The Rich Get Richer: Royal Caribbean's Fain Cashes In

Richard Fain Adam GoldsteonReuters reports that Royal Caribbean's CEO Richard Fain recently sold 94,850 shares at average price of $62.38 for a total value of $5,916,743.00; and exercised options for 51,143 shares at $7.27 per share for a total value of $3,190,300.00.

CEO Fain holds over a million shares of his cruise line's stock.  Reuters says he holds 1,380,000 (million) shares for a value of over $86,000,000. Tech Insider says that owns 1,153,689 company shares for a total value of around $72,000,000. This excludes the shares owned by various trusts for the benefit of of the Fain family. 

Earlier this week, we reported that Royal Caribbean Chief Operating Officer (COO) Adam Goldstein unloaded sold 42,152 shares of RCL stock at an average price of $61.68 for $2,599,935.36. COO Goldstein still owns 370,724 shares valued at $22,866,256.

Notwithstanding the vast wealth of these cruise CEO's, Royal Caribbean has made substantial cut-backs in the salaries of its staff and crew members, increased work, and reduced benefits. 

 

Photo Credits: Royal Caribbean Press Center

The Rich Get Richer: Cruise Executive Goldstein Unloads $2,599,935.36 of Royal Caribbean Stock

Media reports say that Royal Caribbean Cruises Chief Operating Officer (COO) Adam Goldstein sold 42,152 shares of his cruise company’s stock yesterday.

The shares were sold at an average price of $61.68 for $2,599,935.36.

COO Goldstein still owns 370,724 shares of Royal Caribbean stock, valued at $22,866,256.

Royal Caribbean announced its earnings results on Thursday. The cruise line reported revenue of $1.98 billion for the quarter. The company’s quarterly revenue was up 5.2%.  

Royal Caribbean We last reported on Mr. Goldstein in February when he sold 44,256 shares of Royal Caribbean stock at an average price of $52.96, for a total transaction of $2,343,797.76.  

What do the hard working crew members and the loyal shore-side cruise employees think of all of the money Mr. Goldstein is raking in? 

The cruise line pays a minimal salary to Royal Caribbean waiters and cabin attendants of only $50 a month; the cruise passengers pay tips to the waiters and stewards but the cruise line is scooping up much of the tips to pay other crew member's salaries. Employees like utility cleaners earn a pittance of around $550 a month (with no tips) working around 11-12 hours a day, every day of the month during contracts that are 6-8 months long.

In September of last year, Royal Caribbean fired over one-hundred employees in its corporate offices in order to increase profits. You can read about that here: Loyal to Royal? Royal Caribbean Axes 100 Jobs in Corporate Headquarters.

What's the saying? The rich get richer, the poor get poorer.

In Last Week Micky Arison Sells Over $78,000,000 of Carnival Stock - He's Sold Over $473,000,000 of Carnival Stock in 3 Months

In the last week, Carnival's Micky Arison sold over $78,000,000 of his cruise line's stock.

On June 6th, Arison sold 961,717 shares of the cruise company’s stock at an average price of $40.24, for a total value of $38,699,492.08.

On June 10th, Arison sold 992,369 shares at an average price of $40.35, for a total value of $40,042,089.15.

Micky ArisonHe also sold $395,000,000 in Carnival stock in early March.  By my calculations, Arison freed up over $473,000,000 in cash in 3 months. You can track Arison's Carnival stock transactions here.

It's an extraordinary amount of money. Yet Carnival continues to screw its crew members, left and right. Consider reading Greed On the High Seas: "Poop Cruise" & Concordia Cruise Executive Cashes $395,000,000 of Carnival Stock.

Speculation in publications like this and this suggest that he may be interested in buying the U.K. Aston Villa soccer club. 

Considering how badly Arison's Miami Heat have been playing basketball in the NBA finals (now down 3-1 to the San Antonio Spurs), perhaps Arison will be spending some time in the future in England watching soccer.

June 16 2014 Update: On June 12th Arison sold another 445,008 shares of Carnival stock at an average price of $40.15, for a total transaction of $17,867,071.20.  That means, by my calculations, Arison has unloaded over $490,000,000 in a little over 3 months. 

 

Photo Credit: Steve Mitchell-USA TODAY Sports via 7500toholte.sbnation.com/

Greed On the High Seas: "Poop Cruise" & Concordia Cruise Executive Cashes $395,000,000 of Carnival Stock

Last week I wrote an article about Royal Caribbean CEO and President Adam Goldstein cashing in over $2,300,000 worth of Royal Caribbean stock, still leaving him with around $19,000,000 worth of his company's stock. 

