Seattle Times
American attorneys for Ethiopian Airlines, which lost 157 passengers and crew in the second fatal crash of a Boeing 737 MAX in early 2019, have advised the carrier not to accept a settlement Boeing has offered but instead to sue the manufacturer for punitive damages in the U.S.
In an urgently worded letter sent Sunday, the Chicago-based attorneys warned Ethiopian CEO Tewolde GebreMariam that the offer falls “grossly short” of what the airline could win before a U.S. jury — particularly since Boeing recently accepted responsibility for criminal fraud during the plane’s certification by regulators.
The settlement Boeing has offered is “a mere fraction” of the actual damage, the lawyers told Tewolde, and accepting it “will inevitably leave substantial money on the table and would be a tremendous political and financial mistake for Ethiopian Airlines.”
Yet like many airlines, Ethiopian is now desperate for cash.
Before the 2019 crash of Flight ET302, state-owned Ethiopian was the largest and most successful airline in Africa. It lost business after the tragedy and the subsequent grounding of the MAX fleet. Then last year its revenue plummeted further when the COVID-19 pandemic paralyzed air travel.
The letter conveys the attorneys’ concern that direct settlement negotiations between Boeing and the airline’s management are close to done and that a “financially disastrous” deal may be imminent.
A person familiar with developments in the private negotiations shared details from the letter with The Seattle Times.
It offers a rare look inside what are normally secret negotiations. And with the MAX back in the air and the second anniversary of the second crash approaching, it highlights a Boeing push to conclude customer compensation discussions and put the MAX crisis behind it.
The letter from law firm DiCello Levitt Gutzler, which Ethiopian hired to provide advice on its claims against Boeing, is signed by co-founding partner Adam Levitt.
Boeing declined to comment on discussions with its customer. Ethiopian Airlines did not respond to an emailed request for comment. Levitt did not return a call seeking an interview.
Levitt’s letter argues that Boeing’s Deferred Prosecution Agreement with the Department of Justice (DOJ) earlier this month provides Ethiopian new legal leverage because of “Boeing’s admission of its criminal conduct.”
The DOJ settlement staves off a criminal fraud charge against Boeing with a relatively light $244 million penalty.
It also explicitly exonerates senior management while pinning the fraud on two Boeing technical pilots who misrepresented to airlines the details of new flight control software on the MAX — the maneuvering characteristics augmentation system (MCAS) — that was a key contributing factor in both crashes.
However, Boeing admitted in the deferred prosecution agreement that the accusations of fraud involving the two pilots were “true and accurate” and acknowledged that the company is responsible for criminal acts by its employees.
—
Boeing Reaches $2.5 Billion Settlement in 737 MAX Crashes in Ethiopia & Indonesia
Ethiopian officials deliver the Black Box for Ethiopian Airlines Flight 302 to the headquarters of France’s BEA air accident investigation agency in Le Bourget, France on March 14, 2019. As NPR reports the families of the passengers who died in the crash will be compensated from a fund of $500 million. (Reuters photo)
Updated: January 7th, 2021
Boeing To Pay $2.5 Billion Over 737 Max Fraud, Faces No Other Charges
Boeing will pay more than $2.5 billion to settle criminal charges that it repeatedly concealed and lied about the 737 Max’s engineering problems that led to two catastrophic crashes claiming hundreds of lives.
The company admitted to one count of conspiracy to defraud the United States as part of the deferred prosecution agreement announced on Thursday and will face no further charges from the U.S. Department of Justice.
“Boeing’s employees chose the path of profit over candor by concealing material information from the FAA concerning the operation of its 737 Max airplane and engaging in an effort to cover up their deception,” Acting Assistant Attorney General David Burns of the Justice Department’s Criminal Division, wrote in a statement.
Boeing, which is the country’s second-biggest defense contractor behind Lockheed Martin, will pay the DOJ a criminal penalty of $243.6 million.
The families and legal beneficiaries of the 346 passenger victims who died in the Lion Air Flight 610 in Indonesia in October 2018 and the Ethiopian Airlines Flight 302 in Ethiopia five months later will be paid from a fund of $500 million. If split equally among them, that amounts to a little over $1.4 million for each family.
The vast majority of the settlement is allocated for airline companies that had purchased the faulty 737 Max aircraft and were subsequently forced to ground the planes following the crashes. Together they will receive $1.77 billion in compensation for their financial losses, according to the DOJ.
“The tragic crashes of Lion Air Flight 610 and Ethiopian Airlines Flight 302 exposed fraudulent and deceptive conduct by employees of one of the world’s leading commercial airplane manufacturers,” Burns added in the statement.
In both cases, the crashes were caused by changes to the jet’s Maneuvering Characteristics Augmentation System that forced the nose of the 737 Max toward the ground and left pilots unable to control the planes.
In a note to employees, Boeing President and Chief Executive Officer David Calhoun said, “I firmly believe that entering into this resolution is the right thing for us to do—a step that appropriately acknowledges how we fell short of our values and expectations.”
He added: “This resolution is a serious reminder to all of us of how critical our obligation of transparency to regulators is, and the consequences that our company can face if any one of us falls short of those expectations.”
Internal Boeing documents revealed during a U.S.House panel’s inquiry showed that engineers notified the company of the MCAS “egregious” problems as early as 2016.
—
Related:
Ethiopian Report Blames Boeing for 737 MAX Plane Crash
Boeing to Stop 737 Max Production (AP)
Internal FAA review saw high risk of 737 MAX crashes
Boeing Was Aware of 737 Max Problem Long Before Ethiopia Crash – Report
Boeing CEO Apologizes to Victims of Ethiopia, Indonesia Crashes
Ethiopian Airlines Slams Bloomberg’s Ex-Pilot Story as ‘Baseless & False Allegation’
Read Excerpt From Ethiopia Crash Report
Ethiopian Airlines Expresses Disappointment – Calls Out Media Outlets Eager to Blame Pilot
Watch: Ethiopian CEO on The Future of Boeing 737 Max Planes — NBC Exclusive
Watch: Ethiopia Releases 737 Max Preliminary Crash Report