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Cruise-industry giant Carnival challenges state's fuel-fee probe
A Carnival cruise ship is docked at Port Canaveral. (RICARDO RAMIREZ BUXEDA, ORLANDO SENTINEL / December 27, 2007)
Cruise-industry giant Carnival Corp. is challenging state Attorney General Bill McCollum's investigation into its controversial fuel surcharge by claiming the extra passenger fee already was approved when Gov. Charlie Crist was attorney general.
Records reviewed by the Orlando Sentinel show representatives for Carnival approached then-Attorney General Crist's office in October 2006 seeking approval to charge a new fee that would help Carnival absorb skyrocketing fuel costs. At least one internal meeting on the issue was scheduled by lawyers in the Attorney General's Office on Oct. 5 that year.
McCollum's office said it has been deluged with complaints about the surcharge, which has turned out to be as much as $70 per passenger. But the Attorney General's Office "expressly approved" the fee nearly 18 months ago, Carnival lawyer Curtis J. Mase wrote in a letter to investigators leading the current probe by McCollum's office.
Mase also wrote that Carnival was told "that the approval came from the highest level" of Crist's office.
Five days after that Oct. 5, 2006, meeting, the Republican Party of Florida reported receiving checks totaling $250,000 from two Carnival subsidiaries: Holland America Line and Princess Tours.
Businesses across all industries were at the time pouring record amounts of money into the Republican Party, which was paying for television advertisements, campaign staff and more to help Crist get elected governor.
The twin $125,000 checks are the largest donations that Miami-based Carnival or any of its subsidiaries have made to the Florida GOP since 1996, the earliest year for which electronic records are available.
Carnival said Tuesday that the donations were unrelated to the conversations with Crist's office about the fuel surcharge. "Any contribution by any of our brands to the Republican Party of Florida has no correlation whatsoever to interactions with the AG's office," Carnival spokeswoman Jennifer de la Cruz said in an e-mail.
Paul Huck, a former deputy attorney general under Crist who was involved in the 2006 discussions, said Tuesday in an e-mail that any suggestion of a quid pro quo from Carnival was "offensive" to the lawyers involved in the issue. "I am confident that if such a bargain had been even hinted at during their communications with Carnival, Carnival would have been literally and figuratively shown the door," he said.
Carnival representatives approached the Attorney General's Office about the fuel surcharge to make sure the fee would comply with a 1997 agreement between the state and major cruise lines regarding what they can charge on top of their advertised fares.
Huck said that, after meeting with Carnival, lawyers in the Attorney General's Office recommended to him that the cruise company be allowed to levy a fuel surcharge under three conditions: It had to be temporary; it had to be based on actual fuel-cost increases; and it had to be conspicuously disclosed to consumers before they purchased a ticket.
"The notion was to take into account the reality of increasing fuel prices but at the same time to ensure that the full and conspicuous disclosure of the surcharge was being made to the consumer before he or she made a decision to go ahead and buy a ticket," Huck said in his Tuesday e-mail. Huck eventually became Crist's general counsel in the governor's office but left to join a private law firm in February.
Huck said he authorized the decision and that, to his knowledge, Crist's approval was not sought. Crist said Tuesday that he did not recall any discussions with or about Carnival.
A spokeswoman for the Attorney General's Office, where McCollum succeeded Crist in January 2007, said this week that Carnival's surcharge went beyond the agreement reached with Crist's office in 2006.
That's because when Carnival ultimately announced the surcharge in November 2007 -- a $5 a day charge up to $70 per person or $140 per stateroom on all cruises departing as of Feb. 1 -- it required even customers who had already booked their trips to pay the new charge, though they were also given the option to cancel their reservations without penalty.
The Attorney General's Office says that violates even the conditions set in October 2006 because it wasn't adequately disclosed ahead of time to consumers. "We never agreed nor acquiesced in any way to a retroactive application to previously ticketed passengers," Robert Julian, a lawyer in the office's economic-crimes division, wrote in a Jan. 16 letter to Carnival.
Royal Caribbean Cruises Ltd., which followed Carnival in adopting a retroactive surcharge, has already settled with McCollum's office and agreed to refund $21 million in surcharges to customers charged even after they booked.
But Carnival has so far refused to back down. Carnival's lawyers say the company has met all the criteria outlined under Crist's administration.
The company has, for instance, pointed out in correspondence with the state that its brochures warned customers of the possibility of fuel surcharges. It has also told the Attorney General's Office that it intends to eliminate the surcharge once the price of crude oil drops below $70 a barrel.
Carnival spokeswoman de la Cruz said the cruise operator intends to eliminate the charge once fuel has spent 30 days trading below $70 a barrel on the New York Mercantile Exchange. Light, sweet crude oil closed at $101.22 a barrel Tuesday.
Carnival has already suggested to McCollum's office that it could send refunds to passengers who had already paid in full for their trips when the surcharge was announced, according to the state. But McCollum's office has insisted that any refunds must also apply to customers who had paid deposits only.
Carnival says it would forfeit $40 million if it has to refund the surcharge to all previously booked passengers.
Tallahassee Bureau Chief John Kennedy contributed to this report. Jason Garcia can be reached at email@example.com