A Boeing stock-buyer has filed a federal class-action lawsuit against the company and two top executives for allegedly misleading investors about issues involving the 737 Max.
The suit says Boeing, chief executive Dennis Muilenburg and chief financial officer Greg Smith touted the 737 Max’s safety, and its sales and growth prospects, following the October 2018 crash of a Lion Air 737 Max.
They also reiterated Boeing’s intention to boost 737 production from 52 to 57 aircraft monthly on strong demand, notes the suit, filed 9 April in US District Court for the Northern District of Illinois.
Boeing and the executives made those comments “while concealing the full extent of safety problems caused by placement of the larger engines on” the 737 Max, court papers say.
Boeing did not immediately respond to a request for comment.
The company’s stock price increased about 30% in the first two months of 2019 before sinking 14% in the days after the March crash of an Ethiopian Airlines 737 Max
The second crash prompted the global 737 Max grounding and led Boeing to cut production to 42 737s monthly.
Investigators have said the aircraft’s manoeuvring characteristics augmentation system (MCAS) played a role in both crashes. MCAS pushes the aircraft’s nose down to counter excessive nose-up attitudes that the 737 Max’s larger engines could cause.
“The market price of Boeing securities was inflated by the material omissions and false and misleading statements made by the company, Muilenburg and Smith,” says the suit, filed on behalf of investor Richard Seeks. “Defendants effectively put profitability and growth ahead of airplane safety and honesty.”
Seeks is represented by attorneys with law firm Hagens Berman Sobol Shapiro.
The suit faults Boeing for not disclosing to investors that it prepared reports the FAA used to certify the 737 Max’s safety, including certification of MCAS. The FAA has been criticised for passing too much certification work directly to Boeing, though the agency has defended its practices.
The suit notes Boeing did not initially mention MCAS’s existence in flight manuals, and faults the company for charging extra for safety features it says could have helped address MCAS issues.
The class-action suit is filed on behalf investors who purchased Boeing stock between 8 January 2019 and 21 March 2019. It seeks unspecified compensation, with the amount to be determined at trial.