United States SEC Fines Boeing $200 Million & Former CEO $1 Million for Misleading Investors after Boeing 737 MAX Indonesia & Ethiopa Crashes 2018 & 2019
23rd September 2022 | Hong Kong
The United States Securities & Exchange Commission (SEC) has charged and imposed settlement fines on aircraft-maker Boeing for $200 million & former Boeing CEO (Dennis A. Muilenburg) $1 million for misleading Investors after Boeing 737 MAX crashed in 2018 (Indonesia, Lion Air Flight 610) and 2019 (Ethiopian Airlines Flight 302). United States SEC: “After the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was “as safe as any airplane that has ever flown the skies.” Later, following the second crash, 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 contrary information.” SEC Chair Gary Gensler: “In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets. 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 remains committed to rooting out misconduct when public companies and their executives fail to fulfill their fundamental obligations to the investing public.” See official statement below:
“ United States SEC Fines Boeing $200 Million & Former CEO $1 Million for Misleading Investors after Boeing 737 MAX Indonesia & Ethiopa Crashes 2018 & 2019 “
United States SEC Official Statement
- Boeing to Pay $200 Million to Settle SEC Charges that it Misled Investors about the 737 MAX
- Former CEO Agrees to Settle to Same Charges and Pay $1 Million
22/9/22 – The Securities and Exchange Commission today charged The Boeing Company and its former CEO, Dennis A. Muilenburg, with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019. The crashes involved Boeing’s 737 MAX airplane and a flight control function called the Maneuvering Characteristics Augmentation System (MCAS). According to the SEC’s orders, after the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was “as safe as any airplane that has ever flown the skies.” Later, following the second crash, 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 contrary information.
“There are no words to describe the tragic loss of life brought about by these two airplane crashes,” said SEC Chair Gary Gensler. “In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets. 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 remains committed to rooting out misconduct when public companies and their executives fail to fulfill their fundamental obligations to the investing public.”
According to the SEC’s order, one month after Lion Air Flight 610, a 737 MAX airplane, crashed in Indonesia in October 2018, Boeing issued a press release, edited and approved by Muilenburg, that selectively highlighted certain facts from an official report of the Indonesian government suggesting that pilot error and poor aircraft maintenance contributed to the crash. The press release also gave assurances of the airplane’s safety, failing to disclose that an internal safety review had determined that MCAS posed an ongoing “airplane safety issue” and that Boeing had already begun redesigning MCAS to address that issue, according to the SEC’s orders.
Approximately six weeks after the March 2019 crash of Ethiopian Airlines Flight 302, another 737 MAX, and the grounding by international regulators of the entire 737 MAX fleet, Muilenburg, though aware of information calling into question certain aspects of the certification process relating to MCAS, told analysts and reporters that “there was no surprise or gap . . . that somehow slipped through [the] certification process” for the 737 MAX and that Boeing had “gone back and confirmed again . . . that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes.”
“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 following two tragic accidents that resulted in the loss of 346 lives and incalculable grief to so many families,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division. “But public companies and their executives must provide accurate and complete information when they make disclosures to investors, no matter the circumstances. When they don’t, we will hold them accountable, as we did here.”
The SEC’s orders against Boeing and Muilenburg find that they negligently violated the antifraud provisions of federal securities laws. Without admitting or denying the SEC’s findings, Boeing and Muilenburg 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 harmed investors pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.
The SEC’s investigation was conducted by Ibrahim Sajalieu Bah, Kenneth Gottlieb, Derek Schoenmann, Heather Shaffer, and Tian Wen of the New York Regional Office with assistance from Richard Hong of the Trial Unit. The case was supervised by Celeste Chase and Sanjay Wadhwa. The SEC appreciates the assistance of the Department of Justice Criminal Division’s Fraud Section and the Federal Bureau of Investigation.
About Boeing 737 MAX
The 737 MAX delivers enhanced efficiency, improved environmental performance and increased passenger comfort to the single-aisle market. Incorporating advanced technology winglets and efficient engines, the 737 MAX offers excellent economics, reducing fuel use and emissions by 20 percent while producing a 50 percent smaller noise footprint than the airplanes it replaces. Additionally, 737 MAX offers up to 14 percent lower airframe maintenance costs than the competition. Passengers will enjoy the Boeing Sky Interior, highlighted by modern sculpted sidewalls and window reveals, LED lighting that enhances the sense of spaciousness and larger pivoting overhead storage bins.
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