Boeing agreed to pay $200 million to settle charges laid by the Securities and Exchange Commission (SEC) that it misled investors regarding what caused two crashes of 737 MAX airplanes in 2018 and 2019 that killed 346 people.

The SEC found Boeing and its former chief executive officer, Dennis Muilenburg, made materially misleading statements regarding the role a flight control system on the 737 MAX airplane—the Maneuvering Characteristics Augmentation System (MCAS)—had in causing one crash in Indonesia in 2018 and another in Ethiopia in 2019.

After the first crash, Boeing and Muilenburg “knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was ‘as safe as any airplane that has ever flown the skies,’” the SEC said Thursday in a press release. “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.”

After the second crash, 737 MAX airplanes around the globe were grounded for nearly two years while Boeing and airline safety experts determined what went wrong with the flight control system and how to correct it. The airplanes returned to service in most of the world in 2021, except China.

“There are no words to describe the tragic loss of life brought about by these two airplane crashes,” said SEC Chair Gary Gensler in the release. “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 said Boeing and Muilenburg negligently violated the antifraud provisions of federal securities laws. Without admitting or denying the agency’s findings, Boeing and Muilenburg consented to cease-and-desist orders. Muilenburg agreed to pay a $1 million fine.

Compliance considerations: The SEC focused on public statements made by Boeing and Muilenburg, which the agency contended contained materially misleading statements. The first statement at issue was published in November 2018, after the crash in Indonesia that killed 189 passengers and crew.

In its order, the SEC said Boeing by that point “had determined that MCAS posed an ongoing safety issue that required remediation; indeed, Boeing had already begun work on a redesign of the MCAS software to address the safety issue. However, the press release made no mention of the MCAS safety issue or planned software redesign.”

The second set of misleading statements were made by Muilenburg, the SEC said in its order, after the Ethiopian Airlines crash. During Boeing’s first-quarter earnings call in April 2019, an analyst asked Muilenburg how the errors caused by MCAS slipped through the company’s engineering organization and the Federal Aviation Administration (FAA).

Muilenburg said there was “‘no surprise or gap or unknown here or something that somehow slipped through a certification process. Quite the opposite. We know exactly how the airplane was designed. We know exactly how it was certified. We have taken the time to understand that,’” the SEC noted.

At a press conference five days later, Muilenburg again responded to a question about the flaws in MCAS by saying, “‘[W]e followed exactly the steps in our design and certification processes that consistently produce safe airplanes. It was designed per our standards. It was certified per our standards.’”

The SEC said Muilenburg’s statements were misleading because they failed to include any mention of a November 2016 chat between two Boeing employees who had discovered the MCAS issue during a flight simulation but did not alert regulators to the problem. The expansion of MCAS’s capabilities was never conveyed to regulators and never included in the FAA’s review and approval of pilot training requirements and flight manuals for the 737 MAX, the order said.

Muilenburg was aware of the November 2016 chat and the MCAS expansion, the SEC said in his order.

Boeing “failed to exercise reasonable care” in connection with the November 2018 press release and April 2019 statements, the agency said.

Related case: In January 2021, Boeing paid more than $2.5 billion as part of a three-year deferred prosecution agreement with the Department of Justice (DOJ) to resolve a criminal charge related to the 737 MAX scandal. The company paid a criminal penalty, compensation to the families of passengers, and compensation to airline customers affected by the grounding of all 737 MAX airplanes.

The DOJ credited Boeing with engaging in remedial measures following the misconduct, including:

  • Creating a permanent aerospace safety committee of the board of directors to oversee the company’s policies and procedures governing safety and its interactions with the FAA and other government agencies and regulators;
  • Creating a product and services safety organization to strengthen and centralize the safety-related functions that were previously located across Boeing;
  • Reorganizing the engineering function to have all Boeing engineers, as well as the flight technical team, report through the chief engineer rather than to the business units; and
  • Making structural changes to the flight technical team to increase the supervision, effectiveness, and professionalism of technical pilots.

Boeing response: In an emailed statement, a Boeing spokesperson said the company would “never forget those lost” on the two flights, and that it has made “broad and deep changes across our company in response to those accidents—fundamental changes that have strengthened our safety processes and oversight of safety issues and have enhanced our culture of safety, quality, and transparency.”

“Today’s settlement (with the SEC) is part of the company’s broader effort to responsibly resolve outstanding legal matters related to the 737 MAX accidents in a manner that serves the best interests of our shareholders, employees, and other stakeholders,” the statement said.