Carnival Corp Fined $20M For Violating Federal Environmental Laws

Carnival Corporation Additional Fine For Pollution
Carnival Corporation Additional Fine For Pollution
Carnival Corporation Additional Fine For Pollution
Carnival Corporation Additional Fine For Pollution

Carnival Corp Fined $20M For Violating Federal Environmental Laws – On Monday, June 3, 2019, Carnival Corp and one of its subsidiaries, Princess Cruises,  pleaded guilty to violating the terms of a probation agreement stemming from a 2017 conviction for improper waste disposal. (see video below)

Carnival Corp. has agreed to pay a $20 million penalty for continuing to pollute the ocean despite a 2016 conviction for violating federal environmental laws.

Shares of Carnival Corp have been falling since May 10 when it began falling from 54.34 to June 5 when it bottomed at 50.89 losing .09 %.

A dual-listed company, Carnival is composed of two companies, Carnival Corporation, and Carnival plc, which function as one entity. Carnival Corporation is listed on the New York Stock Exchange and Carnival PLC is listed on the London Stock Exchange. As such, Carnival is the only company in the world to be listed on both the S&P 500 and FTSE 100indices. Carnival brands include AIDA Cruises, Carnival Cruise Line, Costa Cruises, Carnival CSSC, Cunard Line, Holland America Line, P&O Cruises, Princess Cruises, and Seabourn Cruise Line.

In 2017, Florida-based Carnival was fined $40 million after one of its ships, the Caribbean Princess, was determined by federal regulators to have been “making illegal discharges since 2005 using bypass equipment — including a so-called ‘magic pipe’ — to circumvent pollution-prevention equipment that separates oil and monitors oil levels in the ship’s water”.

Department of Justice Adds More Fines

According to the Department of Justice website, “Today, Princess Cruise Lines Ltd. (Princess) and its parent, Carnival Cruise Lines & plc (together “Carnival”) were ordered to pay a $20 million criminal penalty and will be subject to enhanced supervision after admitting to violations of probation attributable to senior Carnival management in a case in which Princess had already paid $40 million.

Princess was convicted and sentenced in April 2017, after pleading guilty to felony charges stemming from its deliberate dumping of oil-contaminated waste from one of its vessels and intentional acts to cover it up. While serving 5 years of probation, all Carnival related cruise lines vessels eligible to trade in U.S. ports were required to comply with a court-approved and supervised environmental compliance plan (ECP), including audits by an independent company and oversight by a Court Appointed Monitor. Numerous violations have been identified by the company, the outside auditor, and the court’s monitor during the first two years of probation, including “major non-conformities” as defined by the ECP.

Carnival admitted it was guilty of committing six violations of probation. Two of the violations involved interfering with the court’s supervision of probation by sending undisclosed teams to ships to prepare them for the independent inspections required during probation. When this was first discovered in December 2017, U.S. District Court Judge Patricia Seitz directed that the practice cease and ordered additional inspections as a consequence. However, without seeking court approval, a second undisclosed program was started shortly thereafter. Documents filed in court showed that a purpose of the vessel visit programs was to avoid adverse findings during the inspections.

“This case demonstrates the importance of identifying and correcting compliance problems at their source. Carnival sought to avoid the discovery of problems during the audits rather than learn from them. Carnival’s deliberate deception undermined the court’s supervision of probation,” said Assistant Attorney General Jeffrey Bossert Clark for the Justice Department’s Environment and Natural Resources Division. “I want to take this opportunity to thank and commend the Office of Probation and the Court Appointed Monitor for the close attention that they have devoted to this important matter post-conviction.”

Carnival’s Chairman of the Board, Chief Executive Officer and Chief Financial Officer attended the hearing pursuant to court’s order and were asked to personally pledge their commitment to correcting the company’s compliance issues and corporate culture. In addition, senior management of each operating cruise line of Carnival Corporation & plc were present for the court proceedings.

The company admitted to other violations of probation today including:

  • Failing to establish a senior corporate officer as a corporate compliance manager with responsibility and sufficient authority for implementing new environmental measures required during probation;
  • Contacting the Coast Guard seeking to re-define the definition of what constitutes a major non-conformity under the ECP without going through the required process and after the government had rejected the proposal and told the company to file a motion with the court if it wanted to pursue the issue;
  • Deliberately falsifying environmental training records aboard two cruise ships; and
  • Deliberately discharging plastic in Bahamian waters from the Carnival Elation and failing to accurately record the illegal discharges. Prosecutors advised the Court that this particular instance was an example of a more widespread problem, identified by the external audits, in failing to segregate plastic and non-food garbage from waste thrown overboard from numerous cruise ships.

Under the terms of the settlement, Carnival will do the following:

  • Pay a $20 million criminal penalty;
  • Issue a statement to all employees in which Carnival’s CEO accepts management’s responsibility for the probation violations;
  • Restructure the company’s corporate compliance efforts, including appointing a new chief Corporate Compliance Officer, creating an Executive Compliance Committee across all cruise lines, adding a new member to the Board of Directors with corporate compliance expertise, and train its Board of Directors;
  • Pay up to $10 million per day if it does not meet deadlines for submitting and implementing needed changes to its corporate structure;
  • Pay for 15 additional independent audits per year conducted by the third-party auditor and Court Appointed Monitor (on top of approximately 31 ship audits and 6 shore-side audits currently performed annually);
  • Comply with new reporting requirements, including notifying the government and court of all future violations, and specifically identifying foreign violations and the country impacted; and
  • Make major changes in how the company uses and disposes of plastic and other non-food waste to urgently address a problem on multiple vessels concerning illegal discharges of plastic mixed with other garbage.

The revised sentence imposed by Judge Seitz also requires that Princess remain on probation for a period of three years.”

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Video: Carnival will pay $20m over pollution from its cruise ships

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