Boeing to Pay $200 Million to Settle SEC Charges that it Misled Investors about the 737 MAX

Washington D.C., Sept. 22, 2022 —

The Securities and Exchange Commission today charged The Boeing Company and its former CEO, Dennis A. Muilenburg, with making materially misleading public statements following crashes of Boeing airplanes in 2018 and 2019. The crashes involved Boeing’s 737 MAX airplane and a flight control function called the Maneuvering Characteristics Augmentation System (MCAS). According to the SEC’s orders, after the first crash, Boeing and Muilenburg knew that MCAS posed an ongoing airplane safety issue, but nevertheless assured the public that the 737 MAX airplane was “as safe as any airplane that has ever flown the skies.” Later, following the second crash, Boeing and Muilenburg assured the public that there were no slips or gaps in the certification process with respect to MCAS, despite being aware of contrary information.

“There are no words to describe the tragic loss of life brought about by these two airplane crashes,” said SEC Chair Gary Gensler. “In times of crisis and tragedy, it is especially important that public companies and executives provide full, fair, and truthful disclosures to the markets. The Boeing Company and its former CEO, Dennis Muilenburg, failed in this most basic obligation. They misled investors by providing assurances about the safety of the 737 MAX, despite knowing about serious safety concerns. The SEC remains committed to rooting out misconduct when public companies and their executives fail to fulfill their fundamental obligations to the investing public.”

According to the SEC’s order, one month after Lion Air Flight 610, a 737 MAX airplane, crashed in Indonesia in October 2018, Boeing issued a press release, edited and approved by Muilenburg, that selectively highlighted certain facts from an official report of the Indonesian government suggesting that pilot error and poor aircraft maintenance contributed to the crash. The press release also gave assurances of the airplane’s safety, failing to disclose that an internal safety review had determined that MCAS posed an ongoing “airplane safety issue” and that Boeing had already begun redesigning MCAS to address that issue, according to the SEC’s orders.

Approximately six weeks after the March 2019 crash of Ethiopian Airlines Flight 302, another 737 MAX, and the grounding by international regulators of the entire 737 MAX fleet, Muilenburg, though aware of information calling into question certain aspects of the certification process relating to MCAS, told analysts and reporters that “there was no surprise or gap . . . that somehow slipped through [the] certification process” for the 737 MAX and that Boeing had “gone back and confirmed again . . . that we followed exactly the steps in our design and certification processes that consistently produce safe airplanes.”

“Boeing and Muilenburg put profits over people by misleading investors about the safety of the 737 MAX all in an effort to rehabilitate Boeing’s image following two tragic accidents that resulted in the loss of 346 lives and incalculable grief to so many families,” said Gurbir S. Grewal, Director of the SEC’s Enforcement Division. “But public companies and their executives must provide accurate and complete information when they make disclosures to investors, no matter the circumstances. When they don’t, we will hold them accountable, as we did here.”

The SEC’s orders against Boeing and Muilenburg find that they negligently violated the antifraud provisions of federal securities laws. Without admitting or denying the SEC’s findings, Boeing and Muilenburg consented to cease-and-desist orders that include penalties of $200 million and $1 million, respectively. A Fair Fund will be established for the benefit of harmed investors pursuant to Section 308(a) of the Sarbanes-Oxley Act of 2002.

The SEC’s investigation was conducted by Ibrahim Sajalieu Bah, Kenneth Gottlieb, Derek Schoenmann, Heather Shaffer, and Tian Wen of the New York Regional Office with assistance from Richard Hong of the Trial Unit. The case was supervised by Celeste Chase and Sanjay Wadhwa. The SEC appreciates the assistance of the Department of Justice Criminal Division’s Fraud Section and the Federal Bureau of Investigation.

Whistleblower Rules Amended to Incentivize Tips

The Securities and Exchange Commission today adopted two amendments to the rules governing its whistleblower program. The first rule change allows the Commission to pay whistleblowers for their information and assistance in connection with non-SEC actions in additional circumstances. The second rule affirms the Commission’s authority to consider the dollar amount of a potential award […]

The Securities and Exchange Commission Publishes Draft FY22-26 Strategic Plan for Public Comment

Washington D.C., Aug. 24, 2022 —

The Securities and Exchange Commission today released for public comment a draft strategic plan for fiscal years 2022 to 2026.

“We can’t take our leadership in capital markets for granted,” said SEC Chair Gary Gensler. “Technology and business models always are changing, and it is important for our agency to evolve in kind. Through the goals we’ve laid out in this strategic plan, we will continue to bring a skilled and steady hand to the capital markets of a changing world. We look forward to reviewing public comments.”

The draft strategic plan establishes three primary goals:

  • Protecting working families against fraud, manipulation, and misconduct;
  • Developing and implement a robust regulatory framework that keeps pace with evolving markets, business models, and technologies; and
  • Supporting a skilled workforce that is diverse, equitable, inclusive, and is fully equipped to advance agency objectives.

Among the initiatives to meet these goals, the SEC intends to enhance the use of market and industry data to prevent, detect, and prosecute improper behavior. The SEC also seeks to modernize design, delivery, and content of disclosures to investors so they can access consistent, comparable, and material information while making investment decisions.

The agency aims to update existing SEC rules and approaches to reflect evolving technologies, business models, and capital markets. To support its diversity and inclusion efforts, the SEC will focus on recruiting, training, and retaining staff with the right mix of skills, experience, and expertise.

The draft plan was prepared in accordance with the Government Performance and Results Modernization Act of 2010, which requires federal agencies to outline their missions, planned initiatives, and strategic goals for a four-year period.

SEC Charges Barred Broker and His Company with Defrauding Older Americans

The Securities and Exchange Commission today charged Global Business Development and Consulting Corp. (Global) and its owner, Anthony J. Mastroianni, Jr., in connection with a $1.2 million fraudulent promissory note scheme targeting older Americans. According to the SEC’s complaint, Mastroianni, a New Jersey resident, sold at least 11 investors promissory notes issued by his company, […]