Former NCL Cruise Executives Square Off in Trial in Miami-Dade Courthouse: But What About the Dead Filipino Crew Members?

Former Norwegian Cruise Line ("NCL") CEO Colin Veitch's trial against his successor, Kevin  Sheehan, and their old cruise line, NCL, for defamation and breach of contract has been underway in the Miami-Dade County courthouse, here in Miami, Florida this past week.

Veitch worked at the helm of NCL from 2000 to 2008. According to Travel Weekly, Veitch was the architect of "Freestyle Cruising" and undertook an ambitious fleet renewal program, purchasing nine new cruise ships. By some accounts, but  not all, Veitch was an innovative cruise executive who was successful in beginning the transformation of under-performing old cruise ships into a larger and far more profitable fleet. 

Veitch turned the revitalized cruise line over to Sheehan in 2008. Things turned sour between the two NCL Colin Veitchrich cruise executives after a travel periodical, Travel Weekly, wrote a glowing article in December of 2014 about Veitch and his success at NCL. Sheehan then sent an email to Travel Weekly mocking the article and criticizing Veitch. The Miami Herald reported at the time, quoting the lawsuit allegations, that Sheehan sent a “vindictive, false and defamatory” email to Travel Weekly which eventually published. A few days later, Travel Weekly retracted the complimentary article about Veitch.

Veitch then sued Sheehan and NCL alleging defamation, as well as breach of contract, claiming that his former cruise line and its new CEO allegedly cheated him out of revenue sharing. 

The overblown 187-page lawsuit which you can review here is, in my opinion, a rather fascinating insight into the hurt-feelings and out-of-control personalities of two multi-millionaire former NCL cruise executives.

The lawsuit which Veitch filed against Sheehan included allegations which have been characterized by the Skift travel publication as "incendiary" accusations that Mr. Sheehan engaged in “a long pattern of personal and professional misconduct and recklessness, stunning in its scope and hubris, corrosive and detrimental in its impact on the company, and deeply undermining of the workplace culture . . . ” 

In response, Mr. Sheehan and NCL asked the court to strike what they characterized as "immaterial, impertinent and scandalous" allegations. 

The bitter personal allegations between these two former cruise executives arise from a nasty dispute between two very wealthy former cruise executives.  When Mr. Veitch resigned from NCL's parent company, Star Cruises, he reportedly received $10,000,000 as part of a severance package. He also settled a $300,000,000 lawsuit which he filed against Sir Richard Branson and the Virgin Group after he alleged that the British billionaire and his company stole his ideas for a new cruise project. The precise amount of money that Veitch pocketed is confidential. 

Kevin SheehanSheehan also received a severance package from NCL in 2015 after it terminated his employment, totaling $13,400,000.

The many articles written by trade publications and major newspapers in Miami. like the Miami Herald and the Miami New Times, have covered the Veitch-Sheehan squabbles at length, but they are ignoring the biter irony of the litigation. Veitch was the NCL CEO in 2003 when a decrepit, poorly maintained steam boiler on NCL's 40+ year-old SS Norway exploded at the port of Miami. The explosion killed eight crew members and seriously burned another nineteen NCL crew members.

The National Transportation Safety Board ("NTBS") concluded that the deadly boiler explosion was caused by NCL's "improper operation, maintenance and inspection" of the old cruise ship's steam chamber. The old boiler had "extensive fatigue cracking" and deteriorated materials that weakened the metal and caused it to rupture under pressure. The NTSB reported that NCL was aware of the dangerous condition but failed to take action to fix the problem. 

CEO Veitch tried to deflect blame but NCL was forced to plead guilty to a criminal charge of gross negligence regarding the explosion. The Norway was subsequently sold for scrap.

When the families of the eight dead crew members who were scalded to death filed suit in Miami to obtain compensation for the loss of their fathers and husbands, Veitch's lawyers argued that the crew members were not entitled to file suit before a judge and jury in Miami. Instead, NCL argued, because the crew members were Filipinos, their loved ones had to pursue the extremely limited death benefits pursuant to the arbitration process in the Philippines. 

