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

Cruise lines hate U.S. governmental scrutiny of their business operations.  

The whole purpose of incorporating their businesses and flagging their cruise ships in foreign countries is to avoid U.S. taxes and the scrutiny of federal regulators. This business model permits the cruise lines to pay virtually no U.S. taxes and to avoid U.S. wage, labor and safety laws. Cruise lines often conceal shipboard crimes and the industry's abuse of crew members.

But one U.S. Senator, Jay Rockefeller of West Virginia, is taking the cruise lines' lack of transparency head on. Following Carnival's string of disabled cruise ships and nonchalant attitude towards its quests, Senator Rockefeller sent a letter to Carnival billionaire cruise CEO Micky Arison in March, inquiring into issues pertaining to the cruise line's avoidance of taxes as well as issues regarding the safety of cruise passengers. You can read the letter here. 

Carnival's letter back to Rockefeller dodged and weaved and argued and mostly avoided responding to Senator Rockefeller's concerns. Carnival refused to disclose, for example, the number of victims of sexual assault - a topic that the cruise lines strenuously try to avoid talking about.  We summarized Arison's defiant attitude in our article: Carnival CEO Arison's Letter to Senator Rockefeller: Screw You!

Undaunted, Senator Rockefeller has sent another letter to Arison and has also sent letters to the CEO of Royal Caribbean Cruises (Richard Fain) and Norwegian Cruise Lines (Kevin Sheehan).

In his letters yesterday, the Senator is inquiring into the internal safety audits which the cruise lines and the cruise association are allegedly conducting. At the recent cruise trade show on Miami Beach, the Carnival, Royal Caribbean and NCL cruise executives talked at length about their ability to learn from their own internal investigations but never stated that they would release the reports from the investigations.

This is the usual cruise line ploy: assuring the public that they are busy at work investigating themselves after cruise ships sink or catch on fire; however, they never ever disclose the results of their alleged investigations. Carnival said that it was conducting an internal audit of its operations after the Carnival Splendor was disabled after an engine room fire in 2010.  But Carnival has never released the results of its investigation. The public remains in the dark.

Senator Rockefeller is also again demanding that the cruise lines disclose the number of crimes, particularly sexual assault, on cruise ships. The cruise industry has been notoriously dishonest in revealing accurate crimes statistics. It usually defaults to conclusory, self-serving opinions that crime is "rare" while simultaneously concealing the true crime statistics.

At a prior Congressional hearing, Royal Caribbean responded to a Congressional inquiry by stating that 66 women were raped during a three year period.  But in a court case we handled, the cruise line was ordered to reveal that the actual number of such crimes was much higher.

The LA Times reported on the cover-up in an article: Cruise Industry's Dark Waters.   

Royal Caribbean faced no consequence for misleading Congress back in 2006.  

The cruise lines' response to Senator Rockefeller in due on May 24th.  

Will RCCL CEO Fain and NCL CEO Sheehan be transparent? Or will they join Arison in a game of hide and seek?

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Under public criticism and pressure initiated by U.S. Senator Rockefeller, Carnival announced today that it will reimburse the federal government for costs of over $4,000,000 incurred by the U.S. Coast Guard and U.S. Navy in responding to its Triumph and Splendor cruise ships. 

Senator Rockefeller set his sights on the cruise industry at a Senate hearing last year following the deadly disaster of the Carnival-owned Costa Concordia cruise ship.  Rockefeller grilled the cruise industry's CEO and questioned why the cruise lines avoided most U.S. taxes and did not reimburse the federal government for the services of some 20 federal agencies.

Senator Rockefeller recently sent a letter to Carnival CEO Micky Arison, who is worth over 5.7 billions dollars, demanding an explanation why Carnival paid virtually no U.S. taxes even though the Panamanian incorporated cruise line uses the services of the U.S. Coast Guard and other U.S. agencies on a daily basis.  Carnival's response was labeled "shameful" by Rockefeller.

NBC aired a special on the story and interviewed Rockefeller (and me) during the program. NBC's Rock Center commissioned an audit of Carnival which revealed that Carnival paid 0.6% in international, federal, national, and local taxes on its many billions of dollars in income over the course of the last 5 years.    

Numerous news sources, including the Huffington Post, published articles highly critical of Carnival. Since then, Carnival has been the butt of "poop ship" jokes and ridiculed for non-payment of U.S. taxes. Carnival has been clobbered in the arena of public opinion.    

Carnival released a statement today saying: “Although no agencies have requested remuneration, the company has made the decision to voluntarily provide reimbursement to the federal government.”

Senator Rockefeller responded by saying: “I’m glad to see that Carnival owned up to the bare minimum of corporate responsibility by reimbursing federal taxpayers for these two incidents. I am still committed to making sure the cruise industry as a whole pays its fair share in taxes, complies with strict safety standards, and holds the safety of its passengers above profits.”

The issue of Carnival's avoidance of paying taxes and for U.S. services has been brewing for years. The International Cruise Victims (ICV) organization, a non-profit organization focused on crimes and disappearances of passengers on cruise ships, has addressed the issue of cruise tax avoidance for years.  ICV CEO Ken Carver sent a Freedom of Information Act (FOIA) request for the costs associated with the U.S. Navy and U.S. Coast Guard responding to the disabled Carnival Splendor in November 2010.

Mr. Carver's investigation led to a response from the Navy which revealed that the Navy incurred $1,884,376.75 in responding to the disabled Splendor which included sending the U.S. aircraft carrier Ronald Reagan and helicopters to the fire stricken cruise ship.

Read: Your Tax Dollars At Sea - Who Pays When Things Go Wrong on Cruises?     

Congratulations to the ICV and CEO Ken Carver for raising this issue over the past years.

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Today I read a press release by the U.S. Coast Guard about a maritime safety exercise conducted in the waters of Freeport Grand Bahamas.

U.S. Coast Guard crew members from the Coast Guard Cutter Diamondback conducted a safety exercise with Royal Caribbean's Monarch of the Seas on April 2, 2013. The exercise was called "Black Swan" and was described as "a joint offshore emergency exercise" coordinated by the Coast Guard, the cruise line industry and the Bahamian government.

