freedom of the seas fire

Is this a fallout from the Freedom of the Seas fire? Is this a sellout? You be the judge. Check out this revealing article below that appeared in Cruise Law News. It is written by Maritime Lawyer, Jim Walker of the law firm Walker and O’Neill.

Yesterday, Royal Caribbean chairman Richard Fain sold 151,032 shares of his cruise line’s stock for $13,650,151 at an average price of $90.40 a share. President and Chief Operating Officer Adam Goldstein sold 4,184 shares at at $91.08 per share for a total value of $381,094.19. Royal Caribbean’s General Counsel and Chief Compliance Officer Bradley Stein sold 2,402 shares of the company stock for for a total value of $218,748.70. In sum, these insider traders sold $14,249,993 of company stock.

A little over 10 days earlier Royal Caribbean’s Freedom of the Seas burst into flames as the cruise ship approached Falmouth, Jamaica. The ship burned for one and one-half hours and destroyed all of the insulation around the exhaust stack from the bottom deck to the fifteen deck. Many passengers, crew members and maritime experts believe that the fire may have started due to the instillation of a scrubber system on the cruise ship and the welding process to accomplish the work. Royal Caribbean is not saying, of course.

The cruise lines has also been criticized for downplaying the fire, saying that it was just a “small fire” which was contained in the lower mechanical spaces and it was quickly extinguished, all patently false statements as we have demonstrated in video and photographs. To make matter worse, the cruise ship sailed onto the next port without a post-fire inspection by the flag state (Bahamas) or the classification society. This ship never should have sailed on without a rigorous inspection after the fire. The photographs clearly show that the ship sustained major damage. The photographs and first hand observations by the crew confirm that the fire destroyed the insulation around the exhaust stack and this presented a grave potential danger to the ship’s passengers and crew.

My opinion is that the Royal Caribbean cruise executives effectively misled the public about the fire in order to maintain the stock’s improved performance. The company shares have rallied 46.38% in the past year. On July 31, 2015, the shares had rallied to one year high of $90.88 compared to a one year low on October 15, 2014 of $52.32.

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If the executives had shut the ship down in Jamaica for the mandatory SOLAS inspection, this would have resulted in tens of millions of dollars spent by the company on lodging, airfare of all passengers back to Miami and cruise refunds to over 4,000 people which would have had a material negative effect on the company’s stock. Did the executives put their financial interests ahead of passenger and Royal Caribbbean Freedom of the Seas Firecrew safety? Absolutely they did, in my opinion.

What do these executives really think about the stock value now that the fire is out and the cruise line has dodged, so far, a publicity fall-out? One analyst said that “Mr. Richard’s trade could mean only one (thing): that he’s a pessimist when it comes to the Company’s prospects and its stock price.”
Fain & company bamboozled the public with the “small fire” hoax. I suspect that the executives thought that it was time to cash out and put some more millions in their accounts before the truth comes out.

 

Curated from Cruise Law News

 

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