Boeing (BA.US) hit by negative news! Reports of Department of Justice involvement in 737 Max explosion incident could lead to criminal prosecution.

According to sources familiar with the matter, the US Department of Justice is investigating an incident last month in which a Boeing (BA.US) aircraft door exploded in mid-air on an Alaska Airlines flight, potentially exposing the company to criminal prosecution, which could have far-reaching implications for its operations and reputation. The unnamed source stated that the Justice Department is investigating whether this incident violates the Deferred Prosecution Agreement (DPA) reached between the government and the company in 2021 in relation to the two previous fatal crashes involving Boeing's 737 Max jetliners. If prosecutors determine that the door explosion constitutes a violation of the agreement, Boeing may face criminal liability. The news of this investigation caused Boeing's stock price to drop by approximately 2% in after-hours trading. Under the $2.5 billion settlement agreement, the company implemented a compliance program aimed at preventing deception of regulatory agencies, including the Federal Aviation Administration (FAA). Boeing agreed to comply with the settlement agreement and cooperate with the government for three years, after which the charges would be dismissed. The Alaska Airlines incident occurred on January 5, just two days before the expiration of the deferred prosecution agreement. If US prosecutors determine that Boeing's handling of the door incident violated the 2021 agreement, they have the authority to tear up the agreement and bring criminal charges against the company. The Justice Department has six months to determine if Boeing has met the conditions of the agreement and must seek court approval to dismiss the case. The Justice Department's investigation is being led by the Department's Fraud Section and the US Attorney's Office in Seattle, near Boeing's Renton production facility where the 737 models are assembled. Both the Justice Department and Boeing have declined to comment. Earlier this year, Boeing disclosed in a filing that it believes the reporting deadline specified in the deferred prosecution agreement expired in January. In the filing, Boeing stated that the Justice Department is "currently considering whether we have fulfilled the obligations of the DPA and whether to take action to dismiss these allegations, which would require court approval." An Alaska Airlines Boeing 737 Max aircraft experienced a major incident when a body panel covering an unused door fell off in flight, putting pressure on Boeing from regulators, lawmakers, and customers for tighter scrutiny. All 171 passengers and 6 crew members were unharmed. Investigators later determined that the aircraft had not been delivered with the four bolts needed to secure the door plug. In a near-disastrous incident, the Federal Aviation Administration issued a final warning to Boeing earlier on Wednesday, demanding the large American aircraft manufacturer to develop a plan within 90 days to address its alleged "systemic" quality control issues. Prior to the deadline, Congress authorized the release of a blunt report evaluating shortcomings in Boeing's safety culture. The report found that the safety measures taken by Boeing following multiple 737 Max crashes did not have the intended effect. The agreement not to prosecute Boeing for the 2021 crashes of the 737 Max aircraft, announced at the end of the Trump administration, sparked strong criticism, including from families of the victims. The agreement absolved Boeing executives of responsibility for the two crashes that claimed 346 lives. Of the $2.5 billion settlement, only $243.6 million was in criminal fines, $1.7 billion was for compensating Max customers, and $500 million for compensating victims' beneficiaries. Additionally, no external monitors were appointed by prosecutors. Boeing had previously faced criminal charges for misleading US regulators about the design of the Max. The deferred prosecution agreement only addressed the actions of two former Boeing employees involved in drafting the pilot's manual. One of them, Mark Forkner, was charged with lying to the FAA regarding whether additional training for pilots was required for the modifications to the 737 Max. After a three-day trial, the defense argued that their client was a scapegoat for Boeing, and Forkner was acquitted. In the United States, aviation accident investigations rarely lead to criminal charges. The National Transportation Safety Board (NTSB) is an independent agency under the Department of Transportation responsible for conducting accident investigations, but it does not have authority to bring charges. Criminal authorities such as the Justice Department only intervene when there is evidence of intentional wrongdoing. Criminal investigations could potentially disrupt or delay the NTSB's investigation of the door incident. In the United States, parallel criminal investigations into transportation accidents have often hindered the NTSB's work in recent decades. The NTSB's mission to gather facts to prevent future major accidents largely depends on cooperation from witnesses, who may be less willing to provide crucial evidence if criminal investigations are involved.