Boeing and its former CEO Dennis Muilenburg agreed to pay massive fines to settle charges from the Securities and Exchange Commission that misled the public about the safety of the 737 Max after two fatal crashes in 2018 and 2019.
The SEC alleges that in the wake of the October 2018 crash of a Lion Air 737 Max that killed 189 people, Boeing and Muilenburg learned that part of the plane’s flight control system was an ongoing safety concern, yet they told the public that the 737 Max was Safe. He flies. After the 737 Max crash on March 10, 2019, the SEC alleged that Boeing and Muilenburg intentionally misled the public about “slippage” and “loopholes” in the certification process for this flight control system.
“In times of crisis and tragedy, it is especially important that public companies and CEOs provide full, fair and honest disclosures to markets,” Gary Gensler, president of the SEC, said in a statement. Boeing and its former CEO Dennis Muilenburg failed in this basic commitment. They misled investors by offering assurances about the safety of the 737 Max, despite knowing of serious security concerns. ”
Boeing said in a statement that the settlement “fully resolves the Securities and Exchange Commission’s previously disclosed investigation into matters related to 737 Max accidents.”
“Today’s settlement is part of the company’s broader efforts to responsibly resolve outstanding legal issues related to 737 MAX accidents in a manner that serves the best interests of our shareholders, employees, and other stakeholders,” Boeing said.
The company and Muilenburg agreed to settle charges of violating anti-fraud provisions in US securities laws, but they have neither admitted nor denied the SEC allegations. Boeing agreed to pay a $200 million settlement, and Muilenburg agreed to pay $1 million.
“Boeing and Muilenburg doubled profits by misleading investors about the safety of the 737 Max in an effort to rehabilitate Boeing’s image in the wake of two tragic accidents that killed 346 people and left untold grief for many families,” said Gurbert Grewal. Director of the Enforcement Department of the Supreme Education Council in a statement.
The fines, while significant, pale in comparison to the financial hit that Boeing has taken over the years over the 737 Max. Boeing’s reported losses amounted to tens of billions of dollars, which does not account for the company’s ongoing legal exposure.
Boeing (BA) shares fell more than 3% Thursday but rose slightly in after-hours trading following the Securities and Exchange Commission’s announcement.