It's difficult to justify the enormous wealth of the cruise executives given the fact that the cruise business is rigged to create gigantic profits free of U.S. taxes. Cruise lines like Royal Caribbean (Liberia) and Carnival (Panama) incorporated in foreign countries in order to avoid U.S. taxes, labor and wage laws, and safety regulations. The cruise lines pay dirt cheap wages to laborers from India and the Caribbean islands. They provide no benefits at all to their loyal crew members.

Cruise executive compensation isn't tied to whether the line's ships sink or catch on fire. One of the Micky Arison Carnival CruiseRoyal Caribbean cruise ships, the Grandeur of the Seas, caught on fire for two hours last year yet cruise CEO Goldstein still raked in millions. Cruise executives are rewarded for squeezing blood out of the stone. 

Tax-fee Royal Caribbean pays a salary of only $50 a month to its waiters and cabin attendants who it works like dogs, relying on the tax-paying cruise passengers to pay tips so the employees can try and make a living.  Yet Royal Caribbean is stealing, some say, some of the passenger money intended for tips and using the "tips" to pay the salaries of the non-tip earning crew members. Last year Royal Caribbean fired over one-hundred employees in its corporate offices here in Miami because of "tough economic times." Yet the cruise line executives like CEO Goldstein and chairman Richard Fain still pocketed millions and millions and millions at the end of the year.

No doubt the cruise employees are getting the shaft. The crew is getting poorer while the fat cat executives are getting richer and richer.  

The greediest cruise executive in my opinion is, hands down, no doubt-about-it, by-far Micky Arison. He makes Goldstein look like chump change. Arison is the news this weekend after agreeing to sell up to 10 million shares of Carnival Corporation stock. At $39.50 per share, that's $395,000,000. 5 million shares were sold on Friday and the remaining shares will be sold over the next 15 months, After the sale is complete, the Arison family will still own 188,000,000 shares worth over $7,426,000,000.

What will multi-billionaire Arison do with the $395,000,000? Build medical clinics in Goa, India where most of his crew members come from? Fund the retirement benefits for his hard working Filipino crew members who have slaved away far-from-their-children for decades on his ships?  Create schools in Nicaragua where thousands of family members of Carnival crew members reside? No, no, no. The nearly $400 million in cash will be solely for his own tax and estate planning.

CEO Arison paid himself a $90,000,000 bonus in 2002 - the same year of the Costa Concordia disaster. In my assessment, he seems like a money hoarder without a social conscious. Here are some of the infamous incidents involving Carnival Corporation and its brands over the last few years:

It is an amazing spectacle to watch Arison enrich himself irrespective of the Concordia capsizing and the Triumph engine room fire. 

Just last week we commented on Carnival's press release, issued during the middle of the Triumph "poop cruise" trial here in Miami. Carnival characterized the cruise passengers, who endured four days in the Gulf of Mexico after the negligently maintained old ship caught fire, as greedy.

I suppose it's business as usual for Carnival to malign its Triumph cruise guests while chairman Arison is cashing in a fraction of his cruise stock during the middle of the Triumph trial for $395,000,000. 

 

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Royal Caribbean: The Rich Get Richer, the Poor Get Poorer

Royal Caribbean Cruise Line CEO Adam GoldsteinRoyal Caribbean Cruises President and CEO Adam Goldstein sold 44,256 shares of Royal Caribbean stock yesterday.  Zolimax News reports that Mr. Goldstein sold his stock at an average price of $52.96, for a total transaction of $2,343,797.76.

After the sale, Mr. Goldstein's stocks total 358,804 shares, valued at approximately $19,002,260.

Royal Caribbean (RCL) has a 52-week low of $31.35 and a 52-week high of $53.42. 

We last reported on the cruise president's stock sales in October of last year when he sold 7,855 shares of RCL stock at an average price of $43.22, for a total value of $339,493.10. At that time, he reportedly owned 335,654 shares of Royal Caribbean stock, valued at approximately $14,506,966. 

It looks like the cruise executive's net worth has increased by over $7,000,000.

Royal Caribbean pays a salary to its waiters and cabin attendants of only $50 a month; the cruise passengers pay tips to the waiters and stewards but Royal Caribbean is scooping up much of the tips to pay other crew member's salaries. Employees like utility cleaners earn a pittance of around $550 a month (with no tips) working around 11-12 hours a day, every day of the month during contracts that are 6-8 months long. 

In September of last year, Royal Caribbean fired over one-hundred employees in its corporate offices in order to increase profits. You can read about that here: Loyal to Royal? Royal Caribbean Axes 100 Jobs in Corporate Headquarters.

