as I see it, but then I took an oath to uphold the Constitution of the United States and that of the specific state which granted my license, so no surprise.

[Big Pistons Forever]

Willow Run

Is 2.5B an exceptional amount with respect to other deferred prosecution agreements for similar circumstances ?

Also what happens if Boeing doesn't shape up and fly right ?

[2Planks]

To put this fine into context the US fined VW $2.8b for the emissions fixing thing and senior execs were arrested. Nobody died directly as a result of that scandal, yes extra pollution will have contributed to deaths, but Boeing appear to have got off lightly.

[PiggyBack]

The significant difference is that VW are not a US company.
It may just be my cynicism but US courts seem to treat US companies completely differently to non-US companies.
For a US companies this is a large fine. If it had been Airbus. We would have been looking fines at least two orders of magnitude more, serious jail time and attempts to ban the sale of airbus products in the US.

[infrequentflyer789]

Thinking along similar lines, I note also that the deaths caused by Boeing were not in the US and (vast majority) not US citizens.

BP (via US subcontractors) killed 11 on DeepWater Horizon, fine was quite a bit larger (along with criminal convictions as well I think) - but that was US nationals in US waters. In both cases, civil and compensation settlements will dwarf the fines of course (and this Boeing settlement doesn't appear to close off criminal prosecutions of individuals).

[FlightlessParrot]

Originally Posted by infrequentflyer789

,,,and this Boeing settlement doesn't appear to close off criminal prosecutions of individuals....

The statement focuses on the actions of two individuals, as though this whole mess were the result of rogue employees, and not the consequence of corporate culture and policy.

[WillowRun 6-3]

Deferred Prosecution Agreement and related

Noting in advance, this will be a lengthy post, because there are several quite significant parts of the DPA. And besides those items there also are some related questions about the money Boeing has agreed to pay and its overall potential criminal liability. And, because as SLF/atty it's an obligation to post only content I can be confident is the best professional assessment or description of legal (and sometimes, policy) aspects of which I am capable...... a few caveats follow, because no one who reads these threads routinely should be misled by a wordy lawyer (even one who seems to think he is an airport, or named for one).

A) WR is not a criminal defense attorney, or prosecutor, and has not done any legal work in the field of criminal law in my entire legal career, and this exclusion emphatically reaches federal criminal matters. Nothing in this post should be construed, relied upon, or otherwise seen, interpreted, understood, or read back, as legal advice to any individual, person, entity, or other callsign-poster. (C'mon, for a mix of the mandatory with the attempt at humor, that was halfway decent.)

B) I have not and don't plan to delve or drill deeply into the finer points of terms and provisions of the DPA or its many elements. It might be entirely routine, in its structure and language, in the courts where these lawyers practice, but it's, how to say this neutrally?...very detailed.

C) Boeing is represented in the matter in which the DPA was agreed to and filed by two of the biggest and best law firms in the country, both with three attorneys listed by name (Kirkland & Ellis, and McGuire Woods). My comments in what follows are, in comparison, entirely from the cheap seats. And intended for the enlightenment if not also reading enjoyment of the community on R&N and any others who may have had a look now and again at this thread.

Here is the DPA as posted on a United States, Department of Justice, website yesterday:
U.S. v. The Boeing Company - Final DPA Package (1.6.21).pdf (justice.gov)

1) The press announcement does an excellent job of explaining the agreement and what the company is obligated to do, although obviously it does not drill into much, let alone all, the pertinent details.
For the best overall summary of the misdeeds (and that's probably an overly nice term) involved in the criminal case particularly, go to the Statement of Facts. It is Attachment A, on pages 28-43 of the pdf. It's some 54 paragraphs. It tells quite a detailed story, factually. Each poster and thread-visitor ought to reach his or her own determinations about just how serious the problems which obviously existed in the company actually were.
Recall, though -- the criminal law complaint here is for acts and omissions in the nature of fraud -- and conspiracy. It is not an overall assessment and allegation of criminal culpability for everything that was done improperly. It is limited. And limited factually - it is only based (insofar as I have understood it) on the conduct of the two unnamed technical pilots.

