The SEC charged Boeing Co. (NYSE: BA) and its former CEO Dennis Muilenburg with intentionally withholding safety problems to investors concerning the infamous 737 Max.
Boeing and Muilenburg on Thursday agreed to pay $200 million and $1 million, respectively, in fines to settle SEC allegations that the aircraft manufacturer and its CEO violated securities laws by making “materialistically misleading” statements to shareholders regarding the flawed software system that ultimately led to two fatal crashes in 2018 and 2019. Although both Boeing and Muilenburg agreed to pay the fines, they refrained from admitting any wrongdoing.
The SEC’s investigation primarily focused on repeated guarantees from Muilenburg that Boeing’s engineers adhered to all safety protocol in designing a software system that relied on a single sensor, ultimately prompting the MCAS flight control system to nosedive the plane against pilots’ directions. In 2018, all passengers were killed when Lion Air Flight 610 plummeted into the sea near Indonesia, prompting Boeing to make assurances the crash was merely caused by maintenance shortcomings despite an internal review determining the MCAS system was actually at fault.
Boeing quickly began to redesign the software system behind closed doors, but it wasn’t long before a second 737 Max crashed in Ethiopia on 2019, prompting airlines around the globe to ground the aircraft. The two tragedies resulted in a Justice Department criminal investigation, which ended in 2021 after Boeing agreed to pay a $243.3 million fine. “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 in a statement. “They misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns.”
Information for this briefing was found via the SEC. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.