Allegations of fraud in a recent federal lawsuit — if substantiated — could empower President Biden’s Justice Department to rescind a controversial deferred prosecution agreement granted to Boeing by Donald Trump’s administration and blessed by an archconservative judge in the wake of two 737 Max crashes, according to experts interviewed by The Lever.
The deal, which has long been criticized by crash victims’ families and recently challenged in court by air safety advocates, allowed Boeing to avoid criminal prosecution on fraud charges and shielded Boeing’s senior executives from such prosecution as well.
The agreement — which was announced just days before Trump left office — was emblematic of the Republican administration at once billing itself as a defender of “law and order” but overseeing a record reduction in overall corporate prosecutions and a continuation of the use of leniency deals allowing companies and executives to avoid sanctions.
However, the Boeing agreement included language requiring Boeing to “protect and detect violations of the U.S. fraud laws throughout its operations, including… those of its contractors and subcontractors.”
The deal also made clear that the Justice Department — now under the direction of Biden — has the “sole discretion” to decide “whether the Company has breached the Agreement and whether to pursue prosecution of the Company and its subsidiaries.”
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In early January, two days before this deferred prosecution agreement (DPA) expired and federal prosecutors began reviewing Boeing’s compliance with the deal, a door plug blew out of one of the manufacturer’s planes over Portland, Oregon. The Lever soon reported on a federal lawsuit that included allegations that Spirit AeroSystems, the Boeing supplier behind the door plug, had engaged in a “fraudulent scheme” involving falsifying records to hide “excessive” numbers of manufacturing defects.
“How is Boeing responding to these serious allegations?” said Peter Reilly, a law professor at Texas A&M University and a consultant for the legal team working with 15 families of people killed in the plane crashes. “This matter is further evidence that Boeing might be failing to meet core requirements set forth in the Boeing DPA.”
“We’ll defer to the Justice Department,” said Jim Proulx, a Boeing spokesperson, in response to questions from The Lever about the DPA and Boeing’s compliance.
The Justice Department declined to comment.
Reilly’s concerns were echoed in a December letter the nonprofit advocacy group Foundation for Aviation Safety sent to the Texas judge overseeing the fraud case against Boeing. The foundation urged the judge “to not dismiss these charges,” saying that it believed Boeing was in violation of the DPA due to quality control and safety issues at the company.
“Really it’s about justice,” said Ed Pierson, executive director of the Foundation for Aviation Safety. “There needs to be accountability. Three hundred and forty-six people died.”
Victims of the 2018 and 2019 crashes have been challenging the Boeing DPA for years, alleging that prosecutors working under President Donald Trump broke the law when they failed to consult family members about the deal before it was finalized. As Fortune reported this month, shortly after the recent door-plug incident, lawyers for the families called for federal prosecutors to review the mishap before dismissing its case against Boeing.
Biden’s Justice Department has so far been tight-lipped about how it intends to proceed with the case. But there’s no sign yet that prosecutors plan to change course and renege on the deal with Boeing.
“The government, throughout the litigation over the last couple of years, has always defended the DPA and said it is going to follow the DPA,” said Paul Cassell, lead attorney representing crash victims’ families. He suspected it would continue to do so.
“Empty And Fairly Meaningless”
The Trump administration brought just one criminal fraud charge against Boeing after the 2018 and 2019 crashes in Indonesia and Ethiopia together killed 346 people. The single charge came despite prosecutors detailing in court filings how the company had conspired to conceal key aspects of a flight control system from federal regulators, excluding it from pilot training manuals, as it vied to get its planes onto runways before its competitor, Airbus. According to the FAA’s 2020 review of the fatal accidents, failures in the new software led to the crashes.
But instead of forcing Boeing to face a trial for that single criminal charge, Trump’s Justice Department immediately granted Boeing a secret deal that avoided any trial or prosecution, and merely required the aviation company to institute a slate of ethics reforms and pay a $2.5 billion penalty — a sum equivalent to just 3 percent of Boeing’s annual revenue in 2023.
According to the Jan. 7, 2021 agreement, the deal would expire after three years, and, after a brief review period, if the Department of Justice determined Boeing had held up its end of the bargain, the agency would push to dismiss the fraud case.
Trump pledged to support the company in a pandemic-related press briefing in April 2020, saying, “We can’t let anything happen to Boeing.”
The deal between Boeing and the Trump administration was signed the same day the company was charged. Such deferred prosecution deals were originally designed to help individuals avoid jail time for petty crimes, but they are now used by prosecutors in major corporate cases, helping companies like Boeing avoid a costly trial or reputation-damaging plea.
As part of the deal, Boeing admitted to the fraud. But the Justice Department’s investigation appeared quite narrow; its scope, as laid out in the charging documents, was largely limited to the actions of two mid-level technical pilots. One, Mark Forkner, was tried and acquitted on four counts of wire fraud in 2022.
What’s more, the case was filed in a Texas federal court, far from Boeing’s headquarters outside Washington, DC, and its flagship factory in Seattle.
“It looks to most that [the DPA] was very much arranged during the latter days of the Trump administration to put it in a very friendly, conservative forum in front of one of the more conservative judges in the country,” said John Coffee, a professor at Columbia Law School.
In a case of “egregious forum shopping,” Coffee explained, prosecutors chose to file the case in a district where they knew it would come before a judge known to be sympathetic to corporate interests: U.S. District Judge Reed O’Connor.
