Yesterday, the SEC announced settled enforcement proceedings against Boeing & former CEO Dennis Muilenburg arising out of alleged misstatements surrounding the catastrophic crashes of two of its 737 MAX aircraft. This excerpt from the SEC’s press release summarizes the alleged misstatements:
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.”
Without admitting or denying the SEC’s allegations, Boeing & its former CEO consented to separate orders (here’s Boeing’s order and here’s the CEO’s order) to cease and desist from future violations of Section 17(a)(2) and 17(a)(3) of the Securities Act. Boeing agreed to pay a $200 million civil penalty and its CEO agreed to a $1 million penalty.
I told everyone to prepare for a torrent of high-profile enforcement proceedings as the SEC’s fiscal year winds down. It will be interesting to see what next week brings. Stay tuned.
– John Jenkins