Last Friday, a status conference took place in the criminal pollution case pending against Carnival Corporation (Carnival) and its brands.
Judge Patricia Seitz, who is the senior federal judge presiding over the case for the last four years, stated that she planned to require Carnival to certify that each of its cruise ships is compliant with its probation obligations at least 60 days before the ships could reenter U.S. waters to resume cruises.
As explained by the Miami Herald, at the start of the hearing, Judge Seitz “said she would sign her order requiring the 60-day notice that evening. Carnival lawyers David Kelly and David Markus begged her to reconsider,” arguing that such a ruling would interfere with Carnival’s plans to restart cruises in the U.S, as early as December 1st. At the end of the hearing, Judge Seitz then agree to delay her order “for 24 hours so the company could review it.”
NEW: Federal judge plans to require Carnival Corp ships to notify her 60 days before reentering US waters. Each ship will need certification from CEO Arnold Donald on its environmental compliance.
If implemented, that means no more Dec. 1 start date. https://t.co/MmqNSEZOHL
— Taylor Dolven (@taydolven) October 16, 2020
As explained below, Carnival has remained largely in non-compliance with the Court’s environmental compliance program over the past four years during which it and its subsidiaries have remained on probation. In 2016, Judge Seitz fined Carnival $40,000,000 after it pleaded guilty to and was convicted of various felonies arising out of widespread pollution for nearly a decade. The felonies involved not just violations of environmental laws and regulations but lying to the U.S. Coast Guard and U.S. Department of Justice and obstruction of justice. The Court concluded that Carnival-owned cruise ships operated by Princess Cruises illegally discharged oil all around the world. The cuise lines’ unlawful conduct was intentional. Ship employees fabricated secret by-pass valves to avoid the ship’s oily-water separators (which would separate the oil from the bilge water to be stored on board in order for the company to safely dispose of it ashore) and dumped the toxic oil directly into the water. The five ships involved were Princess Cruises’ Caribbean Princess, Star Princess, Grand Princess, Coral Princess and Golden Princess.
Read Deliberate Dumping, Cover-Up and Lies: DOJ Fines Princess Cruises $40,000,000 for an explanation of Carnival’s prior environmental crimes.
Judge Seitz again sanctioned Carnival in the summer of 2019, this time for $20,000,000, after it was caught continuing to pollute by discharging large quantities of plastics mixed with garbage and trash, grey water, chemicals and other pollutants thoughout Bahamian waters as well as a U.S. national water park in Glacier’s Bay, Alaska among other locations. Many people were concerned with the meager financial penalty levied by the Court, particularly because Carnival collected over $3,200,000,000 in profits from over $20,000,000,000 in gross revenue in 2019. The monetary fine was just a proverbial drop in the bucket. Judge Seitz had raised hopes that a more significant sanction would be entered when she stated during a conference that she was contemplating prohibiting Carnival cruise ships from calling on U.S. ports as punishment for Carnival continuing to pollute. She also mentioned the possibility of imprisoning some of the Carnival cruise executives for violating her prior orders. But in the end the Court levied just relatively non-consequential fines.
Neither a ban of Carnival from U.S. ports nor jail time for the cruise executives ever materialized.
Wednesday afternoon, the long awaited order was finally made available to the public. But instead of a 60 day requirement of submitting a certificate that Carnival ships were in environmental compliance before entering U.S. waters, Judge Seitz now requires that Carnival has to certify that each ship is environmentally compliant seven days after entering U.S. waters for any ship returning to a U.S. port before December 31st.
NEW: Carnival Corp is still on track to resume cruises in the US 12/1, per judge's order tonight.
CEO will have to certify environmental protection status of each ship 30 days before it reenters US waters, or 7 days after for ships returning before 12/31. https://t.co/SQ7pRdcD5e
— Taylor Dolven (@taydolven) October 21, 2020
The order, which you can review here, essentially permits Carnival to bring its ships into U.S. ports without being fully compliant with environmental equipment and proecdures which had remained outstanding for well over a year. All Carnival has to do is subsequently claim, within a week of ariving in the U.S., that its ship is in compliance. But this is a company which is notorious for its environmental shortcomings and its propensity to lie about its conduct. Moreover, the order specifically envisions that Carnival will simply have to offer an explanation of some sort for its continued non-compliance and offer its own plan for bringing the ship into compliance at some later date.
