FEMA Paid Millions For Half-Empty 'Floating Hotel' After Hurricane Maria

May 30, 2018
Originally published on May 31, 2018 8:17 pm

In the aftermath of Hurricanes Irma and Maria, the federal government signed a multimillion-dollar deal with Carnival Corporation to help house federal aid workers and first responders on the company's Fascination cruise ship in the United States Virgin Islands.

Documents obtained by WLRN show that the ship hosted less than half the federal workers than was agreed to in the $74.7 million agreement, and the cruise line ended up getting more money over the course of that contract than what was directly given victims of the storm to rebuild their homes.

Read the contract between FEMA and Carnival Corporation. 

As outlined in the contract, the company was to house 2,056 FEMA workers and other first responders for the length of the contract. The average number of nightly passengers for the contract window was only 799.5.

Taxpayers footed the cruise ship bill to a tune of $834 per person per night, equal to a rate of $5,959 per person per week, according to a spreadsheet of the daily passenger count and the contract itself, obtained from Freedom of Information Act requests.

The ship was docked in St. Croix throughout the four-month period. For comparison, the market rate for a vacation on the Fascination while the ship is actively moving between ports is between about $370 and about $1,200 per person per week, according to Priceline and CruiseCheap.com. Those numbers are based on double occupancy, but even if doubled would still be considerably cheaper than the rate FEMA paid.

The Carnival contract was signed by the Federal Emergency Management Agency, part of the Department of Homeland Security, on October 11, 2017. In the contract, FEMA likened the ship to a "floating hotel."

The ship only hosted the contracted number of people for a single day over the 112-day span of the agreement. That date was October 29, 2017, when the ship hosted 2,078 guests.

In total, the contract allowed the federal government 230,272 total stays onboard the ship. In fact, the ship only hosted 89,545 stays, less than half of what was paid for.

“FEMA can be blamed for not fully utilizing what they are paying for,” Ross Klein, a Canada-based researcher who has published papers on the cruise ship industry’s business practices, wrote to WLRN in an email. But the fact that Carnival is registered in Panama and pays almost no U.S. income taxes is a larger concern for how the contract was handled, he stressed. The company's main headquarters are in Miami. 

“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,” he added. “Now that is a sweet deal.”

In its most recent annual report to investors, Carnival wrote that “substantially all of Carnival Corporation’s income is exempt from U.S. federal income.”

Chris Chiames, Chief Communications Officer for Carnival, told WLRN that it is “not really relevant” to bring up questions about the federal tax code, but that the company fully complies with all tax requirements. The company also defended the contract, saying that in addition to fares paid by guests, much more onboard revenue is generated for the company through restaurants and bars, onshore excursions, and trips to the casino. The company canceled reservations for over 31,000 passengers to service FEMA, he said.

“We committed the full use of a ship for an extended period of time, whether or not FEMA was going to use the ship or not or filled it with relief workers, that wasn’t part of our obligation,” said Chiames. “Our obligation was to commit this ship so it could be used completely by FEMA and other relief workers.”

In an email, Chiames compared Carnival to cruise ship rivals, including specifically Royal Caribbean, which “actually resumed their operation for cruises departing from San Juan within three weeks after the storms… Instead, we answered FEMA’s call to help in our own backyard, and negotiated an agreement that met federal guidelines.”

After numerous attempts to reach FEMA, the federal agency did not respond to requests for comment.

The contract stipulated that Carnival take care of three meals a day for guests, as well as providing drinks like coffee, tea and water in between meals.

According to congressional testimony given by FEMA Federal Coordinating Officer William Vogel in March, the amount spent by FEMA on the half empty ship was initially more than the total dollars that were “disbursed directly to [U.S. Virgin Islands] survivors to help them get back on their feet.” As of March 1, FEMA had given an estimated $70 million directly to survivors. The Carnival contract ended on February 3. Only later in March--about a month and a half after the Carnival agreement expired--did FEMA dollars disbursed to residents catch up with the contract.

“We had previously chartered three ships after [Hurricane] Katrina in New Orleans, and so we had a relationship with FEMA and we knew of their potential needs,” said Carnival’s Chiames.

That chapter from 2005 raised bipartisan red flags in Congress. The $236 million six-month agreement was signed days after the storm, and the ships sat half empty in the Mississippi River and off the coast of Alabama for months afterward.

"A short-term temporary solution has turned into a long-term, grossly overpriced sweetheart deal for a cruise line," then-Democratic Illinois Senator Barack Obama and then-Republican Oklahoma Senator Tom Coburn wrote in a joint statement at the time. “Finding out after the fact that we're spending taxpayer money on no-bid contracts and sweetheart deals for cruise lines is no way to run a recovery effort.”

>You can read the full contract between Carnival Corporation and FEMA below: 

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