Tag: Plea Agreement

Categories
Blog

The Boeing Monitorship: Memo to Attorney General Garland and Kelly Ortberg

To: Attorney General Merrick Garland and Boeing CEO Robert ‘Kelly’ Ortberg

From: Tom Fox

Re: The Boeing Monitorship

===============================================================

Gentlemen

I have written blog posts and articles about the proposed Plea Agreement negotiated between Boeing and the Department of Justice (DOJ). As the leaders of both organizations, I wanted to address you both directly.

To General Garland, this is the most important monitorship in the history of the DOJ.

To CEO, Ortberg-Boeing has to turn around its culture completely.

To both of you, business as usual will not suffice.

The DOJ must start with full transparency in the process, for sunshine in the light of day is always the best disinfectant. There must be full transparency in the selection process and the oversight of the Monitorship itself, with a party outside the DOJ and Boeing overseeing this process. In other words, it cannot simply be a process where the DOJ decides who will be the monitor, tells the court its selection, and then the DOJ goes off to oversee the process and, in three years, tells us whether Boeing has met the terms of the Monitorship.

First, completing the Plea Agreement by fulfilling the terms laid out must be a condition of the Probation, which the Court must approve. Second, this process must be overseen by the District Court. The Monitor should report to the Court or a court-appointed Special Master to determine whether Boeing has met the requirement to “create and foster a culture of ethics and compliance with the law in its day-to-day operations.” Both parties must realize that Boeing’s culture is broken and must be fixed. This is beyond policies and procedures and a best practices compliance program. This is fixing Boeing’s DNA.

The DOJ recognized that it is more than compliance at Boeing, which is broken; it starts with culture and moves to safety, QA/QC, and even down to record and document keeping. It is far beyond the current mandate of the Plea Agreement, which states that the Monitor should test “the effectiveness of the Company’s compliance program and internal controls, record-keeping, policies, and procedures as they relate to the Company’s current and ongoing compliance with U.S. fraud laws.”

At least this is a decent start, but there are so many other areas that Boeing, the DOJ, and the Monitor must fix. I urged the DOJ to ‘Think Big’ about this monitorship. It concerns not only fraud and record keeping but also culture, safety, QA/QC, compliance, Speak Up and Listen Up, Supply Chain, fraud, Export Control, Sanctions, and a wide variety of other areas not addressed in the Plea Agreement.

Put all of that responsibility on the Monitor but make sure the Monitor has the resources to oversee this work for all of the stakeholders involved: Boeing, its shareholders, the victims’ families, employees, third parties, the U.S. government, Boeing’s customers and the U.S. and global flying public. It all starts at the top of the organization. The Monitor must not simply assess the Board of Directors and senior management’s commitment to and effective implementation of the corporate compliance program “as necessary to address and reduce the risk of any recurrence of the Company’s misconduct”; both the Board and senior management must lead this effort by example.

Finally, the DOJ must get this right. Everyone knows the DOJ’s failures from the 2008 financial crisis to prosecute any bank meaningfully. The phrase ‘too big to fail’ has entered the Lexicon as a byword for corporate malfeasance that gets off with ZERO consequences. This matter is much more important than those banks. It concerns the U.S.’s flagship airline manufacturer and whether it can be turned around through government oversight. If the DOJ does not get this Monitorship right, it will demonstrate once and for a time the failure of this program as a tool to fix a broken business that violates the law multiple times.

But this is not all on the backs of the DOJ or the Monitor. Boeing has an equally key role in this Monitorship. That is why the role of the new CEO is so important. Kelly Ortberg must fully embrace this monitorship and all it will entail to the company as the last and best way to turn it around. He comes from but is outside the organization, so he is not tainted with the company’s prior cultural miasma. Further, he comes from a former supplier to Boeing, Rockwell International. This means he knows the business, and he knows Boeing.

His main focus will be to turn around the company’s manufacturing side and create a culture where employees have enough trust in their employer to raise their hands and speak up when they see something wrong. They also know that the company will not harass or terminate them for doing so. In short, he must set the correct cultural tone and go into the weeds to fix how the company builds planes.

This focus requires Ortberg to fully embrace the Monitorship and a Monitor selected with full transparency and oversight by the Court. Ortberg should welcome the opportunity to turn Boeing around literally with all the help he can garner, not do as his predecessors did with so much opaqueness, where they clearly did not accept their responsibility to fix the company’s broken culture.

Finally, Ortberg must reach out to the victims’ families of the two 737 MAX crashes and listen to their concerns. The victims’ families’ interests are aligned with Boeing on one key point: They do not want any family to go through what they had to go through. Ortberg’s meeting with and listening to the victims’ families can go a long way toward their healing.

Boeing is a key component in U.S. national security. Boeing provides advanced missile defense systems, including the Ground-based Midcourse Defense (GMD) system, which protects the United States from ballistic missile attacks. The company also offers solutions for tracking and monitoring space objects, which is vital for maintaining the safety and security of space operations. Boeing is also involved in the Internal Space Station (ISS), orbital test vehicles, and deep space exploration.

In short, no single institution is as important to the U.S. in manufacturing as Boeing. Nearly 200 million Americans who fly in Boeing planes depend on Boeing to get it right. The U.S. (and the world) economy needs the drive that Boeing provides. The U.S. national security depends on a well-functioning Boeing to lead the technological drive to protect the U.S. for the rest of the 21st century and beyond. Boeing needs to continue its work as one of the leading companies in space exploration. Lastly, and indeed not least, the families of the victims of the two 737 MAX crashes should receive some justice for all they have been through and then seeing Boeing not live up to its agreement in the original DPA or worse for there to be more failures under this Plea Agreement.

