Business
How Boeing Defrauded The United States And Escaped With A ‘Slap On The Wrist’
Boeing faces up to $487 million in fines as part of its expected guilty plea to a felony charge stemming from two fatal 737 Max crashes. Critics of the arrangement, meanwhile, describe it as a “slap on the wrist.”
While corporate guilty pleas by firms the scale of Boeing are uncommon, and some of the plea agreement’s requirements were obviously burdensome to Boeing leadership, the settlement demonstrates the limits of corporate criminal charges.
Boeing agreed to plead guilty to a charge of defrauding the Federal Aviation Administration by concealing critical information about a design fault in the 737 Max during the initial certification process. This design defect has been linked to crashes in 2018 and 2019, which killed 346 people and plunged the firm into a crisis that resulted in $32 billion in losses.
“The Justice Department does no one any favors by trying to sell this as a tough deal,” said Peter Goeltz, a former managing director of the National Transportation Safety Board and current CNN contributor who works for transportation corporations. “It doesn’t smell like a tough deal.”
Under the plea agreement reached late Sunday, Boeing’s $243 million fine, which it agreed to pay back in 2021, could be increased to $487 million.
“That’s what, the price of three 777’s?” Goeltz stated. “I’m not sure that it’s a significant fine.”
Additional data support Goeltz’s claims.
Before the losses in 2019, the business had reported record annual revenue of $101 billion and core operating profit of $10.7 billion, or 21 times the cost of the $487 million punishment.
While Boeing’s credit rating is now at risk of being downgraded to junk bond status for the first time, credit rating firm Moody’s said Monday that the plea and penalty “will have little effect on Boeing’s finances and operations.”
Boeing CNN Image
How Boeing Defrauded The United States And Escaped With A ‘Slap On The Wrist’
And Boeing almost escaped this slap on the wrist.
In January, a door stopper blew off a Boeing 737 Max as it approached 16,000 feet. While no one was killed or seriously injured on that Alaska Airlines flight, the incident not only drew unwanted attention and a slew of federal investigations, but it also jeopardized an agreement Boeing reached with the Justice Department in January 2021 to eliminate the risk of prosecution for defrauding the FAA during the Max certification. The Alaska Air tragedy occurred just days before the probationary term would have expired.
Getting off cheap.
The expected guilty plea did little to appease family members of the crash victims, who called it a “sweetheart deal,” an “atrocious abomination,” and a horrible “miscarriage of justice.”
Their attorneys suggested that Boeing should have received a maximum sentence of $24.8 billion, which they determined by multiplying their estimate of the families’ cumulative losses.
Other firms that pled guilty to felonies have agreed to even higher fines. BP has agreed to pay $4 billion to settle criminal charges, including manslaughter, stemming from an explosion and oil spill at its Deepwater Horizon oil platform in 2010, which killed 11 workers.
In 2017, Volkswagen pleaded guilty to three US felony criminal charges and agreed to pay $2.8 billion in criminal penalties for cheating on diesel emissions tests.
“The fact that this is in the millions of dollars rather than billions is an indication that this is a slap on the wrist,” said Paul Cassell, a University of Utah law professor who worked on the BP case on behalf of victims and is now representing the families of the Boeing tragedies.
One of the factors that has enraged family members is that Boeing chose to plead guilty to simply deceiving the FAA rather than face manslaughter charges for the deaths of hundreds of individuals.
“That’s a tougher case to prove, but I believe the evidence was there,” said Mark Lindquist, another attorney who represents family members and other passengers on the Alaska Airlines aircraft.
“As a practical matter, the result might not have been a lot different” if there had been manslaughter rather than fraud charges in this criminal case, Lindquist stated. “From a philosophical basis, it would have felt more like accountability and justice for the victims’ families.”
Why are no executives facing charges?
However, while the Justice Department stated in January 2021 that “misleading statements, half-truths, and omissions communicated by Boeing employees to the FAA” played a direct role in the crashes, it has taken only limited criminal action against any individual employee and none against the top executives who oversaw the company’s decisions at the time.
The Justice Department issued a press release early Monday stating that the agreement provided “no immunity to any individual employees, including corporate executives, for any conduct.”
However, only one of the two former Boeing workers named in the case’s original settlement in 2021, Mark Forkner, the company’s chief technical pilot at the time, faced criminal charges. He was subsequently acquitted when his attorney convinced the jury that he was being used as a scapegoat.
“As a practical matter, individuals are more sympathetic to jurors than companies,” he said. “DOJ made a prosecutorial decision to pursue the company rather than individuals.”
Other defenses in an individual’s criminal case do not exist in a company’s criminal case.
“With an individual, there’s always someone else he or she can point the finger at,” Lindquist told me.