There are no sanctions for continued non-compliance contained in the order. There is no financial incentive for Carnival finally bringing its fleet into compliance with the Court’s environmental plan, and there is no financial consequence when it again does not.
A review of the court files reflects the Court’s ongoing concerns over the years with Carnival’s failure to install working food waste digesters, many of which had failed to operate correctly on its ships. Pollution prevention devices often have failed to work properly and were often in a state of disrepair. Carnival’s so-called “Advanced Air Quality Sytems” (i.e., “cheat devices“) often leaked, malfunctioned or were otherwise non-operational and lacked critical spare parts for repair.
Last month, the Third Party Auditor (TPA) and Court Appointed Monitor (CAM) issues reports which painted an image of Carnival continuing to struggle to comply with the terms of probation required by the court. In particular, both the TPA and the CAM concluded that after three years of Court ordered probation of the entire fleet of Carnival Corporation-owned ships, the company failed to comply with substantial parts of the Court’s Environmental Compliance Plan (ECP) due to a lack of commitment by Carnival’s senior management.
The TPA Report Demonstrates Numerous Non-Conformities Attributable to the Senior Management’s Lack of Commitment to a Sustainable Environmental Compliance Program
The TPA, ABSG Consulting, Inc., filed a 39 page Three Year Report with 15 pages of exhibits outlining the group’s findings, analysis, observations and recommendations regarding Carnival Corporation’s fleet of cruise ships. The TPA observed that there were “significant multiple documented instances of non-compliance with the Environmental Compliance Plan (ECP)” and marine environmental laws and regulations. Carnival is now entering the fourth year of the five year ECP period. In the last year, from April 19, 2019 through April 18, 2020, the TPA conducted 38 vessel audits including 17 Princess Cruises vessels and and 21 vessels of the other 8 Carnival Corporation brands. The TPA concluded in its summary of year three observations:
“. . . there still appears to be a lack of commitment within the senior management of the Company to bring a sustainable environmental compliance program into the day-to-day culture of the Company.” The TPA commented on the “lack of verifiable actions” during the thrid year that the senior management were “good stewards of the environment.” There are numerous examples of non-conformities documented in the report including the failure of pollution prevention equipment at page 26 of the report, such as this:
- “On board the CARNIVAL VALOR, the Exhaust Gas Cleaning System (EGCS) for MDG No. 5 and No. 6 are not operational due to the failure of the exhaust gas SO2/Co2 analyzer. No. 4 MDG ECGS is nonoperational due to extensive repairs to the exhaust gas piping (exhaust flue).
- On board the AIDADIVA, the waste processing equipment is not operational. Only one (1) food shredder on the pulper system is operational. The second shredder broke down on August 28, 2019 and the ship has had only one (1) shredder working since then.
- On board the CARNIVAL DREAM, the Exhaust Gas Cleaning System (EGCS) have not been operational since March 2018. The CARIBBEAN PRINCESS, ZUIDERDAM, CARNIVAL VISTA, and CARNIVAL LIBERTY were also noted to have non-working EGCS.
- On board the CARNIVAL CONQUEST, the Exhaust Gas Cleaning System (EGCS) installed for engines DG4, DG5, and DG6 are out of service and currently undergoing underway repairs for cracks in the structure of the exhaust system. The estimated time for completion of these repairs is mid-December.”
The report, which is quite detailed, can be reviewed here.
The Court Appointed Monitor’s Third Annual Report Questions Whether Carnival’s Top Leaderships Is Committed to Supporting the Company’s Compliance Goals
The CAM filed an exhaustive 249 page report with 6 pages of exhibits which addressed Carnival’s third year on probation. The CAM was entirely complimentary regarding Carnival’s employee which it indicated were supportive, cooperative and open with their communications. CAM began its introduction by stating that it “has often observed that the Company has employees with the skill, ability, and dedication to accomplish its compliance goals. The continuing question has been whether there is lasting resolve from the Company’s top leadership to support those efforts, both in words and in deeds.”