So one final plea to General Garland and CEO Ortberg-Get it Right This Time

Categories
Blog

The Boeing Monitorship – Compliance, Accountability, and the Path Forward

Regarding corporate accountability and the often murky waters of compliance, few cases are as illustrative and significant as the ongoing litigation involving Boeing. Since the 737 MAX safety scandal erupted in 2021, the company has been embroiled in a complex legal journey. The Department of Justice (DOJ) recently filed a proposed Plea Agreement with Boeing in the District Court in Dallas, Texas. This filing stems from the original Deferred Prosecution Agreement (DPA) in 2021, and it underscores some critical issues that every compliance professional should be acutely aware of.

Boeing has agreed to plead guilty to one count of conspiracy to commit fraud against the Federal Aviation Administration (FAA) and the airplane evaluation group. This plea involves Boeing paying a $243 million fine, predetermined in the 2021 DPA. However, the plea agreement does not conclude the matter; it introduces several critical facets that warrant detailed exploration.

Matt Kelly, who was over in Radical Compliance, also looked at the compliance spending requirement agreed to by Boeing. As laid out in the Plea Agreement, Boeing must “make a sustained monetary investment in its compliance and safety programs of at least $455,000,000, which, on an annualized basis, is an amount equal to at least approximately 75 percent more than the company’s expenditure on compliance in fiscal year 2024.

Now, let’s do some math. If Boeing is supposed to spend $455 million over its three-year probation period, that’s an average of $151.6 million per year.” But here is the bottom line. It “means the company was devoting 0.12 percent of total revenue to its compliance program.”

A poignant and complex aspect of this case is the involvement of the families of victims from the Lion Air Flight 610 and Ethiopian Airlines Flight 302 crashes. Under their statutory rights, these families participate in the proceedings and seek restitution for their profound losses. The court will determine whether any restitution should be awarded, a process fraught with emotional and legal challenges. The families argue that the proposed penalties are insufficient and that Boeing should explicitly acknowledge its responsibility for the tragic events.

The families of the crash victims are not mere bystanders in this process. They have strongly objected to the plea agreement, particularly its perceived leniency and the lack of direct accountability for senior executives. They argue that the agreement implicitly exonerates those responsible for the safety lapses. This concern resonates with many compliance professionals who advocate for robust accountability at all levels of an organization.

Central to this plea agreement is the appointment of an independent compliance monitor tasked with overseeing Boeing’s adherence to compliance and safety protocols over the next three years. This monitor will be selected through a process involving the DOJ and Boeing, with a noteworthy exclusion: the district court will have no oversight of the monitor’s activities. This exclusion raises significant concerns about transparency and accountability, echoing past controversies in similar cases, such as the environmental crime case involving Carnival Cruise Lines.

The compliance monitor’s role in this case is unusually expansive. Beyond traditional compliance responsibilities—such as policies, procedures, internal controls, and training—the monitor will address anti-fraud measures, safety, and quality assurance/control (QA/QC) issues. This broader remit is essential, given the systemic failures at Boeing that contributed to the 737 MAX disasters.

The DOJ’s findings highlight disturbing lapses in Boeing’s safety and quality records. Employees reported feeling pressured to prioritize productivity and financial performance over safety and quality, a cultural flaw at the heart of the compliance breaches. This pressure led to out-of-sequence work, poor record-keeping, and inadequate safety audits, all indicative of a deeper systemic problem.

Addressing these issues requires a comprehensive approach. The compliance monitor must enforce existing standards and foster a culture of integrity and transparency within Boeing. This involves ensuring that employees can report concerns without fear of retaliation and that safety protocols are rigorously followed and documented.

The district court’s exclusion from supervising the compliance monitor is unprecedented and troubling. In previous cases, judicial oversight has been crucial in ensuring that monitorships lead to genuine remediation. The current arrangement’s lack of transparency—where the monitor’s identity and activities are kept under seal—further exacerbates these concerns. Transparency is a cornerstone of effective compliance and accountability, and its absence could undermine the entire process.

For Boeing to restore its reputation and regain public trust, it must go beyond the minimum requirements of the plea agreement. This involves a commitment to comprehensive remediation, encompassing cultural change, structural reforms, and rigorous safety and compliance standards enforcement.

The compliance monitor’s broader remit is a step in the right direction, but it must be accompanied by genuine transparency and accountability. This includes involving the victims’ families meaningfully through regular updates and consultations and ensuring their concerns are addressed substantively.

The Boeing case is a stark reminder of the critical importance of compliance, transparency, and accountability in the corporate world. It highlights the devastating consequences of systemic failures and the urgent need for robust oversight mechanisms. As compliance professionals, we must advocate for comprehensive and transparent processes that ensure compliance with legal standards and foster a culture of integrity and responsibility.

Ultimately, true remediation and accountability are in the best interests of all stakeholders—from the victims’ families seeking justice to the company itself, striving to rebuild its reputation and restore public trust. Boeing’s path forward is clear: It must commit to rigorous compliance, transparent practices, and a culture prioritizing safety and integrity. Only then can it hope to move beyond the shadows of the 737 MAX scandal and emerge again as a leader in the aviation industry.