DOJ to Boeing: Our Deal is Off

It seems all news is bad news lately for Boeing Co. A harrowing incident earlier this year in which the door on one of its planes blew off mid-flight has sparked intense scrutiny into safety and maintenance practices at the world’s largest aerospace company. Since then, the sudden deaths of two whistleblowers against the company have provided grist for online rumor mills and conspiracy theories.

And now this: The Department of Justice maintains Boeing didn’t live up to its end of a deal reached in 2021 to avoid criminal charges related two plane crashes. That makes the aeronautics manufacturer “subject to prosecution by the United States for any federal criminal violation of which the United States has knowledge,” according to DOJ. The high-profile case touches several issues of importance currently percolating in corporate law enforcement.

The DOJ made its position on the Boeing matter known in a letter earlier this month sent to U.S. District Court Judge Reed O’Connor in Fort Worth, Texas. Boeing responded that it believes it has complied with the terms of the deal – a deferred prosecution agreement reached in 2021 following the Lion Air 737 Max crash in 2018 and the Ethiopian Airlines 737 Max crash in 2019. Under that agreement, Boeing consented to a fine of $2.5 billion and pledged that it would strengthen its safety and compliance practices.

The safety concerns that emerged earlier this year prompted the families of the victims of the earlier crashes to lobby the Biden administration to end the agreement. In its letter to O’Connor, DOJ alleged Boeing failed “to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations.”

It’s not unprecedented for the federal government to claim companies have violated deferred prosecution agreements, but it rarely happens. For instance, DOJ went after Ericsson last year with charges the telecommunications company failed to comply with the terms of a 2019 settlement for violations of the Foreign Corrupt Practices Act. Ericsson paid a nine-figure sum in penalties as part of a new plea agreement.

Complicating matters, Biden’s Justice Department has made corporate self-disclosure a point of emphasis – a sign of an overriding belief at the agency that criminal conduct at corporations remains underreported. The effort also includes a pilot program for voluntary self-disclosure on the part of individuals. Given that the 2021 deferred prosecution agreement did not involve Boeing self-disclosing any misconduct, how will that affect DOJ’s position on holding the company accountable for new missteps?

Meanwhile, the Securities and Exchange Commission is getting in on the act, too. Specifically, Bloomberg is reporting that the regulatory agency is examining the possibility investors were misled by comments from Boeing or company executives regarding its safety protocols in the wake of the incident earlier this year.

Combine the uproar around safety concerns with the Biden administration’s efforts to implement stronger checks on corporate misbehavior, and more turbulence ahead appears likely for Boeing.

 

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