Details emerge in Carnival Corp.’s environmental-compliance case

An old criminal case is in the news again. A federal judge
is unhappy. A government report puts an ugly face on company efforts to keep
the environment clean. 

It’s been a tough two weeks for Carnival Corp.

And it could get worse. Judge Patricia Seitz of the U.S.
District Court for the Southern District of Florida has ordered Carnival back
to court in June to determine if it violated the terms of its parole — in the
process, showing contempt of court — and if so, what the consequences should
be.

At an April 10 status conference, Seitz threatened to
temporarily block all Carnival Corp. ships from calling at any U.S. ports.

In a statement issued after the conference, Carnival
asserted that there had been a misunderstanding. 

“We heard the concerns expressed by Judge Seitz and
will do our utmost to ensure we meet all expectations under the [Environmental
Compliance Program] and continue to strive to be best in class on environmental
compliance,” the company stated. “Our environmental responsibility
has been and remains a top priority for the company.”

Although few may remember it, Carnival has been laboring
under a criminal sanction since 2016. That’s when its Princess Cruises brand
agreed to plead guilty to seven felony charges stemming from oil dumping and a
subsequent cover-up.

As part of its sentence, which included a $40 million fine,
Carnival agreed to five years of probation and a five-year, court-monitored
Environmental Compliance Program, not just for Princess but for eight Carnival
brands.

In a 205-page report, the court-appointed monitor laid out a
laundry list of environmental violations from 2017, most or all reported
voluntarily by Carnival under the terms of the program.

Based in part on the report’s findings, the U.S. Office of
Probation filed a motion in March to revoke probation in the Princess case.
Corporations can’t be sentenced to jail time. But Seitz could impose other
conditions, possibly even including the suspension of Carnival’s right to dock
in the U.S.

The likely focus of debate about whether Carnival violated
probation is an allegation that the company has been secretly and improperly
preparing its ships for audits under the Environmental Compliance Program. 

In December 2017, evidence was presented of the preaudits,
and Seitz instructed Carnival to end them. But according to federal
prosecutors, Carnival then developed a second such program.

The second program differed from the first in that the
preaudits weren’t timed immediately before the scheduled court audits, but
prosecutors said they effectively subverted the Princess plea agreement.

“The United States views both programs as reflecting a
serious failure by the defendant at its senior executive levels to appreciate
the fact that Princess is a convicted criminal on probation and that the terms
of probation are mandatory and not discretionary,” wrote Thomas
Watts-FitzGerald, an assistant U.S. attorney in Miami.

At the April 10 status conference, Seitz seemed inclined to
agree. 

“The defendant is a criminal. It is a recidivist
criminal,” she at one point told Carnival’s lawyers, according to an
account in the Miami Herald.

Federal judges often try to get a defendant’s attention and
underscore the seriousness of an issue by making threats that might or might
not be carried out, depending on the defendant’s level of contrition and
acquiescence.

A federal judge’s discretion is broad, and parties that have
been admonished in cases typically don’t gamble with the potential for an
adverse ruling.

In its statement, Carnival said that it heard the judge and
that leaving the environment “even better than when we first arrived”
is in the best interests of the company, its guests and the oceans.

“We look forward to clarifying any issues and
demonstrating our commitment,” it said.

The judge might have to weigh Carnival’s promises against
some of its practices, as cited in the court monitor’s report, which was
submitted in 2018 and labeled confidential. Seitz said she released it “so
the public can see what this criminal defendant is doing,” the Herald
reported.

In one example, prosecutors say a court-designated auditor
aboard the Carnival Elation informed its Environmental Officer that plastic and
other nonfood items were mixed with the ship’s food waste and that garbage was
not being properly segregated. The ship failed to respond, and the trash was
discharged overboard, prosecutors said.

The report cites crew confusion or lack of training for
other pollution incidents. In November 2017, the Carnival Vista discharged
cleaning chemicals into Bahamian waters “due to a misinterpretation of
territorial waters,” the report said. 

In California, oily bilge water was discharged from the
Carnival Imagination because the engineer “did not ask for a confirmation
from the bridge to commence the discharge,” the report said.

Other conclusions in the report are more favorable to
Carnival. After visiting more than 20 vessels and shoreside offices, conducting
hundreds of interviews and reviewing thousands of documents, the report said
the monitor found no evidence that Carnival brands had repeated any of the
underlying offenses in the Princess case.

It also said Carnival has “qualified and dedicated”
compliance personnel and that employees on balance were highly cooperative and
crew members were “willing and often eager” to talk about
environmental improvements.

But the report also said Carnival’s complex corporate
structure and multiple brands makes it hard for employees to know who is
responsible for what. It also asserted that Carnival’s chief compliance manager
lacks sufficient authority.

It faulted Carnival for a “blame culture” that
pins responsibility for environmental violations on individual bad decisions or
misconduct, rather than looking more broadly for systemic culpability.