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BusinessBoeing to pay $200mn penalty over misleading investors about...

Boeing to pay $200mn penalty over misleading investors about 737 Max


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Boeing and its former chief executive Dennis Muilenburg have agreed to pay millions of dollars to resolve charges they misled investors about two deadly crashes of the company’s 737 Max aircraft.

The aerospace manufacturer agreed to pay a penalty of $200mn to settle the allegations by the US Securities and Exchange Commission, while Muilenburg will pay $1mn. Neither the company nor Muilenburg admitted or denied the SEC’s findings.

The settlements stem from a pair of crashes in 2018 and 2019 off the coast of Indonesia and in Ethiopia. Together the accidents killed 346 people.

The cause was traced to a flight control system that erroneously and repeatedly pushed the nose of the Max downward. Boeing later was found to have deceived both regulators and pilots about the new system as it attempted to win approval from the Federal Aviation Administration without triggering costly new training measures.

Boeing last year agreed to pay $2.5bn to resolve a criminal fraud charge brought by the US Department of Justice. The company admitted guilt as part of the deal to defer prosecution, meaning if Boeing operates a compliance programme for three years, prosecutors will dismiss the case against the company.

The settlement announced by the SEC on Thursday addresses statements made to Wall Street.

“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair and truthful disclosures to the markets,” said SEC chair Gary Gensler. “The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation.”

According to the SEC, Boeing issued a press release a month after Lion Air Flight 610 went down in the Java Sea that “selectively highlighted” portions of an Indonesian government report that suggested that pilot error and poor aircraft maintenance contributed to the crash. The press release did not disclose that Boeing already had begun to redesign the faulty flight control system.

Muilenburg edited and approved the press release, the SEC said.

The chief executive also was aware of information “calling into question” the FAA process to certify the 737 Max following the Ethiopian Airlines Flight 302 crash in March 2019, the SEC said.

Yet about six weeks later, he told reporters and analysts that “there was no surprise or gap . . . that somehow slipped through [the] certification process” for the 737 Max, the securities regulator said. Muilenburg added at the time that Boeing had “gone back and confirmed again . . . that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes”.

Muilenburg, who was fired from Boeing in December 2019, could not immediately be reached for comment.

Boeing said that the company “will never forget” those killed in the crashes and that it had “made broad and deep changes across our company in response to those accidents — fundamental changes that have strengthened our safety processes and oversight of safety issues”. 

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