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Boeing pleads not guilty to fraud in criminal case over deadly 737 Max crashes

Attorney Paul Cassell, (center), speaks as Nadia Milleron, mother of Samya Stumo, (left), and Clariss Moore, mother of Danielle Moore hold photos of their children and others killed in the 2019 crash of Ethiopian Airlines 737 Max aircraft before they head into federal court for the Boeing arraignment hearing in Fort Worth, Texas, Thursday.
LM Otero
/
AP
Attorney Paul Cassell, (center), speaks as Nadia Milleron, mother of Samya Stumo, (left), and Clariss Moore, mother of Danielle Moore hold photos of their children and others killed in the 2019 crash of Ethiopian Airlines 737 Max aircraft before they head into federal court for the Boeing arraignment hearing in Fort Worth, Texas, Thursday.

Updated January 26, 2023 at 7:41 PM ET

Aerospace giant Boeing entered a plea of not guilty to a criminal charge at an arraignment in federal court in Texas Thursday. The company is charged with felony fraud related to the crashes of two of its 737 Max airplanes that killed a total of 346 people.

About a dozen relatives of some of those who were killed in the crashes gave emotional testimony during the three-hour arraignment hearing about how they've been affected by what they call "the deadliest corporate crime in U.S. history."

They testified after Boeing's chief aerospace safety officer Mike Delaney entered a plea of not guilty on behalf of the airplane manufacturer to the charge of conspiracy to commit fraud. The company is accused of deceiving and misleading federal regulators about the safety of a critical automated flight control system that investigators found played a major role in causing the crashes in Indonesia in 2018 and in Ethiopia in 2019.

Boeing and the Justice Department had entered into a deferred prosecution agreement to settle the charge two years ago but many of the families of the crash victims objected to the agreement, saying that they were not consulted about what they called a "secret, sweetheart deal."

Under the terms of the agreement, Boeing admitted to defrauding the FAA by concealing safety problems with the 737 Max, but pinned much of the blame on two technical pilots who they say misled regulators while working on the certification of the aircraft. Only one of those pilots was prosecuted and a jury acquitted him at trial last year.

Boeing also agreed to pay $2.5 billion, including $1.7 billion in compensation to airlines that had purchased 737 Max planes but could not use them while the plane was grounded for 20 months after the second plane crashed. The company also agreed to pay $500 million in compensation to the families of those killed in the two Max plane crashes, and to pay a $243 million fine.

The agreement also required Boeing to make significant changes to its safety policies and procedures, as well as to the corporate culture, which many insiders have said had shifted in recent years from a safety first focus to one that critics say put profits first.

After three years charge may be dismissed and Boeing immune from prosecution

After three years, if the aerospace giant and defense contractor lived up to the terms of the deferred prosecution agreement, the criminal charge against Boeing would be dismissed and the company would be immune from further prosecution.

But last fall, U.S. District Court Judge Reed O'Connor agreed that under the Crime Victims' Rights Act, the relatives' rights had been violated and they should have been consulted before the DOJ and Boeing reached the agreement. Last week, he ordered Boeing to appear Thursday to be arraigned.

On Thursday, the families asked Judge O'Connor to impose certain conditions on Boeing as a condition of release, including appointing an independent monitor to oversee Boeing's compliance with the terms of the previous deferred prosecution agreement, and that the company's compliance efforts "be made public to the fullest extent possible."

O'Connor did not rule on whether to impose those conditions yet, as Boeing and the Justice Department opposed the request. But he did impose a standard condition that Boeing commit no new crimes.

Naoise Connolly Ryan, who lost her husband Michael in the Ethiopia crash, told the court that she wanted justice for her children who had lost their father. "The deal between Boeing and the Department of Justice is not justice," she said, while asking the judge to throw out part of the settlement that gave Boeing immunity from prosecution. "We want to see real justice, and that has to be prosecutions for manslaughter," Ryan said.

In a statement after the arraignment, Boeing said:

"We are deeply sorry to all who lost loved ones on Lion Air Flight 610 and Ethiopian Flight 302, and greatly respect those who expressed their views at the hearing today."

The statement added that Boeing has "made broad and deep changes across our company, and made changes to the design of the 737 MAX to ensure that accidents like these never happen again. We also are committed to continuing to comply scrupulously with all of our obligations under the agreement we entered into with the Justice Department two years ago."

Our previous post continues below

Airplane maker Boeing will be arraigned in federal court in Texas Thursday on a criminal charge of conspiracy to commit fraud related to the crashes of two 737 Max commercial jets in Indonesia in 2018 and in Ethiopia in 2019 that killed a total of 346 people.