According to Lindquist, Boeing attorneys were on a mission to ensure that corporate officials were not charged with any crimes.
“From the beginning, that’s been clear,” he told me.
A Boeing spokeswoman said the company had no comment on the expected guilty plea or the case other than a brief statement announcing the arrangement.
Another method to make executives pay.
Even if no criminal charges are filed against CEOs, Arlen said they might face hefty consequences. That might take the form of “clawbacks,” in which Boeing asks that executives repay incentives received while the misbehavior occurred.
“Ensuring that the individuals are held accountable is the most important thing,” she told me.
But, so far, the Boeing board has yet to show much desire to hold executives financially accountable. It just handed CEO Dave Calhoun a 45% raise, increasing his remuneration from $22.6 million to $32.8 million in 2023.
His predecessor, Dennis Muilenburg, was fired as CEO at the end of 2019 without compensation but departed the business with a bundle of stock valued at approximately $80 million at the time.
Boeing CNN Image
How Boeing Defrauded The United States And Escaped With A ‘Slap On The Wrist’
When asked about potential clawbacks, Boeing cited company policy, which states: “The board shall have the discretion…to recover incentive-based compensation paid to any executive of the company who has engaged in fraud, bribery, or illegal acts…or knowingly failed to report such acts of an employee over whom such officer had direct supervisory responsibility.” Despite the language, no clawbacks have occurred.
Arlen also argued that clawing back salary for board members was justified. Calhoun was not an executive at the time, but he served on the Boeing board and earned more than $300,000 per year while the Max was being certified.
“At the end of the day, when you have a company with systemic problems, the ultimate buck stops with the board,” she told me.
Why will Boeing preserve its federal contracts?
The most serious penalty that Boeing could face is by far the least likely: it could be excluded from federal government contracts as a result of its guilty plea. And this might potentially force the company out of existence. According to business reports, US government contracts accounted for 37% of total income in 2023, or around $29 billion.
However, while it will require permission from the government to continue its contracts, everyone expects those waivers to be granted.
With Boeing, despite the anticipated guilty plea and years of quality difficulties.
It is still the country’s top exporter, with almost 150,000 US employees. The corporation predicts that its economic impact will be $79 billion, sustaining 1.6 million direct and indirect jobs at over 9,900 suppliers throughout all 50 states. And it is critical to the seamless operation of the country’s air transport system.
“It’s very clear to me that Boeing is going to survive this,” said Robert Clifford, another lawyer representing families of crash victims. “Why does Boeing get a pass, but other criminal defendants do not? “Because they are Boeing.”
SOURCE | CNN
The United States government and TikTok will face off in federal court on Monday, as oral arguments begin in a pivotal legal issue that may determine whether or not a popular social media platform used by nearly half of all Americans will continue to operate in the country.
Attorneys from both parties will appear before a panel of judges at the federal appeals court in Washington. TikTok and its Chinese parent company, ByteDance, are appealing a US law that mandates them to cut ties or face a ban in the US by mid-January. The legal dispute is expected to reach the United States Supreme Court.
The measure, signed by President Joe Biden in April, marked the end of a years-long saga in Washington over the short-form video-sharing app, which the government views as a national security danger due to its ties to China. However, TikTok claims the rule violates the First Amendment, while others contend it echoes crackdowns witnessed in totalitarian regimes around the world.
TikTok Heads To Court Over US Law That Could Lead To A Ban On The Popular Platform
In court documents filed this summer, the Justice Department emphasized the government’s two main concerns. First, TikTok captures massive amounts of user data, including sensitive information about viewing patterns, which may fall into the hands of the Chinese government if coerced. Second, the United States claims that the proprietary algorithm that drives what users view on the app is susceptible to manipulation by Chinese authorities, who can use it to mold information on the platform in ways that are difficult to detect.
TikTok has frequently stated that it does not share U.S. user data with the Chinese government and that the government’s worries have never been proven. In court documents, attorneys for TikTok and its parent business said that members of Congress attempted to punish the platform based on propaganda they thought to be on TikTok. The corporations also stated that divestiture is impossible and that the app will be forced to close by January 19 if the courts do not intervene to prevent the law.
“Even if divestiture were feasible, TikTok in the United States would still be reduced to a shell of its former self, stripped of the innovative and expressive technology that tailors content to each user,” the businesses claimed in a legal brief they submitted in July. “It would also become an island, preventing Americans from exchanging views with the global TikTok community.”
Opponents of the bill argue that a prohibition would disrupt the marketing, retail, and lives of many diverse content providers, some of whom sued the government in May. TikTok is paying the legal fees for that litigation, which the court has clubbed with the company’s complaint and another filed in favor of conservative creators working with a nonprofit called BASED Politics Inc.