You can see from the photos, taken Chris Todd, U.S. Coast Guard Auxiliary, that multiple Coast Guard vessels were involved.

The cruise industry's trade organization, the Cruise Line International association (CLIA) touted the exercise as part of the cruise industry's commitment to safety.  CLIA CEO Chritine Duffy said the exercise:

" . . . further strengthens the cruise industry's unwavering commitment to emergency preparedness in coordination with the Coast Guard and other government authorities . . . (and) underscores the focus we maintain on our No. 1 priority: the safety and comfort of our guests.” 

What CLIA does not mention is that the cruise industry does not pay for the Coast Guard services even though the cruise lines collect over $35,000,000,000 (billion) a year but pay less than 1% a year in local, state, federal and international taxes a year. 

The Coast Guard is severely under-funded but receives absolutely no reimbursement from the cruise lines. The cruise industry then uses the exercises (paid for by U.S. taxpayers) as part of its marketing to sell cruise tickets to the tax-paying public.  

The cruise lines have rightfully been criticized for not reimbursing the Coast Guard for rescuing vessel at sea.  But there are many, many other expenses which the Coast Guard incurs which the cruise lines do not reimburse, such as daily Coast Guard escorts into and out of U.S. ports, safety exercises, and medevac airlifts of ill crew members and passengers.

At a time of financial crisis in the U.S., it is obscene that the cruise industry gets a free ride from our federal government for services like this.  A friend just emailed me about this PR exercise by the cruise lines: "what a gross waste of money by US taxpayers in support of an industry that is so arrogant and exploitative of US resources." 

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Tonight Seatrade Insider published an article about Carnival CEO Micky Arison's letter to Senator Rockefeller who has been critical of Carnival cruise line's avoidance of taxes and non-payment of services to federal agencies like the U.S. Coast Guard.

You will recall that Senator Rockefeller, who convened a hearing last year after the Carnival-owned Costa Concordia cruise ship killed 32 passengers and crew members and injured or terrorized thousands of others, sent a letter to cruise tycoon Arison last week. Rockefeller asked Arison whether Panama-incorporated Carnival though it was fair that it paid a pittance in taxes. Rockefeller asked Arison to pay for the considerable services incurred by US federal agencies when Carnival cruise ships caught on fire or were disabled on the high seas.    

You will not find a copy of the letter from Arison to Rockefeller anywhere on line. The only one talking about the letter is Seatrade Insider, because Carnival sent an advance copy of the letter to its friends at that cruise publication. 

Why did Seatrade Insider receive an advance copy? Because that publication is an associate member of the cruise industry trade organization Cruise Line International Association (CLIA) whose goal is to advance the interests of the cruise lines. Seatrade Insider did not bother to publish the letter but obviously supports everything the billionaire cruise CEO said and it summarily dismissed all of Senator Rockefeller's well-founded points.

Arison's letter enclosed responses signed by Carnival vice president for corporate maritime policy James Hunn. Carnival says that is has no intention of reimbursing the U.S for anything. Carnival also does not contest the fact, brought out by a NBC special last week, that over the last 5 years it paid only 0.6% in local, state, national and international taxes on the many billions of dollars in revenues collected each year.  Last year, Carnival collected over $15 billion in revenues.

Earlier today, Carnival lost one of its greatest supporters when the editor of the Cruise Critic cruise fan site, Carolyn Spencer Brorwn, stated that she would not cruise on Carnival and she recommended that the Cruise Critic readers "book elsewhere."

We'll comment further on Arison's letter after it is received by the Senator and released to others outside of the cruise line's cheerleaders like Seatrade Insider.  

April 3 2013 Update: You can read the letter here.   It seems to dodge some of the requests for information and documents. It's argumentative.  And it down-plays the seriousness of most of the 90 incidents involving Carnival over the past several years.   

Photo Credit: Jim Walker

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In an exclusive story, Cruise Line News has learned that cruise industry giant Carnival Corporation recently incorporated its business in the United States (in the state of Delaware). Carnival intends to announce this historic development tomorrow, April 2nd, at Carnival's headquarters in Miami.

Since 1972, Carnival has incorporated its business and registered its cruise ships in the country of Panama. For over 40 years, Carnival cruise ships have flown the flag of Panama in order to avoid the onerous safety regulations, excessive labor laws, unreasonable environmental laws, and high taxes of the United States of America.

Cruise Law News' discovery of this historic event came about when prominent maritime lawyer Jim Walker bumped into Carnival's CEO Micky Arison at court side when Arison's championship basketball team, the Miami Heat, won another game.  Maritime ace lawyer Walker asked Arison: "Micky, if Dwayne Wade and LeBron James earn several hundred million dollars from Carnival and pay tens of millions of dollars in U.S. taxes, don't you think it is fair that Carnival - which earns over 15 billion dollars a year in cruise ticket sale - pays a few billion dollars in U.S. taxes?"

Perhaps it was the euphoria of the Heat beating the San Antonia Spurs by two points in a close overtime victory, but Micky was ecstatic. "Yes, let's do it!" he said handing maritime lawyer Walker a half-eaten hot dog and three-quarters of a warm Bud Light which a Miami cheerleader handed Micky in the first quarter of the previous game a few days earlier.

While quickly consuming the beer and hot dog in the excitement of the moment, expert cruise lawyer Walker happened to have U.S. articles of incorporation which he handed to Micky to sign as well as U.S. flags to fly on the Carnival fleet of cruise ships.

Arison has been under intense pressure lately following fires, collisions, sinkings, pirate-attacks, flounderings, norovirus outbreaks and a Jon Secada onboard concert which have ruined the last 37 Carnival cruises.  Just last week Senator Jay Rockefeller called Arison a "scallywag" on national TV. Rockefeller challenged Arison to pay his fair share of U.S. taxes on the bounty his foreign-flagged cruise ships collect on the high seas. 

Micky commented that he was embarrassed that his father Ted, the founder of Carnival Cruise Lines 40 years ago, denounced his U.S. citizenship in order to avoid paying some 10 billion dollars in U.S. taxes.

