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

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

A fixed bonus of $1.125 million for 2013;

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

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

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

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

You can read the official SEC filing here.

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

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

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

 

Photo Image: St. Louis Post Dispatch

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.   

As promised, Senator Jay Rockefeller announced that he has introduced legislation seeking to eliminate the Section 883 exemption for cruise industry income derived from cruises that embark or disembark passengers in the U.S.  Senator Rockefeller stated in a press release: 

“The cruise industry can’t operate for free here in the U.S. It costs money to send the Coast Guard to tow their drifting ships and it costs money to maintain the ports they use. Cruise lines need to start paying their fair share of taxes and stop expecting everyone else to foot the bill.”

Over the last year, Senator Rockefeller has raised concerns that the cruise industry has used the infrastructure of U.S. ports, the resources of the U.S. Navy and Coast Guard, and  more than 20 U.S. agencies, but has paid virtually no U.S. taxes. At the same time, the U.S. Coast Guard is substantially Cruise Ship Taxesunder-funded and is increasingly called upon to assist cruise lines which are experiencing fires and engine failures.

Efforts to repeal the exception have been a long time coming.  Earlier this year, as the disabled Carnival cruise ship Triumph was being towed back to the U.S. at U.S. taxpayer expense, Forbes published an article: Ship Isn’t The Only Thing That Stinks At Carnival: Low Tax Rate Stirs Ire.   

The cruise industry enjoys a substantial tax advantage over shore-side hotels, restaurants and amusement parks by incorporating their businesses and registering their cruise ships in foreign countries. This permits the cruise lines to sell their cruises at artificially low prices.  Although Carnival and Royal Caribbean are based here in the U.S., they are registered in Panama and Liberia respectively to avoid U.S. taxes.  

Rockefeller’s proposed legislation would eliminate the tax exemption for cruise lines and impose a 5 percent excise tax on gross income if passengers get on or off a ship in the U.S. The tax would be targeted to improve the transportation infrastructure.

Avoiding taxes is a cornerstone of the cruise industry’s business model. Expect CLIA and the cruise lines to mount a heavy PR campaign to try and kill the new bill.  

Interested in this issue? Consider reading:

Over Past 5 Years, Carnival Paid Taxes of Only 0.6% on Billions & Billions

Cruise Lines Depend on U.S. Coast Guard for Safety & Security But Pay Nothing

Under Pressure, Carnival Agrees to Reimburse U.S. for Coast Guard & Navy Costs in Responding to Disabled Triumph & Splendor Cruise Ships

Your Tax Dollars At Sea – Who Pays When Things Go Wrong on Cruises?

Have a thought about this issue?  Leave a comment below or join the discussion on our Facebook page.
 

Below – watch a NBC special where Senator Rockefeller and I are interviewed about Carnival’s avoidance of U.S. taxes: 

  

http://www.msnbc.msn.com/id/32545640

 

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

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

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).

NCL Cruise CEO Kevin SheehanIn 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 Royal Caribbean Cruise CEO Richard Fainthat 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?

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 Senator Rockefeller - Micky Arisonfor 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 Micky Arison - Senator Rockefeller 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.

Coast Guard - Cruise Line - TaxesToday 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." 

Coast Guard - Cruise Ship - Payment of Expenses

Micky Arison - Senator Rockefeller - Cruise Ship TaxesAs I mentioned earlier, Carnival responded to Senator Rockefeller’s letter inquiring into the cruise line’s avoidance of U.S taxes and its refusal to reimburse federal agencies for services rendered with what I characterized the other day as a "screw you!" letter.

Today news sources are reporting that Senator Rockefeller characterized Carnival’s response as "shameful."  

Carnival’s letter dodged the central question of exactly what and how much the cruise line pays in taxes.

Senator Rockefeller - Micky Arison Cruise Ship Tax DisputeA recent audit of Carnival’s finances on behalf of NBC News revealed that Carnival paid only 0.6% in taxes on the billions and billions of dollars collected from its passengers over the last five years. That’s less than 1% in local, state, federal and international taxes. 

One thing is clear to me at this point. Senator Rockefeller is not going to drop the issue after receiving a blow-off letter like this from Carnival’s CEO Arison.  

Rockefeller convened a hearing last year after the Costa Concordia disaster and grilled the cruise line’s representatives at that meeting about the non-payment of taxes, non-payment for the services of the Coast Guard and other federal agencies, and pollution.

Rockefeller seems likely to schedule another one soon. 

This may be a good time to introduce legislation to create some meaningful oversight of foreign cruise lines given the public’s loss of confidence in Carnival following its streak of cruise ship fires and disabled ships.   

 

Yesterday cruise passengers at Port Everglades waited for up to four hours in long lines to be processed by customs and border protection officials.  

Due to budget cuts caused by the federal budget sequester, there were only three U.S. Customs Border Protection Officers working.

There were also long lines of passengers waiting to board the cruise ships in port.

WSVN-7 interviewed a number of passengers from the Carnival Freedom cruise ship. 

Carnival has become under criticism of late for paying less than one percent in local. state and federal taxes on its billions and billions collected from cruise passengers over the years. Last year, Carnival collected over $15 billion dollars alone.

Most cruise passengers take for granted the enormous costs associated with funding the federal agencies which provide services to the cruise lines free of charge.

 

 

WSVN-TV –