Directors of Boeing Co., including current CEO David Calhoun, lied about the company’s oversight of its 737 Max 8 aircraft and took part in a misleading public relations campaign following two fatal accidents involving the aircraft, shareholders claim .
The council ignored red flags over the 737 Max, did not develop its own tools to evaluate security and did not hold former CEO Dennis Muilenburg accountable for launching an attempt to lobby and public relations back against the criticism of the plane. design errors according to recent undecided court documents.
“Before the 737 Max was grounded, the council did not conduct its own evaluation of the safety of holding the 737 Max up,” investors said in an amended complaint in Delaware Chancery Court released Feb. 5. exacerbated his lack of oversight by lying about it in public. ”
The unsealed documentation, first reported by the Wall Street Journal, is part of a derivative case first filed by Boeing shareholders in 2019 after Lion Air and the Ethiopian Air 737 Max crash combined Claimed 346 lives. Unlike in action shareholders, judgments or settlements in derivatives are usually repaid to the company from liability insurance policies for its directors and officers.
‘Public interest’
The amended complaint reveals for the first time details about Boeing’s internal handling of the 737 Max debacle, which led to a two-year grounding of the aircraft. Judge Morgan Zurn, Chancellor of the Exchequer in Delaware, agreed to disclose the details of the case after “favoring” the public interest in the council’s handling of the 737 Max fiasco.
“It should come as no surprise that a lawsuit filed by plaintiffs seeking to take advantage of a lawsuit provides a misleading and incomplete picture of the activities of Boeing and its board,” said Bradley Akubuiro, a spokesman for Boeing. an email statement said. “We believe the plaintiffs’ claims are not meritorious, and will renew our motion to dismiss the lawsuit later this year.”
In a non-sealed company submission, Boeing directors argued that they had ‘robust and well-established mechanisms’ to evaluate the safety profile of the 737 Max before it ever left the ground and’ these systems work around the board’s involvement in matters concerning safety. and the quality of Boeing’s products. ”
Problems with the aircraft’s automatic flight control system – which has the acronym MCAS – have been implicated in the crashes. The US Federal Aviation Administration gave Boeing the green light last year to have the aircraft resumed after extensive modifications to the MCAS systems. The 737 Max will return to European air this month after being cleared by regulators there as well.
But Boeing executives originally pointed to possible pilotage and maintenance errors as a major role in the crash of Lion Air Flight 610 in Indonesia in October 2018, while secretly beginning to address the flaws of MCAS.
Diversion Campaign
Two weeks after the Lion Air crash, Muilenburg launched a ‘campaign for public relations, investor relations and lobbying’ to oppose the American airline pilot’s associations against Boeing’s revelation about the design of the 737 Max and a spate of negative press work. The campaign does not mention the focus of Boeing engineers on MCAS, but rather seeks to draw attention to other possible reasons for the accidents, according to the amended lawsuit.
Two directors – Calhoun and former Reagan White House chief of staff Ken Duberstein – have been briefed on the campaign, according to internal emails in the 119-page amended complaint. Calhoun succeeded Muilenburg as CEO of Boeing in January 2020.
Instead of holding Muilenburg responsible for the fact that the 737 Max was able to transport passengers with an unhealthy flight control system, directors led a public defense of their CEO in May 2019. According to the indictment, Calhoun led the indictment.
“Calhoun and the board only stopped defending Muilenburg when they learned in December 2019 that his relationship with the FAA had broken down and that the FAA would not reaffirm the 737 Max any time soon,” the case reads.
Bad faith benefits
Directors continued to act in good faith when they decided to fire Muilenburg in a way that would deny him $ 38 million in share benefits, according to court documents. Instead, the board chose to allow the CEO to retire with his equity grant.
“By paying Muilenburg, the Council has let down a public spit with him that would inevitably raise questions about the Council’s debt to support him and not exercise security oversight,” shareholders claim.
The case is In Re Boeing Co. Derivative Litigation, 2019-0907, Delaware Chancery Court (Wilmington).