Washington – When Carnival Cruise Lines agreed to lease three ships to the government to house evacuees from Hurricane Katrina, the company president portrayed it as an act of compassion intended to “provide desperately needed housing for thousands of individuals.”
Now two lawmakers are raising questions about the hastily negotiated deal that could provide the company with as much as $236 million.
Rep. Henry Waxman, D-Calif., sent a letter Friday to Homeland Security Secretary Michael Chertoff requesting a copy of the contract and supporting documentation for its cost.
Rep. Marilyn Musgrave, R-Colo., said she intended to ask for an investigation. Carnival says it will earn no additional profit on the deal, which was reached on Sept. 2, but would recover only the income it would have received if the three vessels had remained in regular service.
But the pact, made by the Navy’s Military Sealift Command at the direction of the Federal Emergency Management Agency, has raised questions about whether the payments are excessive, especially as neither Carnival nor the government will release details about how they arrived at the contract numbers.
The deal calls for Carnival to be paid $192 million for providing about 7,100 berths for six months. Carnival also is being reimbursed for as much as $44 million in operating costs, including charges assessed at ports for fuel, water, electricity and waste disposal.
In addition, Carnival’s contract includes compensation to the company for corporate taxes that could amount to tens of millions of dollars. The government agreed to this because Carnival is exempt from U.S. income taxes because it is registered in Panama, its ships fly foreign flags and operate primarily in international waters.
The trade association that represents cruise lines is seeking a waiver from the Treasury Department that would exempt vessels under government contract from federal corporate income taxes and withholding taxes for crews.
