Bloomberg Opinion — The first indictment in the Boeing Co. 737 Max crisis should not be the last.
Late last week, a federal grand jury charged the company’s former chief technical pilot, Mark Forkner, with deceiving Federal Aviation Administration officials in their evaluation of the Max and scheming to defraud the plane maker’s customers. Forkner is the only person to be indicted thus far in connection with the lead-up to the twin crashes of the Max, which killed 346 people, prompted a nearly two-year worldwide grounding of the best-selling jet and caused a moment of reckoning for the aviation regulators who blessed the plane as safe. Boeing’s market value remains about half of what it was before the Max was grounded; the damage to its reputation and that of the FAA is immeasurable.
Forkner was an important liaison for the FAA. His responsibilities included coordinating with the regulator on information pertinent to pilot-training requirements. But he was also a mid-level manager. On Friday, he pleaded not guilty to the charges. His lawyer, David Gerger, told the Wall Street Journal that his client was being made into a scapegoat. Gerger didn’t respond to a request for additional comment. Boeing declined to comment.
The Max crashes have been linked to flight-control software — known as the Maneuvering Characteristics Augmentation System — that was originally added to guard against an aerodynamic stall, but instead repeatedly forced the planes to nosedive and set off a cacophony of alerts that overwhelmed pilots. The FAA excluded details on MCAS from manuals and training materials because officials believed it turned on only in extreme situations. They thought this, according to the indictment, because Forkner allegedly declined to inform regulators when he learned that the scope of MCAS had been expanded so that the system would activate in more normal flying conditions.
A key sales pitch for the Max was that pilots who were already well-versed in flying older 737 models would need limited additional training. Proper consideration of MCAS may have led the FAA to require more extensive training, which would have been expensive and perhaps led some airlines to choose planes built by rival Airbus SE instead. “In an attempt to save Boeing money, Forkner allegedly withheld critical information from regulators,” Chad Meacham, acting U.S. attorney for the Northern District of Texas, said in a Department of Justice statement on the indictment. “There is no excusing those who deceive safety regulators for the sake of personal gain or commercial expediency,” added Eric Soskin, inspector general for the Department of Transportation. If convicted, Forkner faces a maximum penalty of 20 years in prison for each count of wire fraud and 10 years for each count of fraud involving aircraft parts in interstate commerce.
The facts detailed in the indictment aren’t flattering for Forkner. But the idea that he was operating as some kind of rogue employee and should shoulder this much blame defies logic. The indictment says Forkner was aware that Boeing had agreed to compensate at least one airline customer if the FAA required more significant pilot training. It doesn’t say he made that decision himself. Nor was he the one who elected to expand the scope of MCAS in the first place, without the kind of fixes and adjustments that Boeing has since made in order to get the Max flying again. It appears that he wasn’t even properly informed of the rework. “I basically lied to the regulators (unknowingly),” Forkner wrote in a message to a colleague included in the legal filings after seemingly stumbling across the increased range of MCAS in a simulated test flight.
It wasn’t one person who acted for the sake of personal gain or commercial expediency; it was a culture that encouraged such behavior and a company that lacked the kind of inter-divisional coordination and quality controls necessary to churn out safe airplanes.
The language in the DOJ’s statement on Forkner echoes that of a January deal with Boeing to settle a criminal charge of conspiracy to defraud the U.S. government with essentially a slap on the wrist. The headline penalty was $2.5 billion, but the vast majority of that represented customer compensation that Boeing would have needed to pay regardless. The deferred prosecution agreement requires Boeing to cooperate with investigators, enhance reporting on internal controls and meet routinely with regulators to prove it’s doing all it can to discourage future infractions. But the DOJ concluded that Boeing didn’t need an independent compliance monitor, in part because its “misconduct was neither pervasive across the organization, nor undertaken by a large number of employees, nor facilitated by senior management.”
Really? Forkner left Boeing in July 2018, according to the indictment. The first Max crash happened in October of that year. It took Boeing and former CEO Dennis Muilenburg many months after the second accident in March 2019 to take full accountability for the company’s role in the crashes. Boeing repeatedly pushed overly optimistic deadlines for the Max’s return, to the point where, in late 2019, FAA Administrator Steve Dickson publicly rebuked the company. It wasn’t until January 2020, 10 months into the Max’s grounding, that Boeing finally shifted its position and recommended simulator training for pilots.
Despite the crash, Muilenburg was paid a total of $23.4 million in 2018, while board members — including current CEO Dave Calhoun — earned an average of $345,000 that year. Muilenburg was ousted in December 2019 but has re-emerged as CEO and chairman of New Vista Acquisition Corp., a special purpose acquisition company that raised more than $200 million earlier this year to hunt for deals in the space or air mobility industry. There’s something fundamentally lopsided about this.
It’s worth noting that it’s possibly also in the U.S. government’s interest to paint the Max crisis as the work of rogue employees; a full-scale criminal prosecution of Boeing at the corporate level may have complicated the company’s ability to continue receiving federal contracts. Boeing is one of the top U.S. defense contractors and America’s only maker of large commercial jets. Casting blame on the Boeing employees who communicated with the FAA also diverts attention from why regulators failed to probe more thoroughly. The Journal has reported that officials elsewhere within the FAA knew about key changes to MCAS, even if those whom Forkner interacted with on pilot training did not.
The 737 Max crisis reflects systemic breakdowns in company culture, management oversight and airplane safety regulation. If there is a primary villain in this mess, it’s not Mark Forkner.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Brooke Sutherland is a Bloomberg Opinion columnist covering deals and industrial companies. She previously wrote an M&A column for Bloomberg News.