Featured Expert Contributor, White Collar Crime and Corporate Compliance
Gregory A. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP. He also serves on WLF’s Legal Policy Advisory Board and is a former U.S. Attorney and FBI senior executive.
Last week, Boeing and DOJ took a major step toward finally resolving the Department’s long-running investigation into the 2018 and 2019 crashes of two of the company’s jetliners with the formal filing of a plea agreement with the court. Boeing’s decision to plead guilty came after DOJ determined that Boeing had violated the terms of a 2021 deferred prosecution agreement meant to resolve the matter.
DOJ based its determination that Boeing breached the DPA on a finding that the company had failed to design, implement, and enforce a compliance and ethics program as necessary to prevent and detect violations of U.S. law throughout its operations. While acknowledging that Boeing took “considerable steps” during the term of the DPA to enhance its compliance program, DOJ nevertheless concluded that the company failed to “sufficiently extend its anti-fraud ethics and compliance program over its quality and manufacturing process before the end of the term” of the DPA’s three-year term.
Here are some key parts of the deal:
Admission of criminal wrongdoing. Boeing admits that at least two of its now former employees conspired to defraud the United States by misleading the FAA about certain safety tests related to its 737 MAX aircraft, the model that was involved in two crashes that killed 346 people. The company’s potential criminal liability for this conduct led to the 2021 DPA and DOJ’s subsequent decision to void the DPA and prosecute instead.
Term of probation. The company will serve a three-year term of “organizational probation” which the court can shorten or extend based on the duration of the independent compliance monitor’s work. (see below).
Retention of an independent compliance monitor. Boeing will be subject to the scrutiny of an independent compliance monitor. While not a surprise in this case, monitors can be challenging both in terms of the expense and the commitment of other resources to the effort. Here, the good news for Boeing is that it will have some say in the selection of the monitor per the process spelled out in the plea agreement, something that has drawn criticism from the families of victims who have suggested that the judge should make the selection.
New investment in compliance. The agreement requires Boeing to invest $455,000,000 in new money on its compliance and safety programs over the next three years. One area of improvement highlighted in the agreement is the integration of the company’s ethics and quality programs. Specifically, DOJ seems to be focused on both senior management support for compliance and middle management commitment to the same. The agreement also emphasizes the need for Boeing to adopt a “clearly articulated and visible corporate policy against violations of U.S. fraud laws.”
Payment of an additional fine. Boeing has agreed to pay an overall criminal monetary penalty of $487,200,000 which puts it at the top of the applicable Sentencing Guidelines range and the maximum allowed under applicable laws. However, DOJ will recommend to the court that Boeing get a credit for the $243,600,000 previously paid as part of the 2021 DPA, leaving a new balance of $243,600,000.
Restitution to victims. As part of the DPA, Boeing had agreed to pay compensation totaling $1.77 billion to 737 MAX customers and to create a $500 million fund to compensate the heirs, relatives, and legal beneficiaries of the 346 individuals who died in the two subject crashes. The plea agreement simply requires the company to pay restitution to victims in an amount to be determined by the court.
Meeting between the Boeing board and the victims’ families. The plea agreement obligates Boeing to “facilitate and conduct” a meeting between the company’s board of directors and the crash victims’ families and their counsel withing four months of sentencing. The agreement requires the board members to be present for the entirety of the meeting to hear about the crashes’ impact and recommendations for how to improve compliance, safety, and quality programs.
As with any plea agreement, this one must be approved by the judge presiding over the case. The judge may accept the deal as presented, may reject it outright with more or less guidance for a different agreement that he will approve, or may explicitly tell the parties what exactly he doesn’t like and direct the parties to bring back something that he will approve. The families of the crash victims have been critical of several aspects of the plea agreement and will have an opportunity to communicate those concerns to the judge—a situation that may complicate finalizing the agreement.
Among the lessons learned here is that a DPA (or NPA) is very valuable and must be zealously protected and preserved once obtained. In other words, a company’s ability to resolve a criminal investigation with such an agreement constitutes a significant win for the company. Boeing’s 2021 DPA clearly was just that. Of course, that doesn’t mean that the DPA was a loss for DOJ. Rather, like any negotiated resolution, it was a compromise with neither party completely winning nor completely losing. Unfortunately for Boeing, it won’t be able to see the 2021 DPA through to its intended conclusion, which was a dismissal of the single charge filed with the court as part of the agreement. How does a similarly situated company avoid Boeing’s situation? The answer is that strict compliance with the terms of a DPA has to be a top priority for the company at the highest levels. While Boeing would certainly contend that it did everything it could to comply with the DPA and that it did, in fact, do so, DOJ clearly disagreed. The real lesson here is that when DOJ can find a reason, it will find a way to get out of such an agreement. To avoid this result, companies must be absolutely committed to not helping DOJ find one.