Boeing will settle SEC charges for $200 million

The SEC charged Boeing and its former CEO with making materially misleading public statements about the plane and a flight control system involved in the crashes.

WASHINGTON — Boeing Co. will pay $200 million to settle allegations that the company and its former CEO misled investors about the safety of its 737 Max after two of the planes crashed, killing 346 people.

The Securities and Exchange Commission said Thursday it has accused plane manufacturer and former CEO Dennis Muilenburg of making materially misleading public statements about the plane and an automated flight control system involved in the crashes in Indonesia and Ethiopia.

Neither Boeing nor Muilenburg admitted wrongdoing but offered to agree and pay penalties, including $1 million for Muilenburg, which was grounded in December 2019, nine months after the second crash.

The SEC said Boeing and Muilenburg knew the flight system known as MCAS posed a safety issue but promised the public the plane was safe. The SEC said it also falsely claimed there were no gaps in the plane’s certification process at all.

“Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 Max in order to rehabilitate Boeing’s image after the crashes,” said Gurbir Grewal, director of the SEC’s Enforcement Division.

Boeing said it has made “widespread and profound changes within our organization in response to these accidents” to improve safety and quality.

“Today’s settlement is part of the company’s broader effort to resolve outstanding legal matters related to the 737 Max accidents responsibly and in a manner that serves the best interests of our shareholders, employees and other stakeholders,” said the in Arlington, Virginia, resident companies.

A new Max operated by Indonesia’s Lion Air crashed into the Java Sea in October 2018 and another Max flown by Ethiopian Airlines crashed into the ground near Addis Ababa in March 2019. In each crash, MCAS nosed down after receiving erroneous readings from a single sensor and the pilots were unable to regain control.

The crashes prompted regulators around the world to ground the plane for almost two years until Boeing made fixes to the flight control system designed to help prevent aerodynamic stalls when the nose is pointing up too much. None of the planes that crashed were in danger of stalling.

The SEC accused Boeing of misleading investors in a press release after the crash in Indonesia, which said the plane was “as safe as any plane that has ever flown the skies.” Boeing knew MCAS needed to be fixed when it made that claim and was already planning changes, the SEC said.

After the crash in Ethiopia, on a call with investors and Wall Street analysts and during Boeing’s annual shareholder meeting, Muilenburg said the company followed the normal process to have the plane certified by regulators. But by that time, in response to a federal prosecutor’s subpoena, Boeing had already found documents showing it had failed to disclose key facts about MCAS to the Federal Aviation Administration, the SEC charged.

Boeing reached a separate $2.5 billion settlement with the Justice Department last year. Most of the money went to airlines whose Max jets were grounded.

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