"I want to make certain that Carnival pays one hundred % of our U.S. tax obligations (estimated to be over $5,000,000,000 a year) plus be subjected to the most rigorous U.S. safety, wage,and labor laws and the most stringent U.S. environmental regulations, Micky announced over the arena's PA system! "I want Carnival Cruise Line to be synonymous with Old Betsy - the U.S. Stars and Stripes - what the U.S. stands for! Its time that indigent crew members from India and Nicaragua who earn $500 working 360 hours a month be entitled to the full benefit of U.S. employment laws, a 401(k) retirement fund, severance pay, and a college fund for their children!"

While appreciative of Arison's change of heart, sources say Walker was miffed that Arison demanded that he pay $6 for the remains of the hot dog and $7.50 for the rest of the Bud Light.

April 1 2013 Update: South Florida Business Journal picks up on this shocking development in the cruise industry. Read here.

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Last night NBC Rock Center with Brian Williams aired a special on Carnival CEO Micky Arison who has a net worth reportedly of around $5,700,000,000.

One of the secrets to Arison's wealth is that his cruise line, Carnival, according to NBC News, paid around 0.6% in taxes at the federal, state, local and international levels over the past 5 years. That's less than 1% tax on all of the billions and billions in revenues collected from U.S. tax-paying citizens. 

Plus Carnival does not pay for the services provided by the U.S. federal agencies such as the U.S. Coast Guard or the U.S.Navy for responding to disasters at sea which disable Carnival cruise ships.

You can watch the video below produced by Tom Bettag and interviews by Harry Smith: 

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Tonight NBC will take a hard look at Carnival CEO Micky Arison who I have written about on this blog. 

Micky Arison is well liked here in Miami, mostly for bringing a couple of NBA basketball championships to South Florida - first with Shaq and later with D-Wade and Lebron James who he has spent hundreds of millions of dollars on. He is extraordinarily wealthy with somewhere between 5 and 6 billion dollars.

Arison is also extraordinary in his ability to exploit crew members from impoverished countries like India and the Caribbean islands who work over 350 hours a month for as little as $550.

At 10:00 PM EST tonight, NBC's Rock Center television program will air its investigation into Carnival's cruise line business and how Arison has profited greatly from it. 

Carnival's CEO Micky Arison has incurred the wrath of Senator Jay Rockefeller who expressed his outrage to NBC over Carnival’s abuse of the loopholes in the tax system. Rockefller recently sent a letter to Arison which you can read about here.

Rockefeller, chairman of the Senate Commerce Committee, told Rock Center's Harry Smith that he regards Carnival “very poorly” as a corporate citizen. Rockefeller says Carnival's extremely low tax rate is "disgusting" particularly  because of the cruise line's extensive use of federal agencies like the US Coast Guard.

NBC points out that the cost of US assistance to the fire-disabled Triumph cruise ship was $779,914.26. And another Carnival ship, the Splendor, suffered an engine fire two years ago that required assistance from the US Coast Guard and the Navy. That cost each service more than $1,500,000 which Carnival did not pay.

During the program tonight, you will see veteran newsman Harry Smith interview me as well. You can watch the video here or wattch the video below.

Will CEO Arison be on the program? No. He's a no-show, just like he has never appeared at the scene of a cruise fire, collision, or catasrophe involving his cruise line guests.

Interested in this issue?  Here are some other articles I wrote on Micky Arison:

Carnival CEO Micky Arison's Net Worth Increases from $4,700,000,000 to $5,700,000,000, Notwithstanding Costa Concordia Disaster

Hard Times For Carnival? Hardly.

Profits Over People: Carnival's Exploitation of Crew Members is Standard Industry Practice

Cruise Crisis Management FAIL - How Carnival is Ruining its Reputation Following the Costa Concordia Disaster

Is Carnival's Micky Arison a Greedy Corporate Pig?

Art Credit: Nickolay Lamm from MyVoucherCodes.co.uk

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I have written around 1,500 articles about the cruise industry on this blog.

I've covered the issues which are important to me, like the negative environmental impact caused by cruise ships which dump raw sewage into the water and belch toxic high-sulfur smoke into the air. Like the exploitation of vulnerable citizens of India and the Caribbean islands who work over over 360 hours to earn less than $600 a month. Like the fact that cruise lines avoid all U.S. federal taxes, U.S. wage and labor laws, and U.S. safety regulations by incorporating their companies and registering their ships overseas in countries like Panama, Liberia and the Bahamas.       

But do Americans really care about these issues?

An article the other day from the Plain Dealer struck a strange chord with me.  The article was entitled Cruise Industry's Recent Troubles Could Mean Bargains on the Horizon. The newspaper writes that although the cruise industry is floundering again with images of stranded ships with over-flowing toilets (Image above courtesy Adweek), cruise lines will "fight back by throwing money at the image problem, lowering their prices until customers start buying again."

The newspaper's bottom line is that the recent spate of pseudo disasters may be a good thing for consumers - "this may be the time to find a bargain."

Americans love bargains.  They want affordable and fun vacations. That's what Carnival offers.

Americans don't want to think about 400,000,000 people in India living below the poverty line many of whom are easily exploitable on cruise ships. Or the burning of toxic bunker fuel. Or the fouling of the waters in Alaska with a billion gallons of cruise ship waste water. Or the cruise line's non-payment of U.S. taxes.

Americans want to enjoy a cheap vacation on a "fun ship."  The cruise lines provide that.  If fair treatment of Indian crew members, clean air and water, and the payment of taxes by the cruise lines will make cruising more expensive, most cruisers will choose the cheaper cruise.

Today I saw a tweet by the IrixGuy on Twitter. Seems like a nice fellow.  His YouTube video (below) explains why you should continue to cruise on Carnival.  His basic points:

1. Carnival is "great;" 

2. Carnival cruises have the "best prices;" and

3. With all of the "disasters" and negative press, it's a "really good time to get a really good deal."

I suppose that's basically what most cruisers want, right?

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Carnival CEO Micky Arison joined Twitter in 2010. I was curious to see how such a big shot cruise executive would interact with the common man on such a popular social media platform like Twitter.

