Boeing Shareholder Lawsuit Accuses Company Of Misleading Investors About 737 Max Jets
CHICAGO (CBS/AP) — A Boeing shareholder is suing the aerospace giant, claiming the company defrauded investors by not disclosing the safety issues of its now-grounded 737 Max aircraft.
A federal lawsuit filed in Chicago accuses Boeing of putting profitability ahead of honesty. The lawsuit seeks damages after Boeing's stock lost about 13 percent of its value, following the deadly Ethiopian Airlines crash last month.
Shareholder Richard Seeks argues that Boeing should have told investors about safety problems with its best-selling plane after the fatal crash of a Lion Air flight in October.
Instead, it pushed the stock up to artificial highs by speaking optimistically about future sales before a second fatal crash in March sent shares tumbling, he says.
The federal suit also named Boeing CEO Dennis Muilenburg and the chief financial officer, Gregory Smith, as defendants.
The company misled investors "by touting its growth prospects and profitability, raising guidance, and maintaining that the Boeing 737 MAX was the safest airplane to fly the skies," the lawsuit alleges. By doing so, investors bought shares at "artificially inflated prices."
The suit filed in U.S. District Court for the Northern District of Illinois seeks class action status for all Boeing shareholders who bought stock between January 8 and March 21.
Boeing did not immediately respond to a request for comment.
The company has been named as a defendant in growing number of suits filed by families of passengers killed in a Lion Air crash off the coast of Indonesia on October 29 and an Ethiopian Airlines crash on March 10. All 346 aboard the two flights died.
Its stock hit $440 early last month, then fell to $362 after the Ethiopian Airlines crash. The stock was at $369 in mid-afternoon trading Wednesday.
Boeing announced that it is making changes to a flight-control system implicated in both crashes. It has vowed to a software fix to get the planes back in the air since a worldwide grounding last month.
The company is also promising that it would provide airlines with certain safety features previously offered to them as options and that it would provide additional training for Max pilots.
The lawsuit said that Boeing should have told investors that the safety features were optional on the Max jets it sold.
It also alleged that the company hid from investors that the U.S. Federal Aviation Administration had given it authority to help certify that the Max plane was safe, along with allowing the company to green-light a flight-control system involved in the two crashes.
The practice by the FAA of delegating safety checks to manufactures has come under fire by Congressional investigators since the crashes. The company is also facing probes by the U.S. Justice Department and the Transportation Department's inspector general.
(© Copyright 2019 CBS Broadcasting Inc. All Rights Reserved. The Associated Press contributed to this report.)