A month after an automation flaw forced a Boeing jet into the Java Sea, Boeing’s then-chief executive, Dennis Muilenburg, directed the drafting of a news release that said the 737 Max “is as safe as any airplane that has ever flown the skies” — even though the company knew of an ongoing safety problem, the U.S. Securities and Exchange Commission said Thursday.
Boeing to pay $200 million after SEC finds it misled on 737 Max safety
That November 2018 statement and others Muilenburg made the following April after a second Max crashed in Ethiopia were misleading and harmed investors, according to SEC enforcement orders. The agency said Boeing will pay a $200 million penalty to settle the matter. Muilenburg will pay $1 million. Neither admitted or denied the SEC’s findings, the agency said.
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” SEC Chair Gary Gensler said in a statement. “The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation.”
Boeing said the settlement “fully resolves” the SEC’s probe and added that “we have made broad and deep changes across our company in response to those accidents — fundamental changes that have strengthened our safety processes and oversight of safety issues.”
A lawyer for Muilenburg did not respond to requests for comment.
The penalties are the latest in a line of legal consequences facing the manufacturing giant after an automated flight control system, known as the Maneuvering Characteristics Augmentation System (MCAS), repeatedly forced the noses of the two Max planes down, killing 346 people.
Some victims’ families are also seeking to overturn a deferred prosecution agreement between Boeing and the Justice Department, reached in the final days of the Trump administration, telling a federal judge in August that they had been improperly excluded from the process. The families have argued the company and its senior leadership have not been held accountable for their actions.
Longtime consumer advocate Ralph Nader, whose great-niece Samya Rose Stumo was 24 when she was killed on the Ethiopian Airlines flight, said the SEC actions put a needed focus on the actions of top Boeing leaders, including Muilenburg, and demonstrated a newly aggressive posture that is welcomed by the families.
“It’s an unusual sanction by the SEC, which is usually much more laid back on matters like this,” Nader said, adding that the agency “after years of self-imposed restraint, has decided enough already and started enforcing the securities and exchange laws to protect investors.”
The SEC said Muilenburg approved the news release before it was sent out weeks after the crash off the coast of Indonesia. Although it offered the company’s “assurance” on the plane’s safety, “Boeing had determined that MCAS posed an ongoing safety issue that required remediation; indeed, Boeing had already begun work on a redesign of the MCAS software to address the safety issue,” the SEC said in a filing. No mention was made of the problem or planned software redesign, it said.
In April 2019, after the second Max crash, according to the SEC, Muilenburg told investors, analysts and reporters that “there was no surprise or gap or unknown … that somehow slipped through [the] certification process” for the 737 MAX.
But before those statements, the company had “uncovered documents that suggested that key facts about MCAS’s operational scope had not been disclosed” to the section of the Federal Aviation Administration responsible for approving training requirements for pilots, according to the SEC. That omission helped leave pilots unprepared to deal with the problems they would eventually face, congressional investigators have said.
“Those facts were not disclosed or otherwise known to the public when Muilenburg made his April 2019 statements,” the SEC said.