Boeing Co is to pay US$200 million to settle civil charges by the US Securities and Exchange Commission (SEC) that it misled investors about its 737 MAX, which was grounded for 20 months after two fatal crashes killed 346 people, the agency said on Thursday.
Boeing knew after the first crash that a flight control system posed a safety issue, but assured the public that the 737 MAX airplane was “as safe as any that has ever flown the skies,” the SEC said in announcing the settlement.
The SEC also said former Boeing CEO Muilenburg had agreed to pay US$1 million to settle charges.
Both Boeing and Muilenburg did not admit or deny the SEC’s findings, the agency said.
A fund is to be established for the benefit of harmed investors, it said.
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” SEC Chair Gary Gensler said in a statement.
Boeing and Muilenburg “failed in this most basic obligation,” he said.
The SEC charged Boeing and Muilenburg “with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019.”
Boeing, which said it did not admit or deny wrongdoing in the settlement agreement, said it had made “fundamental changes that have strengthened our safety processes” and said the “settlement is part of the company’s broader effort to responsibly resolve outstanding legal matters related to the 737 MAX accidents.”
The crashes were linked to a flight control system called the Maneuvering Characteristics Augmentation System (MCAS).
The SEC said “after the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was ‘as safe as any that has ever flown the skies.’”
The first crash, of a Lion Air flight in Indonesia, occurred in October 2018.
After the second crash, in Ethiopia in March 2019, “Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of contrary information,” the SEC said.
Boeing has resolved most claims from the two fatal crashes. Last year, it acknowledged liability for compensatory damages in lawsuits filed by families of the 157 people killed in the 2019 Ethiopian Airlines 737 MAX crash. A small number of trials are expected to begin next year to help resolve claims.
The US Federal Aviation Administration (FAA) required 737 MAX pilots to undergo new training to deal with MCAS, as well as mandating significant new safeguards and other software changes to the flight control system, before allowing the planes to return to service.
The crashes cost Boeing more than US$20 billion and led the US Congress to pass sweeping legislation reforming how the FAA certifies new airplanes. Boeing faces a December deadline to win approval from the FAA of the 737 MAX 7 and 10 variants, or it must meet new modern cockpit-alerting requirements.
In January last year, Boeing agreed to pay US$2.5 billion in fines and compensation to resolve a US Department of Justice criminal investigation into the 737 MAX crashes.
The justice department settlement, which allowed Boeing to avoid prosecution, included a fine of US$243.6 million, compensation to airlines of US$1.77 billion and a US$500 million crash-victim fund over fraud conspiracy charges related to the plane’s flawed design.
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