Cruise Law News : Maritime Lawyer & Attorney : James M. Walker : Walker & O'Neill Law Firm : Admiralty Law, Cruise Ship Accidents & Injuries

One of the purposes of the new Cruise Vessel Security and Safety Law is to educate the public regarding the sexual assaults and other crimes which occur on cruise ships.

But as we reported in our article Cruise Lines, FBI & Coast Guard Caught Altering Cruise Crime Law, the FBI and Coast Guard - acting to promote the cruise lines' interests - undercut the Congressional purpose of the new cruise crime law. The cruise lines and these two federal agencies changed the language of the law to eliminate most cruise ship crimes from being reported.  

Originally all cruise ship crimes were required to be disclosed to the public.  But with the altered language, cruise crimes not reported to the FBI, or those crimes reported to the FBI and still under investigation, do not need to be disclosed to the public. 

You can read about about this issue in the Washington Post, USA Today, Arizona Central and NBC Bay Area.

A good example of how the cruise lines are trying to hide crime statistics is a recent case this year involving a young girl raped on Royal Caribbean's Allure of the Seas. We reported on the crime in January.  A fifteen year old girl was lured from a teen club and raped by another teenager and a 20 year old man, Luis Scavone (photo left), on the last night of the cruise. The minor promptly reported the crime after she escaped from the rapists' cabin.

Royal Caribbean allegedly "sealed" off the crime scene and reported the crime to the FBI and the Broward County's Sheriff's Office in the cruise ship's home port. In Florida, local law enforcement also have jurisdiction over crimes on the high seas on cruise ships which return to a port in Florida.    

But rather than preserving evidence of the crime scene, Royal Caribbean unlocked the "sealed" cabin and cleaned the cabin.  It destroyed evidence in the crime scene.  Once the FBI learned of the cruise line's misconduct, it left the cruise ship and declined to prosecute.

The FBI was willing to let the two rapists (from Brazil) walk free after raping a girl. Even more disturbing is that the evidence destruction occurred on a cruise ship supervised by a former top FBI officer, Gary Bald (photo below left), who now heads Royal Caribbean's security department.

The FBI agents should have arrested cruise line employees for the destruction of evidence, but the FBI looked the other way and simply closed its investigation. The cozy relationship between the FBI and its former FBI agents, who are now working for the cruise lines, sometimes leads to the former and present FBI agents scratching each other's backs rather than protecting the public.

The Broward County Sheriff's Department, on the other hand, was not deterred by the cruise line's misconduct and arrested the two Brazilians. The State Attorney's Office for Broward County then prosecuted the two suspects and obtained guilty pleas from both.  The 20 year old Brazilian man pled guilty last week to two counts of lewd and lascivious battery in the rape of the girl.  He is now behind bars.   

You would think that the rape of a child on the world's largest cruise ship would be documented on the online database maintained by the FBI and Coast Guard.  That was the intent of the cruise crime law. But the FBI decided not to report it. Take a look here at the FBI statistics.  There is not a single report of a sexual assault for Royal Caribbean in 2012. In fact, there is not one report of a violent sexual crime against a cruise passenger for the entire cruise industry this year.

In prior years, the FBI reported over 400 crimes on cruises a year.  But now with the altered language in the cruise crime law, the FBI and cruise lines are concealing crimes. The FBI online database lists only 13 sexual crimes for all of last year.   

The bottom line is that even thought the cruise rapist is in jail after pleading guilty to state prosecutors, the FBI refuses to reveal the crime to the U.S. public on the online database required by the cruise crime law.

There is monkey business going on here.

The FBI and the cruise lines who routinely hire FBI agents are in cahoots. Congress needs to investigate how they derailed the law.  And the U.S. public needs to know how a law designed to protect women and children on cruises has been sabotaged to protect the image of the billion dollar cruise industry.     

• Comments (2)

A fifty-one year old employee of Carnival Cruise Lines has been arrested for organized fraud and theft.  

Miami resident Serafin Sanchez was arrested and booked on two criminal counts, described as organized theft of more than $50,000 and first degree fraud in excess of $100,000.

According to the arrest warrant, Mr. Sanchez is a shore-side employee of Carnival and worked as a "Crew Travel Coordinator."  His responsibilities included booking airline flights for crewmembers signing on Carnival's cruise ships around the world.

Carnival has two basic types of crew employees: (1) those who qualify for free fights to and from ports (salary employees), and (2) those who must pay for airline flights (non-salary employees).  Mr. Sanchez is accused of defrauding Carnival Cruise Lines by using his knowledge and authority to book flights for non-salary crewmembers and charging Carnival's travel account while keeping the money the crewmembers paid for the airline tickets.

The alleged scheme operated as follows:

A crewmember working on a Carnival ship would contact a head waiter on a cruise ship (identified as Rudy Saldana), who was known "to have a friend" (Mr. Sanchez)  who could arrange reduced price airline tickets. 