Kicking "foreign" (i.e., non-U.S.) crew members out of the American legal system was unprecedented.  Foreign crew members injured or killed due to the negligence of U.S. based shipping companies have long been permitted to have their cases resolved through jury trials under the Jones Act here in the U.S. In addition to the Jones Act, crew members have also been entitled to obtain medical treatment and daily living expenses when they are injured aboard U.S. based cruise ships Norway Boiler Explosionunder the "maintenance and cure" doctrine, one of the oldest legal American legal doctrines dating back to the early 1800's. 

But NCL, which faced substantial liability and damages for the deaths of eight crew members and nearly twenty other ship employees burned in the explosion, sought to dismiss the cases, arguing that their only remedy was the limited benefits under the Filipino law. NCL argued that Miami was not the proper location to resolve the dispute even though it is based in Miami and the deaths occurred at the port of Miami.  In Batista v. Star Cruises, our federal court agreed with NCL and sent the cases to Manila, where Filipino law limited the widows to just $50,000 and the children to just $7,500 for the loss of their dead husbands/fathers.

Like "freestlye cruising," NCL's unprecedented legal posturing has also been copied by NCL's competitors Carnival, Royal Caribbean and all other cruise lines, which quickly inserted one-sided arbitration clauses into their crew member employment agreements to escape or limit their liability when things go wrong on the high seas. 

Except for Disney Cruises, all other cruise lines prohibit injured crew members from having their cases heard by juries in the U.S. legal system. Filipino seafarers are especially susceptible to being screwed by the Miami-based cruise lines, thanks to NCL's efforts which started under Veitch's tenure. 

During the trial last week at the Miami-Dade courthouse, where NCL crew members are barred from filing suit, Veitch's lawyer reportedly asked the jury to consider awarding $95,000,000 in damages, according to Court View Network (CVN). That may be a proper amount to finally compensate the families of the eight Filipino crew members who were burned to death on the SS Norway back in 2003, but it seems to be an awful lot for a healthy, millionaire former cruise executive with hurt feelings. 

Have a comment? Please leave one below or join the discussion on our Facebook page.

December 11, 2017 UpdateAs reported by the Miami Business Review today, Norwegian Cruise Line Defeats $90M Lawsuit From Former CEO.

Photo credits:

Colin Veitch: Associated Press via the Honolulu Star-Bulletin

Kevin Sheehan: REUTERS/Brendan McDermid.

SS Norway: News7 Miami via CBS News video.

CEO Fain Rakes In Over $24,000,000 In Sale Of RCCL Stock

Royal Caribbean Richard FainRoyal Caribbean chief executive officer Richard D. Fain sold 210,706 shares of his cruise line stock in a transaction on Wednesday, August 2, 2017 at an average price of $115.83, for a total value of $24,406,075.98.

Mr. Fain was last in the news in April when a filing with the Securities and Exchange Commission reflected that his total compensation last year was in the amount of $10,400,000.

Maritime Executive recently reported that Royal Caribbean's income for the second quarter reached $370 million, the highest second quarter earnings in company history. The cruise line's financial performance, the maritime journal wrote, "vindicates Fain's prediction that 2017 would shape up to be a 'sensational year.'"

Following the stock sale, CEO Fain reportedly now owns 967,741 shares of his company’s stock, valued at $112,093,440.03. 

Have a thought? Please leave a comment below or join the discussion on our Facebook page.

Interested in this issue? Read Cruise Executive Richard Fain Hits the Jackpot Again.

Photo Credit: CNBC

Is Too Much Ever Enough? NCL to Gouge Customers Again

Travel Weekly and Cruise Critic are reporting that Norwegian Cruise Line (NCL) is raising gratuities on April 1st from $13.50 per person, per day, to $13.99, on all ships except the Norwegian Sky. Daily gratuities for standard cabins on the Norwegian Sky will increase to $18.99 (an increase over 40%). 

Travel Weekly says that NCL will increase daily gratuities for suites from $15.50 to $16.99 on all of its ships except for the Sky where it will charge $21.99. 

