This is Bloomberg Law with June Brusso from Bloomberg Radio. Boeing is under fire, facing investigations by the Federal Aviation Administration, the Justice Department, and the National Transportation Safety Board. What's more, Justice could tear up a controversial twenty twenty one deferred prosecution agreement that allowed Boeing to escape criminal charges over crashes in twenty eighteen and twenty nineteen that killed three
hundred and forty six people. And the testimony before Congress two weeks ago of whistleblower Sam Salapor, a Boeing engineer, could illustrate a reason for the Justice Department to tear up that deferred prosecution agreement.
The NTSB chair reiterated Congress last week that Boeing has said there are no records documenting the removal of the last airline store. I'm not going to sugarcoat this. This is a criminal cover up. Records do in fact exist. I know this because I've personally passed them to the FBI.
Joining me, is Bloomberg Legal reporter Greg Farrell. Greg tell us about the deferred prosecution agreement with Boeing.
This deferred prosecution agreement has turned out to be controversial insofar as it was struck in the winning days of the Trump administration, and in fact it was signed on January sixth, twenty twenty one. You know, most news covers that day focused on other events in Washington, DC rather
than on the Boeing TPA. It got almost no coverage at the time, but essentially following two horrific crashes that took the lives of three hundred and forty six people and a two year Justice Department investigation, ended up with a fine at the low end of two hundred and forty three million dollars and acknowledgment that Boeing didn't cooperate with the investigation for several months at the beginning. So they got a good deal despite not cooperating very much.
They got a deferred prosecution agreement instead of an actual criminal charge.
The families of the people that are killed, were they not happy about that Boeing agreement.
Absolutely. First of all, they were blindsided by this settlement. They suddenly just announced, you know, on January seventh. They had asked the Justice Department on several occasions, you know, throughout twenty nineteen and twenty twenty. You know, if they're investigating Boeing and how's the criminal investigation going. And we're told in twenty twenty that there was no criminal investigation, so you know, they were not happy with that, but they sort of had to deal with that and move on.
And then suddenly to find out that there was a criminal investigation that they weren't informed of that it ended up being very favorable to Boeing, and they weren't even consulted. They were just shocked and blindsided by that. That really
like there was sault in the wound. And then the charge that to which Boeing acknowledged its misconduct but didn't have to plead guilty too as of then was defrauding the US government by being dishonest with the FAA over the need for extra training because of this this new software program that would be an automated steering system under certain circumstances, and eventually, you know, it was blamed for
you know, both of these failed crashes. The government focused only on misleading the FAA, But what they did not pay any attention to was the fact that boeinghead insisted that the plane was safe even after the first crash. The material has emerged in various congressional investigations that the top executives were aware and trying to fix you a possible problem with the steering during a period of time, but the Justice Department did not bring any action against
senior executives at all. Instead, the only criminal charge for an individual was this mid level technical pilot, a guy named Mark Folkner, who was tried and acquitted in like two hours. It was clearly viewed as a scapegoat by the jury and even the FAA witnesses who were called to testify, the ones who were deceived that felt the same thing, even though this guy is just being set
up by the company. That's the sign of a weak DPA is that you're blaming the death of three forty six people, two horrific crashes on this controversial system that was not disclosed through the FA, all on one guy, as if no one above him knew about this.
So, you know, we all know about that recent Boeing mid air blowout of the door plug, so bad luck for Boeing. That was just days before this deferred prosecution agreement, and we.
Were the first to report that that it came just two days before the three year term expired and shortly thereafter, the Justice Department did start looking into that two parts of criminal investigation into any whether any laws were broken in terms of how this door plug came off, did going again hide records or not disclosed things they should have disclosed, And you know, concurrently with that, part of the terms of the DPA is that you've got to
be good for three years, improve your disclosure system so that you never deceive regulators again and don't commit any ponies. And if it turns out that there was a felony associated some evidence of criminal activity in either hiding or concealing, are not doing the proper work or disclosing it about the door plug? And that would be adequate grounds for the government to tear up the DPA.