 

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Photo Credit: Adam Goldstein - Cruise360 Vimeo

Royal Caribbean President Sells Stock

Adam Goldstein Royal CaribbeanNews sources report that Royal Caribbean President Adam Goldstein sold 7,855 shares of RCL stock on the open market in a transaction yesterday.

Goldstein's sold the stock at an average price of $43.22, for a total value of $339,493.10.

He reportedly now directly owns 335,654 shares of Royal Caribbean stock, valued at approximately $14,506,966.

Yesterday on our Facebook page, I suggested that at a price of $43 you should take your profit on RCL stock and run.

In July 2013, we reported that President Goldstein sold almost 19,000 shares of RCL stock worth over $700,000. This year Goldstein has sold over $1,000,000 of his company's stock. 

Two years ago, Goldstein sold over 40,000 shares between February 1 - 16, 2011 - for a total of over $1,900,000.

Royal Caribbean has not suffered the same severe problems as rival Carnival this year, but it has had its share of problems.  It suffered a major fire on the Grandeur of the Seas in May, and its subsidiary brand Pullmantur also a major fire on the Zenith cruise ship in June.

Just last month, Royal Caribbean cleaned house and terminated over 100 employees in its corporate offices in Miami as a cost saving measure. Read about that here: Loyal to Royal? Royal Caribbean Axes 100 Jobs in Corporate Headquarters.   

"CNN Effect" Doesn't Stop Royal Caribbean CEO From Buying Nearly $1,000,000 in RCL Cruise Stock

Yesterday, I wrote a short article about Royal Caribbean President Adam Goldstein selling 2,181 shares of RCL cruise stock earlier this week at an average price of $36.80, for a total value of $80,260.80. Cruise executives buying and selling their company's own stock is interesting to me as an indicator into their true thoughts about the direction of their business' future.

That being said, an cruise executive's sale of only $80,000 worth of stock doesn't say much. $80,000 may pay the annual wages of a dozen RCL utility cleaners but it's pocket change for a cruise line president. Goldstein still owns 335,654 shares of the company’s stock worth over $12,350,000.   

But today Forbes reports that Royal Caribbean CEO Richard Fain purchased 26,800 shares of RCL stock which, at a price of $36.82 a share, turns out to be $985,776.

As Forbes writes: "company’s own top management tend to have the best inside view into the business, so when company officers make major buys, investors are wise to take notice."

RCL’s low point in its 52 week range is $24.16 per share. Its 52 week high is $38.62. 

So CEO Fain is buying near the top of the chart. Seems risky to me.

As we mentioned this week, research firms are split on RCL's stock. One analyst gave the stock a "sell" rating, nine analysts assigned a "hold" rating and ten issued a "buy" rating. RCL currently has a consensus rating of “hold” and a consensus target price of $40.21.

Royal Caribbean Cruise Richard Fain Travel Weekly quoted Fain at the cruise line's second-quarter earning call last week. He said that despite the “unrelenting pressure of a deluge of negative publicity” on the cruise industry, things are looking up. Mr. Fain said the company is overcoming what he called the "CNN effect” of negative media scrutiny on things like highly publicized cruise ship fires that have occurred this year.

Royal Caribbean suffered a serious fire to its Grandeur of the Seas. And just last month, it's subsidiary brand Pullmantur's Zenith suffered an engine room fire which disabled the ship which needed to be pulled by tugs to back to shore.  

Royal Caribbean is also suffering from the spill-over effect from the negative publicity caused by Carnival's Costa Concordia disaster and the Triumph's infamous "poop cruise," in addition to other Carnival cruise ship mishaps.   

Does Mr. Fain know something that the analysts and the public doesn't know? Or this really a big calculated bluff to prime the pump of positive thinking?

I am not too sure that I would bank on a more positive public perception of the cruise industry developing naturally. The "CNN effect" is real.  In my opinion, the images broadcast by CNN are a lot more persuasive and powerful than the positive musings of a hopeful cruise executive.  

Plus there's a couple of things to keep in mind. There are increasing cut backs in RCL officer and staff salaries and crew pay coupled with an increase in their responsibilities which are deteriorating morale on the ships. Some of the tips which formerly went to the RCL cabin attendants and waiters are being channeled away from the crew to the company's income stream and destroying the crew's attitude in the process. And the MLC will come onto effect next month, restricting crew member working excessive hours, which may increase RCL's costs, restrict the cruise line's historical exploitation of its crew, and push its profit margins down.

Royal Caribbean Grandeur of the SeasRCL's cost cutting measures helped it to squeeze out a profit this past quarter, but it was under $25 million on gross revenues of $1.88 billion. How much more can RCL cut from the already overworked and underpaid crew?

