Boeing knew something was wrong with its 737 MAX aircraft, yet the company and its former CEO, Dennis A. Muilenburg, publicly claimed it was “as safe as any plane that has ever flown through the skies.” The Securities and Exchange Commission (SEC) concluded that they misled investors and charged the company with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019. On Thursday, Boeing reached a $200 million settlement with the SEC to end the case, the regulatory body said in a statement.
The money will not go to the families of the victims of the accidents but to the investors who saw the share price of Boeing drop as a result of the crashes. At the time, Boeing announced $100 million in compensation for the 346 victims.
The company’s former CEO Muilenberg separately agreed to pay $1 million as part of another settlement. Boeing has neither admitted nor denied the charges, saying that it had improved “safety processes and oversight of safety issues” tied to the 737 MAX.
“There are no words to describe the tragic loss of life brought about by these two airplane crashes,” said SEC Chair Gary Gensler. “In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets. The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation.”
According to Gensler, the company misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns.
One month after Lion Air Flight 610, a 737 MAX aircraft, crashed in Indonesia on October 2018 just 13 minutes after takeoff, killing 189 passengers and crew, Boeing issued a press release, edited and approved by Muilenburg, which selectively highlighted certain facts from an official Indonesian government report that suggested pilot error and poor aircraft maintenance as the cause of the crash. The press release also gave assurances about the aircraft’s safety, without disclosing that an internal safety review had determined that MCAS, a flight control system that acts as the aircraft’s automatic stabilizer, posed a safety concern for the aircraft and that Boeing had already begun redesigning that system to correct it.
The 737 MAXs kept flying. On March 10, 2019, Ethiopian Airlines Flight 302 also crashed shortly after takeoff, killing 157 people. The investigation quickly revealed similarities between the two accidents. The MCAS malfunction prevented the pilots from gaining control of the aircraft. International aviation regulators decided to ground the entire 737 MAX fleet.
Despite all this, six weeks after the second accident, and aware of the problems with the plane, Muilenberg again misled analysts and journalists, assuring them that there was no problem in the certification process, and that Boeing had confirmed again that all steps in the design and certification processes were followed that “consistently produce safe airplanes.”
“Boeing and Muilenburg put profits before people by misleading investors about the safety of the 737 MAX, all in an effort to rehabilitate Boeing’s image after two tragic accidents that caused the loss of 346 lives and untold pain for so many families,” said Gurbir S. Grewal, director of the SEC’s Enforcement division.
Despite these assurances, the manufacturer’s shares plummeted and the company experienced the greatest crisis in its history, both financially and in terms of reputation. Orders plunged, revenue tanked and the company went into the red.
Muilenberg acknowledged mistakes when he appeared in October 2019 before the US Senate Transportation Committee. “Zero accidents is the only acceptable number. People’s lives depend on us,” he declared then, as relatives of the victims of the two accidents stood by showing large photos of their loved ones.
Boeing’s CEO stepped down in December of that year. Even after forgoing the year’s bonus and a portion of his stock, his exit package from the company was valued at more than $60 million.