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Will Boeing Face U.S. Criminal Charges for 737 Max Crashes?

Boeing Criminal Probe Rare in U.S. for a Planemaker After Crash

(Bloomberg) -- There’s little precedent for planemakers like Boeing Co. facing U.S. criminal charges over deadly crashes, though there may be risks of prosecution if the company lied to regulators about the safety of its 737 Max jets.

Federal authorities began a criminal probe of the certification process for the new 737 Max planes, after the first of two catastrophic crashes since October. But prosecutions are unusual following U.S. air disasters, where investigators tend to focus on determining the cause of a crash so it can be fixed.

“We want to encourage people to come forward and admit mistakes, free from fear of reprisal or jail,” said Kenneth Quinn, a former chief counsel of the Federal Aviation Administration who now represents airlines and aerospace companies. “The last thing the industry and FAA need is the specter of a criminal investigation hovering over an accident inquiry.”

Will Boeing Face U.S. Criminal Charges for 737 Max Crashes?

Still, authorities began a criminal probe following the crash of a Lion Air 737 Max 8 on Oct. 29 shortly after takeoff from Jakarta, according to a person who wasn’t authorized to speak about the investigation and asked not to be named. On March 10, an Ethiopian Airlines 737 Max 8 crashed near Addis Ababa. In both cases, all the passengers and crew were killed.

U.S. investigators are probably looking for any false statements or material omissions by Boeing officials, such as misrepresenting to pilots how the aircraft operated and whether there were internal documents backing that up, according to former federal prosecutors.

The government could bring fraud charges if it determines the company lied to authorities or tried to cover up concerns about the aircraft’s systems, the former prosecutors said.

“The key piece for criminal investigators will be looking for any evidence of knowledge of a defect, and how that was addressed,” said Ryan Rohlfsen, a former Justice Department prosecutor now at Ropes & Gray LLP in Chicago. “Someone did something wrong, and then covered it up, is classic evidence of fraud and criminal intent. Compare that with a routine review of technical issues that appear contemporaneously to be sorted out, where you might have mistakes -- but likely not a crime.”

Will Boeing Face U.S. Criminal Charges for 737 Max Crashes?

For a guide to what may happen with Boeing, the past failings by automakers could prove useful.

Prosecutors filed fraud charges in criminal cases against Takata Corp. over exploding air bags, General Motors Co. for faulty ignition switches, and Toyota Motor Corp. for accidents connected to unintended acceleration. With General Motors and Toyota, the U.S. alleged the companies misled regulators about potential safety issues.

‘Deadly Defect’

GM agreed in September 2017 to pay $900 million to settle a criminal probe, admitting that it failed to disclose to regulators a defective ignition switch that had been linked to at least 124 deaths. The company was charged with wire fraud and conspiracy for its scheme to hide a “deadly safety defect” from regulators. GM entered into a deferred prosecution agreement. To date, no individuals have been prosecuted.

Toyota agreed to pay $1.2 billion in 2014 to end a criminal investigation into sticky gas pedals and shifting floor mats linked to sudden, unintended acceleration. The U.S. charged Toyota with wire fraud, alleging the company misled consumers and federal regulators about the problem. The company entered into a deferred prosecution agreement, admitting responsibility. No individuals were charged.

“This, unfortunately, is a case that demonstrates that corporate fraud can kill,” U.S. District Judge William Pauley said in court when accepting the deal.

Takata pleaded guilty in February 2017 to one count of wire fraud for misleading automakers about the safety of its exploding air bags, which had been linked to at least 17 deaths. The company agreed to a $1 billion settlement, including a $25 million fine, $850 million to automakers for recalls and $125 million in compensation to accident victims.
 
While a criminal case against Boeing seems unlikely, “it could be a legal nightmare” for the company if it misled regulators or hid information to speed approval of the 737 Max design, said Marc Moller, who represents victims and families in air crash claims. The FAA could impose a whopping fine and victims’ families could demand large cash settlements or punitive damages, he said.

Civil Lawsuits

The criminal probe could aid civil lawsuits if plaintiffs can get hold of evidence collected by the government, said Mike Slack, a lawyer for crash victims with the Austin, Texas, firm Slack Davis Sanger.

But criminal investigations also can slow down civil litigation, particularly if witnesses invoke their fifth-amendment right against self-incrimination, said plaintiffs’ attorney Kevin Durkin, a former prosecutor who represents victims of airplane crashes.

“In any civil litigation, we gather evidence,” Durkin said. “If people are taking the 5th, it deters us in seeking the ultimate truth.”

Criminal charges have occurred after airline crashes.

In 1996, federal and state authorities investigated airline maintenance contractor SabreTech Inc. after the crash of a ValueJet plane in southern Florida. Prosecutors claimed company employees had loaded oxygen generators on the flight in violation of safety rules. The generators exploded after takeoff, causing the crash of a DC-9 and the death of all on board.

Federal prosecutors charged SabreTech and three employees, two of whom were found not guilty at trial. The third fled and remains a fugitive. SabreTech was found guilty of mishandling hazardous materials and failing to properly train its employees, though the conviction on the federal mishandling charges was reversed on appeal.

SabreTech settled state murder and manslaughter charges by pleading no contest to a charge of mishandling hazardous waste and agreeing to pay $500,000.

To contact the reporters on this story: Bob Van Voris in federal court in Manhattan at rvanvoris@bloomberg.net;Margaret Cronin Fisk in Detroit at mcfisk@bloomberg.net;Tom Schoenberg in Washington at tschoenberg@bloomberg.net

To contact the editors responsible for this story: David Glovin at dglovin@bloomberg.net, Steve Stroth, Elizabeth Wollman

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