A Federalist Society contributor, former Republican Senate staffer and reliable conservative jurist, O’Connor is a favorite of attorneys general in Texas fishing for favorable rulings against policies they oppose, as with the Affordable Care Act in 2018. When the Boeing deal reached his courtroom, O’Connor allowed it to proceed.
The DPA, in Coffee’s view, was weak: “Pretty empty and fairly meaningless,” he said. It required Boeing institute a host of compliance programs to prevent fraud — but did not, as is sometimes the case, appoint an independent monitor to ensure that Boeing did, in fact, improve compliance. The deal required Boeing to pay out what looked at first glance like a hefty penalty ($2.5 billion) — but most of that figure Boeing had already agreed to pay as compensation to airlines and victims.
“This is a get out of jail free card for the corporate executives,” said Pierson, a former senior manager at Boeing and the founder of the Foundation for Aviation Safety. As part of the deal, Boeing executives were shielded from criminal prosecution.
What’s more, Boeing and the Justice Department signed the DPA without consulting any of the families of the victims of the two crashes, which is a requirement of the 2004 Crime Victims’ Rights Act.
“It’s literally an illegal contract,” said Reilly, the Texas A&M professor.
Reilly, Cassell, and the families of the victims have been working to overturn the Boeing deal on that basis, and instead force the government to take the case to trial.
“It seems like the last thing you would want to do when there are so many questions swirling around Boeing right now is to avoid a further public process,” said Cassell. “And so that’s what the families want here is a public process, a public trial.”
While even O’Connor has agreed that the deal violated victims’ rights, the families haven’t managed to force the courts to scrap the agreement. In December, an appellate court ruled that the victims had to wait until prosecutors asked to dismiss the charges against Boeing in order to challenge the deal.
The DPA’s expiration earlier this month kicked off the six-month review period, in which the government will decide whether Boeing has complied with the terms of the deal. If prosecutors conclude Boeing has done so, they will likely request that O’Connor dismiss the case. If not, prosecutors might extend the deal for a period of time, to allow Boeing to come into compliance.
Or, instead, as the crash victims’ families have called for, the Justice Department could prosecute Boeing for fraud.
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“Boeing Has Violated The Conditions Of The DPA”
On Jan. 5, two days before the DPA expired, a door plug blew off an Alaska Airlines Boeing 737 Max 9 airliner over Portland, Oregon, forcing the Federal Aviation Administration to ground certain 737 Max planes pending inspections. The incident was followed by other high-profile failures of 737 planes, one of which left former Boeing consultant and now-Secretary of State Antony Blinken stranded in Switzerland, and the Biden administration is now planning to conduct a broad investigation of the company, Secretary of Transportation Pete Buttigieg said on Wednesday.
The Foundation for Aviation Safety had already claimed in its Dec. 14 letter to O’Connor that Boeing had “violated the conditions of the DPA,” outlining an array of safety concerns related to Boeing’s 737 Max planes, the newest generation of Boeing’s 737 jets.
“Company leaders have withheld critically important safety information,” the letter reads, citing production defects and lingering design issues, like those with an anti-ice system on 737 Max planes that could cause the plane’s engine to overheat, causing Boeing to request safety exemptions for the system.
For Cassell and Reilly, both part of the legal team representing crash victims’ families, Boeing’s recent troubles are just the latest sign that the deal is insufficient.
“When you see the sort of safety issues that have been cropping up here… that makes, I think, everyone wonder whether Boeing is really delivering on the promises it was making,” Cassell said.
The fraud allegations at Spirit, the Boeing subcontractor, were noteworthy, Reilly said.
“The DPA spells out in no uncertain terms that Boeing must maintain an effective and reliable process for responding to, investigating, and documenting allegations of fraud,” he said, “whether those alleged transgressions are committed by Boeing or by its affiliates and subcontractors such as [Spirit].”
Still, whether this amounted to a violation of the DPA may be difficult to prove, according to Coffee.
“One would have to show that Boeing was at least grossly negligent to say it violated this DPA,” he explained.
It’s unclear yet how aware Boeing was of the issues at Spirit, or what kind of oversight it had over its subcontractor. The National Transportation Safety Board is now investigating Spirit over the door-plug failure, and Boeing CEO David Calhoun, who last week made a high-profile visit to the supplier’s Wichita, Kansas campus, has suggested the door plug failure was a “quality escape” from Spirit.
On Wednesday, the Seattle Times reported that while Spirit had originally installed the door panel, Boeing workers had removed and then reinstalled it, citing a Boeing source and a separate whistleblower account posted publicly in a comment on an aviation news blog. When Boeing reinstalled the panel, employees failed to install four critical bolts that secure it, according to the accounts.
If the National Transportation Safety Board investigation backs up this series of events, the blame for the door plug blowout would seem to fall largely on Boeing. But the accounts also appear to validate prior testimony from Spirit employees about the supplier’s quality control issues — and indicate that the reason the door plug was reinstalled in the first place was due to a separate Spirit production defect.
There are “so many problems with the Spirit build in the 737,” the anonymous whistleblower wrote in the comment, calling the entire 737 production system “a rambling, shambling, disaster waiting to happen.”
While the whistleblower’s identity is unknown, the Seattle Times reported that the commenter appeared to have detailed, accurate knowledge of Boeing’s internal manufacturing processes and recordkeeping.
“I think the background of continuing safety problems at Boeing is going to be part of the calculation,” said Cassell of prosecutors’ deliberations over whether Boeing violated the DPA.
“I think the families just want accountability here,” he added. “This was the deadliest corporate crime in U.S. history. And at this point no company, no individual, has been held accountable for that.”