And there was congressional testimony that Boeing was not cooperating and wouldn't give over the list of people who'd worked on the door and said records had apparently disappeared, and all this was hampering the government's investigation into the incident.
There should be like, you know, some kind of a work review exactly over who did what and who would the last people to look at the door plug, And there was a there was a gap or at least Boeing didn't have anything. And there was a whistleblower who testified in Congress, you know, like two weeks ago, saying that he was aware of paperwork and he had handed
it over to the FBI. So, yes, we have whistleblowers, current and former who stay pluggedn't no pun intended to what's going on at Boeing, you know, also calling attention to this stuff.
So the victims' families have certain rights under the crime victims' rights laws, and tell us about the attorney who's working for them on this deferred prosecution agreement.
Hey, former federal judge a laury named Paul Cassel, based in Utah took up the cause of trying to attack the DPA intervene in the district in Texas where this case was brought, and he was shot out Initially. The judge eventually recognized that the families were victims and that they were improperly shut out by the Just Department from
proper consultation before reaching this determination in the DPA. It doesn't mean that the victims get a veal power over what the prosecutors are going to decide, but it does force the government to make sure they keep victims' families surprised of what they're doing.
And the families of the victims had a meeting with the Justice Department last week.
Just from this time wants to do right by the victims in so far as to make sure they do not repeat the mistakes of three years ago. So the government they have six months to determine whether or not the company complied with the elements of the DPA, and six months from January seventh to July seventh. So as
that date is approaching, the family's gotten more concerned. The government decided to bring them in to let them know what was going on, also give them an opportunity if they had any evidence to indicate that Boeing had violated the terms of the DPA, they should bring it there. Although that's unrealistic. It's not up to the families to do an investigation. It's actually the Justice Department's job. But they did at least do what they did not do
four years ago and keep them apprized. They went a little further and gave them some information about how this is going to go down. They told the victims' families and their lawyers if they hadn't made a decision yet on what to do, whether not to tear up the DPA or withdraw the true charge that was lodged three
years ago. Because they haven't made that decision, they expect and hope to make it by the end of May early June, in other words, and they said that if they decide to withdraw the charge, the families will be the first to know. They won't have to learn about in the media the way they did three years ago. However, if they do decide to tare up the DPA, they want to give Boeing at least thirty days noticed so
they can appeal or argue against it, et cetera. So that was the message from the Justice Department to the families.
Last week you mentioned Paul Cassell. He said, we have no idea what the Justice Department will do, which leads us to believe they're still in bed with Boeing, and if they move to dismiss, we'll fight that motion vigorously. Do you really think they'll dismiss when there's this criminal investigation and other investigations into the Alaska air incident. I mean, it would be controversial if they let Boeing off the hook.
Right, So politically, the optics of this for the Justice Partment would not be good. If they determined that Boeing as in fact not violated any term of it, they would draw the charge. They might be able to justify that legally, but it will look bad. It'll just be another set of news cycles. At the same time, you should not bring a charge because you don't want to look bad. And clearly there's enough here because of this Alaska Air incident. The Alaska Air incident really did trigger
this investigation. I think if it weren't for that incident, that would be well on our way to a withdrawal. But I think it's clear that the government is taking this seriously. Paul. I think that's a default position because of what happened a few years ago and that the
Justice Department has been unhelpful to the families. But at the same time, it's not up to the Justice Department to show their cards, you know, and if we take them at their word that they haven't decided yet, right, it would be improper for them to show their card. So if the just Go Barnment does move to withdraw this charge, then Paul Cassell does plan to litigate it in the in Fort Worth. And this is far more legal detail than you know, most people want to know,
but there's precedent. There have been several decisions going up to the Supreme Court in recent years about judicial challenges to defer prosecution agreements. When just a deferred prosecution agreement, it's not legal until it comes in and then you know, you get a judge to sign off on it. And
most of the time judges are fine with it. But there have been a few cases, particularly in Washington, d C. Federal judges where they've challenged the government on why you give them, you know, these guys such a good deal. In other cases and one of them, the judge you know, didn't want to approve the DPA because he felt that the prosecutors were too lenient on this foreign company that
had you know, facilitated weapons transferred to Iran. And then it went to the Supreme Court and the Supreme Court decided that in a different prosecution agreement, is beyond the purview of the judicial branch of the government to question prosecutorial decisions by the executive branch unless there's some evidence of corruption or some wrongful conduct. But it's not up to the juici branch to decide, you know, this is
a bad deal, you should go redo it. So the default, particularly for this judge until now in Fort Worth, has been like, you know, even if I want to, my hands are tired. It can't do anything. However, the Fifth Circuit last year, you know, ruled on the Crime Victims Rights Act, et cetera, and allowed, in a message directly to the judge it's involved in this case, said that you only need to approve this if you think it's
in the public interest. In other words, if the government decides to withdraw the charge, then the Fifth Circuit gave the federal judge and Fort Worth the elbow room to decide whether or not that would be in the public interest.
