Aviation

Boeing and former CEO Muilenburg settle allegations they misled about the Max | News

Boeing has agreed to pay $200 million to settle charges that it misled investors about issues facing the 737 Max, violating US securities laws.

Former Boeing chief executive Dennis Muilenburg, who left the company in late 2019, has settled for $1 million as part of the same investigation, the Securities and Exchange Commission says on 22 September.

“Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 Max, all in an effort to rehabilitate Boeing’s image following two tragic accidents that resulted in the loss of 346 lives and incalculable grief to so many families,” says Gurbir Grewal, director of the SEC’s Enforcement Division.

Dennis Muilenburg - Jim Young/AP/REX/Shutterstock

In consenting to the settlement, neither Boeing nor Muilenburg denied or admitted the charges.

“Public companies and their executives must provide accurate and complete information when they make disclosures to investors, no matter the circumstances,” adds Grewal.

“Today’s settlement is part of the company’s broader effort to responsibly resolve outstanding legal matters related to the 737 Max accidents in a manner that serves the best interests of our shareholders, employees and other stakeholders,” Boeing says.

It adds that the agreement “fully resolves the SEC’s previously disclosed inquiry into matters relating to the 737 Max accidents”.

In January 2021, Boeing agreed to pay $2.5 billion to settle a criminal case brought by the Department of Justice, which alleged that Boeing misled the Federal Aviation Administration about the Max.

Muilenburg did not respond to a request for comment about the SEC settlement.

The SEC charged Boeing and Muilenburg “with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019”, it says. They “negligently violated the anti-fraud provisions of federal securities laws”.

The October 2018 crash of a Lion Air Max killed 189 people, and the March 2019 crash of an Ethiopian Airlines Max killed 157. Following the second crash, aviation regulators grounded the jet.

ethiopian crash debris c Mulugeta Ayene_AP_Shutter

Investigators concluded that a system unique to the Max – the Maneuvering Characteristics Augmentation System (MCAS) – erroneously activated, causing both jets to nosedive.

“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 SEC says.

Boeing made that statement in a November 2018 media release, which the SEC says Muilenburg edited and approved.

The release “selectively highlighted” details from a preliminary crash report, “suggesting that pilot error and poor maintenance contributed to the crash”, the SEC says.

Meanwhile, however, Boeing had started redesigning MCAS to make it safer.

Then, after the second crash, Muilenburg insisted that nothing about the Max’s design “slipped through” the FAA’s certification process.

But, the SEC says, Muilenburg was at that time “aware of information calling into question certain aspects of the certification process related to MCAS”.

A Congressional investigation later concluded that Boeing withheld information from the FAA, “including internal test data that revealed it took a Boeing test pilot more than 10sec to diagnose and respond to uncommanded MCAS activation in a flight simulator”.

Federal guidelines “assume pilots will respond to this condition within 4sec”, said the report.

It also became known that Boeing lobbied the FAA for a training report to make no mention of MCAS, meaning pilots needed less training when transitioning from the 737NG to the Max.

“We will never forget those lost on Lion Air flight 610 and Ethiopian Airlines flight 302, and we have 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, and have enhanced our culture of safety, quality and transparency,” adds Boeing.

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