After the Costa Concordia disaster killed 32 of his cruise guests and crew members, cruise CEO Arison made no public appearances. When he was first seen in public it was at the Miami basketball arena here in Miami to watch his Miami Heat play. His first tweet after Concordia sank was "Let's Go Heat." Even when the world press focused on his insensitive and selfish antics, Arison could have cared less it seems. He tweeted away about his celebrity friends and his star studded basketball team as if Concordia never sank.     

Yesterday Forbes published an article how Arison's cruise empire avoids U.S. income tax - "Ship Isn't The Only Thing That Stinks At Carnival: Low Tax Rate Stirs Ire".  

Forbes explains that Carnival collects billions of dollars every year, but pays about a 1% tax rate because the Arison family incorporated the cruise line in Panama. Even though the cruise line benefits from being located here in Miami and uses the services of the U.S. Coast Guard, U.S. Customs and many other agencies, it essentially gets a free ride. 

As Forbes states: "While the U.S. Coast Guard patrols the seas for Carnival’s ships – and, in the case of the Triumph, towed them back to safety – Carnival ducks out on most U.S. taxes."

Carnival's CEO Arison is a shrewd businessman. He know how to work the system.  His cruise ships use the ports in the U.S. and foreign countries for free.  Local citizens like you or me pay for the port terminals. If there is a port fee or head tax, the passengers pay it. When it comes to his basketball team, the local citizens pay for that too.

The Arison family have been gaming the system for 45 years. They will say that they are taking advantage of legitimate tax loopholes in the I.R.S. Code.  But that begs the question of why the federal tax code is drafted as if it were written by Carnival's tax lawyers and why it has not been amended to result in Carnival paying a reasonable and fair shore of its share.  The truth is that Carnival and other cruise lines spend many millions of dollars lobbying Congress while hiring high ranking federal directors of federal agencies to keep the cozy status quo exactly like it is.

But how much is enough for Arison? Fifteen years ago a local journalist asked "Is Micky Arison a Greedy Pig?"  I repeated the question here a few years ago.

Arison is the richest person in Florida, worth over $5,000,000,000. Two months ago, he paid himself a end-of-the-year bonus of $90,000,000 - in the same year where his Concordia killed 32 people. The stricken cruise ship still lies on its side in the waters of Giglio, and the victims of that terrible ordeal were offered only $15,000 by Carnival, but Arison pays himself a $90,000,000 year end bonus.

After the Carnival Triumph ignited off the coast of Mexico last weekend, Arison made no public statements.  Later that Sunday afternoon, there Micky sat at half-court at the Miami Arena watching his Heat beat the Lakers. His last tweet today was an instagram photo of him and Beyonce'.

Just how out-of-touch is this cruise CEO with the reality of the world around him?  Over 4,000 of his guests and ship employees endured a week-long-cruise-from-hell aboard the urine and fecal stained Carnival Triumph but Arison tweets a photo of him hanging with Beyonce'.

The question arises again. Is Micky Arison a greedy pig? In answering the question, consider Arison's bio on his twitter page:

"CEO of Carnival. Owner of your @MiamiHEAT I do not respond to requests for free cruises or tix. Unfortunately we have to pay for fuel, food & players."  

"Unfortunately we have to pay for fuel, food and players?" What a cynical mantra for his luxurious life.

How much greed does it take to turn Arison's enormous prosperity into petty bitterness over having to pay for food for his cruise guests and pay for the salaries of basketball players who bring him so much wealth, power and prestige?

So if you are just arriving home today from Arison's disgusting & disabled cruise ship after another cruise-from-hell, whatever you do, don't ask Micky for a free Heat ticket or a free cruise. He's too busy hanging with Beyonce' to even consider such a request.        

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Today I read an interesting case analysis from the Journal of Business Case Studies (May/June 2012), which studied the business model of the second largest cruise company in the world, Royal Caribbean Cruises, Ltd.   

The article is entitled "Royal Caribbean Cruises Ltd.: Innovation At A Cost?" (click on the pdf link)

The article focuses on Royal Caribbean Cruises Ltd. which was formed in 1997 when Royal Caribbean Cruise Line (founded in 1968) and Celebrity Cruises (founded in 1988) merged together. 

The article explains that the foundation of Royal Caribbean is the avoidance of U.S. taxes and regulation. It accomplishes this by:

• Incorporating in a foreign country (Liberia, Africa), and
• Registering its cruise ships in weak, poor and disorganized foreign countries (mostly Liberia and the Bahamas).  

By registering its corporation and ship overseas, it avoids U.S. taxes, labor and environmental laws, and criminal culpability.  U.S. executives are offered millions in bonuses while the cruise line itself pays no U.S. taxes, which is the key to its profitability. The Journal writes that Miami based cruise lines, like Royal Caribbean:

" . . .  take advantage of maritime laws to avoid paying U.S. taxes, gain immunity from American labor laws, avoid U.S. courts in workplace disputes, and fend off new environmental regulations, government records and industry reports show. They have done this by incorporating in Central America and Africa and registering their ships under the flags of foreign nations . . ." 

Although this theoretically gives tiny countries regulatory power over one of some of Florida's largest corporations, the flag states " . . . are not only reluctant to discipline major contributors to their economies, but also do not have the resources to enforce regulations or even punish polluters."

Flying flags of convenience has historically been used to conceal criminal activities, and is now "used primarily for economic reasons and sanctuary from restrictive regulatory environments."

Tonight in England a documentary will air about the exploitation of crew members on the Eclipse cruise ship which is operated by Royal Caribbean's sister company, Celebrity Cruises, out of Southampton England.  Crew members work 12 hours a day (sometimes more), every day, every week for the length of their 6 - 8 month contracts with no time off. When injured, the crew members  are often dumped back in their home countries and paid only $12 a day and denied competent medical treatment.

You can trace the root cause of this abuse back to the earliest days of Royal Caribbean in the late 1960's when the cruise line decided to skirt U.S. laws by incorporating in the lawless country of Liberia.       

