Musgrave, Flake & Tiahrt Call For Investigation Into Cruise Line Deal To House Katrina Evacuees
Political Desk
October 03, 2005
Details of $236 million contract with Carnival called into question
Today, Representative Marilyn Musgrave (R-CO) was joined by two of her House colleagues in petitioning congressional leadership to hold an investigation of a contract negotiated between Carnival Cruise Lines and the government after Hurricane Katrina. Representatives Jeff Flake (R-AZ) and Todd Tiahrt (R-KS) joined Musgrave in sending a letter detailing their concerns over the deal and calling for congressional oversight.
"There are a lot of questions at this point, but not a lot of answers, and I find the size of this contract to be a jaw dropper," said Musgrave. "First, it is important to acknowledge Carnival Cruise Lines for their initiative to help evacuees in the Gulf Coast, there were thousands of people in desperate need and quick help. Our aim is to shine the light on how taxpayer money is being used and how this federal contract was negotiated to be sure that the people's best interests were being protected. The bottom line is that any money wasted on this deal cannot put to work helping displaced families."
After Hurricane Katrina devastated the Gulf Coast of Mississippi and Louisiana on Labor Day weekend, the Federal Emergency Management Agency (FEMA) instructed the U.S. Navy Military Sealift Command (MSC) to make contracts for emergency relief housing. Within a 24 hour deadline, Carnival Cruise Lines submitted their bid for three of their 20 year old ships, the Ecstasy, Sensation, and Holiday, which could hold 7,116 evacuees for six months.
The price tag for the federal government is $236 million, $192 million for base costs for the ships for 6 months and $44 million for reimbursements, covers fuel, dock fees, and other expenses.
In the petition, Musgrave highlights her concerns, stating they cover "...a broad range of issues related to this contract, including the cost and specifics of the contract; the manner in which it was negotiated; and the effectiveness of its use as temporary housing for evacuees."
The text of the petition follows.
September 30, 2005
The Honorable J. Dennis Hastert
Speaker of the House of Representatives
Capitol, H-232
Washington, DC 20515
Chairman Jerry Lewis
Chairman, House Committee on Appropriations
Attn: Survey and Investigation staff
Capitol, H-218
Washington, DC 20515
Dear Speaker Hastert,
We are writing to inquire about a contract negotiated between the Federal Emergency Management Administration (FEMA) and Carnival Cruise Lines. It is our understanding that the $236 million contract is intended to compensate Carnival for the charter of three luxury cruise ships to provide housing for displaced victims of Hurricane Katrina. According to some published reports, the cost to house evacuees on these vessels would exceed $30,000 per person over the next six months.
We have concerns about a broad range of issues related to this contract, including the cost and specifics of the contract; the manner in which it was negotiated; and the effectiveness of its use as temporary housing for evacuees. We also are interested in published reports of an unusual side arrangement between Carnival and the federal government that would adjust the contract amount if Carnival receives tax waivers. While it is important for agencies like FEMA to have the power to make quick decisions, it is essential that they maintain a level of fiscal responsibility. It is our belief that there are enough questionable circumstances here to merit an investigation.
Additionally alarming is the tax waiver sought by Carnival. (See letter to the Honorable John Snow, Secretary of Treasury, dated September 15, 2005). While foreign flag cruise ships operating in international commerce are exempt from U.S. tax and labor laws, the operation of foreign-flag ships for an extended period in the Gulf region under the FEMA contract certainly appears to constitute domestic commerce, and, as result, these ships should be subject to American laws and taxes. In its letter to Secretary Snow, Carnival has asked that revenue from this quarter-of-a-billion dollar contract be treated as "ancillary activities" and therefore exempt from U.S. taxation. In addition, Carnival has requested that "income earned by [its] non-resident alien crew [be treated as] income from services performed without the United States." Like the aforementioned contract and contracting process, this request also appears to be highly unusual.
Also troubling is Carnival's suggestion in the tax waiver request letter that its participation in the disaster relief effort may be "interrupt[ed]" if the tax waiver is not granted.
We request an immediate investigation into all matters related to the contract. Please provide us with copies of all contracts between FEMA (or the U.S. Navy Military Sealift Command) and Carnival Cruise Lines as well as any supporting documents, including and particularly those related to the pricing for this contract. Please also confirm whether the Internal Revenue Service or the U.S. Department of Treasury has, in fact, granted the tax waiver and to what extent the contract would be adjusted if such a waiver were granted.
Thank you for your cooperation in this matter.
