According to the new report by Reuters, Boeing Co.’s legal woes got worse on Tuesday when a new lawsuit was filed against the aircraft maker. In this new lawsuit, the company has been accused of defrauding its shareholders by not sharing the safety problems with the best-selling 737 Max 8 jets prior to the two crashes that led to the grounding of the aircraft across the world.
The class action lawsuit, filed in the Chicago federal court, is demanding damages for securities fraud violations after the aircraft maker’s market valuation plunged $34 billion in less than 2 weeks after the Ethiopian Airlines 737 Max flight crashed on March 10.
Ethiopian Airlines flight 302 crashed just 6 minutes after taking off, and all the 157 people on board were killed in the crash. Evidence indicated that the jet’s anti-stall software kept mistakenly trying to push the plane’s nose down. Pilots repeatedly tried to raise the plane’s nose but were unsuccessful, despite following the procedures laid out by Boeing.
Five months before that, the Lion Air flight 610 suffered a similar fate, which led to the deaths of 189 people who were on board.
Dennis Muilenburg, the Chief Executive Officer of Boeing, as well as Gregory Smith, the Chief Financial Officer, were named as defendants in the lawsuit.
Charles Bickers, the official company spokesperson, did not make a comment on this news.
According to the filing, the company had placed growth and profitability ahead of aircraft safety as well as honesty by rushing the production of the 737 Max so that it could compete with its long-time rival Airbus SE. Due to this, Boeing omitted the extra or optional features that had been designed to prevent crashes such as those that Lion Air and Ethiopian Airlines experienced.
The complaint went on to state that the company’s claims about its growth prospects as well as the growth of the 737 Max had been undermined by the conflict of interest due to Boeing retaining authority of its board from regulators in assessing the aircraft’s safety.
The lead plaintiff, Richard Seeks, said that these compromises made by the company began to come to light after the Ethiopian Airlines crash. Seeks stated that he had purchased 300 of Boeing’s shares at the beginning of March, and had been forced to sell them at a loss in the last two weeks.
Now, in the lawsuit, investors are seeking damages from Boeing for losses suffered between January 8 and March 21.
It is common for investors to sue companies for securities fraud for hiding negative information that lead to a fall in share prices when it becomes public.
Boeing, headquartered in Chicago, is facing multiple lawsuits due to the two 737 Max crashes. Plaintiffs include the victims’ families as well as employee retirement plan participants.
In fact, according to Business Insider, after Muilenburg issued a formal apology for the two crashes, even more families of the crash victims have decided to sue to the company.
On Tuesday, April 09, the aircraft maker announced that orders for airplanes dropped from 180 per year in 2018 to 95 per year now. The company also stated that there had been no orders for the 737 Max after the jet was ground by governments and airlines companies across the world.
The company had previously announced on April 05 that it was planning to reduce its production of the 737 from 52 jets to 42. Boeing also said that it was making progress on the software update for the 737 Max that would prevent any further accidents from taking place.