Hey everybody, welcome back to the Elon Musk Podcast.
This is a show where we discuss the critical crossroads that
shape SpaceX, Tesla X The Boring Company.
And Neuralink. I'm your host, Will.
Walden the United States Department of Justice is
preparing to charge Boeing with fraud, giving the aerospace
giant a choice between pleading guilty or facing a trial.
The decision must be made by the end of the week, according to
sources familiar with the situation.
The DOJ has also indicated that Boeing would need to pay a fine
and hire a corporate monitor if it chooses to plead guilty.
The DOJ informed families of victims of two fatal 737 Max
crashes and their attorneys about the impending charges
during a meeting on Sunday. These crashes, involving Lion
Air Flight 610 and Ethiopian Airlines Flight 302, resulted in
the deaths of 346 people. The DOJ, officials from the
Fraud Section and the US Attorney's Office for the
Northern District of Texas attended this meeting.
Both the DOJ and Boeing have declined to comment on the
situation. However, Bloomberg previously
reported that Boeing has been in discussions with the department
to resolve potential charges related to the crashes, which
are expected to include the appointment of a corporate
monitor. A guilty plea to criminal
charges would mark a significant downturn for Boeing, a company
historically known for its cautious and methodical
approach. Such a plea raises concerns
about Boeing's ability to secure future U.S. government
contracts, especially as its commercial airplane business
faces significant financial challenges.
The DOJ's move follows its determination that Boeing
violated a 2021 deferred prosecution agreement.
This agreement, made in the final days of the Trump
administration, allowed Boeing to avoid criminal prosecution by
meeting certain conditions, including the implementation of
an effective compliance program. However, in May, the DOJ
concluded that Boeing failed to meet the requirement for an
effective compliance program to prevent and detect violations of
US fraud laws. Boeing has contested this
finding, asserting that it has honored the terms of the
agreement. The breach announcement came
after a fuselage panel blew off a Boeing jet operated by Alaska
Airlines mid flight in January. Investigations revealed that the
plane was missing 4 bolts meant to secure a door plug, leading
to scrutiny over Boeing's manufacturing and quality
control processes. The Mid Air incident has since
caused significant turmoil for Boeing.
The company's shares have dropped by about a third this
year, and it is expected to burn through approximately $8 billion
in cash during the first half of this year due to a slowdown in
production following the incident.
In response to the January accident, the Federal Aviation
Administration FAA imposed restrictions on the production
of the 737 Max and required Boeing to submit a comprehensive
plan to. Address the.
Quality issues at its factories. This incident has intensified
regulatory and legislative scrutiny of Boeing.
Concurrently, Boeing is undergoing a leadership
transition as it searches for a new CEO to replace Dave Calhoun,
who plans to step down later this year.
This leadership change comes at a critical time as the company
navigates these legal and operational challenges.
Under the 2021 deferred prosecution agreement, Boeing
paid a $243 million criminal fine and admitted to deceiving
the FAA about an important feature of the 737 Max that
affected the flight control system.
Boeing also committed to improving its internal safety
controls and submitting regular reports to the DOJ.
The recent developments, including the door plug blowout
and subsequent investigations, have led the DOJ to consider
revoking the deferred prosecution agreement.
This potential revocation could have serious consequences for
Boeing, leading to renewed criminal charges.
The DOJ's offer of a plea deal includes a fine of approximately
244 million hours, three years of probation, and oversight by
an external monitor. Paul Cassell, an attorney
representing 15 families of crash victims, has criticized
the deal as a sweetheart deal that fails to hold Boeing
adequately accountable. Castle has expressed strong
objections to the plea deal, stating the deal will not
acknowledge in any way that Boeing's crime killed 346
people. It also appears to rest on the
idea that Boeing did not harm any victim.
He emphasizes that the families of the victims demand more
justice than what the proposed deal offers.
Boeing has until the end of the week to accept or reject the
plea deal. If the plea deal is accepted,
U.S. District Judge Reed O'Connor
would be unable to increase Boeing sentence or impose
additional punishment for conviction, according to
Cassell. Boeing CEO Dave Calhoun faced
intense questioning from from set from senators earlier this
month regarding the settlement and other safety concerns during
a Homeland Security subcommittee hearing.
During the hearing, Calhoun apologized to the families of
the crash victims, reaffirming Boeing's commitment to safety
and quality. On the day following the
hearing, families of crash victims sent a letter to the DOJ
urging federal prosecutors to pursue aggressive criminal
prosecution against Boeing. They argue that the severity of
Boeing's crime justifies a maximum fine exceeding 24
billion, although they acknowledge that some funds
could be directed towards safety improvements.
The DO JS current offer to Boeing has provoked anger and
disappointment among the victims families and their attorneys.
Aaron Applebaum, another attorney for the families, has
criticized the proposal as shameful and inadequate in
recognizing the dignity of the victims.
Boeing's troubles were compounded when, in January, a
737 Max 9 aircraft experienced a door blowout mid flight,
creating a hole in the side of the plane and necessitating an
emergency landing. The FAA temporarily grounded
Boeing and conducted an investigation that revealed
significant safety and manufacturing issues at Boeing.
Amid these ongoing challenges, Boeing has reportedly agreed to
acquire Spirit Aero Systems, a key supplier, in a deal valued
at over $4 billion. This acquisition is seen as part
of Boeing's efforts to stabilize its supply chain and address
production challenges. The DOJ's proposed plea deal and
Boeing's response to it will be closely monitored, as it holds
significant implications for the company's future operations and
its relationship with federal regulators.
The outcome of the situation will likely influence how Boeing
navigates its ongoing legal and operational hurdles.
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