Boeing pleads not guilty to fraud charge in 737 MAX arraignment

© Reuters. An aerial photo shows Boeing 737 MAX airplanes parked at the Boeing Factory in Renton, Washington, U.S. March 21, 2019. REUTERS/Lindsey Wasson

By Sheila Dang and David Shepardson

FORT WORTH, Texas/WASHINGTON (Reuters) -Boeing Co pleaded not guilty on Thursday to a 737 MAX fraud conspiracy felony charge after families objected to a 2021 Justice Department agreement to resolve the investigation into the plane's flawed design.

Boeing’s chief safety officer, Mike Delaney, entered the not-guilty plea on behalf of the planemaker at a three-hour hearing. A not-guilty plea is standard in deferred prosecution agreements.

U.S. District Judge Reed O'Connor last week ordered Boeing (NYSE:BA) to appear to be arraigned after he ruled that people killed in the two Boeing 737 MAX crashes in 2018 and 2019 are legally considered "crime victims."

The crashes in Indonesia and Ethiopia killed 346 people. They cost Boeing more than $20 billion, led to a 20-month grounding of the best-selling plane and prompted lawmakers to pass sweeping legislation reforming airplane certification.

Boeing in a statement said it had "made broad and deep changes across our company, and made changes to the design of the 737 MAX to ensure that accidents like these never happen again. We also are committed to continuing to comply scrupulously with all of our obligations under the agreement we entered into with the Justice Department two years ago."

O'Connor imposed a standard condition that Boeing commit no new crimes but did not rule on other conditions sought by the victims, including a request he name an independent monitor to oversee Boeing's compliance and disclose publicly as much as possible of the substance of Boeing’s corporate compliance efforts adopted since 2021.

O'Connor asked the Justice Department to follow up with an answer to his question about whether there were instances of the government pushing back on something Boeing did that "wasn’t up to snuff."

The Justice Department in 2021 agreed to seek dismissal of the charge after the three-year agreement if Boeing complies with all terms. Boeing admitted in court documents that two of its technical pilots deceived U.S. regulators about a key flight control system linked to both fatal crashes.

Relatives of people who were killed in the crashes spoke on Thursday at the arraignment.

Naoise Connolly Ryan, who lost her husband in the Ethiopia crash, said she wanted justice for her children who had lost their father. "The deal between Boeing and the Department of Justice is not justice," she said.

The relatives said in a filing that Boeing had "committed the deadliest corporate crime in U.S. history."

Boeing and the Justice Department oppose reopening the $2.5 billion agreement, which included $500 million in victim compensation, a $243.6 million fine and $1.7 billion in compensation to airlines.