Former Boeing chief executive Dennis A Muilenburg is to pay a penalty of $1m in settlement of charges that he and the company violated US antifraud laws by withholding knowledge of the causes of crashes of the Boeing 737 Max.

Boeing itself will have to pay $200m. Both the company and Muilenburg neither admit nor deny the findings of an investigation by the US Securities and Exchange Commission, but agreed to pay the penalties and consented to a cease and desist order.

Two fatal crashes by 737 Max jets took 346 people’s lives, led to the grounding of the entire fleet, and investigations around the world.

The SEC probe was into statements made by the company and its former chief executive which could have affected the company’s share price, and the implications for investors in the company.

According to the SEC, after the first crash, Boeing and Muilenburg knew that the new airplane’s MCAS control system “posed an ongoing airplane safety issue, but nevertheless they assured the public that the 737 Max airplane was ‘as safe as any airplane that has ever flown the skies’.

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“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,” the SEC concluded

"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 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 fulfil their fundamental obligations to the investing public."

According to the SEC’s order, one month after Lion Air Flight 610 — a 737 MAX — 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.

Profits over people

"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 Grewal, director of the SEC's enforcement division.

"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. A Fair Fund will be established for the benefit of harmed investors.

The US Justice Department fined Boeing $2.5 billion last year, on charges of fraud and conspiracy in connection with the two crashes.

Authorities said the company had engaged “in an effort to cover up their deception” and chose “the path of profit over candor by concealing material information” from the Federal Aviation Administration, the aviation regulator.

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