Sincerely,
Congresswoman Marilyn Musgrave
Congressman Jeff Flake
Congressman Todd Tiahrt
Marilyn Musgrave was elected to the United States House of Representatives in January 2003, and she represents Colorado's Fourth Congressional District. Musgrave is a member of the House Committees on Agriculture, Education and the Workforce, Resources, and Small Business. To learn more about Rep. Musgrave please visit her official website at http://www.house.gov/musgrave
Today, Representative Marilyn Musgrave (R-CO) was joined by two of her House colleagues in petitioning congressional leadership to hold an investigation of a contract negotiated between Carnival Cruise Lines and the government after Hurricane Katrina. Representatives Jeff Flake (R-AZ) and Todd Tiahrt (R-KS) joined Musgrave in sending a letter detailing their concerns over the deal and calling for congressional oversight.
"There are a lot of questions at this point, but not a lot of answers, and I find the size of this contract to be a jaw dropper," said Musgrave. "First, it is important to acknowledge Carnival Cruise Lines for their initiative to help evacuees in the Gulf Coast, there were thousands of people in desperate need and quick help. Our aim is to shine the light on how taxpayer money is being used and how this federal contract was negotiated to be sure that the people's best interests were being protected. The bottom line is that any money wasted on this deal cannot put to work helping displaced families."
After Hurricane Katrina devastated the Gulf Coast of Mississippi and Louisiana on Labor Day weekend, the Federal Emergency Management Agency (FEMA) instructed the U.S. Navy Military Sealift Command (MSC) to make contracts for emergency relief housing. Within a 24 hour deadline, Carnival Cruise Lines submitted their bid for three of their 20 year old ships, the Ecstasy, Sensation, and Holiday, which could hold 7,116 evacuees for six months.
The price tag for the federal government is $236 million, $192 million for base costs for the ships for 6 months and $44 million for reimbursements, covers fuel, dock fees, and other expenses.
In the petition, Musgrave highlights her concerns, stating they cover "...a broad range of issues related to this contract, including the cost and specifics of the contract; the manner in which it was negotiated; and the effectiveness of its use as temporary housing for evacuees."
The text of the petition follows.
September 30, 2005
The Honorable J. Dennis Hastert
Speaker of the House of Representatives
Capitol, H-232
Washington, DC 20515
Chairman Jerry Lewis
Chairman, House Committee on Appropriations
Attn: Survey and Investigation staff
Capitol, H-218
Washington, DC 20515
Dear Speaker Hastert,
We are writing to inquire about a contract negotiated between the Federal Emergency Management Administration (FEMA) and Carnival Cruise Lines. It is our understanding that the $236 million contract is intended to compensate Carnival for the charter of three luxury cruise ships to provide housing for displaced victims of Hurricane Katrina. According to some published reports, the cost to house evacuees on these vessels would exceed $30,000 per person over the next six months.
We have concerns about a broad range of issues related to this contract, including the cost and specifics of the contract; the manner in which it was negotiated; and the effectiveness of its use as temporary housing for evacuees. We also are interested in published reports of an unusual side arrangement between Carnival and the federal government that would adjust the contract amount if Carnival receives tax waivers. While it is important for agencies like FEMA to have the power to make quick decisions, it is essential that they maintain a level of fiscal responsibility. It is our belief that there are enough questionable circumstances here to merit an investigation.
Additionally alarming is the tax waiver sought by Carnival. (See letter to the Honorable John Snow, Secretary of Treasury, dated September 15, 2005). While foreign flag cruise ships operating in international commerce are exempt from U.S. tax and labor laws, the operation of foreign-flag ships for an extended period in the Gulf region under the FEMA contract certainly appears to constitute domestic commerce, and, as result, these ships should be subject to American laws and taxes. In its letter to Secretary Snow, Carnival has asked that revenue from this quarter-of-a-billion dollar contract be treated as "ancillary activities" and therefore exempt from U.S. taxation. In addition, Carnival has requested that "income earned by [its] non-resident alien crew [be treated as] income from services performed without the United States." Like the aforementioned contract and contracting process, this request also appears to be highly unusual.
Also troubling is Carnival's suggestion in the tax waiver request letter that its participation in the disaster relief effort may be "interrupt[ed]" if the tax waiver is not granted.
We request an immediate investigation into all matters related to the contract. Please provide us with copies of all contracts between FEMA (or the U.S. Navy Military Sealift Command) and Carnival Cruise Lines as well as any supporting documents, including and particularly those related to the pricing for this contract. Please also confirm whether the Internal Revenue Service or the U.S. Department of Treasury has, in fact, granted the tax waiver and to what extent the contract would be adjusted if such a waiver were granted.
Thank you for your cooperation in this matter.
Sincerely,
Congresswoman Marilyn Musgrave
Congressman Jeff Flake
Congressman Todd Tiahrt
Marilyn Musgrave was elected to the United States House of Representatives in January 2003, and she represents Colorado's Fourth Congressional District. Musgrave is a member of the House Committees on Agriculture, Education and the Workforce, Resources, and Small Business. To learn more about Rep. Musgrave please visit her official website at http://www.house.gov/musgrave
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