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Boeing faces SEC probe into disclosures about 737 Max troubles
[WASHINGTON] The US Securities and Exchange Commission (SEC) is investigating whether Boeing Co properly disclosed issues tied to the grounded 737 Max jetliner, according to people familiar with the matter, as regulators intensify their scrutiny of the company following two deadly crashes.
Officials in the SEC's enforcement division are examining whether Boeing was adequately forthcoming to shareholders about material problems with the plane, said the people who asked not to be named because the probe isn't public. The agency is also reviewing the aircraft manufacturer's accounting to make sure its financial statements have appropriately reflected potential impacts from the problems, the people said.
The SEC inquiry is in its early stages and the regulator's investigations often don't lead to allegations of misconduct. Still, the probe deepens the crisis facing Boeing since a 737 Max crashed in Ethiopia March 10. That wreck, which followed a deadly October crash in the waters off Indonesia, prompted regulators around the world to ground the jet.
Boeing didn't immediately comment, while SEC spokeswoman Judith Burns declined to comment.
Boeing has already faced questions about its level of disclosures. It revealed in a May 5 statement that it knew a cockpit alert wasn't working properly for more than a year before the company shared its findings with airlines or the US Federal Aviation Administration (FAA). Boeing made the disclosure to customers and the FAA after the October crash, according to the statement.
Federal authorities have been conducting a criminal probe of Boeing related to the crashes. While that investigation is looking into the certification process for the new 737 Max planes, the SEC's probe is focused on whether Chicago-based Boeing fulfilled its reporting obligations to investors as a public company. US securities rules require that companies inform shareholders about issues that could have a material impact on their finances, typically by filing statements with the regulator.
The problems associated with the 737 Max centre around a piece of flight control software that may have contributed to the planes' sudden and deadly descents in Ethiopia and near Indonesia. Both crashes occurred shortly after takeoff. Boeing said earlier this month that the Max had successfully performed more than 200 flights with a software upgrade.
Still, US authorities haven't yet tested or approved the fix and its unclear when the plane might be allowed to fly again. FAA acting chief Daniel Elwell said Thursday that a meeting of aviation regulators from around the world to discuss the grounded jetliner was "both comprehensive and constructive".
In the aftermath of the global grounding of the 737 Max, the company's main source of profit, Boeing halted share repurchases to preserve cash and suspended its financial forecast for 2019.
Boeing also reassigned Michael Luttig, its general counsel and a former federal appeals court judge, to a newly created position to advise chief executive officer Dennis Muilenburg and directors on all legal matters related to the crashes. The company described facing "multiple legal actions" as a result of the tragedies in an April 24 quarterly report filed with the SEC.
"We are fully cooperating with all ongoing governmental and regulatory investigations and inquiries relating to the accidents and the 737 Max program," the company said in the filing. "We cannot reasonably estimate a range of loss, if any, that may result."