The Boeing DPA Breach: DOJ Prosecutors Place Themselves Squarely in the Business of Corporate Compliance

The Department of Justice (DOJ) notified a federal district court judge last week that it believes Boeing is in breach of its deferred prosecution agreement (DPA). In its filing in United States v. The Boeing Company, No. 4:21-cr-00005 (N.D. Tex.), DOJ claimed that Boeing “fail[ed] to design, implement, and enforce a compliance and ethics program to prevent and detect violations of the U.S. fraud laws throughout its operations.” For Boeing, the consequences of such a breach could be substantial. DOJ’s letter stated that, as a result of the alleged breach, Boeing is now subject to criminal prosecution for any federal criminal violation of which the government has knowledge, including conspiracy to defraud the United States, the subject of the DPA.

The Boeing DPA resulted from the government’s investigation following two fatal and high-profile crashes of Boeing’s 737 Max 8 jet in 2018 and 2019. The investigation resulted in a single charge of conspiracy to defraud based on two Boeing employees’ alleged misleading of federal regulators regarding the jet’s novelty and training requirements. Boeing entered into the DPA with DOJ to resolve the charge, ultimately agreeing to pay over US$2.5 billion in penalties, which included compensation payments to Boeing customers and the establishment of a crash-victim beneficiaries fund.

Despite the hefty fines, DOJ’s filing demonstrates that it takes seriously Boeing’s non-monetary obligations under the DPA. Among those obligations, Boeing agreed to strengthen its compliance program, and agreed to quarterly meetings with DOJ’s Fraud Section and yearly reports to the section regarding the “status of its remediation efforts, the results of its testing of its compliance program, and its proposals to ensure that its compliance program is reasonably designed, implemented, and enforced[.]” Although DOJ has yet to publicly announce a more detailed reason for the purported breach, its letter to the court suggests prosecutors continue to see a lack of commitment to compliance within the aerospace giant.

While unusual, it is not unprecedented for DOJ to claim corporate breach of a DPA. Just over a year ago, the international telecom company Ericsson pleaded guilty to violations of the Foreign Corrupt Practices Act — including bribery and falsifying books and records — after breaching a 2019 DPA that deferred prosecution of the same violations. Similar to Boeing, Ericsson had paid significant criminal penalties as part of the agreement. After the breach, DOJ pursued prosecution, leading to Ericsson’s plea agreement and payment of hundreds of millions of dollars in additional penalties.

What sets the two cases apart, however, is the nature of Boeing’s alleged breach. Ericsson’s breach involved withholding information from prosecutors. According to DOJ, Ericsson had “repeatedly failed to fully cooperate and failed to disclose evidence and allegations of misconduct in breach of the agreement.” Boeing’s breach, on the other hand, appears to involve the company’s efforts (or lack thereof) to build and enforce a robust compliance and ethics program.

We will have to wait to see what comes next. DOJ’s notice stated that it is “determining how it will proceed in this matter,” and indicated that it will honor the DPA provision allowing Boeing to respond to the notice of breach in writing within 30 days. If DOJ continues down this path, and Boeing’s compliance program indeed comes under fire, it will place prosecutors at the heart of corporate compliance for one of the country’s largest public companies. DOJ’s next move could have far-reaching ramifications for corporations and their compliance heads everywhere.

We will continue to monitor the situation here on Enforcement Edge. If you have questions, please reach out to the authors of this post or any of their colleagues in Arnold & Porter’s White Collar Defense & Investigations practice group.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This blog post is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.