*

DOJ's proposed plea deal includes $487.2 million penalty,

half

credited from previous settlement

*

Boeing ( BA ) may face three years of probation and independent

safety

audits

*

Victims' families informed of DOJ's decision before Boeing ( BA )

(Adds statement from victims' families in paragraphs 15-16)

By Mike Spector and Chris Prentice

June 30 (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,

two people familiar with the matter said on Sunday.

The Justice Department planned to formally offer a plea

agreement to Boeing ( BA ) later in the day, which includes a financial

penalty and imposition of an independent monitor to audit the

company's safety and compliance practices for three years, the

sources said.

Justice Department officials plan to give Boeing ( BA ) until the

end of the week to respond to the offer, which they will present

as nonnegotiable, the sources said. Should Boeing ( BA ) refuse to

plead guilty, prosecutors plan to take the company to trial,

they said.

Boeing ( BA ) and the Justice Department declined to comment.

Reuters was first to report the Justice Department's decision to

prosecute Boeing ( BA ) and seek a guilty plea.

The Justice Department decided to charge Boeing ( BA ) after

finding it violated a 2021 agreement that had shielded it from

prosecution over the fatal crashes involving 737 MAX jets. The

deadly crashes took place in 2018 and 2019, killing 346 people.

The decision to move toward criminally charging Boeing ( BA )

deepens an ongoing crisis engulfing the planemaker, exposing the

company to additional financial ramifications and tougher

government oversight.

A guilty plea could also carry implications for Boeing's ( BA )

ability to enter into government contracts such as those with

the U.S. military that make up a significant portion of its

revenue. Companies with felony convictions can receive waivers,

and it remained unclear to what extent the Justice Department's

proposed plea deal addresses the issue.

Justice Department officials revealed their decision to

victims' family members during a call earlier on Sunday. The

proposal would require Boeing ( BA ) to plead guilty to conspiring to

defraud the U.S. Federal Aviation Administration in connection

with the fatal crashes, the sources said.

The Justice Department's push for Boeing ( BA ) to plead guilty

follows a separate January in-flight blowout that exposed

continuing safety and quality issues at the planemaker.

A panel blew off a new Boeing 737 MAX 9 jet during a Jan. 5

Alaska Airlines flight, just two days before a 2021

deferred prosecution agreement with the Justice Department

expired.

That agreement had shielded Boeing ( BA ) from prosecution over the

2018 and 2019 fatal crashes. Boeing ( BA ) has previously said it

"honored the terms" of the settlement and formally told

prosecutors it disagrees with the finding that it violated the

agreement.

The proposed agreement also includes a $487.2 million

financial penalty, only half of which Boeing ( BA ) would be required

to pay, they added. That is because prosecutors are giving the

company credit for a payment it made as part of the previous

settlement related to the fatal crashes of the Lion Air and

Ethiopian Airlines flights. The penalty is the maximum legally

allowed for the charge.

Boeing ( BA ) could also likely be forced to pay restitution under

the proposal's terms, the amount of which will be at a judge's

discretion, the sources said. The offer also contemplates

subjecting Boeing ( BA ) to three years of probation, they said.

The plea deal would also require Boeing's ( BA ) board to meet with

victims' relatives, they said.

Victims' relatives expressed anger toward Justice Department

officials during the call, viewing the proposed plea deal as

failing to hold Boeing ( BA ) accountable for the fatal crashes, said

Erin Applebaum, one of the lawyers representing victims'

relatives. Family members wanted the company to face additional

charges and stiffer financial consequences, she said.

"The 737 MAX families vigorously oppose the shameful new

sweetheart deal between Boeing ( BA ) and the Department of Justice,"

said Applebaum. She called the proposed plea agreement's

financial penalty "negligible" and said victims' families will

oppose the deal in court.

The Justice Department declined to comment on the families'

reaction.

It is unusual for the Justice Department to inform other

interested parties of its plans before notifying the company in

its crosshairs, a third source said. But the Justice Department,

led by Attorney General Merrick Garland, has sought to change

its tack after facing backlash from the victims' families over

the original 2021 agreement. Victims' relatives found out about

the 2021 deal only after it had been negotiated.

U.S. lawmakers in June grilled Chief Executive Dave Calhoun

over Boeing's ( BA ) tarnished safety record. Lawyers for victims'

family members have cited criticism from Capitol Hill when

pressing the Justice Department to prosecute the planemaker and

impose a fine of up to $24.78 billion.

Boeing ( BA ) previously paid $2.5 billion as part of the deal with

prosecutors that granted the company immunity from criminal

prosecution over a fraud conspiracy charge related to the 737

MAX's flawed design.

Boeing ( BA ) had to abide by the terms of the deferred prosecution

agreement for a three-year period that ended on Jan. 7.

Prosecutors would then have been poised to ask a judge to

dismiss the fraud conspiracy charge. But in May, the Justice

Department found Boeing ( BA ) breached the agreement, exposing the

company to prosecution.