Don't miss:

"Celebrity Cruises Crew Member Controversy Brewing in Britain"

"Profits Over People: Carnival's Exploitation of Crew Members is Standard Industry Practice"

"Royal Caribbean Executives Get Richer While Crew Members Get Poorer"

Credit: Flags of convenience article - "Flags at Sea . . . "

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Over the past week, CNN has aired a number of special programs about the cruise industry, revealing a number of things that the industry would prefer you not know.

The segment below focuses on the cruise lines' efforts to avoid U.S  taxes,

By registering their cruise ships in foreign countries, cruise lines avoid most U.S. regulations and virtually all U.S. taxes. The CNN program points out that Carnival is registered in Panama; Royal Caribbean in Liberia; and Princess in Bermuda. Why? Primarily to avoid U.S. taxes.

Last year Carnival paid no U.S. taxes.  None.  Over the last seven years Carnival netted profits of over 11 billion dollars and paid a measly amount in taxes of barely over 1%.

The video shows some interesting comments by Senator Rockefeller (D - WVA) who presided over the hearing in the U.S. Senate about the Costa Concordia disaster. He stated that cruise ships are "getting away with alot."  They register overseas to avoid taxes; they hire cheap labor; they don't reimburse some 20 U.S. federal agencies for services rendered to the foreign cruise ships; and they pay the absolute minimum to passengers who are seriously injured or killed due to their negligence and recklessness.

There is a direct correlation between registering cruise lines in places like Africa or Central America and few safety regulations and lackluster regulatory bodies.      

CNN interviewed me for a short segment of the program where I discuss the extraordinary efforts cruise lines go to limit their liability by inserting onerous terms and conditions filled with legal "mumbo jumbo" to avoid paying fair compensation to injuries passengers and the families of the dead.      

The cruise industry may say that its priority is the safety of passengers, but as Senator Rockefeller said: the cruise lines' financial "bottom line" is the cruise lines' true emphasis.  

Watch the CNN video below:

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Carnival held its annual meeting this morning at a hotel on Miami Beach. But today was different from the usually dull, self-serving pontificating by cruise line executives when a group demanding that Carnival pay its fair share of taxes appeared on the scene.

An organization called "1Miami" challenged Carnival and its CEO Micky Arison to pay their "fair share" of taxes.  Their presence caused an uproar with shareholders yelling at the protesters to be quiet and CEO Arison apologizing for the clamor.

Cruise lines avoidance of taxes is one of my favor topics.  Cruise lines like Carnival are registered in Panama to escape U.S. taxes.  According to the New York Times, Carnival paid taxes of only 1.1 percent of their $11.3 billion in profits over the last five years.  The issue is a hot one after Senator Rockefeller grilled cruise line executives at a Senate hearing last month why cruise lines use some 40 federal agencies yet avoid all U.S. taxes by registering their businesses and ships in places like Liberia and the Bahamas.

This is a story I have written about a lot: Is Micky Arison A Greedy Corporate Pig?   Nothing subtle here.

You can also check out some other articles No Taxes - The Cruise Line's Dirty Little Secret or Your Tax Dollars at Work - Who Pays When Things Go Wrong On Cruises? 

The "controversy" was caused by the 1Miami grass roots organization simply asking Carnival to pay its fair share of taxes and help keep Miami afloat.

The Miami Herald reported Carnival's claim that it pays "head taxes" to ports around the world.  But this is hardly true; its the passengers who pay the port taxes.  Carnival just acts as a middle man. The Herald also writes that CEO Arison found the tax questions "insulting."  

Ah, a raw nerve.  Arison is very touchy about the issue of taxes. This is probably because he is the richest person in Florida.  And probably because of some slick and embarrassing tax maneuvering by his father, Ted Arison.    

Carnival was created by the senior Arison in the 1960's.  He raked in tens of billions of dollars from tax paying U.S. passengers, exploited the hell out of Caribbean crew members, and lived the good life in Miami. But he registered his Miami-based cruise line and his cruise ships in Panama to avoid U.S. taxes. In 1990, he abandoned Miami, denounced his U.S. citizenship, and returned to Israel with his billions in a ploy to avoid estate and inheritance taxes.

Carnival should have seen the protesters coming from a mile away.  

Earlier in the week the 1Miami group protested about Carnival's non-payment of taxes while in small boats next to Arison's super yacht, the 200 foot Feadship Mylin IV, at the Miami Beach marina.

You can watch the video here.

Arison's personal yacht, by the way, is registered in the Cayman Islands - to avoid taxes.  

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This week the United States Coast Guard rescued two cruise passengers - one ill young man from the NCL Gem cruise ship sailing off the coast of North Carolina and a second young woman from the Explorer cruise ship who was suffering from an appendicitis attack near Key West Florida. 

When we report on these type of rescues, we sometimes hear from readers of Cruise Law News complaining that the cost of the medical evacuations should be borne by the sick passengers themselves. 

We especially hear these complaints when a passenger inadvertently goes overboard.  Was the passenger acting negligently or was he or she under the influence of alcohol (a major money maker for the cruise lines).  If so, many people protest loudly and angrily that the cruise passenger should bear the extra fuel expenses and other costs incurred by the cruise ship and the Coast Guard searching for the missing passenger.   

Federal agencies are prohibited by law from seeking reimbursement of the costs associated with search and rescue of this type. 

So who bears the expense when the cruise lines act irresponsibly and the cruise goes terribly wrong?

Consider the fire last year aboard the Carnival Splendor which caused the cruise ship to lose power off of the coast of Mexico.  The Carnival ship was disabled due to the negligent design of the cruise ship itself which risked the lives of 4,500 passengers and crew.  As we reported before, the U.S. Coast Guard blasted Carnival for its defective engines and poorly designed safety instructions which caused several thousands of passengers to find themselves helplessly adrift at sea without lighting, air conditioning or hot water on the high seas. 

Carnival quickly considered legal claims against the companies which designed and manufactured the engines which failed.  Carnival did not hesitate making a claim against these companies for the revenues lost while the Splendor sat in dry dock being repaired.

But who paid for the enormous costs associated with the U.S. Navy and U.S. Coast Guard responding to the emergency?  

