Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
Families of victims killed in the 737 Max crashes are fighting with the US Department of Justice over the selection and role of the compliance monitor who will oversee quality and safety initiatives at Boeing, now that the company has agreed to plead guilty to fraud.
The plane maker is poised to join the ranks of companies that have been subject to court-ordered oversight, including Volkswagen, Apple and Deutsche Bank.
But Javier de Luis, an aeronautics professor at the Massachusetts Institute of Technology whose sister was killed in the second Max crash, said the Justice Department’s proposed process to choose a monitor is essentially Boeing “picking its own probation officer”.
“Giving Boeing a say as to who is responsible for monitoring them goes against first principles for how justice is done,” he said.
Boeing’s plea deal will be filed in court next week, prosecutors have said. The deal fines the company about $487mn, of which it has already paid half, following its $2.5bn deferred prosecution agreement in 2021.
The plea deal further requires the plane maker to spend $455mn over three years to improve compliance and safety programmes and to appoint an independent corporate monitor for three years.
A Justice Department official said the plea deal “holds Boeing accountable” and “protects the American public”. Boeing declined to comment.
Corporate monitorships are a lucrative business for law and accounting firms, lasting years and usually requiring staff, with the company being monitored footing the bill.
Monitors make regular reports to court on the company’s progress towards meeting goals established at the outset.
“They’re most appropriate when the misconduct at a corporation is either severe or pervasive,” said Veronica Root Martinez, a professor at Duke University School of Law who studies corporate monitorships. “This seems like a pretty classic case where you’d want one.”
Lawyers for the victims’ families and prosecutors will now argue in a federal court in Texas over the process for appointing a monitor.
The Justice Department initially proposed that it would follow the government’s “standard process” and choose a monitor from a pool of candidates proposed by the company, prosecutors said in a court filing.
After meeting with the victim families on June 30, prosecutors now say they will solicit a public request for proposals, pick from among them “with feedback from Boeing”, with the court having 10 days to object to the department’s choice.
But the families want Judge Reed O’Connor to select the monitor, said Erin Applebaum, one of the attorneys on the case. They would like the judge to consider names they suggest but believe anyone picked by the court would do a better job than a choice from the DoJ and Boeing.
Trust between the DoJ and the victims’ families is frayed. Prosecutors did not consult the families on the 2021 deal, and they argued — ultimately unsuccessfully — against their designation as crime victims.
That designation, Applebaum said, is the only reason the Justice Department is conferring with the families at all.
The two sides also disagree on how often the monitor should report on Boeing’s progress. The DoJ has endorsed an annual report, with a public executive summary, while the families want monthly updates.
The Justice Department began using corporate monitors in the mid-2000s.
Prosecutors used to appoint their friends, said Martinez, so companies began proposing candidates to avoid such cronyism.
Companies like to have input, too, because they are paying the bill.
David Hess, law professor at the University of Michigan’s business school, said companies have no incentive to pick a monitor who will “go easy on them” because the DoJ can then reject the entire slate and pick someone else.
The worry for companies is that the scope of a monitor’s work can always potentially expand, he added. “[Once monitors] start looking under the hood, [they] may find other problems that are tangentially related . . . That fear is always there in the background.”
Meanwhile, De Luis said the public has a very broad understanding of what a “monitor” can do.
“They think that somebody is actually going to make sure that planes don’t roll off [the assembly line] with missing bolts, and from what I’ve heard so far, that’s not what this monitor intends to be doing,” he said.
De Luis sat on the expert panel that published a Congressionally mandated report earlier year, which called Boeing’s safety processes “inadequate and confusing” and recommended a monitor be empowered to oversee implementation of the report’s 53 recommendations.
Additional reporting by Stefania Palma in Washington
Read the full article here
