Boeing Settlement Prepares for Landing

Last week we learned that federal prosecutors have reached an agreement not to prosecute Boeing for its many safety failures and corporate compliance missteps over the years — missteps that led to two plane crashes, 346 deaths, one airplane door blown out in mid-flight, and billions spent on legal fees, victim compensation, and compliance program reforms. 

Compliance professionals have much to unpack here. Let’s take it one step at a time. 

First, the immediate news is that the Justice Department and Boeing struck a deal last week that will result in a non-prosecution agreement for Boeing, rather than the guilty plea that Boeing had been preparing to accept last year. This new deal would have Boeing pay $1.14 billion in penalties and other costs, including $445 million for various compliance program improvements; and hire an “independent compliance consultant” for two years, who will make recommendations for improvements to Boeing’s anti-fraud compliance and ethics program and report his or her findings to the Justice Department along the way.

It’s all a remarkable turn of events from Boeing’s previous circumstances. As recently as last summer, Boeing had been staring at a far more severe outcome, where the company would have had to plead guilty to criminal charges, accept a three-year probation period, hire an independent compliance monitor for three years, and pay that $1.14 billion in penalties and other costs. 

That settlement was then delayed at the 11th hour (we’ll get to why it was delayed shortly), which stalled proceedings long enough for the Trump Administration to arrive. Now we have this much diminished settlement instead. 

And let’s remember that this current settlement stems from Boeing’s failure to live up to the terms of its prior settlement in 2021 for those two Max 737 plane crashes. That original deal included $2.5 billion in penalties and a three-year deferred prosecution agreement. Just days before that agreement was set to expire in early 2024, Boeing had that aircraft door blow out mid-flight on an Alaska Air flight because the door had been missing important bolts to keep it secure. Prosecutors promptly declared the DPA breached.

Anyway, after all that history, here we are. As compliance professionals absorb the significance of this case, we should focus on three basic questions:

  • Exactly what is the government imposing? 
  • What has Boeing done to get to this point? 
  • What will Boeing need to do in the future to make sure that its improvements in corporate compliance and culture endure?

Today we’ll tackle the first question.

The Proposed Settlement So Far 

The settlement proposal filed by federal prosecutors is only eight pages long, and scarce on specifics. Perhaps we’ll see more detail whenever Boeing and the Justice Department reach a final, court-approved settlement, but for now we only know two items. 

First, Boeing must spend $455 million “to strengthen the company’s compliance, safety, and quality programs.”

That’s the same amount of money specified in last year’s proposed settlement. Under the terms of that proposed deal, Boeing was supposed to spend that amount over the course of three years to integrate its ethics and compliance program with its safety and quality program. Like, that objective was expressly stated in the proposed deferred-prosecution agreement. 

So is that still the point of this $455 million in new spending? Will Boeing need to spend that sum in coming years, or will any of its previous spending increases be credited toward that amount? Is it supposed to spend the $455 million over the course of the coming two years, under the compliance consultant’s oversight; or over three years like the prior proposed terms, or across some other timeframe? We don’t know.

Second, Boeing must hire an independent compliance consultant “empowered to make recommendations for further improvement and required to report its findings directly to the government.” This consultant will be in addition to the $455 million in new compliance spending, not simply part of it; but beyond that, we don’t know much about the precise scope of this person’s duties. 

For example, it seems like this consultant will only observe Boeing’s ethics, fraud, and internal speakup program, rather than the nitty-gritty of its aviation safety practices. (The Federal Aviation Administration will have its own air safety inspectors watching Boeing on those technical issues.) But we don’t know how this consultant will be selected, how much independence he or she will have, how much the consultant will be paid, or how often the consultant will report back to the Justice Department on what he or she observes.

The scope of the consultant’s duties and power does strike me as an important point. The Justice Department announced earlier this month that it really, really doesn’t want to use compliance monitors any more as part of corporate misconduct settlements. OK, but if that’s the case, are “independent compliance consultants” meant to be some new half-measure of accountability? Will we see them more often? What will they be allowed to do or not do? 

The only reference point we have right now are the independent compliance consultants assigned to Wall Street banks during the SEC’s crackdown on off-channel messaging. For example, when JPMorgan agreed to hire an independent compliance consultant, the bank pretty much had to implement the consultant’s recommendations; or else make a big, documented fuss about why it wouldn’t. Nor could JPMorgan fire this consultant once hired. All the other banks that accepted consultants as part of their settlements faced similar terms.

So will that be the model here? Right now we don’t know. 

Will This Settlement Happen?

That’s a fair question, because we still have the families of the 346 victims of Boeing’s two crashes. Most of them are irate at this deal.

The proposed settlement does say that the families of roughly 110 victims have reviewed the terms and accept the deal, but that still means more than two-thirds of victims’ families haven’t. One lawyer for the victims blasted the non-prosecution deal as “unprecedented and obviously wrong for the deadliest corporate crime in U.S. history,” and said his clients will urge the court to reject it. They are not alone.

This brings us to the judge in the case, Reed O’Connor, an appointee of President George W. Bush. O’Connor has been no fan of Boeing’s conduct either, and any final settlement does need his blessing — but his klutzy handling of this case is what brought us to this watered-down settlement.

Recall that previous settlement Boeing and the Justice Department reached last summer. It included an independent compliance monitor. But the Justice Department’s policies of the time included references to DEI in selection of a monitor. O’Connor didn’t like that one bit, so he rejected last year’s plea agreement in December and scheduled a trial for later this summer.

Then the Trump Administration arrived with its feathery light approach to corporate accountability, and now we have an even weaker proposed settlement. If O’Connor had simply gotten over himself and his anti-DEI jihad at the start, this case would have been settled last year under more severe terms. Instead, we’re all here facing the possibility of less accountability, thanks to O’Connor’s obstinacy.

It’s possible that O’Connor will reject this agreement too. The victim families would welcome that move, although it means more litigation for everyone. Or maybe O’Connor will roll over and let Boeing land with this far more favorable outcome. We’ll see. 

That’s enough for today. Later this week we’ll take a closer look at what Boeing has done lately to improve its compliance program, since there’s a lot to discuss there too.