Boeing agrees to pay $200 million for misleading claims about 737 MAX flight control system

(Photo: Boeing)

Boeing and Dennis Muilenburg, who served as the company’s president and CEO from July 2015 to December 2019, agreed to pay the fines separately under a Sept. 22 settlement. settlement announced by the Securities and Exchange Commission (SEC). The separate settlements relate to false claims made by Boeing and Muilenburg about the 737 MAX’s flight control system after the fatal crashes involving Lion Air and Ethiopian Airlines in 2018 and 2019.

Lion Air crashes in October 2018 and Ethiopian Airlines 737 MAX crashes in March 2019 resulted in aircraft malfunctions Maneuverability Augmentation System (MCAS). According to the SEC, Muilenburg and Boeing Company violated “the anti-fraud provisions of the federal securities laws” by publicly stating that the plane was safe and had no gaps in the certification process, despite knowing that ” contrary information’.

“Without admitting or denying the SEC’s findings, Boeing and Muilenburg agreed to cease and desist orders that include penalties of $200 million and $1 million, respectively,” the SEC wrote in a Sept. 22 news release. “An equitable fund will be established for the benefit of injured investors pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.”

The agency issued two separate cease-and-desist orders Boeing and Muhlenburgeach pointing to specific instances following the crash of Lion Air Flight 610 and the crash of Ethiopian Airlines Flight 302 when each failed to exercise “reasonable care” in making statements about the safety of the 737 MAX.

As shown in the international government-industry series accident reports and reviews of both accidents, the fatal accidents were the result of erroneous activation of the 737 MAX’s MCAS system. Boeing originally developed MCAS as a feature on the MAX designed to automatically control the aircraft’s downward-facing stabilizer to improve pitch characteristics when entering steep turns with increased load and flap ratios in near-stall conditions.

Investigations into both the Lion Air and Ethiopian accidents found that neither flight was approaching stall conditions at the time MCAS was activated. In both flights, erroneous signals from the system’s external sensor triggered MCAS repeatedly as the plane was gaining altitude at a normal angle, and the pilots were unable to regain control of the plane after the inadvertent activations, according to the ground action order issued by the SEC.

“Boeing and Muilenburg are putting profits before people by misleading investors about the safety of the 737 MAX in order to rebuild Boeing’s image after two tragic accidents that killed 346 people and caused untold grief to many families,” Gurbir S. Grewal, Director of the SEC’s enforcement division, the statement said. “But public companies and their executives must provide accurate and complete information when they disclose information to investors, regardless of the circumstances. If they don’t, we will hold them accountable, as we have done here.”

The settlement is the latest regulatory action taken by the US government against Boeing since October 2021, when the former chief technical pilot of the Boeing 737 MAX was indicted for fraud.

The FAA became the first civil aviation regulatory body in the world to approve Return MAX to passenger services in November 2020 after two disasters led to a 19-month shutdown of the global fleet. Since then, other agencies, including EASA and Transport Canada, have issued individual approvals for its return to service by region.

All approvals included requirements for software updates and improved flight control laws to enable MCAS to be activated along with other display systems and system wiring changes. During Boeing’s first-quarter 2022 earnings call in April, current president and CEO Dave Calhoun said the airline had flown more than 1 million flight hours on the recertified MAX just over a year after the plane returned to service.

Ethiopian Airlines has also officially resumed flights of its first recertified by MAX in February. The latest figures from Boeing show that as of the end of August, the company had received 373 total orders for the MAX this year.

https://www.aviationtoday.com/2022/09/23/boeing-agrees-200m-settlement-misleading-statements-737-max-flight-control-system/ Boeing agrees to pay $200 million for misleading claims about 737 MAX flight control system

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