Boeing shareholder files class-action lawsuit over 737 Max safety risks
A Boeing shareholder has filed a class-action lawsuit accusing the Chicago-based company of covering up safety problems with its 737 Max, the commercial jet at the center of two crashes that killed 346 people.
In court documents filed in the U.S. District Court for the Northern District of IllinoisTuesday, investor Richard Seeks claims the plane maker "effectively put profitability and growth ahead of airplane safety and honesty." The suit, which seeks damages for alleged securities fraud violations, said Boeing's market value plunged by nearly $20 billion after an Ethiopian Airlines jet crashed shortly after take off on March 10, killing all 157 on board.
The crash was the second in five months involving the same Boeing model. On Oct. 29, Lion Air Flight 610 went down off Indonesia, killing all 189 passengers and crew members.
Investigators have zeroed in on a new automated anti-stall system known as MCAS as a possible cause in both incidents. A preliminary report on the Ethiopian Airlines crash indicated that pilots struggled to control the MCAS before the crash.
Last week, Boeing chief executive Dennis Muilenburg said it was "apparent" that MCAS had been activated in both crashes after sensors fed the system erroneous information.
The lawsuit is one in a growing list of challenges for the company. Several lawsuits have been brought by victims' families who allege the company failed to inform pilots about the dangers and risks of MCAS and that it was negligent. The company recently said it would decrease production of the 737 Max from 52 aircraft per month to 42. And aviation officials around the world have continued to ground the aircraft.
Boeing did not immediately respond to a request for comment.
Seeks claims that Boeing's "false and misleading statements" about the companies' operations, its growth and its safety record inflated the company's market value. "Boeing, and the passenger airlines, also hid the fact that Boeing withheld necessary safety features from the Boeing 737 MAX unless airlines purchased them as 'extras' or 'optional features' in order to keep the price down" to compete with Airbus, the lawsuit states.
Seeks said that in early March he bought 300 Boeing shares and sold them weeks later, losing more than $14,000 in the process. The lawsuit seeks damages for investors who purchased Boeing shares from Jan. 8 to March 21, plus interest, and attorneys fees.
Muilenburg, the CEO, and Chief Financial Officer Gregory Smith are also named in the lawsuit.
Seeks' attorneys did not immediately respond to a request for comment.