Boeing Co. directors, including current Chief Executive Officer David Calhoun, lied about the company’s oversight of the 737 Max 8 plane and participated in a deceptive public relations campaign after two fatal crashes with the plane, shareholders claim .
The board ignored the red flags on the 737 Max, did not develop its own tools to evaluate safety, and did not hold former CEO Dennis Muilenburg properly responsible for launching lobbying and public relations to counter criticism of the plane. design flaws, according to recently unsealed court documents.
“Prior to grounding the 737 Max, the board failed to conduct its own evaluation of the safety of keeping the 737 Max in the air,” investors said in an amended Delaware Chancery Court complaint. which was made public on February 5. compounded the lack of oversight by publicly lying about it. “
The unsealed documents, 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 totaling 346 lives demanded. Unlike shareholder class actions, judgments or settlements in secondary lawsuits are usually reimbursed to the company from liability insurance policies for its directors and officers.
‘Public interest’
The amended complaint discloses details for the first time about Boeing’s handling of the 737 Max debacle, which led to a two-year grounding of the aircraft. Judge Morgan Zurn of the Delaware Chancery Court agreed to disclose the details of the lawsuit after concluding the “public interest” that the board of directors is dealing with the 737 Max fiasco “in favor of disclosure.”
“It should come as no surprise that a filing from claimants seeking to benefit from a lawsuit provides a misleading and incomplete picture of the activities of Boeing and its board of directors,” said Bradley Akubuiro, a Boeing spokesman, in a statement per e-mail. “We believe the plaintiffs’ claims are unfounded and will renew our motion to dismiss the lawsuit later this year.”
In an unsealed corporate filing, Boeing executives argued that they had “ robust and well established mechanisms ” to evaluate the 737 Max’s safety profile before it ever got off the ground and that “ these systems worked to ensure the involvement of the to ensure advice on safety-related matters. and the quality of Boeing’s products. “
Problems with the aircraft’s automated flight control system – which is shortened to MCAS – have been implicated in the crashes. The US Federal Aviation Administration gave Boeing the green light last year to allow the aircraft to resume passenger flights after extensive modifications to the MCAS systems. The 737 Max is set to return to European airspace this month, after being acquitted there by regulators as well.
But Boeing executives originally pointed out potential pilot and maintenance errors that played a major role in the October 2018 crash of Lion Air Flight 610 in Indonesia, as they began secretly addressing MCAS’s shortcomings.
Redirection campaign
Two weeks after the Lion Air crash, Muilenburg launched a “public relations, investor relations and lobbying campaign” to counter US aviation pilot unions’ convictions of Boeing’s revelations about the 737 Max’s design and a wave of negative press. The campaign made no mention of the Boeing engineers’ focus on MCAS, but instead tried to divert attention to other possible reasons for the crashes, the suit said.
Two directors – Calhoun and former White House Chief of Staff Ken Duberstein – were briefed on the campaign, according to internal emails in the amended 119-page complaint. Calhoun succeeded Muilenburg as CEO of Boeing in January 2020.
Rather than holding Muilenburg responsible for allowing the 737 Max to carry passengers with a flawed flight control system, the directors led a public defense of their controversial CEO in May 2019, the lawsuit said. Calhoun led the charge, according to the complaint.
Calhoun and the board only stopped defending Muilenburg when they learned in December 2019 that his relationship with the FAA had been severed and that the FAA would not be re-certifying the 737 Max any time soon, the indictment said.
Benefits of Bad Faith
Directors continued to act in bad faith when they decided not to fire Muilenburg in a way that would deprive him of $ 38 million in stock benefits, court documents said. Instead, the board chose to allow the CEO to retire with his equity.
“By paying Muilenburg, the Board circumvented a public argument with him that would inevitably raise questions about the Board’s debt for backing him and not overseeing security,” shareholders claim.
The case is In Re Boeing Co. Derivative Litigation, 2019-0907, Delaware Chancery Court (Wilmington).