U.S. District Court Judge Reed O'Connor of the Northern District of Texas ordered Boeing last week to be publicly arraigned on the felony charge, adding that the company "has no right to waive its appearance."

The judge is also allowing family members of some of those who were killed in the crashes to be heard during the proceeding, ruling that federal law and criminal court rules "require this Court to publicly arraign Boeing and permit the crime victims' representatives to be heard at or in advance of the proceeding."

About a dozen relatives of crash victims have notified the court that they intend to be heard, including Naoise Connolly Ryan of Ireland, whose husband Michael, 39, was killed in the Ethiopian Airlines 737 Max plane crash on March 10, 2019. That tragic event happened less than five months after the Oct. 29, 2018 crash of a Lion Air 737 Max jet in Indonesia.

Investigators blame both crashes in part on a flawed automated flight control system that acted on erroneous information from a single sensor to force the planes repeatedly into uncontrollable nose dives. Federal prosecutors accused Boeing of deceiving the FAA about the system, "concealing material information" when the regulatory agency was certifying the 737 Max.

"Misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA impeded the government's ability to ensure the safety of the flying public," prosecutors said in announcing a deferred prosecution agreement to settle the criminal charge in January, 2021, giving Boeing immunity from further prosecution if the company lived up to the terms of the deal.

Relatives of those killed in crashes object to Boeing settlement

But many of the relatives of those killed in the 737 Max crashes loudly objected to the settlement.

"It was a sweetheart deal. It wasn't justice," Ryan told NPR last year. "And by giving this immunity, basically, the decision makers have not been held to account."

Also filing to speak in court Thursday are Michael Stumo and Nadia Milleron of Massachusetts, parents of Samya Rose Stumo, 24, who also died in the Ethiopian crash; and Paul Njoroge, a Kenyan who was living in Toronto at the time of the Ethiopian crash, which killed his wife, his three children, and his mother-in-law.

Stumo has also previously blasted the deferred prosecution agreement, calling it "a Boeing protection agreement." He previously told NPR, "It wasn't justice. And by giving this immunity, basically, the decision makers have not been held to account. There's nobody being held accountable..." adding that the Justice Department "is letting the fraudsters off the hook."

In a brief filed with the court late Wednesday, the relatives of the crash victims say that the defendant, Boeing, "committed the deadliest corporate crime in U.S. history," contending that the court has already determined that, "In sum, but for Boeing's criminal conspiracy to defraud the FAA, 346 people would not have lost their lives in the crashes."

They will urge the judge to require Boeing to cooperate with an independent corporate monitor who will evaluate Boeing's compliance with the terms of a deferred prosecution agreement that the company entered into with the U.S. Department of Justice two years ago to avoid criminal prosecution.

"Only an independent monitor — the proverbial second set of eyes — can begin to restore confidence in Boeing and ensure safety of the community," the families wrote in their court filing.

Under the terms of the deal, Boeing admitted to defrauding the FAA by concealing safety problems with the 737 Max, and agreed to pay $2.5 billion in fines and compensation to airlines and relatives of the crash victims.

The agreement also required Boeing to make significant changes to its safety policies and procedures, as well as to the corporate culture inside the company, which many insiders have said had shifted in recent years from a safety first focus to one that critics say put profits first.

Boeing CEO says he feels heartbreak for the families

After three years, if the aerospace giant and defense contractor lived up to the terms of the deferred prosecution agreement, the criminal charge against Boeing would be dismissed and the company would be immune from further prosecution.

The families of those killed in the crashes petitioned the court to reverse the deal, arguing that under the Crime Victims' Rights Act, they should have been consulted and had input into the agreement. The Justice Department initially objected, arguing that it was the FAA, a regulatory agency overseeing airplane certification, that had been defrauded by Boeing, not those killed in the crashes and their survivors.

Judge O'Connor sided with the families this fall, ruling that they legally are crime victims and that their rights were violated under the Crime Victims' Rights Act, and they should have been consulted. But he has not yet agreed to reopen the deferred prosecution agreement.

Boeing representatives Wednesday declined NPR's request for comment, with a spokesperson emailing that, "We do not have anything to share at this time."

Asked about the arraignment and the families being allowed to speak out in an interview on CNBC Wednesday morning, Boeing CEO David Calhoun said, "My reaction to the families is always the same, just nothing but heartbreak."

He said that their views were "a good reminder ... of how important safety is for all of us. Any and every hearing they want to express those views is OK with me."

But Calhoun declined to say how the company would plead at the arraignment.

Copyright 2023 NPR. To see more, visit https://www.npr.org.

David Schaper is a correspondent on NPR's National Desk, based in Chicago, primarily covering transportation and infrastructure, as well as breaking news in Chicago and the Midwest.