(Reuters) – Boeing Co. will pay $200 million to settle civil charges brought by the US Securities and Exchange Commission that it misled investors about its 737 MAX, which was grounded for 20 months after two fatal crashes killed 346 people, the agency said Thursday.
Boeing knew after the first crash that an air traffic control system posed a safety problem, but assured the public that the 737 MAX airplane was “as safe as any that has ever flown in the air,” the SEC said in announcing the settlement.
The SEC also said former Boeing CEO Dennis Muilenburg had agreed to pay $1 million to settle the charges.
Both Boeing and Muilenburg did not acknowledge or deny the SEC̵7;s findings, the agency said. A fund will be established for the benefit of injured investors, it said.
Boeing shares rose 0.4% in after-hours trading.
“In times of crisis and tragedy, it is especially important that public companies and managers provide full, fair and truthful disclosures to the markets,” SEC Chairman Gary Gensler said in a statement. Boeing and Muilenburg “failed in this most basic obligation,” he said.
The SEC accused Boeing and Muilenburg “of making materially misleading public statements following crashes involving Boeing aircraft in 2018 and 2019.”
Boeing, which noted that it did not admit or deny wrongdoing in the settlement agreement, said it had made “fundamental changes that have strengthened our safety processes” and said “the settlement is part of the company’s broader effort to responsibly resolve outstanding legal issues related to to the 737 MAX accidents.”
The crashes were linked to an air traffic control system called the Maneuvering Characteristics Augmentation System. The SEC said “after the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing aircraft safety issue, but still assured the public that the 737 MAX aircraft was ‘as safe as any that has ever flown in the air.’
The first crash, of a Lion Air flight in Indonesia, occurred in October 2018.
After the second crash, in Ethiopia in March 2019, the SEC said: “Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of information to the contrary.”
Boeing has settled most of the claims from the two fatal accidents. Last year, it admitted liability for compensatory damages in lawsuits filed by families of the 157 people killed in the 2019 Ethiopian Airlines 737 MAX crash. A small number of lawsuits are expected to begin in 2023 to help settle claims.
The Federal Aviation Administration required 737 MAX pilots to undergo new training to handle MCAS as well as ordered significant new safety measures and other software changes to the air traffic control system before allowing the plane to return to service.
The crash cost Boeing more than $20 billion and led Congress to pass sweeping legislation reforming how the FAA certifies new airplanes. Boeing faces a December deadline to get approval from the FAA for the 737 MAX 7 and 10 variants, or it must meet new modern cockpit warning requirements.
In January 2021, Boeing agreed to pay $2.5 billion in fines and compensation to settle a criminal investigation by the US Department of Justice into the 737 MAX crash.
The Justice Department settlement, which allowed Boeing to avoid prosecution, included a $243.6 million fine, $1.77 billion in restitution to the airlines and a $500 million crash victim fund for fraud conspiracy charges related to the plane’s flawed design.
The families of some people killed in the Boeing crash have asked a judge to declare that the government violated their legal rights when it reached the settlement.
In December 2019, Boeing fired Mr. Muilenburg after the company clashed with regulators over the timing of the 737 MAX’s return to service. A lawyer for Mr. Muilenburg, who neither admitted nor denied wrongdoing, did not immediately respond to a request for comment.
Muilenburg left Boeing with $62 million in compensation and pension benefits but received no severance pay.
“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 SEC Enforcement Director Gurbir Grewal.
Last November, Boeing’s current and former executives reached a $237.5 million settlement with shareholders to settle a lawsuit over the board’s safety oversight of the 737 MAX.