Mr. Sanchez would quote an arbitrary price for the ticket to Mr. Saldana who would communicate it to the crewmember.   Mr. Saldana would then collect the money from the crew member.  Mr. Saldana would deposit the money in his personal account to which Mr. Sanchez had access via a debit card.  Mr. Sanchez would then purchase the airline ticket for the crewmember but would charge the price of the ticket to the Carnival travel account.  Mr. Sanchez would allegedly pocket the money collected from the crewmember.

The arrest affidavit further alleges that Mr. Sanchez operated this "organized scheme" to defraud Carnival of approximately $132,000.00 from June to September 2011.  Mr. Sanchez  did not reimburse Carnival Cruise Lines any of cash collected from the non-salaried cruise employees.

Mr. Sanchez pled not guilty to the allegations. He is out on a $20,000 bond.  His defense counsel is Joel DiFabio whose office released the following statement:

"We are actively cooperating and working with the Miami-Dade State Attorney's Office in an attempt to resolve this matter as quickly as possible."   

Photo credit:  Mugshot via whosarrested.com

• Comments

This weekend, the Freeport News reported on  the saga of a well respected Bahamian family who purchased a cruise through a travel agent for 39 family members to sail with Carnival Cruise Lines on the Carnival Freedom cruise ship. 

Written by reporter Yasmin Popescu, the newspaper article reports on what it described as a family "torn apart" because of the fraudulent conduct of a local travel agent and the harsh conduct of the cruise line. 

The story involves the Edden family of Smith's Point in Freeport which went through what is described as a "vacation from hell."

Thirty nine family members ranging from age 4 to age 71 had booked the Carnival cruise through Morris Travel which issued Carnival Fun Ship cards but actually never paid the cruise line for all of their fares. 

The large extended family flew from Freeport to Fort Lauderdale to meet the cruise ship the following day.  However once they arrived at the port, the family faced problems.  Carnival told many of the family members that they didn't have confirmed reservations.  Many of the family members were separated from their family members, including children, who were frightened by the ill treatment.   Carnival representatives treated them like they were criminals and threatened to take their mug shots and finger-print them and turn them over to the police.  

Ten of the family members were taken away from the check in area and forced to sit behind a cordoned off area, which subjected them to the scrutiny of and ridicule from other passengers.   

Carnival left these ten family members at the port terminal while the remaining twenty-none family members left on the cruise.  Carnival did not provide any explanation for the mistreatment, leaving them abandoned at the port without any transportation or accommodations. They were separated from the family and crying when the cruise ship sailed without them.

For the family members who Carnival permitted to board the cruise ship, many of them did not receive the type of cabins they booked.  One one young woman in a wheelchair with spina bifada was forced to leave her wheelchair outside of the non-accessible cabin and crawl into the cabin and in and out of the bathroom.

After sailing for five days, Carnival finally discovered that one of the credit card used by the travel agent was fraudulent.  Carnival then treated the family members like they were criminals.  It demanded $17,000 immediately.  Carnival belittled them and threatened arrest once they returned to South Florida. 

Carnival also told them that they would not be permitted to leave the cruise ship when it called on Nassau because the cruise line was afraid that they would flee and not return to the ship.  Carnival insisted that it confiscate their passports if they decided to go into Nassau. 

Fortunately, a former Member of Parliament in the Bahamas, David Wallace, kept the family group from being arrested or being held on the ship. 

When they returned to Ft. Lauderdale, the family members felt that they would be arrested and taken to jail.

Once back home in Freeport, the family hired prominent Bahamian lawyer, Jacy Whittaker (above left), of the law firm of Parris | Whittaker to represent their interests.

Mr. Whittaker retained our firm as well as high profile Miami lawyer Roberto Villasante (photo right) to investigate legal action against Carnival for its outrageous mistreatment of the family during the cruise.

On Friday, we met with some of the aggrieved family members, from little children to grandparents.  A photograph I took of the family members is below.

Freeport reporter Yasmin Popescu took the photo at the top of me interviewing some of the family members. 

Ms. Popescu has covered this story from the beginning.  An earlier article can be read here.

My cruise travel agent friend Chris Owens wrote an article about the debacle in July:

"Be Sure Your Cruise Travel Agent Is Not A Crook"

• Comments

A third class action lawsuit has been filed against Royal Caribbean Cruises seeking class action certification for what is alleged to be fraudulent conduct by the cruise line and executives Richard  Fain, Brian Rice, and Henry Pujol.

The law suit was filed by the law firm of Kessler Topaz Meltzer & Check in Pennsylvania. 

We reported on the first two lawsuits alleging fraud in an article last month Royal Caribbean Stock Fraud Lawsuits - What Did the Cruise Line Executives Know and When Did They Know It?

The lawsuit was filed here in Miami, in Federal Court for the Southern District of Florida.

