The SEC (Securities and Exchange Commission), an American body similar to the Brazilian CVM (Securities and Exchange Commission), this Thursday, September 22, accused the Boeing Company and its former CEO, Dennis A. Muilenburg, of materially misleading public statements following the 2018 and 2019 plane crashes.
The accidents involved Boeing’s 737 MAX plane 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 posed an ongoing plane safety issue, but assured the public that the 737 MAX plane was “as safe as any plane that has ever flown in the skies.”
Later, after the second accident, Boeing and Muilenburg assured the public that there were no lapses or gaps in the certification process regarding MCAS, despite being aware of contrary information.
“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 obligation. They misled investors by providing assurances about the safety of the 737 MAX, despite knowing serious safety concerns. The SEC remains committed to eradicating misconduct when public companies and their executives fail to meet their fundamental obligations to the investing public.”
According to the SEC, a month after Lion Air Flight 610 with a 737 MAX plane crashed in Indonesia in October 2018, Boeing issued a press release, edited and approved by Muilenburg, that selectively highlighted certain facts. of an official Indonesian government report suggesting that pilot error and poor maintenance of the aircraft contributed to the accident.
The press release also gave assurances of the plane’s safety, not revealing that an internal safety review had determined that the MCAS posed an ongoing “airplane safety issue” and that Boeing had already begun redesigning the MCAS to address this. problem, according to the SEC.
Approximately six weeks after the March 2019 crash of Ethiopian Airlines Flight 302 with another 737 MAX, and the grounding by international regulators of the entire 737 MAX fleet, Muilenburg, although aware of information questioning certain aspects of the related certification process told MCAS, told analysts 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 confirmed again (…) that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes.”
“Boeing and Muilenburg put profits above people deceiving 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 executives must provide accurate and complete information when making disclosures to investors, no matter the circumstances. When they don’t, we’ll hold them accountable, as we did here.”
The SEC orders against Boeing and Muilenburg find that they negligently violated the anti-fraud provisions of the federal securities laws.
Without admitting or denying the SEC’s findings, Boeing and Muilenburg have consented to cease and desist orders that include fines 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 Sarbanes-Oxley Act of 2002.
The SEC investigation was led 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 overseen by Celeste Chase and Sanjay Wadhwa. The SEC appreciates the assistance of the Fraud Section of the Criminal Division of the Department of Justice and the Federal Bureau of Investigation.