Princess Cruises Pleads Guilty to Violating 'Magic Pipe' Probation

Carnival Corp.'s Princess Cruises has again pleaded guilty to violating its probation imposed as a result of its record $40 million criminal conviction for its "magic pipe" environmental crimes.

The U.S. Department of Justice (DOJ) said on Tuesday that Princess failed to establish and maintain an independent internal investigative office as required after pleading guilty to felony dumping and attempted cover-up charges in April 2017. An engineer aboard the Caribbean Princess revealed to authorities in 2013 that a so-called “magic pipe” had been used to illegally discharge oily waste without the use of required pollution prevention equipment. The $40 million fine Princess received as a result remains the largest-ever criminal fine for intentional pollution from ships.

While serving five years of probation, Princess and all other Carnival-related cruise line vessels trading in U.S. ports were required to comply with a court approved and supervised environmental compliance plan (ECP), including audits by an outside and independent third-party auditor (TPA) and oversight by a Court Appointed Monitor (CAM).

Now, following its latest violation, Princess is required to undertake remedial measures to ensure that it and its parent Carnival Cruise Lines & plc establish and maintain the independent internal investigative office known as the Incident Analysis Group (IAG).

In 2019, Princess was convicted of six violations of probation, fined an additional $20 million, and required to undertake more remedial measures. In that case, two of the violations involved interfering with the court’s supervision of probation by sending undisclosed teams to ships to prepare them for the independent inspections required during probation. Documents filed in court showed that one purpose of the vessel visit programs was to avoid adverse findings by the independent outside auditors working on behalf of the court.

Beginning with the first year of probation, there have been repeated findings that the company’s internal investigation program was and is inadequate. the DOJ said. In November 2021, the Office of Probation issued a petition to revoke probation after adverse findings by the CAM and TPA.

In an October 2021 letter to U.S. District Court Judge Patricia A. Seitz, the CAM and TPA concluded that the continuing failure “reflects a deeper barrier: a culture that seeks to minimize or avoid information that is negative, uncomfortable, or threatening to the company, including to top leadership (i.e., the Board of Directors, C-Suite executives and Brand Presidents/CEOs).”

A joint factual basis for this week’s guilty plea was submitted to the court in which Princess and Carnival admitted to the failure to establish and maintain an independent investigative office. Princess admitted that internal investigators had not been allowed to determine the scope of their investigations, and that draft internal investigations had been impacted and delayed by management.

Under its new plea deal resolving its latest probation violation, Carnival must restructure so that its investigative office reports directly to a committee of Carnival’s Board of Directors. Carnival’s internal investigative office must be given the authority to initiate investigations on its own and to determine their scope, and Carnival’s management will be restricted in its ability to remove the head of the “Incident Analysis Group” that performs internal investigations. In addition, the company must conduct an assessment to ensure independent investigators have sufficient resources. Carnival must also assess the effectiveness of required changes and correct deficiencies. Failure to meet deadlines in the plea agreement will initially subject the defendant to fines of $100,000 per day, and $500,000 per day after 10 days.

“This case shows the importance of addressing issues of corporate culture and structure, and the root causes of environmental non-compliance,” said Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division. “This was a serious and ongoing violation of probation that reflected Carnival’s failure to prioritize compliance with court orders. I thank the court, the Office of Probation, court appointed monitor and third-party auditor for the close attention that they have devoted to this important matter.”

“Just like individual defendants, corporate defendants must also comply with court orders. They are not above the law”, said U.S. Attorney Juan Antonio Gonzalez for the Southern District of Florida. “The corporate defendant here ignored the court, choosing instead to thwart the compliance plan that was put in place to protect our environment. As this probation violation proceeding demonstrates, the government will not tolerate defendant’s blatant violation of court orders.”      

The plea agreement and factual statement were signed by Micky Arison, Chairman of Carnival’s Board of Directors and Arnold Donald, the Chief Executive Officer and a member of the Board of Directors. Both attended the hearing as they have quarterly status hearings pursuant to court order.

The case is being prosecuted by Richard A. Udell, Senior Litigation Counsel with the Environmental Crimes Section of the Department of Justice and Assistant U.S. Attorney Thomas Watts-FitzGerald, Environmental Crimes Coordinator, Economic & Environmental Crimes Section, for the Southern District of Florida.