So Fifth Circuit once again out on a limb.
Yes exactly. That's component of this. If the government does decide to basically withdraw the charge and bowen, can you go in peace after the events of five years ago, that needs to be approved by the judge and there'll be vigorous argument about it.
So we may find out by the first week of June, but certainly by July. Thanks so much, Greg. That's Bloomberg Legal Reporter Greg Ferrell coming up next on the Bloomberg Law Show. The EPA has some tough new power plant rules,
and there's sure to be litigation. This is Bloomberg. The Environmental Protection Agency has proposed new regulations that would force coal fired power plants to capture smoke stack emissions or shut down, the Biden administration's most ambitious effort yet to roll back planet warming pollution from the power sector, the nation's second largest contributor to climate change, environmental legal experts and advocates so the administration checked all the right boxes
to avoid the pitfalls that characterize the EPA's twenty twenty two defeat in the Supreme Court. But West Virginia's attorney general has already promised a lawsuit, and other Republican leaning states and industry groups are likely to follow, joining Me's environmental law expert Pat Parento, a professor at the Vermont Law and Graduate School. What do these new EPA rules do?
So, there are four of them, and they're all aimed at coal fired power plants, although one of them also includes gas fire plants. But three of the rules deal with conventional what I would call conventional regulation of coal plants. One of them deals with mercury emissions. It's closing a loophole for plants that burn lignite, which is the lowest grade of coal and the dirtiest three times more mercury emissions, which of course are neurotoxins dangerous to children and fish
and other things. And so the first rule just closes this loophole that exempted these lignite plants from regulation under the Clean Air Act. That's rule number one. Rule number two deals with toxic discharges from coal plants, which also include mercury, but in addition arsenic and some other toxic pollutants. And that rule is under the Clean Water Act, and it simply updates rules that should have been updated many
years ago. In fact, they were updated by Obama, but of course then they were repealed by Trump, and so now they're being reinstated by Biden. So the second rule toxic discharges from coal fired power plants. The third rule deals with the disposal of coal ash, which is also hazardous and contains heavy metals again, mercury, cadmium, selenium, lots
of nasty stuff. So the third rule is frankly just closing another loophole that didn't require cleanup of abandoned coal ash pits and ponds, and these are the things that sometimes fail and overflow. We had a huge disaster in two thousand and eight at the Kingston coal plant run by TVA in Tennessee. We had a more recent one in two thousand and eighteen where there was a spill of coal ash into the Dan River in North Carolina. So the third rule is just another closing of a
loophole requiring cleanup of these abandoned ash pits. The fourth rule is the big one and the one that's most controversial, and that's the rule that replaces the Clean Power Plan that Obama had adopted and the Supreme Court of course killed. First, the Supreme Court put a stay on the Clean Power
Plan so it never took effect. And secondly, it issued this infamous decision West Virginia versus EPA, which not only invalidated the Clean Power Plan, which, by the way, EPA had said it had no intention of reinstituting, it was moving on to a different approach. But nevertheless, the Supreme Court struck it down and adopted what we now know as the Major Question Doctrine. The fourth rule is called greenhouse Gas regulation of existing coal fired power plants and
new gas fired power plants. EPA's original proposal was to regulate both new and existing gas plants, but in the final rule, EPA opted not to regulate existing power plants. That's through an awful lot of criticism from the environmental community and from people concerned about climate change. But EPA is counting on dealing with existing gas plants. Should President Biden get a second term A big question mark, of course,
but that's what EPA decided. They're going to postpone dealing with existing gas plants to the future.
