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Carnival Ship Deal Faces Probe

October 29, 2005|Ken Silverstein and Alan C. Miller | Times Staff Writers

WASHINGTON — The Senate unanimously passed a measure Friday to require an investigation into the $236-million deal to lease three ships from Carnival Cruise Lines for emergency housing after Hurricane Katrina.

The measure calls on the Department of Homeland Security's inspector general to determine whether the deal "was appropriate and reasonable" and whether "there were any irregularities or deviations in the award and subsequent oversight and administration of the contract." Homeland Security oversees the Federal Emergency Management Agency, which brokered the deal.

The contract was negotiated after Katrina struck the Gulf Coast region in late August. The deal pays Carnival $192 million over six months for about 7,100 berths. The company is also authorized to receive as much as $44 million in reimbursements for various expenses.

The ships were initially meant for evacuees, but are mainly housing emergency workers.

"We are confident that it will stand up to any governmental review," Tim Gallagher, a Carnival spokesman, said of the deal.

Critics say there were cheaper housing options and that Carnival could reap huge profits. Last week, Rep. Henry A. Waxman of Los Angeles, the House Government Reform Committee's top Democrat, criticized the deal in a letter to Homeland Security Secretary Michael Chertoff. He said internal company data indicated that Carnival could take in as much as $86 million more under the deal than it would have made otherwise.

Homeland Security and Carnival have rebuffed criticism. The company says government payments were not intended to exceed what the company would have made during normal operations. Homeland Security officials have said that chartering the cruise ships was cheaper than housing evacuees and rescue workers in hotels.

In late September, Carnival and the government inserted a clause in the contract that required the firm to return any excess profits to the government.

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