You can read the lawsuit papers here.

The law firm's press release can be read here.

• Comments

Two stock fraud lawsuits recently filed against Royal Caribbean Cruises have placed the cruise line's corporate ethics under the microscope.

In the case of Todd Roth v. Royal Caribbean Cruises, Ltd, Richard D. Fain, Brian J. Rice, and Henry L. Pujol, United States District Court, Southern District of Florida, Case No. 22783 - MSC, a stockholder alleges that the cruise lines withheld disclosing certain accounting errors dating back to 2009, misrepresented the company's financial status, and misled investors about the cruise line's financial future. The case was filed by the New York and Louisiana law firm of Kahn, Swick & Foti and the Florida firm of Vianale & Vianale.   

The lawsuit alleges that on January 27, 2011, Royal Caribbean issued a press release where it made false and misleading statements that its fourth quarter results for 2010 were better than expected and it anticipated certain positive developments regarding its operations, expenses, costs, ratios and net income for 2010.  

On April 28, 2011, after the first quarter, Royal Caribbean again made misleading statements regarding its financial status.  The lawsuit alleges that CEO Richard Fain (photo left) falsely stated that "the year started off with a roar - strong bookings, low costs and solid profits - and in the first quarter every one of our brands exceeded its forecast . . . " 

However, on July 28, 2011,  Royal Caribbean suddenly and dramatically departed from its rosy projections regarding the company's financial operations.  The cruise line published a release revealing for the first time that it was performing well below expectations and that certain accounting errors (regarding treatment of interest income relating to amortization of certain financing fees) resulted in a drastic downward revision of the company's financial statements.

This news "shocked and alarmed" investors.  Royal Caribbean's stock price then fell precipitously in two days, from $35.75 to $30.50.  This development had a disastrous effect on the investments of individual shareholders.  The stockholder who filed suit, Todd Roth, had purchased 5,000 shares on July 26, 2011 at a price of $36.65 a share.  Three days later, with the stock trading at $30.50, he lost over $30,000. 

Included as defendants in the lawsuit are the CEO (Richard Fain), the Chief Financial Officer (Brian Rice) and the Corporate Financial Controller (Henry Pujol).  On January 28, 2011, the day after touting the financial strength of the cruise line, CEO Fain sold 200,000 shares at a price of $46.63 for a what the lawsuit alleges are total illicit proceeds of $9,326,000.  CFO Rice (photo right, below) quickly followed suit, selling 88,872 shares in the $46 to $47 range from February 1 - 14, 2011 for over $4,100,000 in illicit proceeds. 

Although not named personally in the lawsuit, Royal Caribbean President Adam Goldstein sold over 40,000 shares between February 1 - 16, 2011 - for a total of over $1,900,000.  Six other executives sold stock between January 28 and February 16, 2011, which combined with the stock sold by the named defendants totaled over $20,000,000.  

The lawsuit alleges that these individual defendants knew that the negative financial information had not been disclosed to the public and was being concealed, and they were participants in a "fraudulent scheme and course of business that operated as a fraud or deceit on purchasers of Royal Caribbean securities . . . "      

Earlier this year, in an article entitled Royal Caribbean Executives Get Richer While Crew Members Get Poorer, I reported that  Royal Caribbean increased its 2010 compensation paid to CEO Richard Fain almost 60% to $8,600,000.  Royal Caribbean increased the compensation paid to the company's four other named executives from 18.5% to almost 50%.  The largest compensation increase of the four executives went to President Adam Goldstein whose total compensation increased to over $4,000,000. 

These increases were primarily incentive based, meaning that the executives claimed that they met or exceeded certain financial goals for the corporation.  With this recent revelation that the company's financial performance was overstated and that the executives allegedly committed fraud or recklessly misrepresented the cruise line's financial data, the question arises whether the incentive based millions of dollars in compensation should be returned voluntarily to the corporation or disgorged in the pending lawsuits.    

The Roth lawsuit seeks class action status for what is referred to as either hundreds or thousands of other shareholders who were defrauded by the cruise line between January 27, 2011 and July 28, 2011. 

A second lawsuit seeking class action status was reportedly filed yesterday by the Pomerantz law firm with offices in New York, Chicago and Washington D.C.  It is on behalf of stockholder Stanley Wolfe and was filed in the United States District Court, Southern District of Florida, Case No. 22855.  This lawsuit seeks class certification for stockholders who purchased securities between April 23, 2009 and July 27, 2011.

It will be interesting to see how these lawsuits turn out.  What did the cruise line executives know about the accounting errors?  When did they learn of the irregularities?  What did they do once they learned that the cruise line was performing substantially under expectations?  Did they dump their stock realizing that the price was artificially high?  Or did they act prudently and responsibly once the accounting mistakes were brought to their attention? 

Photo credits:  www.azamaraclubcruises.com

Chart credit:  Rick + Rick law firm

• Comments (3)