2) About the fine and its amount. It turns out, the monetary amounts are calculated according the the U.S. Sentencing Guidelines. The $243.6 million amount is based on the company's own calculation, internally, of its intended cost savings. (Para. 9(b)).
The $500 million in compensation to crash-victim beneficiaries is to be administered by a highly structured, and very highly neutrally structured, escrow fund arrangement. These payments, when ultimately made, will not be offset against other claims by crash-victim beneficiaries (Para. 19). How exactly this term might interact with damages provisions in the liability lawsuits, or under the Montreal treaty system in general, is a question for another place and time (or, I'm not sure how that plays out, candidly).
The $1.77 million for airline financial penalties can be offset by payments already made by Boeing to its airline customers (para. 12).

2(a) - how do these amounts compare to other DPAs, per the question of a recent post? I don't know. The DPA process for negotiation, for manipulation of the Guidelines as a tactical matter as well as intellectual exercise - way out of my league here. My own view is that some account must be taken of the role Boeing plays, sorry make that roles, plural,...the multiple roles Boeing plays in the national aviation sector, the international aviation sector, aerospace, and as a defense contractor. There is prosecutorial discretion, and then there are other, even larger matters of discretion. This should not be a saga akin to, "it became necessary to destroy the village in order to save it."

3) Notice that the court of public opinion can be a much easier place to win a sensational case than a court of law especially the United States District Court in any District in the country. This is not to say the prosecution had a big uphill fight, but just because respected and credible writers, journalists and armchair expert/authorities view liability issues in the criminal law one way, does not mean that your pre-trial order and proffers of trial exhibits are going to be good enough.

4) About the comparisons to other companies based in other sovereign Member States (ICAO reference, in case anybody needs the note), this is apples and golf balls. No one has ever said that the United States legal system and its courts are set up as a kind of "all comers" system, any litigant, any place of existence, any claim. (Reference to a U.S. Supreme Court case a few years back about a university having an "all comers" policy for acceptance of students into campus organizations.) Whether a terribly botched blowout of a drilling rig or a screwed up way of gaming anti-air pollution rules can be compared to the elaborately articulated civil air transport safety and certification system, its legal and regulatory regime, I think is not as simple as just measuring who received superficially harsher sentences.

4(a) Note the recitation in the DPA of remedial measures instituted by the company (para. 4(d)). Skeptics may scoff and surely will, yet these actions by the company would not end up in the DPA itself unless some pretty hardheaded federal prosecutors believed in good faith and on the basis of evidence likely admissible in a court of law that these steps are for real. Does that alter anyone's calculus for comparing the VW or BP cases? Up to you.

5) About what happens if Boeing does not comply? The DPA term can be extended. Further about company performance, there is an extensive template for its Corporate Compliance Program in Attachment C. And Reporting obligations are set forth in Attachment D. They're both apparently heavy programs and obligations, reaching for an escape-proof burden for the company to fulfill. In this context, a look at Paragraph 5, Future Cooperation and Disclosure Requirements, likely would be instructive.

6) With no doubt at all, individuals are not released whatsoever from potential criminal prosecution. It's stated in Para.20(b).

** ** **
On some thread or another, discussion has occurred over the likely, or even only possible, legal fate to befall one or both of the named technical pilots. Certainly a good number of others must share the culpability in some arena or another. At the same time, the admissions by the company which it made as part of this outcome of this specific federal criminal inquiry would seem not good for the prospects for those individuals...not at all good. I wish unfavorable outcomes on no one, having experienced enough lean times to appreciate that for your friendly neighborhood SLF/attorney-poster, the rule of law being the determining factor must be all that we can ask for, and all that we really need.
With apologies to Gums, WR sends.....