The CAM noted that the company exhibited some progress particularly after Carnival Corporation accepted responsibility for six admitted probation violations, leading to pleading guilty in June of 2019 to multiple felonies (and Judge Seitz fining it an additional $20,000,000). But the CAM stated that “. . . barriers and obstacles to compliance remain. The Company continued to have “gaps and missteps in addressing underlying compliance weaknesses.” These include:
- Repeated gaps on basic compliance support for the ships, including issues related to: reliability and availability of pollution prevention equipment; availability of spare parts; adequacy of crew staffing; high crew workloads; the generally slow pace of IT improvements needed to support compliance; and the revelation that, despite public statements that the Company was vetting its waste vendors before using them, the general lack of evidence of such vetting, leading to questions about the ultimate fate of wastes offloaded from Company ships;
- Delay in developing a coordinated, centralized response to the findings of the corporate-wide environmental compliance culture survey—a delay which reflects the challenges of the Company’s complex and decentralized corporate structure, identified as a barrier to compliance in the CAM First Annual Report;
- Unresolved weaknesses in the corporate compliance function, including that the compliance function remains decentralized in many ways—again, reflecting the CAM’s ECP Year One finding that the Company’s balkanized corporate structure is a barrier to compliance;
- An apparent failure to provide the Chief Ethics & Compliance Officer and Environmental Corporate Compliance Manager with the authority required by the ECP and probation settlement, despite pleading guilty in June 2019 to a probation violation for failing to provide the Environmental Corporate Compliance Manager with ECP-required authority, another issue identified by the CAM in ECP Year One;
- Persistent failure to develop an effective, independent internal investigations function—a challenge recognized by the Company, its consultant, the Third Party Auditor (“TPA”), and the CAM as early as ECP Year One;
- A waste vendor assessment program that, despite being an improvement from the previous practices, still appears to be inadequate; and
- A continuing failure to listen to, and respond to, the Company’s own employees, auditors, and consultants, who have repeatedly alerted the Company to many of these issues. For instance, as early as February 2018, Company employees identified the issue of prohibited discharges of non-food items (including plastics) into the ocean due to inadequate onboard food waste management. But it was not until the issue was illuminated by the TPA and the CAM Team in late 2018, and put forward by the Office of Probation in the probation revocation petition filed in March 2019, that the Company began significant work to address this problem.”
The CAM stressed that Carnival “appears to be among the few corporate defendants to have violated the terms of a corporate probation so significantly that it faced probation revocation proceedings by the Office of Probation.”
The lengthy report can be viewed here. There are numerous details of the CAM’s findings of multiple environmental violations and non-compliance with the ECP.
Pollution Control Equipment Often Remain Broken and Out of Sevice
The CAM noted that the majority of Major Non-Conformity findings fell under the category of “failure of pollution prevention equipment.” A common problem was that critical spare parts for environmental equipment was not maintained to acceptable levels and orders were found overdue without follow up. There were 12 major non-conformities) regarding inoperable
pollution prevention equipment.
The CAM reports that that it will continue to evaluate “the extent to which there is a sustained focus by top leadership on support for compliance, including in the form of concrete commitments and actions.”
Carnival Has Made a Mockery of Its Environemntal Compliance Obligations
With no requirement that Carnival’s long-standing environmental deficiencies be required to be corrected before its ships are permitted to again operate in U.S. waters, the Court kicked the can down the road again. The result is that when the next Carnival ship appears at a U.S. port (assuming the Centers for Disease Control and Prevention lift its no-sail order), it will be questionable whether Carnival has finally taken such basic steps as installing a new food digester or repairing the malfunctioning air quality devices. But the cruise fans and travel writers won’t know and don’t care, as they celebrate the arrival of Carnival ships back to U.S. ports with great fanfare.
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Photo credits: Carnival Liberty – James Willamor, Raleigh, NC, CC BY-SA 2.0 commons / wikimedia; Carnival Conquest – Derek Kastner f, Reston, VA CC BY 2.0 commons / wikimedia.