Wednesday, September 28, 2005
Corruption in Fema Cruise Ship Contract?
CORRUPTION IN FEMA CRUISE SHIP CONTRACT?
Multi-million dollar contract to Carnival Cruise Lines has a suspicious odor, you might say.
Since “our” government has such good friends in private industry, and believes that corporate capitalism is the way to go, this deal smells, at least to some of us.
“Bribery” was a word used not too many years ago to describe such things as government officials getting favors from people in return for legislative efforts, either before or after the facts. “Sweetheart deals” is a polite way to phrase it, nowadays.
Originally, in this country, corporations could not spend money to influence politicians or politics. Things have changed. Lobbying is now a big business: many many lobbyists give presents like trips, free hotel rooms, big dinner parties, campaign contributions, and just plain money to politicians. I don’t know if that’s what happened in this case. There will be sweet returns from the cruise line to the various officials who signed off on a contract this dumb. Bet on it.
Think of the defense industry: a procurement officer in the Pentagon OK’s some nice deal with an arms contractor—a cost plus ten per cent contract, say—and then the procurement officer retires out of the DOD, and takes a swell job with that contractor. That’s perfectly legal, we’re told, not bribery or anything like that. Bullshit: if it walks like a duck and quacks like a duck, it’s a duck.
The Administration has done so many no-bid contracts that my inner cynic says, this is the most corrupt regime since U.S. Grant’s presidency. But will anything really be done about this corrupt system? I’m not holding my breath. Neither are the hundreds and hundreds of lobbyists in Washington.
washingtonpost.com
$236 Million Cruise Ship Deal Criticized
By Jonathan Weisman
Washington Post Staff Writer
Wednesday, September 28, 2005; A01
On Sept. 1, as tens of thousands of desperate Louisianans packed the New Orleans Superdome and convention center, the Federal Emergency Management Agency pleaded with the U.S. Military Sealift Command: The government needed 10,000 berths on full-service cruise ships, FEMA said, and it needed the deal done by noon the next day.
The hasty appeal yielded one of the most controversial contracts of the Hurricane Katrina relief operation, a $236 million agreement with Carnival Cruise Lines for three ships that now bob more than half empty in the Mississippi River and Mobile Bay. The six-month contract -- staunchly defended by Carnival but castigated by politicians from both parties -- has come to exemplify the cost of haste that followed Katrina's strike and FEMA's lack of preparation.
To critics, the price is exorbitant. If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week, according to calculations by aides to Sen. Tom Coburn (R-Okla.). A seven-day western Caribbean cruise out of Galveston can be had for $599 a person -- and that would include entertainment and the cost of actually making the ship move.
"When the federal government would actually save millions of dollars by forgoing the status quo and actually sending evacuees on a luxurious six-month cruise it is time to rethink how we are conducting oversight. A short-term temporary solution has turned into a long-term, grossly overpriced sweetheart deal for a cruise line," said Coburn and Sen. Barack Obama (D-Ill.) in a joint statement yesterday calling for a chief financial officer to oversee Katrina spending.
Carnival's bid totaled $192 million over six months, plus $44 million in reimbursable expenses, such as port charges, fuel, food and docking costs. To Carnival executives, the contract will ensure only that the company breaks even when it pulls three ships from holiday operations. About 100,000 passengers had their vacations canceled to accommodate the government's needs, said J. Michael Crye, president of the International Council of Cruise Lines, who has been answering questions about the deal for Carnival.
"In the end, we will make no additional money on this deal versus what we would have made by keeping these ships in service," said Jennifer de la Cruz, a Carnival spokeswoman. "That has been our position from the outset, and it has not changed."
Government contracting officials defended the deal. "They were the market," Capt. Joe Manna, director of contracts at the Sealift Command, said of Carnival. "Under the circumstances, I'd say we're getting a pretty good value."
Coburn and Obama disagreed. "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," they said in the statement.
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. Despite its experiences with last year's busy hurricane season, FEMA found itself without standing contracts for standard relief items such as blue tarps to cover damaged roofs, according to Thomas A. Schatz, president of Citizens Against Government Waste.
"It is ridiculous that they can't have the supply on hand for these basics that you know you'll need in every instance," Schatz said.
But the Carnival deal has come under particular scrutiny. Not only are questions being raised over the contract's cost, but congressional investigators are examining the company's tax status. Carnival, which is headquartered in Miami but incorporated for tax purposes in Panama, paid just $3 million in income tax benefits on $1.9 billion in pretax income last year, according to company documents. "That's not even a tip," said Robert S. McIntyre of Citizens for Tax Justice. U.S. companies in general pay an effective income tax rate of about 25 percent, analysts say. That would have left Carnival with a $475 million tax bill.
Carnival's public records boast "that substantially all of our income in fiscal 2004, 2003 and 2002 . . . is exempt from U.S. federal income taxes," largely because it maintains that its operations are not in the United States but on the high seas.
Carnival does not want to see that tax status jeopardized just because three major ships are clearly operating in the United States. After it won the FEMA bid, Carnival appealed to Treasury Secretary John W. Snow for a waiver of U.S. taxes. "We do not want to jeopardize our tax exemption, nor do we want to interrupt our relief efforts for failure to secure this assurance from the Treasury Department," wrote Howard Frank, Carnival's chief operating officer.
Cruise line council President Crye said the company will reduce its billings under the contract by the amount of income taxes forgiven. The waiver would spare Carnival and its employees the paperwork of filing tax returns.
But critics say Carnival deserves to be treated no differently than a hotel housing relief workers under a FEMA contract. "Carnival should be contributing to the relief effort just like all other taxpayers are," McIntyre said. "Why should they be singled out for special treatment, just because they've been so good at tax avoidance in the past?"