[tdracer]

Those of you who want a much large financial penalty against Boeing, you need to ask what's your end-game? Boeing is already in a financially precarious state - between the MAX fiasco and Covid, their current and long term losses are in the tens of $Billions, and tens of thousands of Boeing employees have already lost their jobs (add in the impact on suppliers, and you're well into the six figure range for job losses), with more to come.
All that would happen if the feds applied a 10 figure fine on Boeing is they'd have to turn around and bail them out again to prevent the company from completely collapsing.
Unless the goal is to put Boeing Commercial out of business and give Airbus a complete monopoly on large passenger aircraft, assessing a huge fine against Boeing would end up being counter productive...

[Longtimer]

Only to save US jobs is a bail out needed, not because of a lack of suitable aircraft from other companies

[GlobalNav]

tdracer "Those of you who want a much large financial penalty against Boeing, you need to ask what's your end-game?"

A large financial penalty is about the only way the government has (other than incarceration) to make the company accountable. The sad thing is the immense consequences this has on people who are in no way responsible. In my judgment, the desirable end-game is change. Change in the corporate culture, change in the motivations that governed bad decisions made by management and those who needed to satisfy management, change in the business goals and measures of performance in business plans that gave priority to share price, schedule and sales numbers. No fine will bring back lost lives.

But it seems you are much closer to the company than the rest of us. What do you think will result in real change, so that the fundamental values that led to these disasters don't lead to the next one?

[FlightlessParrot]

There is a capitalist answer to the problems of Boeing, summed up in the slogan "Creative destruction." Over two decades or so, Boeing has abandoned the things that made it truly respected and trusted by everyone who ever set foot in an aeroplane, all in pursuit of financial success. The consequences of this management policy is that it is now vulnerable to the external shock of the pandemic. The company Boeing is, perhaps, no longer the best entity to manage its productive assets, both plant and skilled workers. As the company was moving more and more to an outsourcing model, with shared risk, there would be the less disruption in breaking it up into manageable, more nimble, and more ethical productive units.

[tdracer]

Longtimer

Fixed that for you.
Seriously, who currently builds a viable, 200 passenger or larger commercial aircraft besides Airbus and Boeing? If Boeing was shuttered tomorrow, you're looking at ten years before anyone else could even think of bringing a competitive aircraft to market (likely requiring many, many billions of tax payer dollars to make it viable). And of you think Boeing got arrogant - just imagine what it would be like dealing with a company that has a guaranteed 10 year monopoly on the business...

Global, the reported $244 million dollar fine is chump change compared to the many billions that the MAX fiasco has already cost (and will continue to cost) Boeing. If the impact to Boeing's finances and reputation are not enough to bring about change, I honestly don't know what would. Something I mentioned way back when the MAX was first grounded was that sometimes it takes a wake up call. I'm pretty much out of the loop (nearly everyone I knew at Boeing has left - either retired or laid off), so I don't know what's going on there currently to change the culture, but I was there in 1991 when three Boeing aircraft crashed due to design errors (Lauda 767 T/R deployment in flight, and the two 747F crashes due to fuse pin failures). The reaction was swift and powerful. I was drafted onto the Propulsion Safety Board a few years later (which reported directly to the Aircraft level Safety Review Board) - our missions statement was simple - there is not going to be another Boeing crash due to a design error. However, over the years, memories fade, people leave/retire, and those in charge forget what the consequences of failure can be.

[Commander Taco]

However, over the years, memories fade, people leave/retire, and those in charge forget what the consequences of failure can be.

A most useful observation, TD, for the non-industry forum participants. It also needs to be said that the situation Boeing finds itself in is not unique at all to Boeing or other manufacturers. At the airline level, I saw several declines and renaissances in “The Standard” over my 40+ year airline career.

[568]

tdracer

Quote" just imagine what it would be like dealing with a company that has a guaranteed 10 year monopoly on the business".

Are you meaning "Airbus"?
If so, what about the defense contracts Boeing has had over the years?

[568]

Boeing have never respected their employees.
Time to drink a different cool aid as times have changed!