Princess Cruise Lines Ltd. and its parent, Carnival Corporation were today ordered to pay a $20 million criminal penalty and will be subject to enhanced supervision after admitting to violations of probation attributable to senior Carnival management in a case in which Princess had already paid $40 million (see earlier story).
Miami local media report that Senior U.S. District Judge Patricia Seitz approved the agreement after Carnival CEO Arnold Donald stood up in open court and admitted the company’s responsibility for the probation violations stemming from the previous environmental case.
At an earlier hearing, Judge Seitz had warned that Carnival could face the prospect of having all its ships banned from U.S. ports.
“The company pleads guilty,” Arnold said six times, watched by other senior Carnival executives, including company chairman Micky Arison, chief financial officer David Bernstein, who were all present pursuant to a court order.In addition, senior management of each operating cruise line of Carnival Corporation & plc were present.
“We acknowledge the shortcomings. I am here today to formulate a plan to fix them,” Arnold said
“The proof will be in the pudding, won’t it?” the judge replied. “If you all did not have the environment, you would have nothing to sell.”
The U.S. Department of Justice says that Princess was convicted and sentenced in April 2017, after pleading guilty to felony charges stemming from its deliberate dumping of oil-contaminated waste from one of its vessels and intentional acts to cover it up. While serving 5 years of probation, all Carnival related cruise lines vessels eligible to trade in U.S. ports were required to comply with a court approved and supervised environmental compliance plan (ECP), including audits by an independent company and oversight by a Court Appointed Monitor. According to the Department of Justice, numerous violations have been identified by the company, the outside auditor, and the court’s monitor during the first two years of probation, including “major non-conformities” as defined by the ECP.
Carnival admitted it was guilty of committing six violations of probation. Two of the violations involved interfering with the court’s supervision of probation by sending undisclosed teams to ships to prepare them for the independent inspections required during probation. When this was first discovered in December 2017, U.S. District Court Judge Patricia Seitz directed that the practice cease and ordered additional inspections as a consequence. However, without seeking court approval, a second undisclosed program was started shortly thereafter. Documents filed in court showed that a purpose of the vessel visit programs was to avoid adverse findings during the inspections.
The company admitted to other violations of probation today including:
- 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;
- 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;
- Deliberately falsifying environmental training records aboard two cruise ships; and
- 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.
Under the terms of the settlement, Carnival will:
- Pay a $20 million criminal penalty;
- Issue a statement to all employees in which Carnival’s CEO accepts management’s responsibility for the probation violations;
- 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;
- Pay up to $10 million per day if it does not meet deadlines for submitting and implementing needed changes to its corporate structure;
- 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); 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
- 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.