And pat Most people who listen to the show have heard about the Major Questions doctrine, but explain it for us.
It's a new way of interpreting agencies authority under statutes that aren't crystal clear, and that doctrine says, if a rule would have quote vast political and economic consequences, then Congress must have explicitly in the text of the law authorize EPA or any other agency to undertake that kind
of regulation. It means no deference to the agency's interpretation, regardless of policy considerations, regardless of the agency's expertise, regardless of the fact that Congress oftentimes delegates broad authority the agencies to implement incredibly complex laws like the Clean Air Act, dealing with incredibly difficult problems like the climate crisis climate disruption.
Regardless of all of that that the Supreme Court in the West Virginia case, the Court will decide, which means five members of the Court will decide what the law means and what the agency's authority is.
I've read that this new rule could require the power industry to install billions of dollars worth of emissions control technologies.
It's a complicated rule. It's staggered. Okay, So what the rule says. If you plan to close your coal plant by twenty thirty two, you don't have to do anything. If you plan to operate your coal plant beyond twenty thirty nine, you have to install carbon capture and sequestration technology CCS that will achieve ninety percent removal of the carbon by twenty thirty two. So you can see how
complicated this is. It's designed, you could say, to encourage owners of coal plants to retire them early, or if you want to take the pejorative, you can say it's forcing premature closure of coal plants. You see what I mean.
So it's not just future coal plants, then it's affecting coal plants today.
Oh yeah, it's existing. There will be no new coal plants. There haven't been for ten years. There won't ever be another new coal plant. That's not my prediction. That's the Energy and Information Agency of does as that there isn't going to be any more new coal plants. So this is all about and there are two hundred coal plants in the country, so this is all about existing coal plants.
So what's West Virginia and other Republican leaning states going to argue to get this rule shut down.
They're worried about closing the coal plants that exist now, and they have three arguments. One, they think that this is just a repeat of what happened in the West Virginia versus EPA case. And they're arguing that the major question doctrine means EPA doesn't have the authority to impose these kinds of high costs with the clear intent to
put coal out of business. That's number one. So they're going to try to get this case back before the Supreme Court and get the Supreme Court to rules that, oh, this is just like what we struck down before in West Virginia versus EPA. That's not true, and I can come back to that, but that's going to be their argument. The second argument they're going to make is that this technology you're talking about, this CCS carbon capture and sequestrations.
While it's true it has been demonstrated at a pilot level or a small scale level, it's not adequately demonstrated to scale up to a ninety percent removal rate in the timeframe. You're talking about complicated system. It requires capturing the emissions at the plant, liquefying them, putting them into a pipeline, and taking them to an area where you can inject the carbon into a formation that will hold
it basically forever. So it's this big, complex, very expensive system, and it's not been demonstrated to the point where coal plant operators can achieve it in the timeframe you've provided, even though the timeframe is lengthy. I mean, they have at least eight years to install these systems. But they're making an argument, we can't do it, we won't be able to do it, and your rule is simply going
to shut us down. You can't do that, and then the third thing they're arguing is that as you begin to force the closure of these coal plants, which are baseload plants that can operate even when the sun isn't shining and the wind isn't blowing to make up for the intermittency of renewable energy systems which are coming online more and more. If you take these base load plants out of the system, you're going to have reliability problems
big time. So the third big argument is you're going to destabilize our grid and you're going to cause people to have blackouts and interruptions in power service in many areas of the country. So those are their three big arguments.
