DALLAS — A federal judge on Thursday rejected a deal that would have allowed Boeing to plead guilty to a felony conspiracy charge and pay a fine for misleading U.S. regulators about the 737 Max jetliner before two of the planes crashed, killing 346 people.
The ruling by U.S. District Judge Reed O’Connor in Texas creates uncertainty around the criminal prosecution of the aerospace giant in connection with the development of its bestselling airline plane. Boeing and the Justice Department could try to negotiate a new plea agreement.
O’Connor’s decision was almost certain to please many relatives of the passengers who died in the crashes, which took place off the coast of Indonesia and in Ethiopia less than five months apart. The families have spent years pushing for a public trial, the prosecution of former company officials and more severe financial punishment for Boeing.
"I think the judge did the right thing in this case, I think justice is being served here," said Nadia Milleron. Justice is what Milleron has spent five years trying to get for her daughter who died in the 2019 Ethiopian Airlines crash.
Judge O'Connor provided two reasons for rejecting this deal and both have to do with Boeing's oversight-or its independent monitor. Judge O'Connor took issue with Boeing's Diversity and Inclusion policies saying the monitor selection should be done 'solely on competency.' He also said that the courts need to be involved in this oversight.
"In other words, the judge wants to keep his eye on Boeing," said Attorney Mark Lindquist who represents victim families.
Boeing did not immediately respond when asked for a comment, but aviation analyst, John Nance said he was startled by this response. "I question is whether or not this should have been a matter in federal court involving criminal law to begin with and I've always felt this was a gross overreach by the justice department."
Boeing and the Department of Justice now have 30 days to update the court with how they plan to proceed.
The deal the judge rejected would have let Boeing plead guilty to defrauding regulators who approved pilot training requirements for the 737 Max nearly a decade ago. Prosecutors did not allege Boeing’s deception played a role in the crashes.
The Justice Department first charged Boeing in January 2021 with defrauding Federal Aviation Administration regulators who approved pilot training requirements for the 737 Max.
The department simultaneously announced it would drop the charge after three years if the company stayed out of trouble and paid a $2.5 billion settlement — mostly money the company would have paid airline customers anyway due to the FAA grounding the 737 Max fleet for 20 months.
Families of the victims were outraged. Judge O’Connor ruled last year that the Justice Department broke a victims-rights law by not telling relatives that it was negotiating with Boeing, but said he had no power to overturn the deal.
The 2021 deferred-prosecution agreement was due to expire when a door plug blew off a 737 Max early this year during an Alaska Airlines flight over Oregon. The incident renewed concerns about manufacturing quality at Boeing, and put the company under intense scrutiny.
After determining that Boeing had violated terms of the 2021 settlement, the Justice Department revived its prosecution of the conspiracy charge. That led to new negotiations and the plea deal that Judge O’Connor rejected.
In July, Boeing agreed to plead guilty to a single felony count of conspiracy to commit fraud for allegedly deceiving the FAA about how much training pilots would need before flying the Max. Boeing had downplayed the significance of a new flight-control system called MCAS.
Acting on Boeing’s incomplete disclosures, the FAA approved minimal, computer-based training instead of more intensive training in flight simulators. Simulator training would have increased the cost for airlines to operate the Max and might have pushed some to buy planes from rival Airbus instead.
Because of Boeing’s actions, airlines and pilots didn’t even know about MCAS until it was implicated in the first crash, in 2018 in the Java Sea. Despite knowing about MCAS, Ethiopian Airlines pilots were unable to control the system and prevent another crash in 2019 near Addis Ababa.
Prosecutors told the judge the conspiracy charge was the toughest they could prove against Boeing. Crucially, the Justice Department said that if the case went to trial, it would not present any evidence that Boeing’s deception caused the crashes.
The plea agreement included a fine of up to $487.2 million but would give/have given Boeing credit for $243.6 million in penalties it paid as part of the 2021 settlement. Under the deal, Boeing, which is based in Arlington, Virginia, also would invest $455 million in compliance and safety programs, and be placed on probation and overseen by an independent monitor for three years.
At an Oct. 11 hearing, Boeing lawyer Ben Hatch defended the plea deal, saying Boeing “is a pillar of the national economy and the national defense” and needed to know its punishment before agreeing to plead guilty.
The lawyer’s argument stunned relatives of the victims, who were in the courtroom.
“Boeing is too important for the economy — they’re too big to jail. That’s what he’s saying,” said Michael Stumo, whose daughter Samya died in the second crash. “It allows them to kill people with no consequences because they’re too big and because their shareholders won’t like it.”