Lawmaker Wants Review of Cruise Ship Deal

Friday, October 21, 2005
A top House Democrat called on federal officials to justify their decision to sign a $236 million deal with Carnival Cruise Lines for Hurricane Katrina housing, saying the six-month contract is overpriced. In a letter, Rep. Henry Waxman of California asked Homeland Security Secretary Michael Chertoff to release documents indicating how the price was calculated. Waxman said he had Carnival documents from 2002 showing the company normally earns revenue of $150 million over six months. "A comparison of this information to the federal contract raises serious questions about whether the Carnival contract is a responsible use of taxpayer funds," Waxman wrote. The deal with Carnival for three full-service cruise ships _ which sat half-empty for weeks in the Gulf Coast _ has been criticized by lawmakers of both parties as a prime example of wasted spending in Hurricane Katrina-related contracts. Sens. Tom Coburn, R-Okla., and Barack Obama, D-Ill., also have called for investigations into whether the contract price, which amounts to roughly $1,275 a week per passenger if the three ships were at full capacity, is too high. Carnival officials have defended the deal, saying the company will not make extra profit because the $236 million price covers the revenue it would normally receive for up to 120,000 passengers it could book. But Waxman, the top Democrat on the House Government Reform Committee, said the 2002 financial data shows that taxpayers are paying Carnival "significantly more under the federal contract than the ships earned on their own." He noted that the 2002 figure of $150 million in revenue includes sales for liquor and onshore excursions as well as maintenance costs for pools, bars and casinos, which aren't needed for hurricane evacuees and thus shouldn't be charged. Officials with Homeland Security did not immediately return a phone call Thursday seeking comment. In an e-mail statement Thursday, Carnival spokeswoman Jennifer De La Cruz said the $236 million figure was based on a "good-faith estimate" of what the company would have earned otherwise. She noted that the government contract provides for a refund of any surplus profit based on Carnival's good-faith estimates, and that during 2002, the industry's revenue was lower than usual due to the aftermath of the Sept. 11, 2001 terror attacks. "Using that time period as a basis for the financial analysis is irrelevant and the mathematics on the whole are flawed," De La Cruz wrote. By HOPE YEN The Associated Press

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