According to WRLN in Miami, FEMA grossly overpaid Carnival Cruise Line to charter the Carnival Fascination to provide housing for FEMA workers following Hurricane Maria. 

According to documents obtained through the Freedom of Information Act (FOIA) by Daniel Rivero, WLRN states that FEMA agreed to pay Carnival $74,700,000 to provide accommodations aboard the Carnival Fascination to house federal aid workers and first responders in St. Croix.  

As WLRN explains, the FEMA-Carnival contract provides that the cruise line agreed to house 2,056 FEMA workers for the length of the four month contract. The average number of nightly passengers for the contract period was around 800 which, given the contract price, turns out to be $834 per person Carnival Fascinationper night, paid by U.S. taxpayers. That’s a staggering rate or well over over $5,000 per week per passenger. 

WLRN calculated the market rate for a cruise on the Carnival Fascination between $370 and $1,200 per person per week, which is a fraction of the rate paid by FEMA. 

I also obtained a copy of the FEMA-Carnival charter agreement pursuant to a FOIA request earlier this year. It revealed that FEMA agreed to pay what turns out to be $18,675,000 a month for the Fascination

This exorbitant amount of taxpayer money is even higher than what FEMA paid Carnival in 2005, to charter three Carnival cruise ships following Hurricane Katrina. FEMA agreed to pay Carnival an average of only $13,111,111 a month (for a total of $192,000,000) to charter the Carnival Sensation, Carnival Ecstasy and Carnival’s Holiday for 6 months (plus $44,000,000 for fuel and other expenses) following hurricane Katrina.

Plus, as I pointed out in the article FEMA Agreed to Pay Carnival $74,700,000 for Charter of Carnival Fascination, Carnival didn’t pay any federal taxes on this income. 

In the WLRN article, cruise expert Professor Ross Klein pointed out that Carnival is registered in Panama and pays almost no U.S. income taxes which he believes is a larger concern for how the contract was handled.

“The US Government hired a foreign registered corporation that uses foreign registered vessels with foreign workers (working in the US but not paying US income tax). And because the corporation is offshore, and the ship is offshore, the company pays virtually no income tax on the contract. Now that is a sweet deal,” Professor Klein told WLRN.

What is even more disturbing is that, as WRLN points out, FEMA first (over) paid Carnival even before it disbursed funds to the survivors in the U.S. Virgin Islands hit by the hurricane. Numerous media sources are also now reporting that the death toll in Puerto Rico due to Hurricane Maria was drastically underestimated. The consensus is that that the actual number of deaths was around 5,000 citizens, compared to official estimates of less than 100.   

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Photo credit: Chrismschurz – CC BY-SA 3.0, commons / wikimedia. 

Last year, following a series of hurricanes which struck the Caribbean, FEMA decided to charter the Carnival Fascination to house relief workers in St. Croix. The news was widely reported last October. Carnival cancelled its sailings of the Fascination from October 2017 through January 2018 with the cruise line planning to return the cruise ship to its regular itinerary from San Juan in February 2018.

Carnival touted the deal as demonstrating its humanitarian commitment to the Caribbean relief efforts.

Carnival told the Miami Herald last year that its “history is deeply linked to the Caribbean and our ships have been sailing within the region for more than 45 years. We are pleased to be partnering with Carnival FascinationFEMA on this charter in support of the ongoing relief efforts in the Caribbean.”

I wondered at the time, what type of sharp deal had Carnival obtained at the expense of the U.S. government? This is, after all, a corporation which was incorporated in Panama and registered its fleet of cruise ships in that country to avoid paying U.S. taxes, as well as U.S. safety and labor laws and regulations. So I made a request pursuant to the Freedom of Information Act  (FOIA) to FEMA, which recently responded with a copy of the Carnival-FEMA charter agreement for the Fascination (which you can see below).

The relevant terms are that FEMA agreed to pay Carnival $74,700,000 over the course of 4 months.

The charter agreement includes $39,700,000 (million) plus “costs” of $35,000,000 (million) for a total of $74,000,000 (million).

This is a whopping amount, even compared to the CCL-FEMA deal made back in 2005 when FEMA paid $192,000,000 to charter the Carnival Sensation, Carnival Ecstasy and Carnival’s Holiday for 6 months, plus $44,000,000 for fuel and other expenses, following hurricane Katrina.

FEMA was criticized for paying a total of $236,000,000 for the three Carnival ship over the course of six months, an amount which the Washington Post called an “exhorbitant price.” The Post commented that if the ships were at capacity for six months, the price per evacuee would total over twice what an average passenger would pay which “would include entertainment and the cost of actually making the ship move.”

In the current CCL-FEMA charter, FEMA agreed to pay what turns out to be $18,675,000 a month for the Fascination; whereas in 2005, it paid an average of only $13,111,111 a month for each Carnival ship.

That’s over $5,500,000 a month more than what FEMA paid back in 2005 for each of the other three Carnival ships, even though the Ecstasy and the Sensation are essentially identical to the Fascination. All are Fantasy class ships with the same number of lower berths (2,056). The Holiday, which is no longer in Carnival’s fleet, had a lower capacity of lower berths (1452).

Most states in the U.S. have anti-gouging laws following hurricanes when a state of emergency has been declared. But post-hurricane gouging appears to be business as usual for Carnival.

In 2005, following hurricane Katrina, the cruise trade organization, CLIA, requested that the U.S. Treasury Department exempt Carnival from paying income tax on the cruise ships it chartered to FEMA, even though the ships were moored in U.S. waters during the entire charter, making them clearly subject to U.S. taxes. In this case with the Fascination, the cruise ship is moored in St. Croix, which is a U.S. territory where citizens are expected to pay U.S. taxes. The monies paid to Carnival for the current charter of the Fascination also should be subject to U.S. taxes. Carnival undoubtedly will seek a similar exemption from the taxes which are owing.

After the charter, the Fascination will undergo a two-week dry dock from February 4 to 17, 2018, in Freeport, Bahamas, prior to resuming its regular seven-day cruises from San Juan, Puerto Rico, beginning February 18, 2018. Carnival plans to install a Guy’s Burger Joint, Blue Iguana Cantina, Red Frog Rum Bar, Blue Iguana Tequila Bar, Cherry On Top, Bonsai Sushi Express, and the Alchemy Bar during the extensive and expensive renovation.

If you decide to sail on the Fascination next month, be sure to thank the U.S. government when you enjoy a beer and burger in the new bars and restuarants on the ship which will essentially be paid for from the excessive price of the no-bid contract with the federal government, which probably will not charge Carnival any U.S. taxes either.

I reached out to Carnival for a comment but have heard nothing to date.

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Photo credit: Verybigfish86 (talk) – Public Domain, commons / wikimedia.

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