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 Internet Archive has lost a critical legal battle, potentially affecting the future of internet history. Today, the US Court of Appeals for the Second Circuit decided against the long-running digital archive, affirming a previous decision in Hachette v. Internet Archive, which determined that one of the Internet Archive’s book digitization initiatives infringed copyright law.
Notably, the appeals court’s ruling rejects the Internet Archive’s argument that its lending practices were shielded by the fair use doctrine, which permits for copyright infringement in certain circumstances, calling it “unpersuasive.”
In March 2020, the Internet Archive, a San Francisco-based nonprofit, launched the National Emergency Library, or NEL. The epidemic had forced library closures that prevented students, scholars, and readers from accessing millions of books, and the Internet Archive has stated that it was answering to calls from common people and other librarians to assist individuals at home in obtaining the books they required.
The NEL was an extension of the Open Library, an ongoing digital lending experiment in which the Internet Archive scans physical copies of library books and allows individuals to borrow digital versions as if they were conventional reading material rather than e-books. The Open Library lent the books to one person at a time—but the NEL eliminated this ratio requirement, allowing a large number of people to borrow each scanned book at once.
Shortly after its inception, the NEL faced criticism, with some authors claiming that it amounted to piracy. In response, after two months, the Internet Archive abandoned its emergency strategy and imposed lending caps. But the harm had been done. Major publishing giants, including Hachette, HarperCollins, Penguin Random House, and Wiley, filed the complaint in June 2020.
In March 2023, the district court found in favour of the publishers. Judge John G. Koeltl determined that the Internet Archive had created “derivative works,” claiming that its copying and lending had “nothing transformative” to offer. Following the initial verdict in Hachette v. Internet Archive, the parties reached an agreement, the specifics of which have not been released; however, the archive has filed an appeal.
According to James Grimmelmann, a professor of digital and internet law at Cornell University, the ruling is “not terribly surprising” in light of recent court interpretations of fair use.
Internet Archive won the appeal
The Internet Archive won the appeal, but only narrowly. Although the Second Circuit upheld the district court’s first decision, it underlined that it did not regard the Internet Archive as a commercial business, emphasising that it was clearly a charitable organisation. Grimmelmann believes this is the appropriate decision: “I’m glad to see that the Second Circuit fixed that mistake.” (He joined an amicus brief in the appeal, saying that classifying the use as commercial was incorrect.)
“Today’s appellate decision upholds the rights of authors and publishers to license and be compensated for their books and other creative works, and reminds us in no uncertain terms that infringement is both costly and antithetical to the public interest,” Association of American Publishers president and CEO Maria A. Pallante said in a statement.
“If there was any doubt, the Court makes clear that under fair use jurisprudence there is nothing transformative about converting entire works into new formats without permission or appropriating the value of derivative works that are a key part of the author’s copyright bundle.”
In a statement, Internet Archive director of library services Chris Freeland expressed dismay with “today’s opinion about the Internet Archive’s digital lending of books that are electronically available elsewhere.” We are reviewing the court’s decision and will continue to defend libraries’ right to own, lend, and preserve books.
Dave Hansen, executive director of the Author’s Alliance, a nonprofit organisation that frequently advocates for increased digital access to books, also spoke out against the verdict. “The authors are researchers. “Authors read,” he says. “IA’s digital library assists authors in creating new works and encourages their desire to have their works read. This verdict may boost the bottom lines of the largest publishers and most well-known authors, but it will harm more people than it will help.
Difficult period for copyright law
The Internet Archive’s legal problems are not ended. In 2023, a collection of music labels, including Universal Music collection and Sony, sued the archive for copyright infringement on a music digitization project. That case is still working its way through the courts. The damages might total up to $400 million, posing an existential danger to the nonprofit.
The new ruling comes at a particularly difficult period for copyright law. There have been scores of copyright infringement cases filed against large AI businesses that provide generative AI tools in the last two years, and many of the defendants contend that the fair use doctrine protects their use of copyrighted data in AI training. Any big lawsuit in which judges reject fair use grounds is widely monitored.
It also comes at a time when the Internet Archive’s critical role in digital preservation is becoming increasingly apparent. The archive’s Wayback Machine, which catalogues website copies, has proven to be an invaluable resource for journalists, scholars, lawyers, and anybody interested in internet history. While there are other digital preservation programs, including national efforts by the US Library of Congress, there is nothing comparable available to the public.
