U.S. judge rejects Boeing's plea deal in a conspiracy case stemming from fatal plane crashes

Boeing 737 Max airliners are parked at the company's factory in Renton, Wash., on Sept. 12, 2024. (Stephen Brashear / AP Photo)

DALLAS -

A federal judge on Thursday rejected a deal that would have allowed Boeing to plead guilty to a felony conspiracy charge and pay a fine for misleading U.S. regulators about the 737 Max jetliner before two of the planes crashed, killing 346 people.

The ruling by U.S. District Judge Reed O’Connor in Texas creates uncertainty around the criminal prosecution of the aerospace giant in connection with the development of its bestselling airline plane. Boeing and the Justice Department could try to negotiate a new plea agreement.

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The ruling creates uncertainty around criminal prosecution of the aerospace giant in connection with the development of its bestselling airline plane.

The judge gave Boeing and the Justice Department 30 days to tell him how they plan to proceed. They could negotiate a new plea agreement, or prosecutors could move to put the company on trial.

The Justice Department said it was reviewing the ruling. Boeing did not comment immediately.

Paul Cassell, an attorney for families of passengers who died in the crashes, called the decision an important victory for the rights of crime victims.

"No longer can federal prosecutors and high-powered defence attorney craft backroom deals and just expect judges to approve them," Cassell said. "Judge O'Connor has recognized that this was a cozy deal between the government and Boeing that failed to focus on the overriding concerns -- holding Boeing accountable for its deadly crime and ensuring that nothing like this happens again in the future."

Many relatives of the passengers who died in the crashes, which took place off the coast of Indonesia and in Ethiopia less than five months apart in 2018 and 2019, have spent years pushing for a public trial, the prosecution of former company officials, and more severe financial punishment for Boeing.

The deal the judge rejected was reached in July and would have let Boeing plead guilty to defrauding regulators who approved pilot-training requirements for the 737 Max nearly a decade ago. Prosecutors said they did not have evidence to argue that Boeing's deception played a role in the crashes.

In his ruling, O'Connor focused on part of the agreement that called for an independent monitor to oversee Boeing's steps to prevent violation of anti-fraud laws during three years of probation.

O'Connor expressed particular concern that the agreement "requires the parties to consider race when hiring the independent monitor...'in keeping with the (Justice) Department's commitment to diversity and inclusion."'

O'Connor, a conservative appointed to the bench by President George W. Bush, questioned Justice Department and Boeing lawyers in October about the role of DEI in selection of the monitor. Department lawyers said selection would be open to all qualified candidates and based on merit.

The judge wrote in Thursday's ruling that he was "not convinced...the Government will not choose a monitor without race-based considerations."

"In a case of this magnitude, it is in the utmost interest of justice that the public is confident this monitor selection is done based solely on competency. The parties' DEI efforts only serve to undermine this confidence in the government and Boeing's ethics and anti-fraud efforts," he wrote.

O'Connor also objected that the plea deal called for the government to pick the monitor and for the appointee to report to the Justice Department, not the court. The judge also noted that Boeing would have been able to veto one of six candidates chosen by the government.

Todd Haugh, a business law and ethics expert at Indiana University, could not recall any previous corporate plea deals that were rejected over DEI. He said the larger issue was how the deal took sentencing power away from the court.

"That is a legitimate argument from which to reject a plea agreement, but this particular judge has really stood on this DEI issue," Haugh said. "It comes through loud and clear in the order."

The ruling leaves prosecutors in a bind because they can't simply ignore a government DEI policy that goes back to 2018, he said.

Prosecutors also must weigh the risks and uncertain outcome before pushing for a trial.

Boeing negotiated the plea deal only after the Justice Department determined this year that Boeing violated a 2021 agreement that had protected it against criminal prosecution on the same fraud-conspiracy charge.

Boeing lawyers have said that if the plea deal was rejected, the company would challenge the finding that it violated the earlier agreement. Without the finding, the government has no case.

The judge helped Boeing's position on Thursday, writing that it was not clear what the company did to violate the 2021 deal.

The Justice Department accused Boeing of defrauding Federal Aviation Administration regulators who approved pilot-training requirements for the 737 Max.

Acting on Boeing's incomplete disclosures, the FAA approved minimal, computer-based training instead of more intensive training in flight simulators. Simulator training would have increased the cost for airlines to operate the Max and might have pushed some to buy planes from rival Airbus instead.

When the Justice Department announced in 2021 that it had reached a settlement and would not prosecute Boeing for fraud, families of the victims were outraged. Judge O'Connor ruled last year that the Justice Department broke a victims-rights law by not telling relatives that it was negotiating with Boeing, but said he had no power to overturn the deal.

The 2021 deferred-prosecution agreement was due to expire in January, and it was widely expected that prosecutors would seek to permanently drop the matter. Just days before that, however, a door plug blew off a 737 Max during an Alaska Airlines flight over Oregon.

That incident renewed concerns about manufacturing quality and safety at Boeing, and put the company under intense scrutiny by regulators and lawmakers.

The case is just one of many challenges facing Boeing, which has lost more than US$23 billion since 2019 and fallen behind Airbus in selling and delivering new planes.

The company went through a strike by factory workers that shut down most airplane production for seven weeks this fall, and announced that it will lay off 10% of its workers, about 17,000 people. Its shares have plunged about 40% in less than a year.