April 9, 2019 10:15 pm

Boeing sued by shareholders alleging company hid 737 MAX safety flaws

WATCH: Boeing faces another lawsuit in relation to Ethiopian Airlines crash

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Boeing Co‘s legal troubles grew on Tuesday as a new lawsuit accused the company of defrauding shareholders by concealing safety deficiencies in its 737 MAX planes before two fatal crashes led to their worldwide grounding.

The proposed class action filed in Chicago federal court seeks damages for alleged securities fraud violations, after Boeing’s market value tumbled by $34 billion within two weeks of the March 10 crash of an Ethiopian Airlines 737 MAX.

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Chief Executive Dennis Muilenburg and Chief Financial Officer Gregory Smith were also named as defendants.

READ MORE: Canadian airlines say it’s too early to speculate on future of Boeing 737 MAX 8 aircraft

Boeing spokesman Charles Bickers had no immediate comment.

According to the complaint, Boeing “effectively put profitability and growth ahead of airplane safety and honesty” by rushing the 737 MAX to market to compete with Airbus SE , while leaving out “extra” or “optional” features designed to prevent the Ethiopian Airlines and Lion Air crashes.

It also said Boeing’s statements about its growth prospects and the 737 MAX were undermined by its alleged conflict of interest from retaining broad authority from federal regulators to assess the plane’s safety.

WATCH: Boeing faces inquiries, lawsuits amid probes into deadly crashes

Richard Seeks, the lead plaintiff, said Boeing’s compromises began to emerge after the Ethiopian Airlines crash killed all 157 onboard, five months after the Lion Air crash killed 189.

Seeks said he bought 300 Boeing shares in early March, and sold them at a loss within the last two weeks. The lawsuit seeks damages for Boeing stock investors from Jan. 8 to March 21.

Shareholders often file lawsuits accusing companies of securities fraud for concealing material negative information that causes the stock price to decline upon becoming public.

READ MORE: Boeing says new software successfully tested on 737 MAX flight

Chicago-based Boeing faces many other lawsuits over the crashes, including by victims’ families and by participants in its employee retirement plans.

Boeing said on Tuesday that aircraft orders in the first quarter fell to 95 from 180 a year earlier, with no orders for the 737 MAX following the worldwide grounding.

WATCH: Boeing ‘sorry for pain’ caused by Ethiopian Airlines crash

On April 5, it said it planned to cut monthly 737 production to 42 planes from 52, and was making progress on a 737 MAX software update to prevent further accidents.

The case is Seeks v Boeing Co et al, U.S. District Court, Northern District of Illinois, No. 19-02394.

© 2019 Reuters

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