After Pleading Guilty To Continued Pollution And Trying To Hide It, Carnival Corporation Fined An Additional $20 Million Fine
[Editor's note: I'm back from my break. Thanks to readers for your patience. That break included a vacation on a different cruise line sailing from New Zealand to Canada via Polynesia, Tasmania, southern Australia, French Polynesia, and the Hawaiian Islands. So, this news story caught my attention.]
On Monday, Carnival Corporation acknowledged violating its probation terms from a 2016 pollution case. Government prosecutors fined the company an additional $20 million for the continuing violations. The New York Times reported:
"In 2016, Princess Cruise Lines agreed to pay a $40 million penalty for illegally dumping oil-contaminated waste into the sea and acts by employees to try to cover it up. It was the largest criminal penalty ever imposed for intentional vessel pollution... The new violations included discharging plastic into waters in the Bahamas, falsifying records and interfering with court supervision of ships... Vessel pollution is just one of the many human-caused hazards facing ocean life today. Ship traffic and noise can cause the death of sea creatures; marine animals routinely turn up dead with plastic in their stomachs; and rising sea temperatures, stemming from climate change caused by human activity, are destroying the framework of many ocean ecosystems."
Based in Miami, Carnival Corporation operates several cruise lines including Princess Cruises, Carnival Cruise Line, Holland America Line, P&O Cruises (UK), Cunard, Seabourn, AIDA Cruises (Germany), and Costa Cruises (Italy). It's website states a combined fleet of 102 ships with 19 new ships to be delivered between 2017 and 2022. The company employs about 120,000 people worldwide, and 11.5 million guests sail in its ship each year. In 2018, Carnival Corporation generated after-tax profits of $3.15 billion on revenues of $18.88 billion.
Government regulators focused upon the company after:
"... Princess agreed, in 2016, to plead guilty to felony charges and pay the hefty $40 million penalty. In that case... the Caribbean Princess ship, had used several means, including a device called a magic pipe, to circumvent water-cleaning mechanisms... Officials said that four other Princess ships had also been found to have engaged in illegal practices to discharge waste. The discharged waste included gray water — water that has been contaminated with food particles, grease and fat — and water found in the ship’s bilge, the bottom part of the ship where oil waste from engines can accumulate. A whistleblower employee alerted the authorities and certain engineers ordered a coverup, including directing subordinates to lie, according to prosecutors."
In an announcement on Monday, the U.S. Department of Justice (DOJ) listed in detail the violations by Carnival Corporation and its executives:
"1. Failing to establish a senior corporate officer as a corporate compliance manager with responsibility and sufficient authority for implementing new environmental measures required during probation;
2. Contacting the Coast Guard seeking to re-define the definition of what constitutes a major non-conformity under the ECP without going through the required process and after the government had rejected the proposal and told the company to file a motion with the court if it wanted to pursue the issue;
3. Deliberately falsifying environmental training records aboard two cruise ships; and
4. Deliberately discharging plastic in Bahamian waters from the Carnival Elation and failing to accurately record the illegal discharges. Prosecutors advised the Court that this particular instance was an example of a more widespread problem, identified by the external audits, in failing to segregate plastic and non-food garbage from waste thrown overboard from numerous cruise ships."
The DOJ announcement also listed the terms of the settlement agreement, which requires Carnival Corporation:
"i) Pay a $20 million criminal penalty;
ii) Issue a statement to all employees in which Carnival’s CEO accepts management’s responsibility for the probation violations;
iii) Restructure the company’s corporate compliance efforts, including appointing a new chief Corporate Compliance Officer, creating an Executive Compliance Committee across all cruise lines, adding a new member to the Board of Directors with corporate compliance expertise, and train its Board of Directors;
iv) Pay up to $10 million per day if it does not meet deadlines for submitting and implementing needed changes to its corporate structure;
v) Pay for 15 additional independent audits per year conducted by the third-party auditor and Court Appointed Monitor (on top of approximately 31 ship audits and 6 shore-side audits currently performed annually);
vi) Comply with new reporting requirements, including notifying the government and court of all future violations, and specifically identifying foreign violations and the country impacted; and
vii) Make major changes in how the company uses and disposes of plastic and other non-food waste to urgently address a problem on multiple vessels concerning illegal discharges of plastic mixed with other garbage."
Plus, Princess Cruise Line will remain on probation for three more years. The third-party auditor suggests that the court doesn't trust the company and its executives to accurately report progress and corrective actions toward the deadlines. That's good given the light fines (as a percentage of the company's profits).
Cruise customers have already shared their views. According to the Cruise Critic website:
"... SO DISAPPOINTED IN Carnival/Princess... NOT acceptable!!! I just went on a 12 day cruise on the Star Princess last month. I feel betrayed reading this. I had such a great time too. To intentionally break pollution laws means no integrity and shoddy business practice. I want to slap someone."
" Well now we know why they have increased some pricing, including some drink packages by 40%. Got to get more from the passengers to pay their fine. The customer always pays more in these scenarios."
"Let's hope this will finally get Carnival Corp. to ensure all of its ships adhere to environmental regulations. But in the big scheme of things, $20 million is just a minuscule amount on a company that had $3.2 billion in net income."
More discussion by customers is available here. Clearly, cruise customers want the pollution stopped, executives held accountable, and the company to change its behavior.
A search of both the Carnival Corporation and Princess Cruises websites at press time failed to find any press releases or mention of the latest fine. The Miami Herald published a brief statement by Arnold Donald, the company's Chief Executive Officer, who appeared in court:
"Donald spoke on behalf of Carnival Corp. "I sincerely regret this case," he said. "In my role as CEO I do take responsibility for the problems we have. I am extremely disappointed that we’ve had them. I know you have reservations about our commitment and who we are. I want you to know we are fully committed." Donald was the only executive who spoke at the hearing."
Fully committed? The proof will be in the company's future actions -- not words -- to fully, consistently, and faithfully comply with the latest settlement agreement and clean up its pollution mess. Will it? What action will the board of directors take? Which executives will be disciplined? Which senior executives will resign? Will more whistle blowers come forward? Lots more news to come.