You will recall that the U.S. Navy sent an aircraft carrier, the U.S.S. Ronald Reagan, to the scene as the mostly U.S. passengers bobbed around on the high seas.  The Navy utilized four aircraft and helicopters to assist the stricken Carnival ship.  The Navy made twenty-four airlifts of food and provisions which its aircrew skilfully dropped onto the Carnival cruise ship to feed the passengers.  

How much did this cost and who was paying for it? 

I inquired around and the only knowledgeable source was the International Cruise Victims ("ICV") organization whose President, Ken Carver, had requested information from the U.S. Navy and the U.S. Coast Guard pursuant to a Freedom of Information Act ("FOIA") request.

The U.S. Navy timely responded to Mr. Carver's FOIA request.  The Navy disclosed that it delivered 60 pallets, weighing over 37,000 pounds, of "bread, luncheon meat, pop tarts, canned crab, water and paper plates." 

Considering the cost of positioning an aircraft carrier, dispatching multiple aircraft and helicopters, and delivering tons of food and water to be dropped onto the cruise ship, the Navy stated that it spent $1,884,376.75 responding to the fire aboard the Carnival Splendor cruise ship.  

This figure does not include the costs incurred by the U.S. Coast Guard in responding to the crisis. Unfortunately, the Coast Guard has not yet provided any information in response to Mr. Carver's FOIA request dating back to earlier this year.

The Coast Guard's costs were undoubtedly another $2,000,000 or so in personnel and fuel costs for their vessels and helicopters.

There is a certain irony that cruise lines, which structure their businesses to avoid U.S. taxes and U.S. safety regulations, are dependent on the generosity of our Federal agencies in responding to emergencies when they get themselves into a jam.  

Cruise lines incorporate in foreign countries like Liberia and Panama and register their cruise ships in foreign countries like the Bahamas in order to avoid U.S. laws and all U.S. income taxes. The cruise industry collects over $35,000,000,000 (billion) a year in income from mostly income-tax-paying-Americans, yet it avoids U.S. corporate income tax by incorporating itself and registering its ship abroad.

But when the cruise ships catch on fire and are adrift on the high seas, cruise lines like Carnival are the first to make a distress call to the United States and ask for favors from the U.S. Navy and U.S. Coast Guard. 

When cruise passengers were thinking of suing Carnival last year for the inconvenience caused by the cruise fire aboard the Splendor, I was the first one to say don't do it.  Many of the major news networks and newspapers picked up on the my don't-sue-Carnival message, like the Wall Street Journal, USA Today, Fox News,  ABA Journal, Gadling, and the U.K's Mirror.

At the end of the day, it was not the cruise passengers who filed suit.  It was Carnival who made legal claims against the companies which designed and manufactured its engines.  Carnival made millions in the process.

Did Carnival, the only one suing, repay the U.S. government?  

Not a penny.

So who paid for all of the millions of dollars in emergency services expended by our U.S. Navy and Coast Guard arising from the negligence of the tax-avoiding, foreign flagged and incorporated cruise line which stranded thousands of tax-paying Americans on the high seas?

You, the American taxpayers.    

For additional information about the Carnival Splendor fire and cruise ship fires in general, consider reading:

Carnival Splendor CO2 Firefighting System: "A Recipe for Failure"

"Coast Guard Blasts Carnival Splendor for Fire Negligence"

Ten Years of Cruise Ship Fires - Has the Cruise Industry Learned Anything? 

Photo credit:  bottom photo / U.S.S. Ronald Reagan - providencefox.com

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An interesting editorial appears today in the Jamaica Gleaner about a proposal to increase the head tax on visitors who arrive via air to Jamaica from $10 to $20. The writer characterizes this proposed increase as unfair considering the head tax on cruise passengers is only $2 per person.  These taxes help pay the Tourism Enhancement Fund (TEF) which funds projects that enhance Jamaica's tourism industry. 

But the problem, according to the editorial, is that the cruise lines are refusing to pay Jamaica the head taxes collected by the cruise lines from the passengers:   

". . . the tax on cruise-ship passengers is US$2 per passenger, but the cruise lines mostly honour this obligation in the breach. They owe Jamaica more than US$12 million.

And unlike hotels, cruise lines pay little or no taxes in Jamaica and purchase little in the country."

Cruise lines already don't pay U.S. taxes themselves by incorporating their businesses and registering their cruise ships in foreign countries. 

Are the cruise lines charging head taxes on passengers who sail into Jamaica and keeping the money?  I'll ask the cruise industry's trade organization, the Cruise Line International Association ("CLIA"), for an explanation. 

Don't hold your breath waiting for its answer. 

Photo credit:  AOL Travel

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A reader of Cruise Law News (CLN) brought an excellent opinion piece from the New York Times regarding the shipping industry's use of "flags of convenience" to my attention.  Entitled "Flying the Flag, Fleeing the State" and written by Rose George, the article explains how unscrupulous ship owners evade responsibility for environmental damage, exploitative labor and unsafe work conditions, and criminal behavior. 

The article reveals that ships used to fly the flags of their nation which protected the seafarers and passengers and punished the shipping companies when they broke the law.  But this changed when American flagged ships began flying the flags of foreign countries in order in order to avoid U.S. laws and government oversight.   The "foreign registries" were in countries with no government oversight and no real connection to the vessel or its owners in the first place, like Panama (flag above left), Liberia, North Korea and even landlocked Mongolia.  The registries often fail to monitor the safety and working conditions on ships or investigate accidents.    

What are the real consequences to employees working on foreign flagged ships? 

The New York Times article points out that there is a "human cost" which includes long hours, punishing work, and little rest; some international regulations permit 98-hour work weeks.  Cruise line employees are a good example.  Stateroom attendants and cleaners work a minimum of 12 hours a day and often are pushed to 14 to 16 hours when required to handle luggage on embarkation days, ending up with a 90 plus hour work week and no days off.  Cruise ship cleaners earn a maximum of $545 a month working a minimum of 360 hours a month.  Repetitive injuries to these crew members frequently occur, and just as frequently the cruise lines abandon them in countries like Nicaragua or India with inadequate medical care.

