Featured Expert Contributor, White Collar Crime and Corporate Compliance

Gregory A. Brower is a Shareholder with Brownstein Hyatt Farber Schreck, LLP. He also serves on WLF’s Legal Policy Advisory Board and is a former U.S. Attorney and FBI senior executive.

The Department of Justice has reportedly decided to pursue criminal charges against Boeing after the Fraud Section’s conclusion that the company has failed to fully satisfy the terms of a 2021 deferred prosecution agreement (“DPA”).  DOJ telegraphed this unusual, but not unprecedented, move in a May submission to the court overseeing the matter wherein it claimed that Boeing had breached its obligations under the DPA and was, therefore, subject to prosecution.  This development could be the most significant example yet of DOJ’s years-long campaign to emphasize the importance of corporate compliance.

By way of background, in January of 2021, DOJ and Boeing resolved a criminal investigation into alleged fraud associated with the company’s 737 Max airplane.  The resolution included the simultaneous filing of a criminal information charging one count of conspiracy to commit fraud in violation of 18 U.S.C. § 371 and the announcement of a DPA which effectively held the criminal charge in abeyance for a period of three years after which the information would be dismissed.  As part of the DPA, Boeing admitted to deceiving the FAA about certain aspects of the 737 Max’s performance specifications, agreed to pay more than $2.5 billion in penalties and victim compensation, and agreed to implement an enhanced compliance program.  As usual, the DPA also provided that any breach of the agreement during the three-year period would allow DOJ to immediately prosecute Boeing. 

Then, in a surprise move on May 14, DOJ submitted a letter to the judge presiding over the case, informing him that Department prosecutors had notified Boeing that it was in breach of certain terms of the DPA.  Specifically, the letter stated that Boeing had breached its obligations under the DPA by “failing to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations.”  DOJ further informed the court that it had directed Boeing to provide a response by June 13, and that DOJ would inform the court of its decision as to how it would proceed by July 7.

Without disclosing specific details, DOJ’s letter to the court referenced certain paragraphs of the DPA which Boeing has failed to completely satisfy in the opinion of DOJ prosecutors.  These paragraphs contain standard components of any compliance program, such as fostering an appropriate culture of compliance; communicating and implementing appropriate policies and procedures throughout the company; engaging in a periodic risk assessment specific to the company; and regularly reviewing and updating its compliance policies and procedures regarding U.S. fraud laws.  Indeed, these commitments are so fundamental that it is hard to believe that a Fortune 50 company like Boeing would not have such a program in place, especially considering the scrutiny the company has been under in recent years. For its part, Boeing has publicly confirmed that it disagrees with the Department’s position and has submitted a response. 

In late June, it was reported DOJ prosecutors in the Fraud Section of the Criminal Division had recommended to top Department leadership that Boeing should be prosecuted in light of their conclusion that Boeing is in breach of the DPA.  This recommendation was no doubt informed by an intense lobbying effort on behalf or the families of those killed in the 737 Max crashes that took place in 2018 and 2019.  Former federal judge Paul Cassell has led this effort, which argues that DOJ should prosecute not only Boeing but certain responsible company executives as well.  Most recently, it has been reported that DOJ has offered to accept a guilty plea from Boeing in exchange for Boeing’s agreement to pay an additional fine and submit to oversight to a corporate monitor.  Neither party is speaking publicly about the ongoing negotiations.

DOJ’s extraordinarily aggressive position vis-à-vis Boeing would seem to mark the logical culmination of its repeated emphasis over the past three years that it expects corporate America to take compliance seriously.  Whether the matter is resolved by way of a plea deal or progresses to a trial with the potential for a felony conviction for the company, either scenario presents a range of serious potential collateral consequences for the company.  With the ball now in Boeing’s court, it’s unclear whether the company takes the deal or chooses to go to trial.  What is clear, however, is that companies of all types and their boards, executives, and especially compliance officers should watch this one closely.  What happens here will likely create a precedent both in terms of how DOJ evaluates corporate compliance programs and how it will structure and enforce DPAs going forward.