Boeing 737 MAX plea deal withstands challenge from crash victims' families

By David Shepardson

(Reuters) -A U.S. judge in Texas on Thursday denied a legal bid by families of the victims of two Boeing (NYSE:BA) 737 MAX crashes to reopen or reject a January 2021 deferred prosecution agreement.

Boeing won immunity from criminal prosecution as part of the $2.5 billion Justice Department agreement over a 737 MAX fraud conspiracy charge related to the plane's flawed design.

The families had asked the court to strip Boeing of immunity from prosecution, toss out, revise or supervise the agreement and order disclosure of information about Boeing's conduct.

U.S. District Judge Reed O'Connor ruled he did not have legal authority to grant the relatives' requests despite what he called "Boeing’s egregious criminal conduct."

O'Connor ruled in October the 346 people killed in two Boeing 737 MAX crashes in 2018 and 2019 are legally "crime victims" and said the Justice Department had not complied with its obligations under the law.

O'Connor ordered Boeing arraigned on the 2021 felony fraud conspiracy charge. Boeing, which pleaded not guilty last month and had argued against reopening the plea deal, did not immediately comment. Boeing says it has fully complied with the agreement and made significant reforms.

"This court has immense sympathy for the victims and loved ones of those who died in the tragic plane crashes resulting from Boeing’s criminal conspiracy," O'Connor said in his ruling. "Had Congress vested this court with sweeping authority to ensure that justice is done in a case like this one, it would not hesitate."

But O'Connor said he did not the legal means "to remedy the incalculable harm that the victims’ representatives have suffered."

Paul Cassell, a lawyer representing families of the Boeing victims, said they were disappointed in the ruling and plan to appeal. He said Boeing and the Justice Department "crafted an illegal and secret plea deal without any chance for the families to confer about it."

Boeing's best-selling 737 MAX was grounded worldwide in March 2019 for 20 months after two fatal crashes in Indonesia and Ethiopia - a move that cost Boeing more than $20 billion.

"Boeing’s crime may properly be considered the deadliest corporate crime in U.S. history," O'Connor wrote.

The Justice Department settlement included a fine of $243.6 million, compensation to airlines of $1.77 billion and a $500 million fund for crash victims.

O'Connor also Thursday rejected requests by Polish national airline PLL LOT and Czech airline group Smartwings to deem them both victims in the Boeing 737 MAX criminal case, a move that could have made them eligible for compensation.

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Both airlines separately sued Boeing and argued they should have gotten compensation from Boeing as part of the plea deal, as other airlines did. Those suits in Seattle are pending.

In September, Boeing paid $200 million to settle civil charges by the U.S. Securities and Exchange Commission that it misled investors about the safety of the 737 MAX.