May 15 (Reuters) - The U.S. Justice Department said

Boeing ( BA ) breached its obligations under a 2021 agreement

that kept the planemaker from criminal prosecution following

fatal 737 MAX crashes in 2018 and 2019 that killed 346 people.

The finding raises the prospect of Boeing ( BA ) facing prosecution

it had previously avoided, which could result in fresh penalties

and deepen an ongoing corporate crisis that has already resulted

in a management shakeup and government investigations.

Boeing ( BA ) failed to "design, implement, and enforce a

compliance and ethics program" to prevent violations of U.S.

fraud laws, the Justice Department said in a letter to a Texas

judge contained in a court filing late on Tuesday.

Boeing ( BA ) did not immediately respond to a request for comment

on Wednesday.

WHAT IS THE 2021 AGREEMENT?

Boeing ( BA ) in January 2021 agreed with the Justice Department to

pay $2.5 billion to resolve a criminal investigation into the

company's conduct surrounding the fatal crashes. The agreement

included money to compensate victims' relatives and required

Boeing ( BA ) to overhaul its compliance practices.

The deal, known as a deferred prosecution agreement, gave

the U.S. planemaker a way to avoid being prosecuted on a charge

of conspiring to defraud the U.S. Federal Aviation

Administration. Prosecutors agreed to ask a court to dismiss the

fraud charge if they determined Boeing ( BA ) complied with the

agreement over a three-year period.

The agreement was set to expire on Jan. 7, 2024. Two days

before that, a panel blew off a new Boeing 737 MAX 9 jet during

an Alaska Airlines flight.

WHAT COULD AUTHORITIES DO?

The Justice Department determination exposes Boeing ( BA ) to

potential criminal prosecution over the crashes which could

carry steep financial penalties and tougher oversight, widening

the corporate crisis stemming from the January blowout.

Prosecutors could extend the 2021 settlement for another

year or push for oversight by a court-appointed monitor, a

costly change from the previous agreement that allowed Boeing ( BA ) to

oversee its own changes.

The Justice Department could also push for additional fines

or for the company to plead guilty. That could affect Boeing's ( BA )

ability to secure government contracts, according to a Reuters

review of prosecutors' actions following findings that companies

violated other similar agreements.

However, the Justice Department said in the court filing in

Texas that officials will consider steps the planemaker has

taken to address and remediate violation of the pact before

determining how to proceed.

WHAT IS NEXT?

Boeing ( BA ) has to respond to the Justice Department by June 13.

Boeing ( BA ) said on Tuesday night it believes it honored the terms of

the agreement. Officials are expected to decide whether to

prosecute Boeing ( BA ) by July 7.

Prosecutors are set to meet with family members of the

victims of the previous fatal crashes and their lawyers on May

31 to discuss their decision, according to correspondence

Reuters reviewed.

Any decision would be closely watched by investors at a time

when Boeing ( BA ) is trying to protect its investment grade rating.

The planemaker is holding talks to buy supplier Spirit

AeroSystems ( SPR ) and plans to ramp up now slumping production

of its strong-selling 737 MAX in the back half of the year.

A fine comparable to the $2.5 billion penalty in 2021 "would

certainly put pressure" on Boeing's ( BA ) rating, said Ben Tsocanos,

airlines director of S&P Global Ratings. "The extent would

depend on timing, funding and Boeing's ( BA ) circumstances, including

how much progress it has made on a MAX recovery, whether it's

reached a deal to buy Spirit and how it's funding it."