Business
Hewlett Packard Won’t Drop Its UK $11 Billion Claim Against Tech Mogul Mike Lynch, Who Died When His Yacht Sank
LONDON — Hewlett Packard Enterprise announced Monday that it will not dismiss its U.K. claim for damages against the estate of British tech entrepreneur Mike Lynch, who died when his superyacht drowned last month.
In 2022, Britain’s High Court decided primarily to favor the US technology giant, which accused Lynch and his former finance director of fraud concerning its $11 billion acquisition of his software company Autonomy. Hewlett-Packard is seeking up to $4 billion in damages, and the judge is anticipated to make a ruling on the exact amount shortly.
AP News Image
Hewlett Packard Won’t Drop Its UK Claim Against Tech Mogul Mike Lynch, Who Died When His Yacht Sank
Mike perished when his yacht, the Bayesian, fell in a storm off Sicily on August 19. His widow, Angela Bacares, may now be liable for the damages.
Mike was acquitted in a separate US criminal trial of fraud and conspiracy in the agreement months before the sinking.
Hewlett Packard initially applauded its pricey 2011 acquisition of Lynch’s company but soon began to regret it. The corporation stated on Monday that it had “substantially succeeded” in its civil fraud allegations against Lynch and the former finance director, Sushovan Hussain.
“It is HPE’s intention to follow the proceedings through to their conclusion.”
However, the U.K. civil action judge has already concluded that the amount payable in damages will be “substantially less” than what the company is demanding.
The Lynch family’s spokesman declined to respond.
Mike and his daughter Hannah were among six passengers killed when the 56-meter (184-foot) luxury boat sank. One crew member, the boat’s chef, also perished, while 15 people escaped the accident. They gathered on the yacht to celebrate Lynch’s acquittal.
Hewlett Packard Won’t Drop Its UK Claim Against Tech Mogul Mike Lynch, Who Died When His Yacht Sank
Officials first reported that the boat was hit by a tornado over the water, known as a waterspout, but the weather phenomena was later identified as a downburst. Italian prosecutors are investigating the captain on possible accusations of manslaughter.
SOURCE | AP
Elon Musk has escalated his online attacks on a Supreme Court judge who has threatened to stop social media platform X in Brazil, labeling him “an evil dictator” in an ongoing battle between the two men.
Justice Alexandre de Moraes threatened to suspend X if Musk did not identify a new legal agent for the company in Brazil and pay any outstanding daily fines within 24 hours.
“Alexandre de Moraes is an evil dictator cosplaying as a judge,” the world’s richest person commented on X.
Elon Musk Hits Out At Judge Threatening To Suspend X In Brazil
Musk, who previously referred to de Moraes as “Darth Vader,” retweeted a statement from X’s Global Government Affairs team announcing that the judge’s “illegal demands and all related court filings” would be published in the coming days.
Brazil is a key market for social media networks. According to the Associated Press, around 40 million Brazilians, or roughly 18% of the population, use X at least once a month.
The trash-talking is the latest salvo in Musk’s spat with de Moraes, which revolves around free speech and alleged disinformation. X said earlier this month that it would suspend its business and lay off its employees in Brazil owing to what it described as “censorship orders” from the judge.
De Moraes had ordered the social media company to ban several X accounts he claimed were disseminating misinformation.
The most recent statement, signed by de Moraes, was also posted on the Supreme Court’s official X account, tagging both Musk and X’s Global Government Affairs account.
The Supreme Court statement was uploaded around 8:30 p.m. local time on Wednesday, giving Musk till Thursday evening local time to answer.
‘Censorship Orders’
On August 17, X issued a lengthy statement announcing that it would be forced to suspend operations and terminate employees in Brazil due to de Moraes’ “censorship orders.”
“Despite our numerous appeals to the Supreme Court not being heard, the Brazilian public not being informed about these orders and our Brazilian staff having no responsibility or control over whether content is blocked on our platform, Moraes has chosen to threaten our staff in Brazil rather than respect the law or due process,” according to the statement from X.
Elon Musk Hits Out At Judge Threatening To Suspend X In Brazil
“As a result, to ensure the safety of our employees, we have decided to close our activity in Brazil, effective immediately. The X service remains available to Brazilians. We are profoundly saddened to have been compelled to make this decision. Alexandre de Moraes is exclusively responsible.
“Due to demands by ‘Justice’ Alexandre [de Moraes] in Brazil that would require us to break (in secret) Brazilian, Argentinian, American and international law, X has no choice but to close our local operations in Brazil,” he said on X’s website.
SOURCE | AP
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