*

Boeing's ( BA ) planned guilty plea could impact its ability to

secure

government contracts

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Boeing ( BA ) to pay $243.6 million fine, invest $455 million in

safety

and compliance

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Families of crash victims oppose plea deal, call for

public

trial

By David Shepardson

WASHINGTON, July 8 (Reuters) - Boeing ( BA ) is in talks with

the U.S. Defense Department over how the planemaker's planned

guilty plea could affect its extensive government contracts, a

person briefed on the matter said.

Late on Sunday, the Justice Department said in a court filing

that Boeing ( BA ) had agreed to plead guilty to a criminal fraud

conspiracy charge to resolve an investigation linked to two 737

MAX fatal crashes in 2018 and 2019 that killed 346 people.

Boeing ( BA ) and the Defense Department did not immediately

comment on Monday.

Boeing ( BA ) shares, which were up more than 3% in early trading,

pared gains to trade up 0.6% at $185.97 on Monday afternoon.

A guilty plea potentially threatens the company's ability to

secure lucrative government contracts with the likes of the U.S

Defense Department and NASA. The final details of the plea deal

are expected to be filed by July 19.

Boeing's ( BA ) defense and space unit is vital to its business,

with $7 billion in first-quarter sales, up 6% from a year ago.

Boeing ( BA ) in its annual report said U.S. government contracts

represented 37% of its revenue last year including foreign

military sales. A government report said Boeing ( BA ) had $14.8

billion in Pentagon contracts in 2022.

Still, the financial costs tied to the plea appeared

"manageable relative to the company's scale and overall

obligations," said Ben Tsocanos, airlines director at S&P Global

Ratings.

"We expect that Boeing ( BA ) will likely continue to be a key

supplier of defense and space products following the guilty

plea," he said.

As part of the plea deal, Boeing ( BA ) will pay a criminal fine of

$243.6 million. Boeing ( BA ) has also agreed to invest at least $455

million over the next three years to strengthen its safety and

compliance programs, have the Justice Department appoint a

third-party monitor to oversee the firm's compliance, and to

make annual reports to the Department of Justice.

On Monday, the Justice Department opposed a bid by the

families of those killed to force the government to immediately

appoint a monitor that would oversee Boeing ( BA ) for five years. DOJ

said it generally takes "a number of months to identify a

qualified slate of candidates, vet them, and make a considered

choice."

Family members intend to appear at a future hearing to

object to the plea deal that would require Boeing ( BA ) to admit to

making misstatements to the Federal Aviation Administration.

"Through crafty lawyering between Boeing ( BA ) and DOJ, the deadly

consequences of Boeing's ( BA ) crime are being hidden," said Paul

Cassell, an attorney for the families. He called for "a public

trial, so that all the facts surrounding the case will be aired

in a fair and open forum before a jury."

U.S. District Judge Reed O'Connor, who will decide whether

to accept the plea, previously ordered Boeing ( BA ) publicly arraigned

on the charge last year.

Boeing ( BA ) is set to plead guilty to making knowingly false

representations to the FAA about having expanded a key software

feature used on the MAX to operate at low speeds that was tied

to both fatal crashes.

In 2023, O'Connor leveled harsh criticism at Boeing ( BA ), citing

what he called the planemaker's "egregious criminal conduct" and

adding, "Boeing's ( BA ) crime may properly be considered the

deadliest corporate crime in U.S. history."

O'Connor said last year he was limited in what actions he

could take after families asked him to tear up the deferred

prosecution agreement. "Had Congress vested this court with

sweeping authority to ensure that justice is done in a case like

this one, it would not hesitate," he wrote.

U.S. Senator Tammy Duckworth said on Monday that despite the

expected guilty plea, "regardless of the DOJ's efforts, Congress

must not let up on its own oversight of both Boeing ( BA ) and the FAA,

and that is something I plan to continue to pursue."

Boeing's ( BA ) bonds were trading higher Monday and demand for

them had increased. The credit spreads, or the premium companies

pay over Treasuries, on Boeing's ( BA ) bonds were trading slightly

tighter than their levels last week, according to data from

BondCliq which tracks secondary trading of corporate bonds.