And no cruise executive pumping up a stock price would dare mention Senator Rockefeller's announcement last week that he intends to introduce legislation to take away the loopholes in the U.S. tax code which permits the cruise lines to avoid U.S. taxes on its foreign flagged cruise ships.

Are brighter days ahead for RCL and CEO Fain's newly acquired 26,800 shares?

Maybe. Maybe not. But one thing is certain. All it will take is for one cruise ship to suffer another engine room fire for the "CNN effect" to send the RCL stock price plummeting south.

July 31 2013 Update: Watch List News reports that Royal Caribbean Cruises' President  Adam Goldstein "dumped 16,717 shares of the stock on the open market in a transaction that occurred on Tuesday, July 30th. The stock was sold at an average price of $37.20, for a total value of $621,872.40."

 

Photo Credit:

Top: Royal Caribbean Press Center

Bottom: Janeeva Russell / The Freeport Times / AP

Royal Caribbean President Sells 2,181 Shares of Cruise Stock

RCL Adam Goldstein The Daily Political reports that Royal Caribbean President Adam Goldstein (left) unloaded 2,181 shares of RCL cruise stock yesterday at an average price of $36.80, for a total value of $80,260.80.

Goldstein still owns 335,654 shares of the company’s stock worth over $12,350,000. 

A number of research firms have recently commented on RCL's stock value. One analyst gave the stock a "sell" rating, nine analysts assigned a "hold" rating and ten issued a "buy" rating to the company’s stock. RCL currently has a consensus rating of “hold” and a consensus target price of $40.21.

The stock has a 52 week low of $24.16 and a 52 week high of $38.62. 

Royal Caribbean posted its quarterly earnings last week. The company had revenue of $1.88 billion for the quarter, with a profit of under $25,000,000.  

RCL Chairman Richard Fain (below right) said that a fire on the Royal Caribbean cruise ship Grandeur of the Seas, weak pricing in the Caribbean and itinerary disruptions in Asia affected earnings in the second quarter. 

RCL Chairman Richard FainThe cruise line's business model is predicated on its avoidance of U.S. taxes and regulations, such as minimum wage, overtime, and OHSA regulations. Royal Caribbean avoids taxes and many U.S. regulations by incorporating itself in Africa and incorporating its cruise ships in places like the Bahamas and Malta.

Royal Caribbean and its subsidiaries are currently exempt from U.S. corporate tax on U.S. source income from the international operation of cruise ships pursuant to Section 883 of the Internal Revenue Code.

Senator Rockefeller stated at a Senate hearing last week that he would introduce legislation to close loopholes in the federal tax code which permits foreign incorporated companies operating foreign flagged cruise ships to avoid paying their fair share of U.S. taxes.

If such legislation was enacted into law, the RCL stock value would plummet. 

July 21 2013 Update: Watch List News reports that Royal Caribbean Cruises' President Adam Goldstein "dumped 16,717 shares of the stock on the open market in a transaction that occurred on Tuesday, July 30th. The stock was sold at an average price of $37.20, for a total value of $621,872.40."

 

Photo Credits: Top - NBC News; Bottom - Examiner.com

Royal Caribbean Reports $392,800,000 Loss for Last Quarter

The Associated Press reports that cruise giant Royal Caribbean lost $392.8 million in the fourth quarter because of losses associated with its Spanish cruise line, Pullmantur.

The AP states that Royal Caribbean wrote down $413,900,000 due to a substantial drop in bookings and prices in Spain following the Spanish government’s austerity measures. Royal Caribbean also blamed its losses on the Costa Concordia disaster a year ago.

Royal Caribbean had a profit of $36.6 million during the same quarter a year ago. 

In December we reported that Royal Caribbean's top executive Richard Fain bailed on out on a large block of cruise line stock.

In December 2012, Chairman and Chief Executive Officer Richard Fain sold 143,140 shares of RCL stock for $4,964,095.  

Fain followed up by exercising options and selling 188,443 shares for $6,535,203, for a total of around $11,500,000.  

$11,500,000 in cash in your pocket and 6 weeks later your cruise line posts a loss of over $392,000,000. Goes to show you that cruise line executives have fun making millions hand over fist regardless of how the company performs.

Video below is of CEO Fain on one of the Royal Caribbean FlowRiders (via RCCL YouTube).

 

Cruise CEO Fain Bails On Royal Caribbean Stock For Over $11,500,000

Barron's reports that Royal Caribbean Cruises' top executive recently bailed out on a large block of cruise line stock just before the cruise line's shares touched a new 52-week intra-day high.