Treasury spokesman Taylor Griffin said the matter is under review.
Multi-million dollar contract to Carnival Cruise Lines has a suspicious odor, you might say.
Since “our” government has such good friends in private industry, and believes that corporate capitalism is the way to go, this deal smells, at least to some of us.
“Bribery” was a word used not too many years ago to describe such things as government officials getting favors from people in return for legislative efforts, either before or after the facts. “Sweetheart deals” is a polite way to phrase it, nowadays.
Originally, in this country, corporations could not spend money to influence politicians or politics. Things have changed. Lobbying is now a big business: many many lobbyists give presents like trips, free hotel rooms, big dinner parties, campaign contributions, and just plain money to politicians. I don’t know if that’s what happened in this case. There will be sweet returns from the cruise line to the various officials who signed off on a contract this dumb. Bet on it.
Think of the defense industry: a procurement officer in the Pentagon OK’s some nice deal with an arms contractor—a cost plus ten per cent contract, say—and then the procurement officer retires out of the DOD, and takes a swell job with that contractor. That’s perfectly legal, we’re told, not bribery or anything like that. Bullshit: if it walks like a duck and quacks like a duck, it’s a duck.
The Administration has done so many no-bid contracts that my inner cynic says, this is the most corrupt regime since U.S. Grant’s presidency. But will anything really be done about this corrupt system? I’m not holding my breath. Neither are the hundreds and hundreds of lobbyists in Washington.
washingtonpost.com
$236 Million Cruise Ship Deal Criticized
By Jonathan Weisman
Washington Post Staff Writer
Wednesday, September 28, 2005; A01
On Sept. 1, as tens of thousands of desperate Louisianans packed the New Orleans Superdome and convention center, the Federal Emergency Management Agency pleaded with the U.S. Military Sealift Command: The government needed 10,000 berths on full-service cruise ships, FEMA said, and it needed the deal done by noon the next day.
The hasty appeal yielded one of the most controversial contracts of the Hurricane Katrina relief operation, a $236 million agreement with Carnival Cruise Lines for three ships that now bob more than half empty in the Mississippi River and Mobile Bay. The six-month contract -- staunchly defended by Carnival but castigated by politicians from both parties -- has come to exemplify the cost of haste that followed Katrina's strike and FEMA's lack of preparation.
To critics, the price is exorbitant. If the ships were at capacity, with 7,116 evacuees, for six months, the price per evacuee would total $1,275 a week, according to calculations by aides to Sen. Tom Coburn (R-Okla.). A seven-day western Caribbean cruise out of Galveston can be had for $599 a person -- and that would include entertainment and the cost of actually making the ship move.
"When the federal government would actually save millions of dollars by forgoing the status quo and actually sending evacuees on a luxurious six-month cruise it is time to rethink how we are conducting oversight. A short-term temporary solution has turned into a long-term, grossly overpriced sweetheart deal for a cruise line," said Coburn and Sen. Barack Obama (D-Ill.) in a joint statement yesterday calling for a chief financial officer to oversee Katrina spending.
Carnival's bid totaled $192 million over six months, plus $44 million in reimbursable expenses, such as port charges, fuel, food and docking costs. To Carnival executives, the contract will ensure only that the company breaks even when it pulls three ships from holiday operations. About 100,000 passengers had their vacations canceled to accommodate the government's needs, said J. Michael Crye, president of the International Council of Cruise Lines, who has been answering questions about the deal for Carnival.
"In the end, we will make no additional money on this deal versus what we would have made by keeping these ships in service," said Jennifer de la Cruz, a Carnival spokeswoman. "That has been our position from the outset, and it has not changed."
Government contracting officials defended the deal. "They were the market," Capt. Joe Manna, director of contracts at the Sealift Command, said of Carnival. "Under the circumstances, I'd say we're getting a pretty good value."
Coburn and Obama disagreed. "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," they said in the statement.
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. Despite its experiences with last year's busy hurricane season, FEMA found itself without standing contracts for standard relief items such as blue tarps to cover damaged roofs, according to Thomas A. Schatz, president of Citizens Against Government Waste.
"It is ridiculous that they can't have the supply on hand for these basics that you know you'll need in every instance," Schatz said.
But the Carnival deal has come under particular scrutiny. Not only are questions being raised over the contract's cost, but congressional investigators are examining the company's tax status. Carnival, which is headquartered in Miami but incorporated for tax purposes in Panama, paid just $3 million in income tax benefits on $1.9 billion in pretax income last year, according to company documents. "That's not even a tip," said Robert S. McIntyre of Citizens for Tax Justice. U.S. companies in general pay an effective income tax rate of about 25 percent, analysts say. That would have left Carnival with a $475 million tax bill.
Carnival's public records boast "that substantially all of our income in fiscal 2004, 2003 and 2002 . . . is exempt from U.S. federal income taxes," largely because it maintains that its operations are not in the United States but on the high seas.
Carnival does not want to see that tax status jeopardized just because three major ships are clearly operating in the United States. After it won the FEMA bid, Carnival appealed to Treasury Secretary John W. Snow for a waiver of U.S. taxes. "We do not want to jeopardize our tax exemption, nor do we want to interrupt our relief efforts for failure to secure this assurance from the Treasury Department," wrote Howard Frank, Carnival's chief operating officer.
Cruise line council President Crye said the company will reduce its billings under the contract by the amount of income taxes forgiven. The waiver would spare Carnival and its employees the paperwork of filing tax returns.
But critics say Carnival deserves to be treated no differently than a hotel housing relief workers under a FEMA contract. "Carnival should be contributing to the relief effort just like all other taxpayers are," McIntyre said. "Why should they be singled out for special treatment, just because they've been so good at tax avoidance in the past?"
Treasury spokesman Taylor Griffin said the matter is under review.
