Federal prosecutors would face a daunting challenge in mounting a criminal case against Boeing Co. BA 1.55% or its employees, legal experts said, even with evidence showing workers sounded alarms about the 737 MAX’s safety and a company pilot’s chat messages suggesting he misled regulators.
The Justice Department launched a criminal probe after Lion Air Flight 610 crashed in Indonesia in late 2018, killing 189 people, and continued after Ethiopian Airlines Flight 302 went down in Ethiopia, killing 157 people in March. It has focused on whether Boeing cut corners at the expense of safety in developing the 737 MAX and whether the plane maker provided misleading or incomplete information to airlines or regulators, said people familiar with the matter.
To bring a successful criminal case against Boeing itself, prosecutors would have to show that executives repeatedly concealed or ignored the 737 MAX’s engineering problems, experts said. And there is a larger economic and political component: A corporate indictment and potentially huge sanctions must be balanced against the economic and national-security risks of incapacitating the country’s second-biggest defense contractor behind Lockheed Martin Corp.
Boeing’s defense division backlog stood at $62 billion as of Sept. 30, much of that reflecting U.S. orders.
SHARE YOUR THOUGHTS
Should prosecutors weigh Boeing’s importance to the economy and national security when deciding how to proceed with a criminal case over the 737 MAX crashes?
“The government can’t lose a company like Boeing as a defense contractor,” said Brandon Garrett, a Duke University law professor.
A Justice Department spokesman declined to comment for this article.
Lawmakers have added to Boeing’s pressure. On a Wednesday, a House panel revealed internal Boeing documents suggesting engineers had weighed whether a 737 MAX flight-control system needed an additional safeguard and didn’t adhere to the company’s own standards in designing the feature. They also unveiled a senior plant manager’s email warning of safety risks related to ramping up production of the best-selling jet.
Boeing executives told lawmakers they addressed employees’ concerns, arguing the company’s culture supports discussion of safety matters. House investigators are waiting to talk with Boeing employees until after they are interviewed by prosecutors, congressional officials said.
A Boeing spokesman declined to comment about the Justice Department’s criminal probe, and the company has said it is cooperating with all government inquiries. Boeing, which hasn’t been accused of any wrongdoing, has said its highest priorities are safety, quality and integrity.
Unlike some countries in Europe and Asia where extensive criminal probes often follow major airliner crashes, the Justice Department has seldom ever prosecuted an aviation company following an airline accident, much less secured a conviction. Most corporate defendants are small privately held businesses with fewer than 50 employees, said William Laufer, a University of Pennsylvania professor of legal studies and business ethics.
In 2017, Japanese automotive supplier Takata Corp. admitted to providing misleading testing reports to auto makers on rupture-prone air bags, actions the company’s financial chief acknowledged were “deeply inappropriate.” Takata paid $1 billion in penalties. That same year, Volkswagen AG pleaded guilty to criminal charges for cheating on government emissions tests.
The 2002 Enron-related conviction of accounting firm Arthur Andersen led to its collapse, but most large companies prosecuted are able to survive and eventually rebound. Arthur Andersen’s conviction was overturned by the Supreme Court three years later.
In 2014, Toyota Motor Corp. faced claims of misleading consumers about safety problems, and JPMorgan Chase Bank faced allegations that it failed to alert authorities about Bernard Madoff’s massive Ponzi scheme. Those cases ended with deferred prosecution agreements.
Federal prosecutors can bring charges, secure a plea or negotiate sanctions in lieu of an indictment.
“What investigators scrutinize is the conduct, its duration, possible motives, roles and knowledge of the actors, and evidence of concealment to determine whether the conduct is an aberration or systemic,” said Jacob Frenkel, a white-collar defense lawyer in Washington, D.C.
Boeing has been the target of major federal criminal probes in the past, which will factor into the Justice Department’s decision-making, according to federal guidelines.
In May 2006, Boeing agreed to pay more than $600 million to end a three-year Justice Department investigation into alleged contracting and ethical lapses. At the time, prosecutors called it the largest financial penalty imposed on a U.S. military supplier for weapons-program improprieties.
The government agreed to forego criminal charges against the company or its officials, thus shielding Boeing from a suspension or cutoff of Pentagon or other government contracts. The company agreed to stepped-up federal monitoring of its contracting activities.
Authorities can also waive exclusions and suspensions or lift a contracting ban entirely, as in the case with Siemens AG . In 2008, the German engineering company settled charges it engaged in massive foreign bribery and paid an $800 million in criminal penalties.
The lead agency for U.S. federal government contracts issued a formal determination that Siemens remained a “responsible contractor” for U.S. government business.
In the Boeing probe, federal investigators for months have been interviewing former Boeing employees, gathering information from the manufacturer and airlines, and querying officials at unions representing the carriers’ pilots, the people familiar with the matter said.
At least some of the questioning has included Brian Kidd, a prosecutor who supervises the market integrity and major frauds unit in the Justice Department’s criminal division, some of these people said. Mr. Kidd was one of the lead prosecutors in the Takata case.
Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8