Boeing Likely to Face Fraud Charges. What That Means

The Justice Department will charge Boeing with fraud, according to a report. That gives the airplane maker an important choice.

On Sunday, Bloomberg reported that the airplane maker will be charged with fraud. The decision comes after the Justice Department said Boeing violated the terms of a 2021 deferred prosecution agreement in May.

The Justice Department and Boeing didn't immediately respond to a request for comment.

The agreement resolved criminal conspiracy charges related to two 737 MAX crashes occurring within five months of one another. Both crashes were tied back to faulty flight control software. All MAX jets were grounded worldwide between March 2019 and November 2020 while Boeing fixed the problem and recertified the plane with aviation authorities.

After the crashes, the Justice Department pursued charges that Boeing knowingly misled aviation regulators about MAX flight control systems. Boeing paid a fine of about $2.5 billion as part of a deferred prosecution agreement that committed the company to strengthening and enhancing its compliance program and compliance program reporting requirements, among other things.

With new charges, the Justice Department will likely allege that the 737 MAX 9 door plug blowout during a Jan. 5 Alaska Air flight demonstrates that Boeing failed in its duties. Boeing might counter that the door plug blowout was caused by a supplier quality issue and Covid-19-related employee turnover, which are different issues than what led to the two tragic crashes, and that it has worked with the FAA since 2019 to improve transparency.

Boeing now has the decision to plead guilty, which would likely lead to additional fines and restrictions, or go to court. The Justice Department charged Boeing 737 MAX test pilot Mark Forkner with fraud in 2021. He was acquitted in 2022.

Investors can expect a relatively small reaction in Monday trading. The Justice Department appeared likely to charge Boeing with fraud after recent comments from Senators. What's more, the stock entering Monday trading was down about 30% so far this year while the Dow Jones Industrial Average was up about 4%. Boeing shares were down about 27% since the door plug blowout.

The drop wipes out some $41 billion in market value. That is a rough approximation of all the increased uncertainty, costs, and fines investors expect Boeing to realize from the door plug failure.