The Deep Blue Greed

The Arison clan built Carnival into a money machine by cleverly avoiding tax laws

In September 1992 Rep. Gene Taylor, a Mississippi Democrat, stepped out of his congressional office. He was on his way to the Capitol to vote for a bill that would restrict so-called cruises to nowhere (gambling trips outside the three-mile limit of American territorial waters) to U.S.-flagged ships. Taylor had sponsored and stewarded the measure through the House Merchant Marine and Fisheries Committee. Owners of the foreign-flagged ships, who dominated the cruise business, wanted the bill stopped.

Before Taylor could cross Independence Avenue, Hector Alcalde, a lobbyist whose clients included the International Council of Cruise Lines (ICCL), approached. "He did the typical flattery stuff -- 'You knocked 'em dead in committee, we want to get to know you, we don't feel you understand our industry,'" Taylor recalls. "And then came the punch line: 'We want to give you and your family a free cruise so you can get to know us better.'

"I tell you, I was appalled at the blatancy of what I felt was an attempt to bribe me to back off," Taylor says. "And this just happened to be the day I was walking across the street to pass the bill.... I was furious. I said, 'Listen, buddy, I'm going across that street, I'm going to cut out your freaking loopholes, and I'm going to enjoy every moment of it." Taylor also remembers telling Alcalde to do something with the complimentary cruise.

On September 22 the House passed the bill. But the Senate later gutted it. "Nothing happened on the cruise-to-nowhere side. Finally it dawned on me: I wonder if I'm the only guy he's offered a free cruise to." Taylor eventually uncovered a list of fifteen legislators who had taken "fact-finding" cruises. Although Taylor now acknowledges that these little jaunts were not technically violations of ethics rules, he made a point of entering the names into the public record at a committee meeting. This episode, and the cruise industry's subsequent success on Capitol Hill, leads the congressman to declare that "what's best for them is worst for American taxpayers."

Alcalde did not return several phone calls seeking comment. Bankrolled by Carnival Corporation and its cohorts to the tune of $560,000 in 1998, lobbyists such as Alcalde have for years fought off lawmakers' attempts to impinge on the industry's smooth sailing to riches. Carnival, incorporated in Panama but headquartered in Miami, owns the world's biggest cruise business. The company's 45-ship fleet topped one billion dollars in profits in 1999, thanks to 2.4 million passengers.

The Arison family, which started Carnival, has made a bundle. How much? Recent estimates have placed the net worth of chairman and CEO Micky Arison at $5.1 billion, number 150 on the Forbes 400 list in 1999. He was valued at a comparatively paltry $3.5 billion the year before. Micky's father and Carnival founder Ted Arison was worth an estimated $5.6 billion when he died last year.

Yet, largely because of a loophole in federal law, the company pays just a pittance into public coffers. Other than about half a million dollars in annual property tax on its West Miami-Dade headquarters, and lease payments for its Port of Miami terminal, Carnival gives little to the county or state. Nor does it (or any other foreign-flagged cruise line) pay corporate income tax. On more than one billion dollars in profits last year, all of Carnival's fees (plus federal taxes on its Alaska-based tour subsidiary) totaled less than one percent of its profits. Had the 35 percent U.S. corporate tax rate applied, more than $358 million would have gone to the IRS.

The recently opened AmericanAirlines Arena represents another tax break for Micky Arison, who owns a controlling interest in the Miami Heat. The City of Miami, Miami-Dade County, and the State of Florida have granted the Heat $355 million worth of tax money, rebates, and property for the facility.

"Heck, it's just not fair," Taylor says. "They go buy their ships elsewhere, staff them with cheap, Third World labor, then enjoy all the benefits of doing business in America.... What if something goes wrong on those ships?" he asks rhetorically. "When their ships caught fire, did they sit around and wait for the Liberian Coast Guard to show up? What if there is a hostage situation? Will they call in the Panamanian Navy SEALs? Who incurs all of these responsibilities and pays all these costs? The American taxpayer."


For a man who made his fortune feeding America's appetite for leisure, Ted Arison lived life at a frenzied pace before he died last year at age 75. He launched several failed business ventures only to resuscitate his fortunes with boldness and luck. And perhaps owing to the near-disasters he faced so often in the boardroom, or maybe as a result of his years soldiering, the senior Arison was obsessed with his legacy.

"There were a lot of very sharp people in the early days of the cruise business," says Malcolm Noden, a senior lecturer at Cornell University's School of Hotel Administration. "Those people mostly went on their way, but a few remained, Ted among them. He survived to become 'legitimate,' but I'm not sure I would have trusted him to walk me across the street."

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