honoluluadvertiser.com

Sponsored by:

Comment, blog & share photos

Log in | Become a member
The Honolulu Advertiser
Posted on: Saturday, October 29, 2005

Cruise line to be investigated

By Ken Silverstein and Alan Miller
Los Angeles Times

WASHINGTON — The Senate unanimously passed a measure yesterday that will require an inspector-general investigation into the controversial $236 million deal to lease three ships from Carnival Cruise Lines for emergency housing after Hurricane Katrina.

The measure, which was attached to a bill that authorizes funding for the Coast Guard, calls on the Department of Homeland Security's inspector general to determine if the deal "was appropriate and reasonable" and if "there were any irregularities or deviations in the award and subsequent oversight and administration of the contract." The Department of Homeland Security oversees the Federal Emergency Management Agency, which brokered the agreement.

The contract was negotiated after Hurricane Katrina struck New Orleans and the Gulf Coast region in late August. The deal pays Carnival $192 million over six months for about 7,100 berths. The company also is authorized to receive up to $44 million in reimbursements for fuel, waste removal and other expenses.

The ships initially were intended for evacuees but are being used primarily to house emergency workers.

"The U.S. government ... has the right to audit the charters," Tim Gallagher, a Carnival spokesman, said of the Senate action. "We are confident that it will stand up to any governmental review."

Critics have portrayed the deal as a boondoggle. They say there were cheaper ways to house evacuees and that Carnival could reap enormous profits under the agreement. Last week, Rep. Henry Waxman, D-Calif., the ranking Democrat on the House Government Reform Committee, blasted the deal in a letter to Homeland Security Secretary Michael Chertoff.

He said that internal company financial data obtained by his committee indicated that Carnival could take in as much as $86 million more under the deal with the government than it would have gained if the ships had been at sea.

Both Homeland Security and Carnival have rebuffed criticism of the deal.

The company has said that the agreement was intended to be "profit neutral," meaning that payments from the government would not exceed the revenues the company would have made during normal operations.

Citizens Against Government Waste said the Carnival deal is only one of several instances in which a lack of FEMA preparation may have left federal taxpayers with an outsized bill.