Boeing fined $51M, 3 employees charged for violating Arms Export Control Act

Boeing has agreed to pay $51 million for violating exports controls of military technology, including employees in China downloading sensitive data from numerous defense aircraft and missiles.

The complaint charges that three Boeing employees in China downloaded data 25 times between 2013 and 2017 related to three different models of fighter jets, an airborne warning and control system, an attack helicopter and two varieties of air-to-ground missiles.

In addition, Boeing disclosed that there were also 80 additional unauthorized downloads of defense data and information that was required to be protected by its employees and contractors in 18 countries, including Australia, Canada, France, Germany, Hong Kong, India, Italy, Japan, Kenya, Morocco, Russia, Singapore, South Korea, Spain, Thailand, Taiwan, Ukraine and the United Kingdom.

The State Department found a total of 199 violations of the Arms Export Control Act by Boeing. It said all of the alleged violations were voluntarily disclosed and a considerable majority predate 2020, after which Boeing "incorporated numerous improvements to its compliance program."

"Had the Department not taken into consideration these mitigating factors, it would have charged Respondent with additional violations or proposed a higher penalty," said the statement from the agency to Boeing.

The department said that $24 million of the fine will be suspended as long as that money is used to strengthen Boeing's compliance program further. The company will also be subject to the oversight of a special compliance officer for at least the next two years.

"We are committed to our trade controls obligations, and we look forward to working with the State Department under the agreement announced today," said the statement from Boeing. "We are committed to continuous improvement of that program, and the compliance undertakings reflected in this agreement will help us advance that objective."

Besides its commercial aircraft business, Boeing is a major defense contractor, with revenue of $24.9 billion last year. That compares to revenue of $33.9 billion from its commercial jet sales.

This settlement is just the latest blow to Boeing's once-stellar reputation. It faces multiple investigations for a door plug blowing out on a 737 Max flight in January, leaving a gaping hole in the side of the Alaska Airlines flight.

The National Safety Transportation Board is looking into the causes of the incident and already found that four bolts needed to hold the door plug in place were missing when the plane left a Boeing factory in October.

The Federal Aviation Administration is also demanding that Boeing come up with a plan to improve its quality controls for its aircraft manufacturing.

And the Justice Department is investigating whether the incident is a violation of a settlement it reached in 2021 to defer prosecution on charges that it defrauded the FAA during the original certification of the 737 Max before two fatal crashes that killed all 346 people aboard the flights resulted in a 20-month grounding of the plane.

The NTSB has yet to determine blame or fault for the door plug incident on the Alaska Air flight. That will come later in its investigation, perhaps a year or more from now. But Boeing CEO Dave Calhoun told investors in January, "We caused the problem, and we understand that. Whatever conclusions are reached, Boeing is accountable for what happened."

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