It seems that there is no limit to the greed of cruise executives. NCL CEO Frank Del Rio just spoke at Seatrade Global about how the stock market was at all time high and fewer regulations and President Trump's pro-business tax cuts were good for his business. Del Rio collected nearly $32 million in Miami Cruise Ship Capital of the World2015

Del Rio's NCL has gouged its customers before, with extra charges, including increased room services charges, automatic gratuities and restaurant cover charges. He made this statement at an earning conference in 2015: "... we have looked across the fleet to identify areas where marginal changes ... can be implemented to improve performance. A few examples include a 6.7% average increase in beverage prices, the introduction of a nominal room service fee and lower costs from renegotiated shore excursion agreements. To put into perspective how these small changes can add up quickly, every dollar increase in yield translates to approximately $15 million to the bottom line."

Of course, all the major cruise lines nickel-and-dime their customers. Royal Caribbean just began charging for room service and, in the past, increased its gratuities while attempting to create the appearance that the increases were for its hard-working crew members (Read: Loyal to Royal? Expect to Pay Higher Gratuities! And the Money's Not for the Crew). Carnival Corp. did exactly the same thing while it also pocketed the increased gratuities (Read: Carnival Hikes Pre-Paid Gratuities But Will Passengers Secretly Remove Tips?)

Today, I read an article by David Grace Author titled When Greed Is Thought To Be A Virtue - When More Is Never Enough. He discusses what he calls the "more-more-more-until-it-all-blows-up" business phenomenon. The cruise executives, Del Rio in particular, put on quite a demonstration of unbridled greed at the Seatrade Cruise conference last week. The CEO's have an unhealthy, unchecked pursuit of profits in an industry which has always overreached into the American public's pockets.  The cruise industry pays virtually no taxes, exploits their workers from around the world, and still nickle-and-dimes their tax-paying customers whenever they have a chance. 

When is enough, enough? 

Have a thought? Please leave a comment below or join the discussion on our Facebook page.

Photo credit: Marc Averette - CC BY-SA 1.0, commons / wikimedia.

Carnival Executives Switch Roles

Carnival Cruise LineSeveral news sources are reporting changes in the executive ranks at Carnival Corporation and its brands, Princess Cruises and Holland America Line. 

Carnival Vice Chairman and Chief Operating Officer (COO) Howard Frank will step down. He is slated to be an adviser to CEO Arnold Donald and Chairman Micky Arison. Jan Swartz becomes the new president of Princess Cruises, replacing President and Chief Executive Officer (CEO) Alan Buckelew who moves into the COO role at Carnival. Holland America Line CEO Stein Kruse will begin overseeing Princess Princess under the newly formed entity "Holland America Group." 

It seems like a family affair to me.  Everyone is just changing hats.

The changes become effective December 1, 2013.

I'm pleased to see Ms. Swartz promoted from vice president of sales, marketing and customer service at Princess to the position of president. It's nice to see women advance in the men's club.  

Carnival Cruise Compensation: The Rich Get Richer

Travel Weekly and Skift recently reported that the new CEO of Carnival Corporation, Arnold Donald, will receive the following in compensation:

Arnold Donald - Carnival Cruise Lines Compensation$1 million base salary to start, with reviews by the board of directors to increase or decrease his salary;

A fixed bonus of $1.125 million for 2013;

A one-time award of performance-based restricted stock with a target value of $3 million, although it could be 5 times that depending on company’s performance;

An annual stock award with a fair market value of $3.5 million in long term incentives;

$350,000 to cover relocation and temporary living expenses; and

A bonus for 2014 up to $2.65 million which could go up to $5.3 million in 2015.

You can read the official SEC filing here.

Mr. Donald must be so happy that he feels like dancing. 

The only things missing are a half dozen front row seats to the Miami Heat games.

This news must feel like salt into the wounds of the long term Carnival Cruise Lines crew members who lost their retirement benefits earlier this week. 

 

Photo Image: St. Louis Post Dispatch

Carnival Cruise CEO Arison Pockets $90,000,000

Miami's Daily Business Review reports today that Micky Arison paid himself a "special year-end dividend" of $90,000,000. Yes, that's 90 million dollars.

