Boeing agrees to pay $200 million for misleading the public about the 737 Max

The SEC alleges that, after a crash of a Lion Air 737 Max jet in October 2018 that killed 189 people, Boeing and Muilenburg knew that part of the plane’s flight control system posed an ongoing safety concern, but told the public that the 737 Max was safe to fly. After a fatal 737 Max crash on March 10, 2019, the SEC alleges that Boeing and Muilenburg knowingly misled the public about “slips” and “gaps” in the certification process of that flight control system.

“In times of crisis and tragedy, it is especially important that public companies and executives provide full, honest and truthful disclosures to the markets,” SEC Chairman Gary Gensler said in a statement. “The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation. They misled investors by giving assurances about the safety of the 737 MAX, despite knowing of serious safety concerns.”

In a statement, Boeing said the settlement “completely resolves the SEC’s previously public investigation into matters relating to the 737 MAX accidents.”

“Today’s settlement is part of the company’s broader effort to resolve responsible legal matters related to the 737 MAX accidents in a manner that serves the best interests of our shareholders, employees and other stakeholders,” Boeing said.

The company and Muilenburg have agreed to settle charges of violating the anti-fraud provisions of US securities laws, but they have not admitted or denied the SEC’s allegations. Boeing agreed to pay 200 million dollars and Muilenburg agreed to pay 1 million dollars.

“Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 Max, all in an effort to rehabilitate Boeing’s image after two tragic accidents that resulted in the loss of 346 lives and untold grief for so many families,” said Gurbir Grewal, director of the SEC’s Enforcement Division in a statement.

Muilenburg lost the top job at Boeing in December 2019. But he left with stock options and other assets worth about $80 million at the time — though Boeing shares have lost more than half their value since then. It is unknown what Muilenburg did with his Boeing stock and options after his departure.

Steep losses

While $200 million may seem like a substantial fine for a company, it is a small fraction of the losses already caused by the two fatal crashes that killed 346 people in total and led to a 20-month grounding of Boeing’s best-selling plane
Boeing has already disclosed that the company has taken a $21 billion hit to its bottom line due to lost sales revenue and increased costs — and that doesn’t include potential legal liability for victims’ families. So the $200 million fine represents less than 1% of its previously disclosed losses.

Investors have lost even more: Boeing’s market capitalization has fallen about 58%, or $115 billion, since the first crash of a 737 Max shortly after takeoff from Indonesia in October 2018. While about $100 billion of that happened in the pandemic era that has hurt the demand for flying and aircraft purchases, the longer ground of the Max opened the door for airlines to cancel hundreds of orders for the aircraft without penalty.

Shares of Boeing (B.A) fell more than 3% on Thursday, but rose slightly in after-hours trading following the SEC’s announcement.