So tell me why this Supreme Court and that West Virginia decision was six to three down ideological lines. Why wouldn't this Supreme Court agree with them? I mean, this is not the most environmentally friendly Supreme Court.
Oh that's true. And we won't know, of course, and listen until we see what the Supreme Court does with this.
But here's how the rule differs. The thing that troubled the Supreme Court and Chief Justice Roberts, who wrote the opinion in West Virginia, was that EPA was taking a system wide approach to regulating the power plant sector, and that it was forcing what it called generation shifting from fossil fuel based plants gas and coal to renewable sources wind and solar, and Justice Roberts felt that went too far.
That was an overreach Congress could not possibly have intended in the nineteen seventy Clean Air Act, which is what was being interpreted to give EPA that kind of broad energy policy authority. That's what bothered Justice Roberts. He thought the rule was unlike any rule EPA had ever adopted. That's arguable, but that's what he thought. Thought it was novel. He thought it was based on an obscure provision of the Clean Air Act Section one eleven, which isn't obscure
at all. It's been there from the beginning, and it was there for a very specific purpose. But nevertheless, he thought it was an obscure provision, and so he characterized this as Congress wouldn't hide an elephant in a mousehole. So that's the metaphor.
I remembered that hard you forget, right.
How could you forget? So that's the idea of this great, big authority with vast economic consequences hidden in this little mousehole of a provision. That's the way he viewed it. This time around, EPA has gone to great legs. I mean, there's one hundred pages, by the way in EPA's justification and explanation for this new rule talking about West Virginia, talking about how this rule differs from the Clean power Plant,
et cetera. And it really is different. This rule is a very traditional use of EPA authority to require technology based requirements to reduce emissions pausing public health and environmental damage. That's what CCS is. It's a technology, it's a system of technologies because it's capturing the emissions and it's putting them in this pipeline and taking them for disposal in a safe underground location. So it is a system in
that sense, but it's source specific. It isn't looking at the entire energy system as a whole, looking at the grid, the integrated grid as a whole, which EPA did do in the Clean Power Plant. So it's very much tailored to individual sources and it's telling them, if you install this technology, which we believe is commercially available. EPA is pointing the two plants that are currently operating and capturing
emissions at ninety percent rate. One of them, the Petra Nova plant in Texas, was out of operation for a few years, but it's back in operation and it is shown that it can capture ninety two percent actually of emissions. There's another one being built in North Dakota and so on. So EPA is saying, all we're doing here is what we've always done in implementing the Clean Air Act, requiring proven technology that will make your plants run cleaner and
protect public health and the environment. They've also built in safeguards for reliability. They've given these coal plant operators eight years to install ccs. That I mean eight years is a long time, right, So they've given them adequate time. EPA believes to install technology as I say, is being
installed and operated even now. Secondly, they've said, if there really is a problem with retiring a particular coal plant in a particular area of the country that threatens reliability, they're going to give that coal plant an extra year to meet its requirement. Plus, the Biden administration is investing billions of dollars in upgrading the grid and these two
there are two integrated grids in the United States. Texas has its own, but there are two grids that connect the United States together, and it is improving the operation of the grid system that we have, and it's adopting streamline procedures to expand the grid faster than it's been able to do. So my point is EPA is addressing each and every one of the contentions against the rule, and it's specifically addressing why this rule is not the same as the rule that the Supreme Court struck down
in West Virginia. Of course, we're going to have to wait to see how this all plays out in the litigation that will start very soon as soon as these rules are published in the Federal Register, which could occur later in May or perhaps June. Then the fund begins, Then the lawsuits get filed, and we'll see what happens after that.
Stay with me, Pat, coming up, We're going to continue this conversation, and this is Bloomberg. I've been talking to Professor Pat Parento of the Vermont Lawn Graduate School about the Environmental Protection Agencies proposed new rules for coal fired power plants. The major questions doctrine. They just sort of made that up out of whole cloth. And now it hangs over everything we talk about.
