Cruise Lines Face Covid-19 Compliance Squeeze

Royal Caribbean International has agreed to an exhausting set of criteria from the Centers for Disease Control so the cruise line can evacuate its employees from ships stuck at sea — including the risk of civil and criminal penalties for senior executives should Royal Caribbean bungle the task.

That certainly takes the importance of running a tight ship to a whole new level. 

If you haven’t followed the cruise industry’s predicament closely, it’s a doozy. The three major cruise lines — Royal Caribbean, Carnival Cruises, and Norwegian Cruise Line — have roughly 100,000 employees stranded on ships in U.S. waters. Because the ships are life-sized petri dishes for Covid-19, the feds have been reluctant to let the cruise lines remove their employees to dry land. 

The CDC had proposed a plan to allow the cruise line employees to leave, but it wasn’t easy: no employees taking public transportation home, no employees staying at hotels, and no employees mixing with the public generally while they disembarked. The kicker: each cruise line’s CEO, chief medical officer, and chief compliance officer would also need to attest that all employees would meet those terms, or risk civil and criminal sanctions. 

Cruise line executives balked at that last part about attestations and personal criminal liability, and as of late last week, talks were at an impasse. Over the weekend, however, according to the Miami Herald, Royal Caribbean got over itself and decided to go along with the deal. 

The Herald obtained a letter Royal Caribbean CEO Michael Bayley emailed to all employees on Sunday. The key passage:

“The CDC will only allow us to disembark crew members if company executives, myself included, are willing to attest — subject to criminal penalties including imprisonment — that we will not use any public transportation and that each crew member will comply with certain conditions after disembarking the ships. We are happy to do all the things they requested, but the criminal penalties gave us (and our lawyers) pause.”

Bayley went on to say he hopes the feds will drop the prosecution threat, but “we have decided that the importance of getting you home is so great that we will sign these documents as they are written today to help get you off the ships.”

As of Sunday afternoon, Carnival Cruises and Norwegian hadn’t accepted the CDC’s proposal. Meanwhile, a bonus headache for Carnival: the House Transportation Committee just announced that it will hold a hearing on Carnival’s handling of the Covid-19 crisis sometime in the future. Document gathering is underway.

How Hot Is the Water Really?

To be clear, the CDC agreement only warns that “false or misleading statements or omissions may result in criminal and civil actions for fines, penalties, damages, and imprisonment.” It seems unlikely that CEOs, CCOs, or anyone else would go to prison if a rogue purser or cook absconded onto the subway in direct violation of orders. 

Then again, we’ve also seen numerous news reports that the cruise industry knew Covid-19 posed a clear, imminent threat to the safety of its passengers, crews, and the public — and then let its ships sail into the seas anyway. 

Particularly damning is an in-depth article the Wall Street Journal published on May 1, which identified at least 100 cruise ships that set sail after March 4, the first day that a passenger died of Covid-19 while on a cruise stopping in the United States. And that March 4 death happened a month after the Japanese government quarantined a Carnival Cruise ship docked off the coast of Japan. 

So the cruise industry does not have an impressive record of public health and safety procedures so far. It knew people on its ships were dying of Covid-19 and let more trips continue. 

The CEOs have done themselves no favors along the way either. For example, the Miami Herald has this quote from Carnival CEO Arnold Donald, made in April: “Cruise ships are not the cause of the virus, nor are they the reason for the spread in society. It’s not a dramatic impact compared to how the community spread occurred around the world.”

That statement may be technically accurate, and perhaps is only one fragment of a larger point Arnold was trying to make. Still, it doesn’t help the cruise lines’ reputation among regulators or the public. It comes across as tone deafness at the top. 

Combine statements like that with specific allegations of non-compliance and misconduct (Carnival, for example, is already under investigation by the U.S. Coast Guard for letting sick passengers disembark in San Francisco and Puerto Rico without alerting local health authorities) and it’s hard to be sympathetic to those senior executives while the CDC sticks it to them with attestations and potential criminal liability. 

Royal Caribbean, at least, has decided to put employee well-being above cost and personal legal jeopardy, so we can applaud that company. I’ll be curious to see how Carnival and Norwegian respond. 

As to who these chief compliance officers are, who would need to attest: one assumes that for Royal Caribbean that person is Bradley Stein, general counsel and chief compliance officer. 

At Carnival (which, again, apparently hasn’t agreed to anything yet) the chief compliance officer is Peter Anderson, who joined the firm last July after a separate scandal involving Carnival’s poor environmental compliance.

Norwegian isn’t clear on who its chief compliance officer is, but Daniel Farkas is the company’s general counsel. “Chief compliance officer” is not part of his title, but he does “oversee all aspects of legal, risk management, corporate governance and compliance.” 

Filed under: Rough Seas Ahead.