Cruise line operator Carnival Corp. has pleaded guilty and agreed to pay a $1 million penalty for violating a condition of its probation relating to its environmental compliance plan (ECP), according to court documents filed Friday.
In April 2017, the Department of Justice ordered Princess Cruises, owned by Carnival, to pay a record $40 million penalty for illegally dumping overboard oil-contaminated waste and falsifying official logs to conceal the discharges. Princess and all related Carnival cruise ship companies were further required to implement an ECP, including independent audits by an outside company and oversight by a court-appointed compliance monitor (CAM) for a probation period of five years.
The Carnival ECP was highlighted in detail as part of a Compliance Week case study released in September 2020.
Leading up to a quarterly status hearing in October 2021, the CAM, together with a third-party auditor, presented to the court an analysis of Princess’s internal investigation program, in which they concluded the company “‘does not yet have an effective, independent, and empowered internal investigation program.’” The company’s own internal and external consultants supported these findings, and the company itself admitted to needing to improve its internal investigation function, according to court documents.
The CAM and third-party auditor’s analysis “makes clear that this shortcoming occurs within the context of many good-faith efforts by the incident analysis group (IAG) itself, as well as by employees at all levels across the company,” court documents stated. “What has yet to be addressed, and of primary concern, is the reluctance of some leaders at the highest levels to take the uncomfortable first steps towards culture change: acknowledging the existence of a culture that has tended to minimize or deflect problems and recognizing their role in creating or perpetuating that culture.”
Regarding speak-up culture, “employees do not seek help or disclose shortcomings,” the documents added. The IAG is further not empowered to “provide thorough analyses about compliance risks.”
Under Friday’s proposed agreement, filed in U.S. District Court for the Southern District of Florida, the Carnival board’s compliance committees will approve an updated charter that adds to IAG’s mission statement all significant health, environmental, safety, and security (HESS) risks to Carnival “that can be identified through robust investigation and systemic analysis processes,” the court stated. This task must be completed by Jan. 31.
Carnival must also enhance its formal written procedures to avoid conflicts of interest when the IAG is working with subject-matter experts from other departments. By Jan. 31, the compliance committees of the board “will approve an updated IAG charter clarifying that the IAG shall follow the conflicts of interest procedure described in the updated version” of HESS protocols finalized Dec. 31.
Other changes required by Carnival under the plea agreement resolving the probation violation include:
- Restructuring its investigative office so it reports directly to a committee of Carnival’s board of directors;
- Giving the internal investigative office authority to initiate investigations on its own and to determine their scope;
- Restricting the ability of Carnival’s management to remove the IAG head that performs internal investigations;
- Conducting an assessment to ensure independent investigators have sufficient resources; and
- Assessing 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 Justice Department stated in a news release Tuesday.
Compliance message: “This case shows the importance of addressing issues of corporate culture and structure and the root causes of environmental noncompliance,” said Assistant Attorney General Todd Kim of the Justice Department’s Environment and Natural Resources Division in the release. “This was a serious and ongoing violation of probation that reflected Carnival’s failure to prioritize compliance with court orders.”
Carnival in June 2019 was ordered to pay a $20 million criminal penalty and subjected to enhanced supervision regarding its ECP after admitting to six violations of its probation attributed to the company’s senior management.
Editor’s note: This story was updated Jan. 12 to include details from the Justice Department’s news release.