July 1 (Reuters) - The U.S. Justice Department will

criminally charge Boeing ( BA ) with fraud over two fatal

crashes and ask the planemaker to plead guilty or face a trial,

people familiar with the matter said on Sunday.

Boeing ( BA ) will have until the end of the week to respond to an

offer of a plea deal from the Justice Department, the sources

said. Such an agreement would allow the company to escape a

courtroom battle with federal prosecutors. But it could still

complicate the company's efforts to overcome an ongoing crisis

sparked by the Jan. 5 mid-flight panel blowout on an Alaska

Airlines-operated flight.

The proposed deal follows a Justice Department finding in May

that Boeing ( BA ) breached a 2021 agreement that had shielded it from

prosecution over fatal crashes in 2018 and 2019 that killed 346

people.

WHAT WAS THE ORIGINAL AGREEMENT?

The Justice Department in 2021 agreed to hold off

prosecuting Boeing ( BA ) and ultimately ask a judge to dismiss a

charge of conspiring to defraud the U.S. Federal Aviation

Administration (FAA) so long as the company abided by the deal's

terms over a three-year period.

Boeing ( BA ) agreed to overhaul compliance practices to prevent

violation of U.S. fraud laws and submit regular reports. But the

January mid-flight emergency occurred two days before the

agreement expired.

The planemaker has told prosecutors it disagrees with their

finding and has said it "honored the terms" of the settlement.

WHAT HAPPENS NEXT?

DOJ officials plan to give Boeing ( BA ) until the end of the week

to respond to the offer, which they will present as

nonnegotiable, Reuters reported. Should Boeing ( BA ) refuse,

prosecutors plan to take the company to trial.

A courtroom battle would carry risks for both sides.

Prosecutors would have to prove the planemaker conspired to

defraud the FAA about the flight system, after a jury in

2022 acquitted a Boeing ( BA ) pilot of related charges.

Still, companies are typically unlikely to risk going to

trial, both because a conviction threatens to result in harsher

penalties and lengthy court procedures could prolong uncertainty

surrounding the case for Boeing ( BA ) investors, suppliers and

employees.

WHAT WILL HAPPEN IF BOEING PLEADS GUILTY?

This may be the most risky aspect of the deal terms for Boeing ( BA ),

according to legal experts. A felony conviction could disrupt

Boeing's ( BA ) ability to secure government contracts such as those

with the U.S. military, which make up a significant portion of

its revenue.

"In the world of government contracting, an indictment or

finding of criminal liability can have a significant impact on a

company," said Franklin Turner, a government contracts lawyer at

McCarter & English.

Boeing ( BA ) could seek waivers from government departments and

agencies to continue contracting with them. Some previous

Justice Department settlements have provided details on how

officials should address the issue. It remains unclear to what

extent the proposed Boeing ( BA ) plea deal does.

If the plea offer does not address it, government officials

at each department or agency would have to decide whether

Boeing ( BA ), as a convicted felon, is entitled to a waiver, said

Vikramaditya Khanna, a law professor at University of

Michigan.

WOULD THERE BE FINANCIAL PENALTIES FOR BOEING?

The proposed agreement includes a $487.2 million financial

penalty, about half of which Boeing ( BA ) would need to pay as the

government would credit it for previous penalties.

Boeing ( BA ) would likely be forced to pay restitution, an amount

to be decided by a judge. The company already paid $2.5 billion

in penalties and restitution in 2021 in connection with the

original conspiracy charge, which included a criminal penalty

and compensation for customers and relatives of crash

victims.

The plea offer includes putting Boeing ( BA ) on probation for

three years and requiring its board to meet with victims' family

members, Reuters reported.

IF A FEDERAL MONITOR IS APPOINTED, WHO WOULD IT BE, AND HOW

WOULD THAT BE DETERMINED?

The proposed plea deal includes the appointment of an

independent monitor to audit Boeing's ( BA ) safely and compliance

practices for three years.

The Justice Department under President Joe Biden has renewed the

use of corporate monitors in its deals with companies to resolve

charges of misconduct. The practice had fallen out of favor

under the previous administration.

Companies typically fight against these terms. The outside

firms, which are selected by the DOJ, act as the government's

eyes and ears. The company foots the bill.

FUTURE RISKS

The plea would not resolve or provide immunity to the

company for any other conduct, including the Jan. 5 incident.