The Boeing Company will pay a $200 million settlement over charges it misled investors regarding the safety of its 737 MAX airplane following two crashes, the Securities and Exchange Commission announced.
The SEC’s action pertained to the statements of Boeing and its former CEO Dennis A. Muilenburg after crashes of 737 MAX planes in Indonesia in October 2018 and Ethiopia in March 2019 that killed a total of 346 people. The commission said that Boeing and Muilenburg were aware of safety issues involving the plane’s flight control function known as the Maneuvering Characteristics Augmentation System (MCAS) but nevertheless attempted to assure investors and the public that the aircraft was safe.
Following the first crash, the SEC said Boeing and Muilenburg issued a press release highlighting excerpts from an Indonesian government report indicating that pilot error and poor maintenance were contributing factors, even though the company’s internal review showed MCAS was an ongoing safety issue. After the second crash, the entire 737 MAX fleet was grounded by international regulators. But Muilenberg issued a public statement saying there were no gaps in the process of certifying MCAS despite knowing there was information to the contrary, the commission said.
“In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets,” said SEC Chair Gary Gensler. “The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation. They misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns.”
The SEC found that Boeing and Muilenburg had negligently violated the antifraud provisions of federal securities laws. Boeing and Muilenburg did not admit or deny the findings, but consented to cease-and-desist orders that include penalties of $200 million and $1 million, respectively. A Fair Fund will be established for the benefit of the investors who were harmed, pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.
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