Boeing case puts focus on plea agreements involving corporate defendants

After two jetliner crashes killed 346 people, a $2.5 billion settlement that let Boeing avoid criminal prosecution failed to resolve questions about the safety of the aerospace giant's planes.

Federal prosecutors now accuse the company of failing to live up to terms of the 2021 settlement. Boeing has agreed to plead guilty to a felony fraud charge in a new deal with the Justice Department. The department hopes to file the detailed plea agreement Friday, but says it may need a few more days.

Experts on corporate behaviour say whether the new agreement has a more lasting impact on safety than the earlier settlement could come down to how much power is placed in the hands of an independent monitor who is assigned to oversee Boeing for three years. Prosecutors made the appointment of such a monitor a condition of the plea deal, which also calls for Boeing to pay a new $243.6 million fine.

''Your real concern is protecting against the loss of future lives in future crashes, and that is something that the monitor can have more impact on than simply the amount of the fine," said John Coffee, a law professor at Columbia University who studies corporate governance and white-collar crime.

The finalised plea and sentence are due to be filed in US District Court in Fort Worth, Texas. The filing will give a more precise description of how the compliance monitor will be chosen and the scope of the monitor's duties. Already, the government appears to have backed away from a plan that would given Boeing the biggest role in picking the watchdog.

Families of some of the passengers who died in the crashes have said they plan to oppose the agreement. They want a trial, not a plea deal, and they say Boeing should pay a $24 billion fine. Paul Cassell, a lawyer for the families, said the relatives of crash victims should have the right to propose a monitor for the judge to appoint.

The Justice Department initially planned to select a monitor from a list of three nominees submitted by Boeing, and would ask the company for more names if necessary, according to participants in a June 30 briefing that department officials gave to passengers' families and their lawyers.

The deal that Boeing agreed to in principle a week later said the Justice Department would seek candidates through a public job posting on its website and then select one with feedback from Boeing. The precise extent of the company's role was left unclear.

Once the department and Boeing settle on a choice, prosecutors will tell US District Judge Reed O'Connor. If he doesn't object within 10 days, the appointment would go through. The person picked would need to meet "specific qualifications laid out in the posting and the department's guidelines on selecting monitors in criminal cases, according to the filing.

The monitor will oversee Boeing's compliance with the plea agreement during a three-year probation period, during which the official will write a confidential annual report for the government, and file an executive summary with the court.

The use of monitors as part of plea agreements with companies convicted of crimes reflects prosecutors' reluctance to issue indictments and take the cases to trial.

Brandon Garrett, a Duke University law professor who tracks criminal cases involving corporations, said prosecutors long worried that a criminal indictment could destroy a large, publicly traded company, so they tended to favor out-of-court settlements in the most serious cases. That changed, he said, after the financial crisis of 2008, and the concern became that companies were being treated as too big to jail, a phrase Garrett used in the title of his 2014 book.

The effectiveness of plea deals and deferred prosecution agreements that allow defendants like Boeing in 2021 to avoid criminal liability came into question.
 

 

Especially when you had companies repeatedly getting prosecuted, something needs to change maybe these companies really should get a criminal record, Garrett said. That's when we started to see ... more large cases where companies would be convicted.

Nadia Milleron, whose 24-year-old daughter, Samya Stumo, died in the second of two fatal 737 Max crashes, said the Boeing plea deal is much better than the settlement reached three-and-a-half years ago. In January 2021, the Justice Department agreed not to prosecute the company for conspiring to defraud the US government, a charge based on allegations that Boeing misled regulators who approved the 737 Max nearly a decade ago.

Still, Milleron and relatives of other crash victims want a trial that might unearth more details about discussions inside Boeing leading up to, and even after, the crashes, which occurred in 2018 in Indonesia and 2019 in Ethiopia.

It appeared likely that the Justice Department would permanently drop the 2021 charge until this January, when a panel covering an unused emergency exit blew off a Max jet during an Alaska Airlines flight. The Federal Aviation Administration increased its oversight, and the agency's chief said manufacturing problems at Boeing don't seem to be getting resolved.

The Justice Department defends its decision to seek a plea deal by saying that it includes the most serious punishment possible under the charge facing Boeing.

''We should be asking whether these prosecutions are working and what can be done to make them more effective,'' Garrett said. He suggested that the judge could take an active role in monitoring Boeing to make sure the company complies with the new agreement after violating the old one.

Coffee, the Columbia law professor, said the key to whether the deal deters Boeing from future violations will be a strong and independent monitor.

''Companies fear a free agent roaming around in their files,'' he said, ''On the other hand, if there isn't some ability for the monitor to directly go to the court and say They are not living up to the terms of the agreement, you have an ineffective monitor.''

In one notorious case, prosecutors blocked a federal judge in New York from releasing a monitor's reports about HSBC, a London-based bank that entered a deferred prosecution agreement over allegations that it failed to prevent a Mexican drug cartel from laundering money.

''I'm not saying we shouldn't have deferred prosecution agreements, but they tend to be negotiated to be strongly in the interests of the defendant,'' he said.

The judge in the Boeing case has indicated that after the Justice Department submits details of the plea agreement, he will give relatives of the victims seven days to lodge objections. The government and Boeing then will have 14 days to respond.

The January 2021 decision by the Justice Department not to prosecute Boeing came in the final days of the Trump administration. In 2022 and 2023, federal prosecutions of corporations rose modestly under the Biden administration, according to figures from the US Sentencing Commission.

We are in an election year, so we will be looking to see how that focus by the Department of Justice plays out after the election in November and whether the focus on corporate crime remains the same, said Kya Henley, a former public defender in Maryland who now represents companies and individuals in white-collar cases. Everyone gets to set their agenda.