Boeing, ex-CEO pay $200 million to settle charges over 2 fatal 737 MAX crashes

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Boeing, ex-CEO pay $200 million to settle charges over 2 fatal 737 MAX crashes

After two fatal crashes in 2018 and 2019, Boeing and its former CEO Dennis Muilenburg agreed to pay hefty fines to settle charges from the Securities and Exchange Commission.

After an October 2018 crash of a Lion Air 737 Max jet that killed 189 people, the SEC alleges that part of the plane's flight control system posed an ongoing safety concern and told the public that the 737 Max was safe to fly. After a March 10, 2019 fatal 737 Max crash, the SEC alleges Boeing and Muilenburg misled the public about slips and gaps in the certification process of the flight control system.

The SEC Chair Gary Gensler said that it is important that public companies and executives provide full, fair, and truthful disclosures to the markets in times of crisis and tragedy. Dennis Muilenburg, the former CEO of the Boeing Company, failed in this most basic obligation. The investors were misled by the fact that they gave assurances about the safety of the 737 MAX despite knowing about serious safety concerns. In a statement, Boeing said that the settlement fully resolves the SEC's previous disclosure of matters relating to the 737 MAX accidents. Boeing said today that the settlement is part of the company's effort to resolve outstanding legal matters related to the 737 MAX accidents in a manner that serves the best interests of shareholders, employees, and other stakeholders.

The company and Muilenburg agreed to settle charges of violating the antifraud provisions of US securities laws, but they did not admit or deny the allegations of the SEC. Muilenburg agreed to pay $1 million, and Boeing agreed to pay $200 million for the settlement.

In a statement, Gurbir Grewal said that Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 Max in an effort to rehabilitate Boeing's image after two tragic accidents that resulted in the loss of 346 lives and incalculable grief for so many families.

Muilenburg was fired from Boeing in December 2019. He left stock options and other assets worth about $80 million at the time, though Boeing shares have lost half of their value since then. After his departure, it is not known what Muilenburg did with his Boeing shares and options.

While $200 million may seem like a large fine for a company, it is a small portion of the losses already caused by the two fatal crashes that killed 346 people in total and resulted in a 20 month grounding of Boeing's best-selling plane.

Boeing has already disclosed that it has taken a $21 billion hit to its bottom line because of lost sales revenue and increased costs, and that doesn't include potential legal liability for the families of victims. The $200 million fine represents less than 1% of its previously disclosed losses.

After the first crash of a 737 Max in Indonesia in October 2018, investors have lost even more: Boeing's market capitalization has plunged about 58%, or $115 billion. The prolonged grounding of the Max caused airlines to cancel hundreds of orders for planes without penalty, while about $100 billion has been affected in the pandemic era that has hurt demand for flights and aircraft purchases.

The shares of Boeing BA fell more than 3% Thursday, but rose slightly in after-hours trading following the announcement of the SEC.