New danger Boeing faces if it pleads guilty in US criminal proceedings

If federal prosecutors resume criminal proceedings against the aerospace giant by the end of the week and the company pleads guilty, Boeing could face new dangers.

The settlement could be rejected by a judge. There could be hefty fines to pay. And perhaps the biggest danger is the impact a conviction could have on Boeing’s already battered financial results.

Convictions can strip a company of its ability to contract with the federal government or suspend contracts, and can also prevent it from obtaining loans, said Eddie Jauregui, a white-collar defense attorney at Holland & Knight and a former federal prosecutor.

The implications are particularly significant for Boeing, which counts the federal government as its largest customer. It is also the country’s largest exporter.

The case could go to an executive agency known as the Interagency Suspension and Debarment Commission (ISDC), which has the authority to discuss government-wide suspensions and debarments that could end or disrupt a company’s business with the U.S. government.

“There are many considerations, and they are important,” Jauregui said. “I think working under a government contract is probably an extremely important element for Boeing.”

The question, which will be decided by Sunday, is whether Boeing’s actions leading up to the Alaska Airlines (ALK) Boeing 737 Max 9 door latch failure in January prompted top Justice Department officials to formally revoke the legal protections granted to Boeing under a January 2021 deferred prosecution agreement.

Following investigations into two Max 737-8 crashes in 2018 and 2019 that killed 346 people, Boeing admitted that two former Max test pilots deceived the FAA about a flight-control system called the Maneuvering Characteristics Augmentation System, or MCAS.

Prosecutors agreed to defer prosecution of charges that Boeing engaged in a conspiracy to defraud the federal government on condition that Boeing spend three years designing, implementing and enforcing a compliance and ethics program to promote safer manufacturing and supervisory practices.

But in May, prosecutors told a judge that Boeing had violated the terms of that three-year agreement.

The Justice Department is reportedly planning to bring new criminal charges against Boeing, but will give the company a chance to plead guilty in exchange for meeting certain conditions.

If Boeing does not admit guilt, the Justice Department could take the case to trial, the reports say.

A Chicago law firm representing the families of Boeing 737 Max crash victims said the families would “certainly object” to what it called a “favorable settlement” described to them during a two-hour phone call with Justice Department officials last Sunday.

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The agreement called for the appointment of a corporate watchdog and a monetary penalty; the law firm said the families would ask a judge to throw it out.

Under the law, the maximum penalty for a DOJ conspiracy conviction is $487 million. However, Boeing would receive credit for additional penalties based on penalties it has already agreed to pay.

Boeing and the Justice Department will need court approval to settle.

If the deal were rejected, Boeing and the government could go back to negotiating new terms, and the government could press charges.

Matthieu Goddeyne, a former federal prosecutor and white-collar attorney who represented Gunster, said Boeing’s guilty plea still leaves the Justice Department with the difficult task of enforcing the law while trying to protect victims’ rights and support safe aircraft production.

“I don’t necessarily think it’s the government’s job to try to put Boeing out of business or put thousands of people out of work,” Goddeyne said. “I think it’s their job to try to get justice, treat the victims right and try to make some changes to the company.”

Boeing has not commented on whether it has been offered a settlement. However, in May it said it believed it had met its obligations under a deferred prosecution agreement reached by the Justice Department.

Ultimately, company leaders may be forced to make one of two bad decisions: admit that the company has committed a crime or risk a criminal lawsuit.

“It’s never an easy decision for a company, especially one as closely tied to the U.S. government as Boeing is, to plead guilty,” Jauregi said.

Alexis Keenan is a legal reporter at Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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