Though the government’s primary justification for the statute is public, major portions of its court papers contain classified information that has been redacted and concealed from public access. The firms have requested that the court reject the secret files or appoint a district judge to sift through the data, which the government has resisted since it will cause a delay in the case. If permitted into court, legal experts believe the secret documents could make it practically difficult to know some of the elements that could influence the final decision.
In one of the redacted statements submitted in late July, the Justice Department claimed TikTok received direction from the Chinese government regarding content on its site, but did not provide any other information about when or why those occurrences occurred. Casey Blackburn, a senior US intelligence official, said in a legal declaration that ByteDance and TikTok “have taken action in response” to Chinese government orders “to censor content outside of China.” Though the intelligence community had “no information” that this had occurred on TikTok’s platform in the United States, Blackburn stated that it “may” happen.
In a separate court filing, the DOJ stated that the US is “not required to wait until its foreign adversary takes specific detrimental actions before responding to such a threat.”
However, the corporations contend that the government might have adopted a more customized approach to addressing their concerns.
More than two years ago, during high-stakes negotiations with the Biden administration, TikTok submitted the government with a 90-page draft agreement that allowed a third party to supervise the platform’s algorithm, content moderation processes, and programming. TikTok claims to have spent more than $2 billion voluntarily implementing some of these steps, including putting U.S. user data on Oracle-controlled servers. However, a settlement was not struck since government officials effectively walked away from the bargaining table in August 2022.
Due to TikTok’s scale and technical complexity, justice officials claim that compliance with the draft agreement is difficult or would need enormous resources. The Justice Department also stated that the best way to address the government’s concerns is to cut ties between TikTok and ByteDance, given the porous relationship between the Chinese government and Chinese enterprises.
However, some experts have questioned whether such a move would hasten the so-called “decoupling” between the United States and its strategic foe, especially since other China-founded enterprises, such as Shein and Temu, are also making a major mark in the West. Last Monday, the Biden administration proposed rules that would restrict duty-free products exported straight from China.
TikTok Heads To Court Over US Law That Could Lead To A Ban On The Popular Platform
ByteDance has openly said that TikTok is not for sale. Despite this, several investors, like former Treasury Secretary Steven Mnuchin and millionaire Frank McCourt, have announced offers to buy the platform. However, even if such a transaction were to materialise, it would most likely be devoid of TikTok’s vaunted algorithm, raising concerns about the platform’s ability to serve up the type of personally tailored videos that users have grown to demand.
The political alignments on the topic are playing out in unexpected ways.
The measure, which passed with bipartisan support in Congress, sparked opposition from several progressive and Republican politicians who expressed worries about handing the government the authority to block a platform used by 170 million Americans. Former President Donald Trump, who attempted to prohibit TikTok while in office, is now opposed to a ban because it would benefit its competitor, Facebook, a platform Trump continues to criticise since his 2020 election loss.
In court, free speech and social justice organisations have filed amicus papers in support of TikTok, alleging that it violates users’ First Amendment rights and suppresses minority community speech by interrupting a tool that many of them use to fight for causes online. Some libertarian groups with ties to ByteDance investor Jeff Yass have also submitted briefs in defence of the company.
Meanwhile, more than 20 Republican solicitors general, former national security officials, and China-focused human rights organisations have backed the Biden administration in its request that the court preserve the statute.
SOURCE | AP
Business
Walgreens To Pay $106M To Settle Allegations It Submitted False Payment Claims For Prescriptions
Washington — Walgreens has agreed to pay $106 million to settle lawsuits alleging that the pharmacy giant made bogus payment claims to government health care programs for prescriptions that were never filled.
The settlement announced on Friday resolves cases filed in New Mexico, Texas, and Florida on behalf of three former Walgreens drugstore employees. The claims were brought under the False Claims Act’s whistleblower clause, which allows private parties to file a case on behalf of the United States government and share in the money recovered, according to the Justice Department.
Walgreens To Pay $106M To Settle Allegations It Submitted False Payment Claims For Prescriptions
Between 2009 and 2020, the pharmacy chain was accused of filing fake payment claims with Medicare, Medicaid, and other government health care programs for prescriptions that were completed but not picked up.
According to the settlement agreements, they cooperated with the inquiry and upgraded its electronic management system to avoid similar errors in the future.
The company stated in a statement that due to a technical problem, the business accidentally billed some government programs for a limited number of prescriptions that consumers filed but did not pick up.
Walgreens To Pay $106M To Settle Allegations It Submitted False Payment Claims For Prescriptions
“We corrected the error, reported the issue to the government, and voluntarily refunded all overpayments,” Walgreens stated.
