By Mike Spector and Sheila Dang

FORT WORTH, TEXAS (Reuters) -A federal judge on Friday pressed U.S. Justice Department officials to justify the terms of Boeing’s agreement to plead guilty to fraud in the wake of two fatal 737 MAX crashes but stopped short of ruling on whether to accept the deal.

Attorneys for Boeing and federal prosecutors argued to U.S. District Judge Reed O’Connor in Fort Worth, Texas that he should accept the plea deal, while lawyers for relatives of the crash victims urged him to reject it. The U.S. planemaker agreed in July to plead guilty to conspiring to defraud regulators.

Judge O’Connor said on Friday that he would issue a ruling as soon as possible.

The judge has fielded hundreds of pages of legal briefs from the parties over the past several weeks. In the courtroom on Friday, Paul Cassell, one of the lawyers representing the families of the 346 people who perished in the plane crashes, which occurred in 2018 and 2019, said “there are eight reasons to reject this rotten plea deal.” They included his contention that the agreement allows a cash-flush corporation to dictate its punishments before sentencing, and that the deal failed to go far enough in holding Boeing or its executives accountable for the deaths of the families’ loved ones.

Sean Tonolli, the Justice Department’s senior deputy chief of the criminal division’s fraud section, defended the agreement as “fair and just,” and said that the government modified its approach to the plea agreement to take into account the families’ concerns.

Prosecutors arrived at the plea agreement after an extensive investigation and a series of meetings with the families, prosecutors said. “Yet in the end,” the prosecutors said in an August court filing, DOJ officials have “not found the one thing that underlies the families’ most passionate objections to the proposed resolution: evidence that could prove beyond a reasonable doubt that Boeing’s fraud caused the deaths of their loved ones.” 

Boeing “regrets the unspeakable losses suffered by the families,” Mark Filip, a lawyer representing Boeing, told the judge. He argued the judge should accept the plea agreement. The company previously said in a court filing that it was “prepared to plead guilty and thereby accept ultimate responsibility for the crime” of conspiring to defraud regulators. The planemaker has significantly strengthened, and increased investment in, its safety and compliance practices, Boeing said.

During the hearing, Judge O’Connor pressed Tonolli to explain why the Justice Department was seeking a binding plea agreement that limits his ability to impose punishments during sentencing that go beyond the deal’s current terms and recommendations.

QUESTIONING THE PLEA DEAL

Boeing in July finalized the agreement with prosecutors requiring the planemaker to plead guilty to fraud in connection with the two fatal plane crashes.

The planemaker agreed to pay up to a $487.2 million fine and spend at least $455 million on improving safety and compliance practices over three years of court-supervised probation as part of the plea deal. The agreement allows the judge to cut the fine in half by crediting Boeing for money it previously paid in the case.

Justice Department officials pushed Boeing to take the plea deal after finding the company had violated the terms of a 2021 agreement that had shielded it from prosecution over the crashes, which effectively reopened the case.

That finding followed a separate January in-flight blowout that exposed ongoing safety and quality issues at Boeing. A panel blew off a new Boeing 737 MAX 9 jet during a Jan. 5 Alaska Airlines flight, just two days before the 2021 agreement shielding Boeing from prosecution over the previous fatal crashes expired. 

In the criminal case over the fatal crashes, prosecutors contend they have extracted an agreement from Boeing to plead guilty to the most serious charge they could prove, along with payment of the maximum legally allowed penalty.

The two crashes at the center of the criminal case against Boeing occurred in Indonesia and Ethiopia over a five-month period.

A guilty plea, should the judge accept it, would brand Boeing a convicted felon for conspiring to defraud the U.S. Federal Aviation Administration (FAA) about problematic software affecting the flight-control systems in the planes.

On top of the plea deal’s financial implications, the agreement also imposes a monitor to audit Boeing’s safety and compliance efforts and allows the judge at sentencing to force the company to pay additional compensation to families whose relatives died in the crashes.

Judge O’Connor, considered one of the most conservative judges in the country, also questioned federal prosecutors about a clause in the plea agreement that said the monitor would be selected in keeping with the Justice Department’s diversity and inclusion commitments.

Tonolli responded that the provision “doesn’t mean in practice that we select less qualified monitors.”

Victims’ relatives want Boeing and its executives charged with crimes holding them responsible for the deaths of their loved ones and any evidence of wrongdoing presented in a public trial. They have also argued Boeing should have to pay up to $24.78 billion in connection with the crashes.

Polish national airline LOT also opposes the plea deal and has argued it should have the same rights as the crash victims’ families.

Judge O’Connor has previously expressed strong sympathy for the families of the 737 MAX crash victims and called the Boeing case “the deadliest corporate crime in U.S. history.”

(Reporting by Mike Spector and Sheila Dang; Additional reporting by Chris Prentice; Editing by Nick Zieminski)

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