Boeing (BA)’s legal crisis seemed all but over, but it’s now in jeopardy as the company’s financial crisis deepens, adding further uncertainty to the aircraft maker’s restructuring efforts. There is.
A federal judge in Texas is considering whether to approve a plea deal Boeing reached with the Justice Department in July. In the plea agreement, the company agreed to plead guilty to misleading FAA regulators ahead of two fatal 737 MAX crashes late last year.
Lawyers for Boeing and the Justice Department urged U.S. District Judge Reed O’Connor last Friday to sign the agreement, but families of the crash victims objected.
The families want the agreement to be scrapped in favor of a trial and higher fines. Boeing agreed to pay $487 million, including a deduction for about $243 million in fines it had already paid.
O’Connor also asked Boeing on Tuesday how the company’s diversity, ethics, and inclusion (DCE) policies will impact the plea agreement, and specifically how an independent monitor will monitor Boeing’s safety reporting. ordered further court documents to explain how DEI considerations apply to the selection of compliance.
“Given the facts and history here, I can foresee a scenario where the court rejects the plea,” said Rizwan Qureshi, a former federal prosecutor and white-collar partner in the Washington office of Reed Smith LLP. .
Given the fact that Boeing already has an opportunity to fulfill legally binding commitments under the Deferred Prosecution Agreement (DPA) and is obligated to design, implement, and enforce an effective compliance program; Qureshi added that he believes the judge may send a prison officer. Boeing and the Department of Justice return to the lottery table.
Boeing entered into a DPA with the Department of Justice in 2021, allowing it to avoid criminal charges related to two 737 Max 8 crashes in 2018 and 2019 that killed 346 people.
However, after a third life-threatening aircraft accident in January 2024, when a door plug ejected on an Alaska Airlines (ALK) Boeing 737 Max 9, the Justice Department determined that Boeing had violated the agreement, and as part of the plea agreement. asked Boeing to plead guilty. Charged with conspiracy to defraud the United States.
Qureshi said that not only did Boeing violate the original agreement, but there was also public pressure for the judge to issue a harsher sentence as a result of hundreds of door plug failures in January 2024.
“This is not a technical violation or a violation of the DPA,” Qureshi said. “This is an actual active violation that puts people’s lives at risk” and could be viewed by the court as a “sweet deal” for defendants who have already been granted leniency.
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Relatives of the victims asked a judge to fine Boeing $24.8 billion.
Boeing declined to comment on the plea agreement.
The push for approval of the agreement comes as the country faces challenges on several other fronts.
Boeing took steps this week to strengthen its balance sheet as it faces extremely difficult times ahead. This includes an agreement to secure an additional $10 billion in financing from a consortium of banks and a mixed shelf registration with the SEC providing up to $25 billion. In the offering of new debt, common stock, preferred stock, and other equity securities.
“This credit facility provides additional short-term liquidity access as we navigate a challenging environment,” Boeing said in a statement, adding that Boeing is not utilizing the facility or its existing credit revolver. pointed out.
At the same time, Boeing is embroiled in a labor dispute with its largest union and plans to lay off about 17,000 employees, or 10% of its workforce.
Qureshi said Boeing’s plan to lay off thousands of employees could pose problems for approving a guilty plea deal.
The company failed to implement promised compliance and ethics measures and violated its original agreement with the Department of Justice. These requirements were intended to prevent and detect future violations of U.S. fraud laws, so Boeing said that laid-off workers are necessary to carry out future safety initiatives. It may be necessary to convince Judge O’Connor that there is no such thing.
Qureshi said Boeing’s job cuts are unlikely to jeopardize the plea agreement unless a court finds that the cuts would adversely affect Boeing’s ability to meet ongoing safety requirements. .
Boeing announced that once striking workers return to work after layoffs, the company’s total workforce will increase to more than 150,000.
Even if the plea deal is approved, Boeing’s legal problems are far from over. The agreement indemnifies Boeing only from future criminal charges related to the conspiracy, and does not indemnify Boeing from future civil or regulatory actions.
“I think it’s a mistake to think this is the end,” said Will Thomas, an assistant professor of commercial law at the University of Michigan, who said he hopes the plea deal will be approved, but that’s not a guaranteed outcome. I admit that.
Alexis Keenan is a legal reporter at Yahoo Finance. X Follow Alexis at @alexiskweed.
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