In negotiating the settlement, the company did not admit legal liability in the instances. ____ This story has been amended to state that the cases were launched by private individuals rather than the US Justice Department.
SOURCE | AP
Alexandria, Virginia – It happens in milliseconds, preferably as you browse the internet. Computer and software networks analyze who you are, and what you are looking at, and buy and sell website adverts.
Google is most likely responsible for determining which ads you see and how much an advertiser pays to be on your screen.
AP News Image
Google’s Millisecond Ad Auctions Are The Focus Of A Monopoly Claim
In reality, the Justice Department and a coalition of states argue that Google’s domination over the technology that governs the sale of billions of Internet display ads every day represents an illegal monopoly that should be split up.
A trial is underway in federal court in Alexandria, Virginia, to establish if Google’s ad tech stack represents an illegal monopoly. The first week has included a thorough examination of how Google’s products interact to perform behind-the-scenes computerized auctions that place advertising in front of people in the blink of an eye.
Online advertising has grown rapidly. If you saw an online display ad fifteen years ago, there was a high chance it depicted individuals dancing over their excitement for cheap mortgage rates, and those commercials were pushed on you whether you were browsing real estate or checking for baseball statistics.
AP News Image
Google, for its part, claims to have invested billions of dollars in improving the quality of ads seen by consumers and ensuring that marketers can reach the consumers they seek.
According to the Justice Department, Google has also rigged automated ad sales auctions to favor itself over other would-be industry players, denying the publishing industry hundreds of millions of dollars that it would have received if the auctions were truly competitive.
During the Virginia trial, government witnesses detailed the auction process and how it has developed over time.
In the government’s picture, three distinct instruments work together to sell an ad and present it in front of a consumer. There are ad servers that publishers use to sell space on their websites, particularly the rectangular advertising that displays at the top and right sides of a page. Ad networks are used by advertisers to purchase ad space on a variety of related websites.
Publishers naturally want to earn the highest possible price for their ad space, but testimony at trial revealed that this did not always occur due to Google’s policies.
For years, Google provided its ad exchange, AdX, the first opportunity to match a publisher’s requested floor price. For example, if a publisher wished to sell an ad impression for at least 50 cents, Google’s engine would prioritize its own ad exchange. If Google’s ad exchange bid 50 cents, it would win the auction, even if competing ad exchanges offered higher bids later on.
AP news Image
Google’s Millisecond Ad Auctions Are The Focus Of A Monopoly Claim
Google claimed the approach was required to ensure advertising loaded promptly. It would be too time-consuming for the computers to accept bids from every ad exchange.
Publishers were displeased with the system and devised a workaround to conduct auctions outside of Google’s purview, a procedure known as “header bidding.” Internal Google documents presented at the trial depicted header bidding as a “existential threat” to Google’s market domination.
Google’s reaction was based on its control over all three components of the process. If publishers held an auction outside of Google’s purview but still used Google’s publisher ad server, DoubleClick For Publishers, the program would force the winning bid back into Google’s Ad Exchange. If Google was willing to match the price earned by publishers in the header-bidding auction, it would win the auction.
According to Professor Ramamoorthi Ravi, an expert at Carnegie Mellon University, Google’s regulations failed to maximise value for publishers and “seem to have been designed to advantage Google’s own products.”
Publishers could cease utilising Google’s ad exchange totally, but they were hesitant to do so at trial because it would mean losing access to Google’s massive, exclusive cache of advertisers in its Google Ads network, which was only accessible through Google’s ad exchange.
Google, for its side, claims that it has not conducted auctions in this manner since 2019, and that its proportion of the display ad market has dwindled over the last five years. It claims that integrating its buy side, sell side, and middleman solutions allows them to work more smoothly and rapidly, while also reducing the danger of misleading ads or malware.
Google also claims that its developments over the previous 15 years have helped to better the matching of internet adverts to consumer interests. Google claims it was at the vanguard of introducing “real-time bidding,” which allowed an advertiser selling shoes, for example, to be matched with a consumer whose web profile indicated an interest in purchasing shoes.
According to Google, these developments enabled publishers to charge a premium for their available ad space because the advertiser knew the ad would be seen by someone interested in their product or service.
According to the Justice Department, even though Google no longer conducts auctions in the manner described, it assisted Google in maintaining its monopoly in the ad tech market in the years preceding 2019, and that its current monopoly allows Google to keep up to 36 cents on the dollar of every ad purchase it brokers when the transaction runs through all of its various products.
The Virginia trial comes barely a month after a court in Washington ruled that Google’s search engine is also an unconstitutional monopoly. There has been no ruling in that case as to what remedies, if any, the judge will impose.
SOURCE | AP
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