By David Shepardson, Allison Lampert and Chris Prentice
(Reuters) -Boeing finalized a guilty plea to a criminal fraud conspiracy charge and agreed to pay at least $243.6 million after breaching a 2021 agreement with the U.S. Justice Department, according to a court filing on Wednesday.
The planemaker allowed potentially risky work at its factories and did not ensure key airplane record keeping was accurate or complete, the Justice Department said as it outlined why it believed the planemaker had violated the 2021 deferred prosecution agreement.
Boeing (NYSE:BA) on July 7 agreed in principle to plead guilty to conspiring to defraud the Federal Aviation Administration after the government said the planemaker knowingly made false representations about key software for the 737 MAX.
Boeing confirmed on Wednesday that it had filed a detailed plea agreement with the Justice Department. "We will continue to work transparently with our regulators as we take significant actions across Boeing to further strengthen our safety, quality and compliance programs," the company said.
The Justice Department said in May that Boeing had breached its obligations in the agreement that shielded the planemaker from criminal prosecution stemming from misrepresentations about a key software feature tied to fatal 737 MAX crashes in 2018 and 2019 that killed 346 people.
The finding was made in the wake of a January in-flight panel blowout on an Alaska Airlines 737 MAX that exposed continuing safety and quality issues at Boeing, just two days before the 2021 agreement shielding it from prosecution over the previous fatal crashes expired.
DOCUMENTATION NOT COMPLETED
The Justice Department said in its court filing that Boeing failed to ensure employees documented removal of parts during manufacturing of an airplane and it did not ensure mechanics and inspectors who stamped they completed work had actually done so.
The Justice Department said Boeing in April disclosed false stamping at its 787 plant in South Carolina by some employees. The FAA said in May it was investigating after Boeing said some employees at the plant had committed "misconduct" by claiming some tests had been completed.
Boeing also did not ensure work on airplanes was conducted in the proper sequence, the Justice Department said.
"Boeing senior executives prioritized the movement of aircraft through Boeing’s factories over reducing out-of-sequence work to ensure production quality," the filing said. "Out-of-sequence work is more difficult to perform (and) increases the risk that defects in manufacturing will occur."
The Justice Department has a separate criminal probe ongoing into the Alaska Airlines jet that was missing four key bolts. Boeing has said no paperwork detailing the removal of the bolts was completed.
As part of the guilty plea deal, Boeing agreed to pay the maximum fine of $487.2 million and the DOJ recommended the court credit its previous 2021 payment of $243.6 million against that.
The planemaker also agreed to spend at least $455 million over the next three years to boost safety and compliance programs, said the filing, adding that was 75% higher than Boeing's previously planned expenditures on its corporate compliance program.
Families of those killed in the MAX crashes will be able to file objections within a week before Judge Reed O'Connor, who will decide whether to accept the deal and determine if Boeing owes restitution to the victims' relatives.
Boeing's board will have to meet with the relatives within four months of sentencing, the filing added.
The deal also imposes an independent monitor, who will have to publicly file annual progress reports, to oversee the firm's compliance. Boeing will be on probation during the monitor's three-year term and it can be extended by a year if Boeing does not comply with the terms.