No foreign registry in Liberia, which often rages in civil war itself, gives a damn about the working conditions which men and women from Nicaragua or India face daily on Liberian flagged cruise ships.    

Because most ship employees are non U.S. citizens, the U.S. public has been indifferent to their plight.  But the problem inherent in flags of convenience came home to the U.S. last year when the offshore Deepwater Horizon oil rig exploded and 11 American oil and gas workers perished.  

The U.S. Coast Guard just released a preliminary report  about the Deepwater Horizon oil rig. The Coast Guard criticized not only rig owner, Transocean, but the foreign registry in the Marshall Islands (flag below) where Transocean registered the rig.  Just like a cruise ship, the Deepwater Horizon oil rig was considered to be a vessel which had to be registered. 

Why did the rig owners decide to go all of the way to an island in the Pacific to register its oil rig, you may ask?   For the same reason cruise lines like Carnival and Royal Caribbean went to South America and Africa to register their cruise ships in Panama and Liberia - to avoid U.S. taxes, U.S. safety regulations, and U.S. labor laws.  

One of the the Coast Guard's initial conclusions is that the Marshall Islands "abdicated" its safety responsibilities.  Transocean got just what it wanted - lax safety inspections and substandard safety requirements from the little spec of an island in the Pacific.   The owners enjoyed lower operating costs in addition to the substantial tax benefits of flying a flag of convenience.  But the financial benefits came at the expense of poor training, poorly maintained equipment, and even poorer safety procedures which resulted in inoperable alarms and failed shut-down systems.  

The ultimate result of the Marshall Islands flag of convenience?  11 dead men.  And 11 families consumed with grief and suffering.  

For additonal information, read:

Like Cruise Ships, Foreign Flagged Oil Rigs Avoid U.S. Laws

No Taxes - The Cruise Lines' Dirty Little Secret

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Today the Move On organization published an article entitled "Pay Your Taxes?  These Ten Companies Didn't."   The article points out that while most of us U.S. taxpayers struggle to pay our fair share of taxes, there are certain corporations which have tax avoidance down to an art. 

The list is complied by Senator Bernie Sanders, an Independent from the state of Vermont.  His top 10 corporate freeloaders includes cruise giant Carnival corporation, which incorporated itself in Panama in the 1960s.  Ever since then, it has flown the flag of that country to avoid U.S. taxes, as well as to skirt U.S. safety regulations and wage and labor laws.

I have written about Carnival's extraordinary ability to avoid literally billions in U.S. taxes over the years.  Is paying virtually no taxes vital to the survival of the cruise line?  Hardly, considering that its CEO Mickey Arison (photo circa 2000) is worth billions and billions.  Arison is the richest person in Florida today.  So why does he pay his injured and ill crew members slave wages?  He may not be the only cruise executive billionaire - take a moment and read Cruise Line Fat Cat Billionaires - but he certainly is the fattest.

Arison owns the Miami Heat and is paying basketball stars Dwayne Wade and LeBron James hundreds of millions of dollars, but he treats his crew employees like dog crap.

I am hardly Arison's harshest critic.  Ten years ago journalist Jim DeFede of the Miami New Times wrote a series of articles in which he asked the question "Is Mickey A Greedy Corporate Pig?"  DeFede also wrote some of my favorites "The Deep Blue Greed - The Arison Clan Built Carnival into a Money Machine by Cleverly Avoiding Tax Laws" and "Ten Questions for Micky."

DeFede left the Miami New Times long ago, and we don't have his blunt questions to consider today.  Over the past decade Arison's personal worth increased from $1,700,000,000 to over $4,100,000,000 last year, while Arison convinced the city of Miami to build him two basketball arenas in the process.

So I'll ask the same question DeFede asked 10 years ago: Is Mickey a Greedy Corporate Pig?

In arriving at your answer, consider that Carnival pays disabled crew members receiving medical treatment in their home countries a daily stipend of only $12 and expects them to find lodging and pay for their food and living expenses.  You can't buy a beer and a hot dog at the Miami Heat game for $12 . . .  

Photo:  AP/Wide World Photo via Miami New Times
 

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One of the little know facts about the cruise industry is that it pays virtually no U.S. taxes.

The cruise lines take advantage of an obscure provision in the U.S. tax code which permits shipping companies to evade taxes by incorporating overseas and flying the flags of foreign countries.  That's why Carnival is incorporated in Panama, Royal Caribbean is incorporated in Liberia, and Princess Cruises is incorporated in Bermuda. 

The New York Times covered the issue of cruise line taxes today:

"The Carnival Corporation wouldn’t have much of a business without help from various branches of the government.  The United States Coast Guard keeps the seas safe for Carnival’s cruise ships. Customs officers make it possible for Carnival cruises to travel to other countries.  State and local governments have built roads and bridges leading up to the ports where Carnival’s ships dock.  

But Carnival’s biggest government benefit of all may be the price it pays for many of those services.  Over the last five years, the company has paid total corporate taxes — federal, state, local and foreign — equal to only 1.1 percent of its cumulative $11.3 billion in profits.  Thanks to an obscure loophole in the tax code, Carnival can legally avoid most taxes."

I have written about the cruise industry's ability to avoid U.S. taxes since starting this blog.

Carnival was created by Ted Arison (father of current CEO Mickey Arison, photo right).  Senior Arison collected billions of dollars from tax paying U.S. passengers and lived the good life in Miami.  But he registered his Miami-based cruise line and his cruise ships in Panama to avoid U.S. taxes.  In 1990, he abandoned Miami, denounced his U.S. citizenship, and returned to Israel with his billions in a ploy to avoid estate and inheritance taxes.

Whenever I think of cruise tycoons like the Arisons and the foreign cruise lines like Carnival and Royal Caribbean, I can't help but think what a scam they are running.    

The Miami-based cruise lines file papers of incorporation and vessel registration in distant countries where no one will bother them with things like income tax, wage and labor laws, or safety regulations. They then collect billions of dollars a year from hard working saps - the U.S. tax paying public. 

