The “737 MAX is as safe as any airplane that has ever flown the skies”— Boeing settles antifraud charges with SEC
In a kind of sad coda to the litany of claims, charges, investigations and litigation surrounding the tragic crashes in 2018 and 2019 of two Boeing 737 MAX airplanes and the heartbreaking deaths of 346 passengers, the SEC announced last week, as discussed in this Order, that the Boeing Company had agreed to pay $200 million to settle charges that it made materially misleading statements following the crashes, including statements assuring the public that the 737 MAX airplane was “as safe as any airplane that has ever flown the skies.” (As discussed in this order, the CEO will pay $1 million to settle charges.) Of course, that settlement pales against the $2.5 billion settlement agreed on last year with Department of Justice to resolve a criminal charge related to a conspiracy to defraud the FAA in connection with the FAA’s evaluation of the Boeing’s 737 MAX airplane. Also last year, as reported by the NYT, Boeing’s directors reached a $237.5 million settlement of Caremark claims filed in Delaware, which asserted that, as a result of the directors’ “complete failure to establish a reporting system for airplane safety,” and “their turning a blind eye to a red flag representing airplane safety problems,” the board consciously breached its fiduciary duty and violated corporate responsibilities and, as a result, should bear some responsibility for Boeing’s losses. (For a discussion of that case, see this PubCo post.) According to SEC Chair Gary Gensler, “[t]here are no words to describe the tragic loss of life brought about by these two airplane crashes….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. They misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns. The SEC remains committed to rooting out misconduct when public companies and their executives fail to fulfill their fundamental obligations to the investing public.” How do these things happen? The facts of the Boeing case may be instructive.