Boeing agreed to plead guilty to fraud conspiracy charges and pay nearly $250 million in connection to two deadly 737 Max crashes, the Justice Department announced late Sunday night. Boeing stock rose slightly Monday.
Under the deal, the Dow Jones plane maker will plead guilty to misleading air-safety regulators regarding, among other things, a flight-control system on the 737 Max, prior to two deadly crashes in 2018 and 2019. The crashes killed 346 passengers. The guilty plea comes after the Justice Department in May found Boeing violated a 2021 settlement regarding the crashes.
Boeing agreed to pay an additional $243.6 million criminal fine and will spend $455 million over the next three years on improving its compliance and safety programs. The Dow Jones manufacturer is also required during that period to hire an independent monitor to oversee the improvements.
As part of the deal, Boeing will formally acknowledge guilt and the company would be branded a felon, which could complicate operations. Companies with felony convictions can be suspended or barred as defense contractors, the Wall Street Journal reported. However, Boeing is expected to seek a waiver for that punishment. The company is in talks with the Defense Department, according to the WSJ. Meanwhile, FactSet data shows 32% of Boeing's revenue last year came from its defense, space and security segment.
Boeing's board of directors also agreed to meet with victims' families as part of the plea agreement. However, the deal falls short of the restitution they sought. Families of the victims wanted a fine as high as $25 billion, as well as a trial without concessions, the WSJ reported.
Boeing faces three years of court-supervised probation. During that time, it could face additional penalties for failing to comply with the terms. The plea deal requires approval from a federal judge to take effect. Prosecutors requested the court schedule a hearing in July for the agreement.
Boeing Stock Performance
Boeing stock pared gains to 0.6% Monday. Shares swung 2.3% higher in early trade.
BA stock is trading between its 50-day moving average and 200-day line, attempting to climb out of its latest consolidation.
Boeing shares remain down 28.7% this year amid its latest 737 Max issues and delivery delays.
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