Yeah, it's based on some earlier cases that did acknowledge that where you have a rule, the source of this idea, people call it a doctrine. I would just call it an idea. But the source of this major question idea was an opinion by Justice O'Connor in Brown and Williamson Tobacco versus FDA. This is when FDA, for the first time in its history, decided to regulate cigarettes and even to suggest a band on cigarettes. And the Supreme Court
in that case said, wait a minute. You know cigarettes aren't identified in the Drug and Cosmetic Act, and FDA has never regulated cigarettes, and all of a sudden, now, out of the blue, you've decided to do that. Well, this is going to have tremendous implications, probably both good and bad, as we know, but certainly tremendous implications. So
we don't think Congress have that in mind. All right, So I wouldn't go so far as to say the major Question doctrine is made out of whole cloth, But certainly the way it was fashioned in the West Virginia case is unlike anything that had been done by the Supreme Court before this whole idea that you can completely disregard Congress's ability to delegate broad authority to an expert agency like EPA to deal with problems that Congress could not have foreseen, and that Congress could not have had
the expertise even to legislate about. That's new, And you're right. The doctrine, I mean, Justice Robertson in the West Virginia case said, this is an extraordinary doctrine or idea, meaning this shouldn't be a routine reason to reject an agency's interpretation. But what has happened, of course, in the lower courts is there's been an explosion of cases being brought based on the major question doctrine, many of which are succeeding.
And guess where the most successful cases are. They're in the Fifth Circuit Court of Appeals, which is the most conservative court in the land.
What a surprise, What a surprise.
And it's the court the industry and the Republican Attorneys General run to all the time to try to get decisions in their favor, and they've been successful in many cases.
The trick with the rule regulating power plant emissions is they have to go to the DC Circuit the law is clear that the DC Circuit has exclusive jurisdiction over all of the major rules under the Clean Air Act, and the DC Circuit I won't say they rubber stamp EPA because they don't, but the DC Circuit is very expert at evaluating these really high complex rules, and they have been more favorable to EPA's interpretation over the years
than any other circuit. That doesn't mean that the Supreme Court is going to adopt the DC circuits decision, No, far from it. But it does mean that at least at this first level of litigation, EPA is in the right court. If it's going to win this argument, it's in the right court to do so.
The EPA's enforcement activity has been accelerating. In December, the agency said it opened one hundred and ninety nine criminal investigations in twenty twenty three, a seventy percent increase over the previous year, and it concluded settlements in one thy seven hundred and eighty nine, which is one hundred and fifty over fiscal twenty twenty two. I mean, is there a reason why these are stepping up?
Well, several reasons. They're getting an awful lot of pressure to step them up. Number two, the Biden administration has put a lot more resources into EPA's environmental justice program to increase the level of attention on in four horsemen
in communities that are disproportionately affected. And I guess number three would be the election and the need for the Biden administration to show that it's really responding to what communities are demanding, not only in terms of environmental justice issues, but climate issues, environmental quality issues writ large. And obviously the president is involved in an incredible battle for re election.
This is a game of inches where thousands of votes are going to make the difference in these battleground states literally in terms of the electoral College, and Biden needs to turn out every single Democrat and certainly every single
environmentalist in the country the win. So he's one of the reasons I think we're seeing all these rules coming out and all this activity around enforcement and cleanup is partly because the administration has been committed to that from the beginning, but also because they realize they're in the fight of their life for re election. That's my best guess at.
It sounds like a good guest to me. Thanks so much, Pat. That's Professor Pat Parento of the Vermont Law and Graduate School. And that's it for this edition of the Bloomberg Law Podcast. Remember you can always get the latest legal news by subscribing and listening to the show on Apple Podcasts, Spotify, and at Bloomberg dot com, slash podcast, slash Law. I'm June Grosso and this is Bloomberg