Like this article?  Consider reading: 

Cruise Line Fat Cat Billionaires 

What the Cruise Industry Has to Learn From My Cousins Back in Arkansas

Credits: Mickey Arison - David Adame AP (via Cruise Blog)

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Royal Caribbean is threatening the tiny town of Rockland, Maine after it decided to increase its cruise ship fee to $6 per passenger.  Royal Caribbean wants the fee to stay at $1.

The AP is reporting that Rockland (population 7,000) increased its head tax to help reasonsbly compensate the community for the substantial costs imposed on town's infrastructure by cruise ship visits.

Royal Caribbean told the Maine Public Broadcasting Network that the fee increase "is excessive and ill timed given current economic conditions."

The giant cruise line is threatening that the higher fee will jeopardize a port of call by the Jewel of the Seas, which is scheduled to arrive in October. 

Other ports in Maine charge higher fees, such as Portland, Maine which charges $9 per passenger.  Alaska charges $34.50 per person, down from $50.

Cruise lines like Royal Caribbean pay zero federal taxes on the $6,000,000,000 (billion) in cruise fares from mostly U.S. tax-paying citizens - by flagging their cruise ships in foreign countries.  And there is no doubt that the cruise lines are making money hand over fist.  Forbes announced three cruise tycoons as some of the richest people in the world - "Cruise Line Fat Cat Billionaires."

So just $1 a person?  Or Royal Caribbean will pull its Jewel of the Seas out of Rockland?  

Rockland should call the city managers in Norwich, England whose facilities have been inundated with sick passengers returning from the norovirus contaminated Jewel of the Seas for the past month, and ask them about the real costs associated with entertaining such huge cruise ships. 

Scare tactics.  What a basis for a meaningful relationship.

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The Juneau Empire reports that Alaska just weakened its wastewater regulations at the cruise industry's request.  Cruise ships are now permitted to dump greater amount of ammonia (from fecal matter), copper, nickel and zinc in Alaska's pristine waters.

The newspaper reports that the cruise industry is "pleased" and  and "appreciates" the new wastewater discharge rules.

The cruise industry bullied Alaska, threatening the state with pulling cruise ships from Alaska if the wastewater standards were not relaxed.  Some cruise lines planned to reduce time in the ports in Alaska, so that they could sail outside of state waters and dump wastewater without being subject to Alaska's strict standards.

Cruise lines have been toying with Alaska even since its citizens passed an initiative to increase taxes and enact wastewater regulations to protect Alaskan waters from massively polluting cruise ships.  On Earth Day last week, the New York Times characterized cruise lines as "notorious polluters."  

The cruise industry is having its way with Alaska at this point.

It's agenda was first to wiggle out of Alaska's taxes, but the tax issue was never about whether the $46 head tax was too high.  The cruise lines didn't pay the tax in the first place.  Cruise passengers did.  It is ludicrous to suggest that a family would decide to cruise if the tax were $34 but not cruise at $46.

The real issue has always been the issue of whether the cruise industry would permit a state like Alaska to regulate it.  State of the art pollution technology is expensive.  Cruise lines don't pay any Federal taxes on the $35,000,000,000 they collect on fares each year from tax paying Americans. They don't want to set a precedent of allowing states to impose standards to protect their natural resources.  It's cheaper to pollute.

Earlier this year, the cruise industry twisted the arms of some of the Republican legislators in Alaska and kicked green water scientist Gershon Cohen off of the state's wastewater panel.  This was pay back for Mr. Cohen's work in passing the regulations which strengthened  Alaska's environmental regulations.  With Mr. Cohen removed from the panel, it was easy pickings to gut the pollution standards to benefit the polluters.     

A few weeks ago, Alaska announced it was reducing it's "head tax" on cruise passenger by 25%.  Today, it has relaxed its pollution regulations.  All of this is working exactly as the cruise industry planned after a year of threats and lawsuits. 

The Juneau Empire printed a letter from an Alaskan reader "Beaten Up By Bullies."

It's amazing to see how a "notorious polluting" Miami-based industry which collects $35 billion a year tax-free can threaten and bully Alaska to get exactly what it wants - reduced state taxes, relaxed pollution laws, and more profits . . .

For additional information, consider reading:

Polluting Cruise Industry Tries Again to Avoid Alaskan Regulations

Credits:

Royal Caribbean's Vision of the Seas cruise ship    AlaskanLibrarian's Flickr photostream

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Earlier this week, I attended the "Cruise Shipping Miami" convention here in Miami and reported on the threats against Alaska's Governor Parnell leveled by Holland American Lines' CEO Stein Kruse to pull HAL cruise ships from Alaska. (photo courtesy Travel Agent Central)

As we all know, HAL is wholly owned by Carnival and Kruse reports directly to Carnival CEO and multi-billionaire Mickey Arison.  Mickey has been threatening Alaska ever since the state's voters passed legislation to protect its waters from major polluters like HAL, Princess Cruises and other subsidiaries of Carnival who cruise to Alaska.       

But the issue is not the $50 head tax, as Carnival's lackeys argue.  Its the fact that Alaska has serious environmental regulations which the cruise industry wants to avoid. 

Did the cruise industry's tongue lashing and finger pointing work?  Newspapers like the Alaska Daily News and the Alaska Journal are now reporting that the Governor now wants to reduce the cruise head tax by 25% and make Alaska more conducive to attracting cruise ships.  

In exchange for lower taxes, the cruise industry would drop its lawsuit to repeal the tax and send more ships to Alaska. 

The fact that these huge cruise ships burn nasty bunker fuels and discharge massive amount of ammonium, phosphorus, and fecal matter into Alaskan waters was probably not a topic of conversation when Governor Parnell (right) was chatting  with the cruise line executives. 

Alaskan voters previously voted in favor of the cruise tax to protect its waters.  Who did Governor Parnell pledge his allegiance to?  The citizens of Alaska, or the Miami-based cruise lines?  

Wiggling out of Alaska's laws will be the cruise industry's next step.  Cruise lines don't like to be regulated, especially where Alaska's environmental regulations cause the cruise industry to spend money on state-of-the-art wastewater technology.

Credits:

Cruise line executives       Travel Agent Central

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