DALLAS — A federal judge has recently declined a proposed agreement that would have allowed Boeing to plead guilty to a felony conspiracy charge while paying a fine for misleading U.S. regulators regarding the 737 Max jetliner. This situation arose prior to the tragic crashes of two of these planes, which resulted in the loss of 346 lives.
U.S. District Judge Reed O’Connor, based in Texas, expressed concerns that Diversity, Equity, and Inclusion (DEI) policies in both the government and Boeing might allow racial considerations to influence the selection of an official tasked with overseeing Boeing’s compliance in line with the agreement.
This ruling has introduced ambiguity around the potential criminal charges Boeing may face regarding the development of its most popular airline model. Judge O’Connor has instructed both Boeing and the Justice Department to provide guidance on how they wish to proceed within 30 days, which could include negotiating a revised plea agreement or potentially moving forward with a trial against the company.
In response to the ruling, the Justice Department noted that it was evaluating its implications, while Boeing refrained from making an immediate public comment. Paul Cassell, representing the families of the crash victims, hailed the court’s decision as a crucial win for crime victims’ rights.
Cassell articulated that the ruling prevents federal prosecutors and elite defense attorneys from forging undisclosed agreements without proper judicial oversight, highlighting that Judge O’Connor recognized this particular deal as an insufficient response to the serious issues at hand.
Many family members of the individuals who perished in the 2018 and 2019 accidents, which occurred in Indonesia and Ethiopia respectively, have been advocating for a public trial and the prosecution of former Boeing executives, in addition to pushing for heightened financial penalties against the company.
The rejected deal, which was arranged in July, would have permitted Boeing to plead guilty to having misled regulators regarding the pilot-training requirements for the 737 Max that were established nearly a decade ago. Prosecutors indicated they lacked the necessary evidence to prove that Boeing’s misinformation contributed significantly to the crashes.
In his ruling, Judge O’Connor scrutinized the stipulation for an independent monitor tasked with overseeing Boeing’s compliance with anti-fraud laws during a probation period of three years, raising concerns that race could unduly influence the selection of the monitor in accordance with the Justice Department’s DEI objectives.
The judge, a conservative appointed by George W. Bush, questioned the Justice Department and Boeing lawyers regarding the role of DEI in monitor selection during a hearing in October. Lawyers for the Department maintained that the selection process would be based on merit and encompass all qualified candidates.
However, in his ruling, O’Connor expressed skepticism about whether race would not factor into the government’s choice of a monitor, asserting the importance of public faith in the monitor’s selection as a competency-driven process rather than a race-influenced one.
Furthermore, the judge criticized the plea agreement’s stipulations that granted the government the authority to name the monitor, with the appointee reporting to the Justice Department and also allowing Boeing to reject one of six candidates selected by the government.
Todd Haugh, an expert in business law and ethics at Indiana University, noted that he could not recall any other instances where corporate plea deals had been rejected based on DEI considerations and emphasized that the underlying issue was the transfer of sentencing power away from the court.
The ruling creates a dilemma for prosecutors, who must navigate the implications of a government DEI policy dating back to 2018 while also weighing the uncertainties and potential risks of pursuing a trial.
Boeing had agreed to the plea deal after the Justice Department concluded earlier this year that the company had violated a 2021 agreement that initially shielded it from criminal prosecution over the same fraud-related conspiracy charges. Boeing’s legal representatives suggested that if the plea deal was dismissed, the company would contest the assertion that it violated the earlier agreement, and without this assertion, the government may lack the basis for a case.
The judge’s comments seemed to favor Boeing’s position, noting ambiguity in what the company did to violate the 2021 agreement. The Justice Department has accused Boeing of deceiving Federal Aviation Administration (FAA) regulators into approving less intensive training methods for the 737 Max, which could have been detrimental to airlines financially, potentially incentivizing them to consider competitors like Airbus.
Victims’ families expressed outrage when the Justice Department announced in 2021 that a settlement would prevent criminal prosecution of Boeing for fraud. In a prior ruling, Judge O’Connor stated that the Justice Department had violated rights laws concerning victim notification when it negotiated with Boeing, but indicated he lacked the authority to overturn that particular agreement.
As the deferred prosecution agreement from 2021 is set to expire in January, it was anticipated that prosecutors would drop the case. However, concerns heightened following an incident where a door plug blew off a 737 Max during an Alaska Airlines flight over Oregon, reopening scrutiny regarding Boeing’s manufacturing quality and safety.
This case is one among numerous challenges confronting Boeing, which has suffered financial losses exceeding $23 billion since 2019, and has lagged behind Airbus in the new aircraft market. Additionally, the company faced a strike by factory workers that halted most airplane production for seven weeks earlier this fall, and it announced plans to cut approximately 10% of its workforce, around 17,000 positions, which has significantly impacted its stock prices, leading to a nearly 40% decline within the past year.