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October 21, 2005

Waxman raises new questions on Carnival contract

Rep. Henry Waxman (D. Calif.) is continuing to raise concerns about FEMA's $236 million contract with Carnival covering the chartering of three cruise ships for six months to house hurricane victims.

As we reported earlier, Rep. Waxman, who is Ranking Minority Member of the House Committee on Government Reform, wrote Homeland Security Secretary Michael Chertoff on the topic on September 23.

Yesterday, he fired off another letter to Chertoff.

In the letter, Rep. Waxman raises concerns based on data from an internal 2002 "Financial Review" of three Carnival Cruise Line ships, the Sensation, the Ecstasy, and the Holiday, now under federal contract to provide housing for Hurricane Katrina evacuees.

Rep. Waxman says a comparison between the internal financial review and the $236 million federal contract reveals that the government appears to be paying Carnival significantly more under the federal contract than the ships earned on their own, while Carnival's expenses appear to be significantly less under the federal contract than the ships normally incur.

This new information raises serious questions about whether the Carnival contract is a responsible use of taxpayer funds, says Waxman.

In the letter, Rep. Waxman notes that a provision recently added to the contract with Carnival requires the cruise line to return any contract payments that create a surplus profit over what the the ships would have earned in normal operations "as estimated in good faith" by Carnival.

"The late insertion of the provision may be an admission of the flaws in the contract," says the letter, "but it does little to ameliorate my concerns."

"Instead of this meaningless provision," says the letter, "what we need to do is to restore transparency and accountability to federal contracting."