Boeing’s $100 million pledge for 737 MAX crash victims sparks criticism and questions

Jul. 4--Boeing announced a $100 million fund Wednesday as an "initial outreach" to the families of victims of the two 737 MAX crashes in Indonesia and Ethiopia, a step that lawyers for the families called "unprecedented " yet dismissed as little more than a publicity ploy.

Because the money will be disbursed partly to local authorities and communities, families and lawyers expressed fear that some of it will line the pockets of local officials and could even exert Boeing influence on the handling of the investigations by the Indonesian and Ethiopian authorities.

Boeing said Wednesday it will provide the money "over multiple years ... to address family and community needs of those affected by the tragic accidents of Lion Air Flight 610 and Ethiopian Airlines Flight 302."

The company said the money is intended to "support education, hardship and living expenses for impacted families, community programs, and economic development in impacted communities."

The donation comes as scores of lawsuits are pending after the two crashes that killed a total of 346 passengers and crew. Boeing spokesman Chaz Bickers said the money is being given independent of the lawsuits, and that none of the victims' families will have to waive any rights in accepting it.

Boeing said it will work with local governments and nonprofit organizations to deploy the money, over a period of years.

Lawyers from the victims' families reacted negatively Wednesday. Steven Marks, of the Miami law firm Podhurst Orseck, who represents more than 30 families of victims in both crashes, called it "nothing more than a public-relations stunt to appease the general public."

Jeff Feldman, a professor at the University of Washington School of Law, said such advance payments are "not uncommon in mass tort or mass casualty cases."

"When the Exxon Valdez went aground in Alaska, Exxon made substantial pre-litigation payments to various parties (e.g., fisherman, communities affected by the spill)," Feldman said via email. "I believe that BP did the same thing following the Deepwater Horizon explosion in the Gulf of Mexico."

Mark Dombroff, an Alexandria, Va.-based aviation lawyer with LeClairRyan, said that after most airline accidents, "the airline sends a check to the family, without asking for releases or a credit against any future settlement," to handle immediate needs like mortgage or school tuition.

However, there appears to be no precedent with airplane crashes for a large global payout such as Boeing has promised. Marks said such a payment in advance of any legal settlement is "incredibly unusual" and that he's never seen such a donation in his 35-year career representing victims in major aircraft crashes across the world.

Likewise, Robert Clifford, who has brought lawsuits in the Ethiopian crash on behalf of 23 families from 18 countries, among them eight U.S. families, called Boeing's payment "unprecedented."

Clifford nonetheless called the payment "disingenuous" and said it's "not going over very well with the families that I have spoken with."

He said the families are "tired of hearing justice and accountability defined only in terms of compensation." He said they want answers about what happened and help in recovering the human remains from the crash site.

Shantel Rehhorn, sister of Canadian victim Angela Rehhorn, issued a statement Wednesday calling Boeing's offer "a slap in the face to all who have lost loved ones."

"I believe this is just their way of trying to win back customers," said Rehhorn.

Marks expressed particular concern that some of the Boeing money will be funneled through the governments in Indonesia and Ethiopia, which he said is "a serious problem" because the local authorities in those countries take the lead in the accident investigations.

"It's aimed at influencing those in charge of the investigations, hoping they may not push as hard as they should in uncovering all the facts," said Marks. "Boeing realizes it has a very big problem with public relations and trust in its aircraft, so they are trying to build goodwill and at the same time curry favor with these local authorities charged with investigating the accidents."

Esther Wanyoike, sister of victim George Kabau of Kenya, issued a statement Wednesday saying Boeing is "just trying to win public confidence ... (and) focused upon putting the 737 Max in the air."

"That money shall all be stolen by NGOs and corrupt local government officials if it lands in Kenya," Wanyoike said.

Lawsuits on different tracks

Marks said the main concern of the families of the victims is to find out "exactly why these tragedies occurred and what needs done to prevent similar accidents in future." He said they want "full disclosure and complete transparency of all the information" Boeing has related to the cause of the accidents.

The lawsuits brought on behalf of the victims' families in the two accidents are currently on separate tracks.

Over Boeing's objections, the federal judge overseeing the Ethiopian Airlines crash lawsuits in Illinois, where Boeing is based, has allowed the plaintiffs to begin the discovery process to obtain information from the company.

Plaintiffs will be looking for evidence of Boeing taking shortcuts in the certification process, as well as the design features, pilot training and what actions occurred between the two crashes, Clifford said.

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In this case, some families welcome early settlement talks, but a strong body of families wants answers on what caused the crash, he said.

The lawsuits stemming from the Lion Air crash in Indonesia are in the hands of another Illinois federal judge, and Boeing has a pending motion to move the case for trial to Indonesia.

UW's Feldman said that "for whatever reason, (Boeing) believes it would be better off with the case there." He cited precedent for this, for example a 1981 case of a Piper aircraft crash in Scotland, which the U.S. Supreme Court moved to that country, "even though Scottish law was much less favorable to the plaintiffs than was U.S. law."

It's likely that a court in Indonesia might provide lower damages than a U.S. court.

In the meantime, with this potential change of venue providing some leverage for Boeing, there is a stay on liability claims in the Lion Air case. They won't move forward, to allow settlement talks with the crash families.

Marks said that for these families, he's "pursuing an aggressive, fast-paced settlement track."

Perspective on Boeing's donation

The 737 MAX fleet has been grounded worldwide since days after the second crash in March, creating a crisis of confidence for Boeing and upending plans by dozens of its airline customers worldwide.

To put the $100 million donation Boeing has offered in perspective: In the 1994 crash of a USAir Boeing 737 near Pittsburgh that killed 132 people due to a rudder malfunction, settlements with the families of individuals killed ranged from $6 million to as high as $25 million. That money was paid out by insurers for Boeing and USAir.

Inflation over the ensuing 25 years would boost the expected figure today, though it's also likely that actuarial analyses will pay lower amounts to families in developing countries compared to higher-paid Americans. Still, it's not unreasonable to imagine that Boeing or its insurers may have to pay upward of $3 billion to the relatives of the 346 victims.

This excludes compensation to airline customers and suppliers affected by the grounding of the aircraft.

Last year Boeing spent a total of $244 million in charitable giving, divided mostly between programs to support military veterans, efforts in STEM education and general support for arts and social services in the communities where it has a presence.

At the same time, Boeing returned vastly larger sums to investors in the company.

Last year, Boeing plowed $9 billion into share buybacks to boost the stock price, doled out an additional $3.9 billion in dividends to shareholders and still came out with a net profit of $10.5 billion.

The Boeing board in December authorized a further $20 billion in share buybacks for 2019 and 2020.

Boeing gave no details Wednesday about how the $100 million will be apportioned or used, saying it will release additional information soon.

It also said company employees can contribute to the fund through Boeing's regular process for employee charitable donations, and those donations made through Dec. 31 will be matched by the company.

In a statement Wednesday accompanying the news, Boeing Chairman and CEO Dennis Muilenburg reiterated the company's regrets over the tragedies.

"We at Boeing are sorry for the tragic loss of lives in both of these accidents and these lives lost will continue to weigh heavily on our hearts and on our minds for years to come. The families and loved ones of those on board have our deepest sympathies, and we hope this initial outreach can help bring them comfort," he said.

"We know every person who steps aboard one of our airplanes places their trust in us. We are focused on re-earning that trust and confidence from our customers and the flying public in the months ahead."

This story has been updated. An earlier version quoted a statement by parents of a crash victim with an incorrect calculation comparing Boeing's proposed share buyback to the fund announced Wednesday.

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