Were Boeing's Max Woes Really Not Pervasive?

Boeing Co. is one step closer to relegating the 737 Max crisis to the history books. On Thursday, the aerospace giant entered into a deferred prosecution agreement with the Justice Department under which the company will pay $2.5 billion to resolve a criminal charge that it conspired to defraud the U.S. by deceiving the Federal Aviation Administration about certain characteristics of its 737 Max jet. The plane officially returned to the skies late last year after a pair of fatal crashes forced a 20-month grounding and shattered Boeing’s reputation for safety and quality control.

Roughly two-thirds of the penalty — $1.77 billion — reflects compensation to Max airline customers that has already been budgeted in Boeing’s financial statements. The company will take a charge in its fourth-quarter earnings to reflect the remaining obligations — a $243.6 million criminal penalty and $500 million contribution to the heirs and beneficiaries of the 346 people who died in the two Max crashes.

​​​​“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,” Acting Assistant Attorney General David Burns of the DOJ’s criminal division said in a statement. Employees is a notable word there. It’s striking the degree to which the DOJ paints the Max crisis as the result of actions by two rogue employees. While Boeing had to agree to enhance reporting on its internal controls and meet routinely with regulators to prove it’s doing all it can to discourage future violations of U.S. fraud laws at the company, the DOJ will not require an independent compliance monitor, in part because “the misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management.”