Boeing Co. executives, including current chief executive David Calhoun, lied about the company’s oversight of its 737 Max 8 aircraft and took part in a misleading public relations campaign after two fatal crashes involving plane, according to shareholders.
The board ignored the red flags on the 737 Max, failed to develop its own safety assessment tools, and did not adequately blame former CEO Dennis Muilenburg for launching a lobbying and public relations effort to back down. criticism on the plane. design defects, according to recently unsealed court statements.
“Prior to the grounding of the 737 Max, the board did not make its own safety assessment of keeping the 737 Max up,” investors said in a modified complaint from Delaware Chancery Court that was made public on 5 of February. it aggravated his lack of supervision by publicly lying about it ”.
The unsealed files, first reported by the Wall Street Journal, are part of a derivative lawsuit first filed in 2019 by Boeing shareholders after the Lion Air and Ethiopian Air 737 Max crashes caused a total of 346 lives. Unlike class actions for shareholders, lawsuits or settlements in derivative lawsuits are usually returned to the company through liability insurance policies for its directors and officers.
‘Public interest’
The amended complaint makes public for the first time details about Boeing’s internal handling of the crash of the 737 Max, which led to a two-year landslide of the aircraft. Delaware Chancellor Court judge Morgan Zurn agreed to make the details of the lawsuit public after concluding the “public interest” in the council’s handling of the 737 Max fiasco “favors disclosure.”
“It should come as no surprise that the filing of plaintiffs seeking to claim benefits in a lawsuit presented a misleading and incomplete picture of the activities of Boeing and its board of directors,” Boeing spokesman Bradley Akubuiro said in a statement by email. “We believe the plaintiffs’ claims have no merit and we will renew our motion to dismiss the lawsuit later this year.”
In an unsealed company presentation, Boeing executives argued that they had “robust and well-established mechanisms” in place to assess the safety profile of the 737 Max before it left the ground and “these systems worked to ensure the commitment of the board on issues related to the safety and quality of Boeing products. “
Problems with the plane’s automated flight control system – which goes by the acronym MCAS – have been implicated in the crashes. The U.S. Federal Aviation Administration last year gave the green light to Boeing for planes to resume passenger flights after extensive modifications to MCAS systems. The 737 Max is scheduled to return to European skies this month after being cleared by regulators there as well.
But Boeing executives initially pointed to possible piloting and maintenance errors as protagonists of the October 2018 crash of the Lion Air 610 flight to Indonesia as they began to secretly address MCAS defects.
Diversion campaign
Two weeks after the Lion Air crash, Muilenburg launched a “public relations, investor relations and lobbying campaign” designed to counter the condemnations of US airline pilots’ unions over Boeing’s disclosures about the 737 Max design and a wave of negative press. The campaign did not mention the focus of Boeing engineers on MCAS, but rather tried to divert attention to other possible reasons for the accidents, according to the modified lawsuit.
Two directors, Calhoun and former Reagan White House chief of staff Ken Duberstein, were briefed on the campaign, according to internal emails noted in the 119-page modified complaint. Calhoun succeeded Muilenburg as CEO of Boeing in January 2020.
Instead of holding Muilenburg accountable for allowing the 737 Max to carry passengers with an inadequate flight control system, the directors led a public defense of their CEO in May 2019, according to the lawsuit. Calhoun led the charge, according to the complaint.
“Calhoun and the board only stopped defending Muilenburg when they learned in December 2019 that their relationship with the FAA had broken down and that the FAA would not re-certify the 737 Max,” the lawsuit said.
Benefits of bad faith
Executives continued to act in bad faith when they decided not to fire Muilenburg in a way that would deny him $ 38 million in profits, according to court records. Instead, the board chose to allow the CEO to retire with his equity grant.
“In paying Muilenburg, the Board dodged a public spit that would inevitably raise questions about the Board’s guilt in supporting it and not exercising security oversight,” shareholders say.
The case is In Re Boeing Co. Derivative Litigation, 2019-0907, Delaware Chancery Court (Wilmington).