A US federal judge has rejected a deal that would have allowed Boeing to plead guilty to conspiracy and pay fines for misleading US regulators about the 737 Max before two planes crashed, killing 346 people.
US District Judge Reed O’Connor in Texas on Thursday said that the diversity, inclusion and equality – or DEI policies – of the government and Boeing could lead to race becoming a factor in the selection of an official who will oversee Boeing’s compliance with the agreement.
The decision raises uncertainty about the aerospace giant’s criminal prosecution over the development of its best-selling jetliner.
The judge gave Boeing and the Department of Justice 30 days to tell him how they plan to proceed. They may negotiate a new plea deal, or prosecutors may move to take the company to court.
The Department of Justice said it is reviewing the decision. Boeing did not immediately comment.
Paul Cassell, a lawyer for the families of the passengers who died in the crashes, called the decision an important victory for the rights of crime victims.
“They can no longer make deals with federal prosecutors and powerful defense attorneys and expect judges to agree,” Cassell said. “Judge O’Connor recognized that this was a sweet deal between the government and Boeing that failed to address the concerns at hand – holding Boeing accountable for its heinous crimes and ensuring that nothing like this happens again in the future.”
Relatives of dozens of passengers who died in crashes off the coast of Indonesia and Ethiopia less than five months apart in 2018 and 2019, respectively, have spent years demanding a civil trial, the prosecution of former company executives, and severe financial penalties for Boeing.
The deal the judge overturned was reached in July and would have allowed Boeing to plead guilty to defrauding regulators who approved the 737 Max pilot training requirements nearly a decade ago. Prosecutors said they had no evidence that Boeing’s fraud contributed to the accidents.
The role of DEI
In his decision, O’Connor focused on the part of the agreement that called for an independent monitor to oversee Boeing’s efforts to prevent violations of anti-fraud laws during the three-year probationary period.
O’Connor expressed serious concern that the agreement “requires parties to take into account race when hiring a private investigator … ‘in line with [Justice] The Department’s commitment to diversity and inclusion.’”
O’Connor, a conservative who was appointed to the bench by former President George W Bush, questioned the Justice Department and Boeing lawyers in October about DEI’s role in the regulator’s selection. The department’s lawyers said that the selection will be open to all qualified candidates and depends on their success.
The judge wrote in Thursday’s decision that he was “not convinced … the Government will not appoint a person to monitor without considering race”.
“In such a matter, it is in the interest of justice that the public hopes that this choice of guardian is made based only on their knowledge. DEI’s efforts at parties only serve to undermine this trust in government and Boeing’s ethical and anti-fraud efforts,” he wrote.
O’Connor also argued that the settlement agreement called for the government to appoint a guardian and that the appointee report to the Justice Department, not the court. The judge also noted that Boeing would have been able to vote for one of the six chosen by the government.
Todd Haugh, a business law and ethics expert at Indiana University, couldn’t recall any previous business plea deals that were denied through DEI. He said the big issue is how the agreement removed the power to issue a sentence from the court.
“That’s a legal argument where a deal can be overturned, but this judge is really standing on the DEI issue,” Haugh said. “It comes loud and clear in succession.”
The decision leaves prosecutors in a bind because they cannot simply ignore the government’s DEI policy that dates back to 2018, he said.
Prosecutors must also weigh the risks and uncertain consequences before pursuing a case.
Boeing negotiated the settlement only after the Justice Department ruled this year that Boeing violated a 2021 agreement that protected it from criminal prosecution for a similar fraud charge.
Lawyers for Boeing say that if the plea agreement is overturned, the company will contest a finding that it violated the earlier agreement. Without discovery, the government is not guilty.
The judge upheld Boeing’s position on Thursday, writing that it was unclear what the company was doing to violate the 2021 agreement.
The Department of Justice has accused Boeing of defrauding Federal Aviation Administration (FAA) regulators, who approved the 737 Max pilot training requirements.
Acting on Boeing’s incomplete disclosures, the FAA mandated minimal, computer-based training instead of intensive training in flight simulators. Simulator training would have increased the costs for airlines to operate the Max and may have pushed others to buy planes from Airbus’s rivals instead.
Angry families
When the Justice Department announced in 2021 that it had reached a settlement and would not prosecute Boeing for fraud, the victims’ families were outraged. Judge O’Connor ruled last year that the Justice Department violated victims’ rights laws by not telling relatives it was negotiating with Boeing, but said he had no power to overturn the deal.
The 2021 deal to postpone prosecution was due to expire in January, and it was expected that prosecutors would seek to permanently drop the case. A few days before that, however, a door plug blew off a 737 Max during an Alaska Airlines flight over Oregon.
That incident renewed concerns about manufacturing quality and safety at Boeing and put the company under intense scrutiny from regulators and lawmakers.
The lawsuit is one of the challenges facing Boeing, which has lost more than $23bn since 2019 and is lagging behind Airbus in sales and delivery of new planes.
The company went on strike by factory workers that shut down the production of many planes for seven weeks at the beginning of the year and announced that it would lay off 10 percent of its workforce, about 17,000 people. Its shares have fallen nearly 40 percent in less than a year.
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