By Mike Spector, David Shepardson, Allison Lampert and Chris Prentice

NEW YORK/WASHINGTON (Reuters) -Boeing has reached a tentative nonprosecution agreement with the U.S. Department of Justice in a fraud case stemming from two fatal 737 MAX plane crashes that killed 346 people, people familiar with the matter said.

The agreement would forestall a June 23 trial date the planemaker faces on a charge it misled U.S. regulators about a crucial flight control system on the 737 MAX, its strongest-selling jet.

The agreement would allow Boeing to avoid being branded a convicted felon and be a blow to families who lost relatives in the crashes and had pressed prosecutors to take the U.S. planemaker to trial.

A felony conviction also could have threatened Boeing's ability to secure lucrative government contracts with the likes of the U.S. Defense Department and NASA, although it could have sought waivers.

Boeing had no immediate comment while the DOJ declined to comment.

Boeing in July had agreed to plead guilty to a criminal fraud conspiracy charge after the two fatal 737 MAX crashes in Indonesia and Ethiopia spanning 2018 and 2019, and to pay a fine of up to $487.2 million.

But Boeing has no longer agreed to plead guilty in the case, prosecutors told family members of crash victims during a Friday meeting, the sources said. The company's posture changed after a judge rejected a previous plea agreement in December, prosecutors told the family members.

DOJ officials are still weighing whether to proceed with a nonprosecution agreement or take Boeing to trial, a DOJ official said during the meeting. No final decision has been made, and Boeing and DOJ officials have not yet exchanged papers to negotiate final details of any nonprosecution agreement, the official told family members.

Nevertheless, Boeing has become emboldened to litigate the case since a judge tossed the previous plea deal and the DOJ has concluded there is "meaningful downside risk" to proceeding with a trial, a prosecutor said during Friday's meeting.

U.S. District Judge Reed O'Connor's decision to reject Boeing's previous plea agreement prolonged the case into the incoming Trump administration, which has overhauled the Justice Department. Boeing agreed to the initial plea deal during the final months of the Biden administration.

Paul Cassell, a lawyer for the families, said in a statement the government was intent on dropping the prosecution, saying "they conveyed their preconceived idea that Boeing should be allowed to escape any real consequences for its deadly lies."

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Another lawyer representing family members who attended the meeting, Erin Applebaum, said the DOJ's "scripted presentation made it clear that the outcome has already been decided."

The Justice Department said that Boeing would be asked to pay an additional $444.5 million into a crash victims’ fund that would be divided evenly per crash victim, lawyers for the families said, on top of $500 million Boeing paid in 2021.

Nadia Milleron, who lost her daughter in one of the Boeing plane crashes in 2019, told Reuters she questioned how the DOJ, and Attorney General Pam Bondi, could justify cutting a deal with a repeat offender.

In December, Judge O'Connor in Texas rejected Boeing's previous plea agreement in the case, faulting a diversity and inclusion provision in the deal related to the selection of an independent monitor. He had also said in 2023 that "Boeing's crime may properly be considered the deadliest corporate crime in U.S. history."

Boeing has faced enhanced scrutiny from the Federal Aviation Administration since January 2024, when a new MAX 9 missing four key bolts suffered a mid-air emergency losing a door plug. The FAA has capped production at 38 planes per month.

On Wednesday, Boeing CEO Kelly Ortberg appeared with President Donald Trump in Qatar to announce the planemaker had landed its biggest deal for widebody airplanes when state carrier Qatar Airways placed firm orders for 160 jetliners during Trump's visit to the Gulf Arab country.

The current discussions stem from a series of DOJ decisions spanning presidential administrations.

DOJ officials last year found Boeing had violated a 2021 agreement, reached during the Trump administration's final days, that had shielded the planemaker from prosecution.

That conclusion followed the January 2024 in-flight emergency during an Alaska Airlines' flight. As a result, DOJ officials decided to reopen the older fatal crashes case and negotiate a plea agreement with Boeing.

(Reporting by Mike Spector in New York, David Shepardson and Christine Prentice in Washington, Allison Lampert in Montreal; Editing by Daniel Wallis and Chizu Nomiyama)

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