Shareholders of Boeing Co are suing the company for “defrauding them” when it concealed safety deficiencies in its 737 MAX planes. The shareholders also accused the United States plane maker of putting profit ahead of air plane safety.
The company has recently been faced with all sorts of backlash ever after a second Boeing 737-Max plane belonging to Ethiopian Airways dropped from the sky in March, killing all 157 passengers on board; including one Nigerian.
The first Boeing 737-Max model that crashed in October killed all 189 passengers onboard of Lion Air.
These crashes resulted in a widespread, global banning of the plane model. Boeing Co’s market value also crashed by as much as $34 billion within two weeks of the Ethiopian Airlines crash which occurred on March 10, 2019.
And now, a class action suit from shareholders
The shareholders’ lawsuit against Boeing Co is in the form of a class action which seeks damages for alleged securities fraud violations. The suit was filed at the Chicago federal court, and named Chief Executive Dennis Muilenburg and Chief Financial Officer Gregory Smith as defendants.
What provoked the class action
The shareholders complained that Boeing Co “effectively put profitability and growth ahead of air plane safety and honesty” by rushing the 737 MAX to market to compete with rival, Airbus SE. By so doing, the company left out “extra” or “optional” features designed to prevent the Ethiopian Airlines and Lion Air crashes.
Part of the complaints included Boeing’s statements about its growth prospects and the 737 MAX were undermined by its alleged conflict of interest from retaining broad authority from federal regulators to assess the plane’s safety.
Concealing of negative information cost shareholders: The lead plaintiff, Richard Seeks, said he sold the 300 Boeing shares he bought early March at a loss, adding that the shortcomings of Max models began to unravel after the Ethiopian Airlines crash.
The lawsuit seeks damages for Boeing stock investors from Jan. 8 to March 21. The case is Seeks v Boeing Co et al, U.S. District Court, Northern District of Illinois, No. 19-02394.
Other cases against Boeing: There are many other lawsuits over the crashes, including by victims’ families and by participants in its employee retirement plans.
Crashes drag down orders for Boeing-737 MAX in Q1 2019
The orders for delivery placed on Boeing 737 Max models are beginning to drop, even as Boeing Co announced it recorded zero demand in the first quarter of 2019. This is a significant drop in the history of the company.
The Boeing Max model had been the best-selling model in the history of the American plane manufacturer. However, total demand fell to 95 aircraft from 180 a year earlier.
The company had cut monthly production of 737 to 42 planes from 52, Boeing disclosed last week.