Boeing’s troubles might be about to get exponentially worse as the US Department of Justice (DOJ) said that the company breached terms of its 2021 agreement that shielded it from criminal charges for two fatal 737 Max crashes in 2018 and 2019 that killed a total of 346 people.

How Did Boeing Get Away With the 737 Max Tragedies?

For context, two new 737 Max jets crashed in quick succession, just a few months apart between 2018 and 2019, in Indonesia and Ethiopia. After the first crash, Boeing allowed 737 Max planes to fly again even though it didn’t know what caused it, directly leading to a second tragic crash where all 157 people on board were killed. The DOJ probed the company for nearly two years and accused the company of concealing information about its Max plane, but somehow, it didn’t charge Boeing or its executives with any criminal charges.

Instead, Boeing reached a $2.5 billion deferred prosecution agreement with the DOJ to avoid prosecution on a single charge of fraud. While the settlement shielded Boeing from prosecution it did not grant any immunity to employees who were found to be negligent and engaged in any misconduct (but it hasn’t gone after employees yet either).

Specifically, the FAA said that two Boeing employees “deceived the FAA” about MCAS which was a new flight control system on the 737 Max.

Now, in a letter to US District Judge Reed O’Connor in Fort Worth, Texas, who oversaw the 2021 settlement, the DOJ said that Boeing is liable for criminal prosecution.

The letter states, “For failing to fulfill completely the terms of and obligations under the [deferred prosecution agreement], Boeing is subject to prosecution by the United States for any federal criminal violation of which the United States has knowledge.”

The 2021 settlement was controversial from the very beginning as the families of victims slammed it for denying them justice. The families have been lobbying to end the agreement with Boeing and their efforts gained traction this year after a steady stream of reports of major safety lapses at the company.

Boeing seems to be falling apart, both literally and figuratively. Earlier this year, the door panel of a 737 Max jet blew off during an Alaska Airlines flight. In a more recent incident, the engine cover on a Southwest Airlines Boeing 737-800 fell off during takeoff last month.

In his explosive testimony last month, whistleblower Sam Salehpour reiterated Boeing was very much in the know about the safety issues but not only ignored them but also retaliated against him when he brought these to the notice.

Salehpour accused Boeing of taking shortcuts in the construction of its 787 and 777 jets, where parts of the plane’s fuselage were not properly fastened together. He also alleged that there was a lot of pressure on Boeing engineers to provide a go-ahead on work they had not even inspected.

The families of victims see a step forward after the DOJ said that it could initiate criminal proceedings, even as justice for their loved ones and prosecution of those responsible for the two crashes remains a work in progress.

Attorney Paul Cassell, who represents the victims’ families said in a call yesterday, “This is a positive first step, and for the families, a long time coming. But we need to see further action from DOJ to hold Boeing accountable, and plan to use our meeting on May 31 to explain in more detail what we believe would be a satisfactory remedy to Boeing’s ongoing criminal conduct.”

Boeing’s 2021 Agreement with DOJ Did Not Fix Accountability

Boeing’s 2021 agreement with the DOJ did not go over well with many as the company seemingly got away with just a financial fine while the top leadership skipped any accountability. The fine cost the company only a fraction of its annual profit in 2023.

At Salehpour’s Senate hearing last month, Senator Ron Johnson said, “We come back to accountability. Yes. Has anybody been held accountable for concealing that from the FAA? I mean, 300 some lives were lost again, my condolences those family members of those lives were lost. This was beyond negligence.”

He emphasized, “This is an overt act. And nobody has been held accountable in any way shape or form, financially losing their job, criminally held liable.” Critics argue that if Boeing didn’t have such immense political power through the jobs it creates, the money it donates, and the government contracts it holds, that it would have been prosecuted under the full force of the law for its extreme negligence instead of a slap-on-the-wrist fine.

Incidentally, as part of the 2021 agreement, the DOJ did not assign an independent compliance monitor to Boeing’s progress on the agreed safety framework as it thought the “misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management.” Essentially, the DOJ asked Boeing to police itself (an unfortunately common practice due to regulatory capture) and that has clearly not worked very well.

The ongoing security incidents and whistleblower complaints show how important it is to have an independent entity oversee the progress.

While we can’t be sure whether there was corruption involved in Boeing’s 2021 agreement (for now at least), it is apparent that it not only got away easily but it also didn’t strengthen its safety mechanisms as required by the agreement.

Conspiracy Theories About Boeing Whistleblower’s Death

Conspiracy theorists are having a heyday when it comes to Boeing. Whistleblower John Barnett had previously raised concerns about Boeing’s production process. However, after being asked to give one more day of testimony, he was found dead in the US by apparent suicide.

There is still no physical evidence (that we know of) to indicate that this tragedy was anything other than suicide, though statements of disbelief from friends and family have cast doubt on the theory. Some conspiracy theorists are arguing that Boeing executives may have had Barnett killed, but again, there simply isn’t enough evidence supporting the theory.

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Boeing’s Stock Has Also Fallen Amid Safety Issues

Boeing’s stock has also reacted to the controversies and with a YTD loss of almost 31% it is among the top five S&P 500 losers this year. The stock is in the red in premarkets today as markets gauge the potential impact of the DOJ’s decision.

Wolfe Research analysts said in a note “We think this was the base case, but also admit the range of potential outcomes is less clear with incremental fines and further extension of the period of review a likely outcome.”

They added, “We don’t presume to know all the liability the criminal prosecution Boeing could be opened up to, but we think that is a distant secondary/tertiary risk to the company’s production challenges.”

All said, nothing seems to be going right for Boeing and negative PR keeps piling on, harming the brand as well as the company’s long-term outlook.