Cruise CEO Arison is not the only executive in Florida lining his pockets, as the Review states that other executives in Florida are paying themselves dividends in the range of $250,000 to around $20,000,000. The newspaper states that the whopper of a dividend was probably paid due to expectations that federal tax rates will jump next year. I suppose that's called the "Romney-didn't-win-dividend."

Arison is already by far the richest person in Florida with a net worth of many billions of dollars. The last time I checked it was over $4,000,000,000, or maybe it was $7,000,000,000. I forget. What's an extra billion or two?

Costa Concordia - Micky ArisonI was thinking of entitling this blog "Micky Arison is a fat greedy pig" but at least one journalist already called him that over a decade ago. So I'll keep what I'm thinking to myself.

But, I have to add that it must be something to be the CEO of a foreign corporation that pays no U.S. federal taxes and owns a $600,000,000 cruise ship which sank (the Concordia operated by subsidiary Costa) and killed 32 people and at the end of the year you pay yourself an additional $90,000,000. Yes, the disaster caused some lost revenue for Carnival for a few months. But by the end of the year, Carnival profits are higher than ever. 32 dead customers and crew are not a problem if you keep them from filing suit in the U.S. 

While Arison pays himself a dividend of $90,000,000, he offered the families of the dead and traumatized Concordia passengers $15,000 each. 

When I think of Arison paying himself an extra $90,000.000, I also think of the 150 waiters from India who worked for P&O Cruises (another Carnival subsidiary) who were fired earlier this year at the instructions of Carnival's executives after they went on strike for about an hour in Seattle over low pay and the non-payment of tips. There are now 150 families struggling in India because Carnival made an example of them to show what happens if crew members in Carnival's fleet of 100 cruise ships complain about low pay.

Earlier this week, Arison's cruise line ignited controversy by issuing a last minute edict that passengers who bought tickets on Carnival's drag queen cruise would not be permitted to dress in drag in order to avoid offending "family values." When a boycott was threatened that might result in Carnival losing millions from the offended LGBT community, Carnival reconsidered and lifted the ban on dressing drag.

Always following the money, Arison obviously thought that paying himself a $90,000,000 dividend was not a drag either.   

I wonder what Arison will do with the extra $90,000,000?  Raise wages for his loyal employees on his cruise ships? Invest in a health clinic in India for Carnival crew? Donate the money to a charity for sick seafarers?  Ha. That's something Bill Gates or Warren Buffett would do.  

Read some of our other articles about CEO Arison and judge for yourself. 

Cruise Line Fat Cat Billionaires    

Breaking News: Carnival Cruise Lines Incorporates in the U.S. and Subjects Itself to U.S. Labor, Wage, Safety and Environmental Regulations

Is Carnival's Mickey Arison a Greedy Corporate Pig?

Consider leaving a comment below or on our facebook page.

Royal Caribbean Executives Get Richer While Crew Members Get Poorer

In a proxy filing with the Securities and Exchange Commission, Royal Caribbean Cruises disclosed that its 2010 compensation paid to CEO Richard Fain (photo left) increased 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 Adam Goldstein (photo right), the president of Royal Caribbean International, whose total compensation increased to over $4,000,000. 

These increases were primarily incentive based, meaning that the executives met or exceeded Royal Caribbean Executives - Richard Fain - Adam Goldsteincertain financial goals for the corporation.

One of the company's goal we have been concerned with has been to reduce payments to ill and injured crew members.  In 2008, Royal Caribbean had over over 1,200 open medical files for ill and injured crew members around the world.  Due to certain cost cutting measures, by 2010 Royal Caribbean slashed the number of open crew medical files to around 400. 

In the process, the cruise line culled over 800 ill crew members from its medical department's responsibility.  In many instances, there was no legal basis to terminate the medical care.  In cases where the medical care was not arbitrarily terminated, the cruise line reduced the daily stipend for sick crew employees from $25 to $12 a day.  Needless to say, it is impossible for anyone to live on $12 for food and lodging a day.

These harsh cost cutting measures "saved" Royal Caribbean millions.  Given the fact that cruise executives Fain and Goldstein collected over $12,500,000 together last year, it looks like the money formerly spent on crew member medical benefits ended up in the executives' pockets.   

 

Photo credit:  Royal Caribbean International Flickr photostream