A guilty plea is Boeing’s best option to resolve its 737 MAX troubles

The world’s largest aerospace company has no good option now that prosecutors have decided to revoke its corporate probation over a crime that preceded the first of two fatal 737 MAX crashes more than five years ago. Boeing admitted in 2021 that it misled air-safety regulators about an aspect of the 737 MAX that was implicated in the disasters, which killed 346 people.

Pleading guilty would be a reputational stain, but it might be the company’s best strategy. It likely would close the book on Boeing’s criminal liability.

Going to trial carries more risk. Prosecutors could introduce evidence regarding other alleged acts of wrongdoing to show why they tore up the deal Boeing received in 2021.

“You have the equivalent of a taped confession," said Robert Luskin, a partner at Paul Hastings who defends high-profile corporate clients in government investigations. “An acquittal here is not realistic."

Boeing admitted that two former employees defrauded the Federal Aviation Administration by misleading it about an antistall feature on the 737 MAX. Instead of facing an indictment, the company received a deferred-prosecution agreement, a form of corporate probation.

As part of the deal, it paid $2.5 billion, including a $243.6 million criminal fine and $500 million, to compensate the families of deceased passengers.

Companies usually serve a probationary period and then have the charges dismissed. But Boeing’s case has been anything but typical.

The families of those who perished in the crashes were outraged by Boeing’s original sentence and the lack of charges against executives. They pushed a federal court in Fort Worth, Texas, to redo the agreement or scrap it. A series of legal gaffes and stumbles—involving both the government and the company—aided their cause and revived the criminal case.

The Justice Department said in May that Boeing failed to comply with a core requirement of its deferred-prosecution agreement: maintaining an effective compliance program. That allowed prosecutors to void the earlier deal.

Authorities now hold the trump card. Boeing’s admissions can be used against it at trial. The statements “establish beyond a reasonable doubt the charge set forth," the company acknowledged.

Boeing has a week to decide how to respond to the Justice Department’s demand that it plead guilty.  A company spokeswoman declined to comment.

Prosecutors have told the families that, under a guilty plea, Boeing would pay an additional $243.6 million fine—bringing the total criminal penalty to $487 million—and would have to accept an independent compliance monitor for three years.

An outside law firm or consulting company is typically hired as a monitor, which reports concerns to the Justice Department or a court. Big companies have a strong aversion to monitors, Luskin said, because the overseers have the “ability to roam freely in the company, look at anything and talk to anyone and examine whatever they want."

“That makes senior management’s blood run cold," he said.

Companies with felony convictions face the prospect of being suspended or barred as military contractors, though they can seek a waiver.

Paul Cassell, an attorney for the victims’ families, said the company’s best option is to plead guilty, even though he argues the consequences aren’t severe enough. The families oppose a plea that doesn’t say Boeing caused the passengers’ deaths, he said. The fine Boeing paid was a low-ball number that doesn’t recognize the families’ losses, said Cassell, who has told prosecutors the maximum possible fine should be $24.7 billion.

“I think it will take Boeing somewhere in between three and four seconds to decide to take this deal, because it is such a good deal for them," Cassell said.

The families think the guilty plea’s terms are too lenient and will oppose it, Cassell said.

Boeing investors appear so far to be unmoved by Boeing’s latest legal troubles. Its share price rose Monday, the day after prosecutors’ guilty plea demand became public and the company said it would buy Spirit Aerosystems, a fuselage supplier, for $4.7 billion.

Boeing might be on the hook for additional restitution to the crash victims’ families if it pleads guilty. Courts are permitted to order restitution to victims when a defendant is convicted of a crime. The Justice Department has told the families it wouldn’t support or oppose restitution.

Boeing has said it lived up to its requirements under the deferred-prosecution agreement. If Boeing opts to fight the charge, it could try to convince U.S. District Judge Reed O’Connor that prosecutors nullified the agreement without adequately showing why its compliance program fell short. Such a strategy is a long shot that comes with its own risks, attorneys said. Probationary settlements give prosecutors unilateral authority to decide if a company complied with its deal.

Boeing could add to its problems by forcing the government to go to trial, attorneys said, because prosecutors would have the opportunity to file new charges based on other alleged acts of wrongdoing they might have found.

Prosecutors are already looking into a separate incident in which a fuselage panel blew off a 737 MAX that Alaska Airlines was operating. And Chief Executive David Calhoun acknowledged in Senate testimony last month that Boeing is responsible for the 737 MAX crashes and that whistleblowers inside the company sometimes face blowback for pointing out problems.

Calhoun’s own signature is on the agreement in which Boeing admitted its misconduct tied to the 737 MAX.

“There is no defense," Cassell said of the company’s next move. “There is nothing to mull over."

Write to Dave Michaels at dave.michaels@wsj.com