On December 13th Chairman and Chief Executive Officer Richard Fain sold 143,140 shares of RCL stock for $4,964,095, an average of $34.68 each. Barron's says that Fain followed up by exercising options and selling 188,443 shares for $6,535,203. 

The RCL stock is down over a point since CEO Fain bailed on the stock. Fain still holds 1,049,064 shares directly and 421,412 shares indirectly.

The last time we wrote about RCL's CEO was when he and other executives at the cruise line were sued for fraud for allegedly making false and misleading statements about the company's fourth quarter results for 2010. In January 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 what the lawsuit alleges were total illicit proceeds of $9,326,000.  

Big bucks and cruise CEO's go hand in hand, irrespective of how the cruise industry is actually faring. A couple of weeks ago we wrote about Carniva's Micky Arison paying himself a bonus of $90,000,000 after what he describes as one of the one most challenging years for the cruise lines yet. 

Royal Caribbean Cruises CEO Richard Fain

January 4 2013 Update: The issue of cruise line executive compensation made our list of top ten stories for last year:

2012 was reportedly a difficult financial year for the cruise lines but you would never know it by looking at the huge sums of money, bonuses and stock options which the cruise line CEO's pay themselves. In contrast Fain' with his regular multi-million-dollar salary and the $11,500,000 from stock sales, Royal Caribbean's bar-servers were paid only $50 a month and required to work for tips carrying a dozen tropical drinks around the pool deck while balancing a bottle of rum on their heads

 

Photo Credit: Wall Street Journal Smart Money / by Jeffrey Salter / Redux 

Continuing Negative Cruise News Beats Royal Caribbean Down

The 2012 second quarter earnings results are in for Royal Caribbean Cruises and its not good news.  

The cruise line reported a net loss for the second quarter of this year of $3,600,000 - compared to net income in the second quarter of last year of $93,500,000.

Slightly fewer passengers sailed on Royal Caribbean cruise ships during this last quarter compared to 2011.

The CEO of the cruise line, Richard Fain, tied the decline in passengers and net income to the Costa Concordia disaster in Italy in January, where 32 passengers and crew died. "The steady drumbeat of negative news emanating out of Europe is certainly having an effect," Fain announced at the conference call to analysts.

Motley Fool Slams Carnival But Cruise CEO Micky Arison Laughs All The Way To The Bank

Daily Finance published a debate today by the Motley Fool analysts about whether Carnival is a sound investment following the Costa Concordia disaster and the fire aboard the Costa Allegra cruise ship. 

The result?  Three thumbs down.

Here are the analysts' thoughts:

"I'll keep my flag planted on dry land."

"My primary beef with Mr. Arison was his delayed response (more than one week, according to The Wall Street Journal) to the Costa Concordia tragedy and his lack of response just six weeks later regarding the fire on the Costa Allegra. He seemed concerned more with the Miami Heat, which he owns, than Carnival Cruise Line - Motley Fool AnalystCarnival Cruise Lines, leaving shareholders as an afterthought."

"I see troubled seas ahead for Carnival."

The analysts didn't even mention other recent troubles facing Carnival: the desperate move to steal tips from waiters on Carnival's subsidiary cruise line P&O Cruises, or the widespread sexual abuse scandal on cruise ships managed by its subsidiary Cunard, or the alleged criminal conduct of the Captain of the Star Princess cruise ship operated by another one of its subsidiaries, Princess Cruises.

My take?  Most Carnival cruise passengers are indifferent to the exploitation of crewmembers,  They don't want to hear about the sexual molestation of children during cruises. And they are going to give the captain of the Love Boat the benefit of the doubt, especially over some Panamanians floating 100 miles from nowhere.

Carnival is largely disaster proof. CEO Arison has 100 cruise ships at sea, actually 99 ships cruising and one lying on its side off the coast of Giglio.  Last year, $15,000,000,000 (billion) rolled in. Carnival pays virtually no U.S. taxes. Short of al Qaeda seizing a cruise ship, forcing U.S. passengers into orange Guantanamo jump suits and cutting their heads off, an occasional capsizing, collision or fire will not spook the Carnival faithful.  

Carnival fans want cheap cruises on their fun ships, lots of food & booze, and an escape from reality. As long as Carnival can provide that, fat cat cruise CEO Arison will continue to laugh all the way to the bank.

Another Shareholder Class Action Lawsuit Filed Against Royal Caribbean Alleging Fraud

Royal Caribbean - Stock Fraud?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.

Royal Caribbean Stock Fraud Lawsuits - What Did the Cruise Line Executives Know and When Did They Know It?

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.   

Richard D. Fain - Stock Fraud?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 Brian C. Rice - Stock Fraud$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.

Royal Caribbean Stock Chart

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