Boeing 737 MAX 8
The SEC (Securities and Exchange Commission), an American body similar to Brazil’s CVM (Securities and Exchange Commission), this Thursday, September 22, accused the Boeing Company and its former CEO, Dennis A. Muilenburg, of essentially misleading public Statements about the plane crashes in 2018 and 2019.
The accidents involved Boeing’s 737 MAX aircraft and a flight control function called the Maneuvering Characteristics Augmentation System (MCAS).
According to the SEC, after the first accident, Boeing and Muilenburg knew that MCAS was an ongoing safety concern for planes, but reassured the public that the 737 MAX plane “is as safe as any plane that has ever flown in the sky.”
Later, after the second accident, Boeing and Muilenburg assured the public that, despite being aware of information to the contrary, there were no errors or gaps in the MCAS certification process.
“There are no words to describe the tragic loss of life caused by these two plane crashes,” said SEC Chairman Gary Gensler. “In times of crisis and tragedy, it is especially important for public companies and executives to provide full, fair and truthful disclosures to the markets. The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic of commitments. They misled investors by making assurances about the safety of the 737 MAX despite knowing of serious safety concerns. The SEC remains committed to eliminating wrongdoing when public companies and their officers fail to meet their fundamental obligations to the investing public.”
According to the SEC, one month after the crash of Lion Air Flight 610 of a 737 MAX aircraft in Indonesia in October 2018, Boeing issued a press release edited and approved by Muilenburg that selectively highlighted certain facts from an official Indonesian government report suggesting so Pilot error and poor maintenance of the aircraft contributed to the accident.
The press release also reassured the aircraft’s safety and did not disclose that an internal security review had concluded that the MCAS posed an ongoing “aircraft safety issue” and that Boeing had already begun redesigning the MCAS to address this issue, the SEC said.
About six weeks after Ethiopian Airlines Flight 302, carrying another 737 MAX, crashed in March 2019 and international regulators grounded the entire 737 MAX fleet from flying, Muilenburg told analysts MCAS, despite being aware of information supporting certain aspects of the 737 MAX related certification process, and reporters that “there was no surprise or gap (…) that somehow escaped the certification process” for the 737 MAX and that Boeing “came back and reconfirmed (…) that we were following exactly the steps in our.” have consistently followed design and certification processes to produce safe aircraft.”
“Boeing and Muilenburg are putting profits ahead of people who mislead 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 suffering for so many families said Gurbir S Grewal, director of the SEC’s Enforcement Division. “But public companies and their officers must provide accurate and complete information when making disclosures to investors, regardless of the circumstances. If they don’t, we will hold them accountable, as we have done here.”
The SEC orders against Boeing and Muilenburg find that they negligently violated the antifraud provisions of the federal securities laws.
Without Boeing and Muilenburg have admitted or denied the SEC’s findings and agreed to injunctions that include penalties of $200 million and $1 million, respectively.. A Fair Fund will be established for the benefit of aggrieved investors pursuant to Section 308(a) of the SarbanesOxley Act 2002.
The SEC 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 handled by Celeste Chase and Sanjay Wadhwa. The SEC appreciates the assistance of the Fraud Division of the Department of Justice’s Criminal Division and the Federal Bureau of Investigation.