Alaska still faces potentially harsh findings by the National Transportation Safety Board in its investigation of the crash, as well as dozens of wrongful-death suits, but the U.S. attorney's decision lifts a threat that has been hanging over the airline.
The announcement came as Alaska agreed to pay about $500,000 to settle a libel suit brought by the company mechanic whose allegations triggered the criminal investigation in 1998.
Alaska also has dropped its longstanding appeal of a $44,000 civil penalty stemming from the allegations, allowing a finding by the Federal Aviation Administration (FAA) that the airline in 1998 put planes back in service before maintenance paperwork had been properly completed. The plane that crashed was not among them.
Alaska made no admissions under either settlement as it moved to resolve matters that have dogged it for three years.
Alaska's maintenance operations have been upgraded, and the airline says they bear little resemblance to the way it operated in 1998.
The U.S. attorney's statement came three years to the week after federal agents served a criminal search warrant on the Seattle-based airline.
"We have decided, based on the evidence collected in the course of the investigation, it would not be appropriate to bring criminal charges against Alaska Airlines at this time," office spokesman Matt Jacobs said late yesterday.
Jacobs said prosecutors would continue to monitor the safety board's investigation into the Flight 261 crash. All 88 passengers and crew died when the MD-83, en route from Puerto Vallarta, Mexico, to San Francisco and Seattle, plunged into the Pacific Ocean off Southern California on Jan. 31, 2000.
The safety board's report is not expected until mid- to late 2002.
It is unusual for federal prosecutors to talk about investigations in which no charges are filed, but Jacobs said the conclusions were disclosed to "serve the public." He said he couldn't discuss the reasons for the decision.
Alaska declined comment last night on the decision.
Its settlement with the whistle-blower, John Liotine, calls for him to leave the company by the end of this month.
Liotine, contacted at his home in Northern California, confirmed he had reached an agreement that will end his 12-year employment. He said he couldn't comment on the details.
Liotine's attorney, Rand Stephens, said the terms of the settlement were confidential.
A person familiar with the settlement, which was reached late last week, said Liotine would be paid about $500,000.
In a statement, Alaska said it has "resolved Mr. Liotine's lawsuit against Alaska. The terms of the settlement, which arises from Mr. Liotine's voluntary separation from Alaska Airlines, are confidential."
The suit alleged Alaska posted false statements about Liotine on a company Web site, including a news release that said the mechanic was "incorrect" when he recommended replacement of a part that failed in the crash of Alaska Flight 261.
In another news release issued after the crash, Alaska suggested Liotine went to federal authorities because he was passed over for promotion by two supervisors he accused of falsifying maintenance records.
Alaska also said that contrary to Liotine's assertions, he did not report the alleged irregularities to company officials first.
Liotine, a lead mechanic at Alaska's Oakland maintenance facility, went to the FAA in October 1998, alleging supervisors were signing off for work that hadn't been done or that they weren't authorized to approve.
The allegations led to a criminal investigation in which the FBI and other federal agents seized records from the company on Dec. 22, 1998.
Liotine later became a central figure in the crash investigation when it was revealed that in 1997 he had recommended replacement of the MD-83's jackscrew assembly, which controls up-and-down movements of the tail section's horizontal stabilizer.
Liotine based his decision on a wear test that found the mechanism barely within its acceptable limit.
Another mechanic called for new tests, which found the part well within its limits. The mechanism wasn't replaced, and investigators believe its failure was a key to the crash of Flight 261.
At the time of the crash, Liotine was on paid leave. Alaska had placed him on that status in August 1999, saying he had become disruptive to operations.
While criminal charges won't be pursued, Liotine's allegations prompted the FAA to propose the $44,000 civil penalty against Alaska for allowing two MD-80 aircraft to be flown more than 840 times without assurances maintenance had been properly completed. Neither plane was involved in an accident.
Alaska contested the fine and the findings until recently reaching the settlement with the FAA.
Liotine's allegations also led the FAA to revoke the mechanic's licenses of two Alaska supervisors; the license of a third supervisor was suspended for six months.
Alaska repeatedly disputed Liotine's claims, saying it had a top maintenance program.
But an FAA audit conducted shortly after the crash forced the carrier to make major changes in its maintenance program to improve deficiencies and avoid a threatened shutdown of its major repair centers.
Liotine has said he unsuccessfully tried to warn company officials about irregularities before he went to federal investigators.
As part of his cooperation with federal agents, Liotine wore a hidden microphone in late 1998 and recorded conversations with several supervisors at Alaska.
In his lawsuit, Liotine, who is married and the father of four children, sought $20 million, alleging Alaska made false and defamatory statements about him.
In a deposition in August, he said he endured sleepless nights, concerns for the safety of his family and the enmity of his co-workers.
"When you're portrayed as a disgruntled employee, you feel like you have to defend yourself," he said, noting that "aircraft maintenance has been my life."
Steve Miletich can be reached at 206-464-3302 or email@example.com.