Princess Cruises pleads guilty to violation of ‘Magic Pipe’ probation

Princess Cruises, a part of Carnival Corp, has again admitted violating a probation imposed as a result of its $40m criminal conviction for “magic pipe” pollution offences

The U.S. Department of Justice (DOJ) said on Tuesday January 11th that Princess failed to establish and maintain an independent internal investigative office. This had been required after the business admitted felony dumping and attempted cover-up charges in April 2017.

The $40m fine Princess received remains the largest-ever criminal fine for intentional pollution from ships. A five-year probation period was also imposed by the court, during which Princess and all other Carnival-related cruise line vessels trading in US 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).

Following the latest violation Princess will have 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).

Princess was fined an additional $20m in 2019 for six violations of the terms of probation. 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 US 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.

The new plea deal to resolve the latest probation violation requires Carnival to 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 will have to 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.

The case has aroused interest because it appears to have zoomed in on what it sees as systemic problems at Carnival rather than matters of individual wrongdoing. Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division said that the case showed “the importance of addressing issues of corporate culture and structure, and the root causes of environmental non-compliance”.

He added that the ongoing violation of probation reflected a failure at Carnival to prioritize compliance with court orders.

US Attorney Juan Antonio Gonzalez for the Southern District of Florida said that “the corporate defendant here ignored the court, choosing instead to thwart the compliance plan that was put in place to protect our environment”.

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.