Carnival Cruise Lines defends FEMA contract

Carnival Corp... defended its $236 million U.S. government contract to provide ship-based housing after Hurricane Katrina, telling lawmakers on Wednesday the firm was charging only what it would have earned from its regular cruise business.
...Terry Thornton, vice president of marketing planning at Carnival Cruise Lines, told the U.S. House of Representatives Committee investigating the government's response to Hurricane Katrina that it was a competitively bid contract.
"From the outset of the charter negotiations, Carnival informed the government that its objective was to charge only what it would have otherwise earned from the vessels operating in a post-Katrina marketplace," he said in testimony.
...Thornton said Carnival pay U.S. taxes on the money it earned from the contract.
The contract includes charges to cover U.S. taxes and also has provisions allowing the firm to recoup costs if it is determined its international work force is subject to the U.S. taxes and minimum wages, Thorton testified.
...Thornton said the company had incurred substantial loss of business because of the contracts. The company had to cancel reservations for 120,000 customers and provide full refunds to them. He said the company also paid commissions to travel agents who had booked the canceled vacations.

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