Last month, the Securities and Exchange Commission ("SEC") issued a Cease-and-Desist Order against Boeing Co. (NYSE: BA) and its former CEO, Dennis A. Muilenburg, both of whom agreed to pay civil money penalties to the SEC in the amounts of $200 million and $1 million, respectively, regarding the SEC's charges that Boeing and Muilenburg misled investors over the safety of its 737 MAX line of aircraft following two fatal crashes in October 2018 and March 2019 that killed 346 people, despite knowing of serious safety concerns about the aircraft.
On October 29, 2018, a Boeing 737 MAX crashed in Indonesia shortly after takeoff, killing all 189 passengers and crew on board. SEC Boeing Order at ¶ 2. On March 10, 2019, a Boeing 737 MAX crashed in Ethiopia, also shortly after takeoff, killing all 157 passengers and crew on board. SEC Boeing Order at ¶ 3. Post-crash investigations showed that, "on both flights, an erroneous signal from the external sensor repeatedly triggered MCAS [Maneuvering Characteristics Augmentation System] while the plane was climbing at a normal angle" and that "[o]n both flights, the crews were unable to regain control of the airplane following the unintended MCAS activations." SEC Boeing Order at ¶ 5. See also SEC Boeing Order at ¶¶ 32 and 64. Further, three days following the March 10th crash, the U.S. Federal Aviation Administration ("FAA") grounded the entire 737 MAX aircraft fleet, due to "ongoing safety concerns". SEC Boeing Order at ¶ 6. See also SEC Boeing Order at ¶ 65.
According to the SEC Order, Boeing made a misleading public statement on November 27, 2018, when it assured the public through a company press release that the 737 MAX aircraft "'is as safe as any airplane that has ever flown the skies'" because "by that point, Boeing had determined that MCAS posed an ongoing safety issue that required remediation". SEC Boeing Order at ¶ 8. See also SEC Boeing Order at ¶¶ 37 and 46-53. The Order also states that Boeing, through its former CEO, Dennis Muilenburg, made misleading public statements in April 2019, one month after the Ethiopia crash, including when Muilenburg stated that "'there was no surprise or gap or unknown...that somehow slipped through [the] certification process' for the 737 MAX, and that Boeing 'had gone back and confirmed...that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes'", despite Boeing having uncovered documents before these statements were made which "suggested that key facts about MCAS's operational scope had not been disclosed to the FAA's Aircraft Evaluation Group" and that "an internal compliance review had separately identified certain documentation gaps and inconsistencies relating to MCAS and the certification process." SEC Boeing Order at ¶¶ 9-10. See also SEC Boeing Order at ¶¶ 67-69.
The SEC Press Release can be accessed here.
The SEC Order as to Boeing can be accessed here.
The SEC Order as to Dennis Muilenburg can be accessed here.
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