Boeing Co. executives, including current chief executive David Calhoun, lied about overseeing the company with its 737 Max 8 aircraft and participated in a misleading public relations campaign following two fatal crashes involving the plane, shareholders say.
The council ignored the red flags about the 737 Max, did not develop its own safety assessment tools and did not properly hold former chief executive Dennis Muilenburg accountable for launching a lobbying and public relations effort to push back against criticism. aircraft design defects, according to recently unsealed lawsuits.
“Prior to the grounding of the 737 Max, the board failed to conduct its own safety assessment of maintaining the 737 Max,” investors said in an amended Delaware Chancery Court complaint, which was made public on Feb. 5. he aggravated his lack of supervision by lying publicly about it. ”
Unsealed deposits, first reported by the Wall Street Journal, are part of a lawsuit filed for the first time in 2019 by Boeing shareholders after the Lion Air and Ethiopian Air 737 Max crashes caused a total of 346 deaths. Unlike collective shareholder actions, decisions or settlements in derivative proceedings are usually reimbursed to the company from the liability insurance policies for its directors.
‘Public interest’
The amended complaint makes public for the first time details of Boeing’s internal handling of the 737 Max debacle, which led to a two-year grounding of the aircraft. Delaware Chancery Court Judge Morgan Zurn agreed to release details of the trial after concluding that the “public interest” in the committee’s handling of the 737 Max fiasco “favors disclosure.”
“It should come as no surprise that a case of plaintiffs seeking benefits in a lawsuit presents a misleading and incomplete picture of the activities of Boeing and its board of directors,” said Bradley Akubuiro, a spokesman for Boeing, in an e-mail statement. “We believe that the applicants’ claims are without merit and we will renew the motion to dismiss the case later this year.”
In a record of the unsealed company, Boeing executives claimed that they had “solid and well-established mechanisms” for assessing the safety profile of the 737 Max before it left the field, and “these systems worked to ensure the board’s commitment to safety and quality of Boeing products. ”
Problems with the aircraft’s automatic flight control system – called the acronym MCAS – have been implicated in accidents. The US Federal Aviation Administration last year gave Boeing the green light for the planes to resume passenger flights after extensive changes to the MCAS systems. 737 Max is set to return to the European skies this month, after being released by regulators there.
But Boeing executives initially pointed to possible pilot and maintenance errors as playing a major role in the October 2018 crash of the Lion Air 610 flight from Indonesia, while they began to secretly address MCAS defects.
Diversion campaign
Two weeks after the crash of Lion Air, Muilenburg launched a “public relations, investor relations and lobbying campaign” to counter US airline unions’ condemnations of Boeing’s 737 Max design revelations and a wave of press releases. negative. The campaign did not mention Boeing engineers’ focus on MCAS, but instead tried to draw attention to other possible reasons for the accidents, according to the modified process.
Two directors – Calhoun and former White House Chief of Staff Ken Duberstein – were briefed on the campaign, according to internal emails mentioned in the 119-page amended complaint. Calhoun succeeded Muilenburg as executive director of Boeing in January 2020.
Instead of blaming Muilenburg for allowing the 737 Max to carry passengers with an unfounded flight control system, the directors conducted a public defense of their attacked CEO in May 2019, the lawsuit said. Calhoun led the charge, according to the complaint.
“Calhoun and the council stopped defending Muilenburg only when they learned in December 2019 that his relationship with the FAA had broken down and that the FAA would not soon recertify 737 Max,” the lawsuit said.
Benefits of bad faith
The directors continued to act in bad faith when they decided not to fire Muilenburg in a way that would deny him $ 38 million for the benefit of the stock, according to court records. Instead, the board chose to allow the CEO to retire with his capital aid.
“By paying Muilenburg, the Council ignored a public spit with him, which would inevitably raise questions about the Council’s guilt of supporting him and not exercising safety oversight,” shareholders say.
The case is in Re Boeing Co. Derivative Litigation, 2019-0907, Delaware Chancery Court (Wilmington).