Estranged partner says Virgin stole his idea to upend cruise industry

When Richard Branson, the entrepreneurial billionaire, announced the formation of Virgin Cruises in December, he promised to “shake up the cruise industry”.

Details were scarce, but Bain Capital, the private equity firm backing the project, praised the “strategic vision laid out by our collective team”.

But in a lawsuit filed last Wednesday in Federal District Court in the Southern District of Florida, Colin Veitch, the former chief executive of Norwegian Cruise Line, says the idea for the new venture was his own.

Veitch says in the suit that he brought the business plan for a new cruise line to Virgin’s attention in 2011. After the two sides began to disagree on how they would split the profits, he says Virgin stole his intellectual property and shut him out of a deal that could have made him hundreds of millions of dollars. In a statement, Virgin acknowledged that it had worked with Veitch, but denied the allegations.  Idea targeted extraordinary profitsVeitch retired as chief executive of Norwegian in 2008.  After a brief hiatus, he began work on plans to develop a new product in the cruise industry, which has high barriers to entry. He hit upon the idea of a new company consisting only of “ultra ships” — outsize cruise liners with plush amenities and the potential to generate extraordinary profits.

While Royal Caribbean and Norwegian currently each operate one of these ships, no company has focused on them exclusively. “It would be like the Bellagio Hotel when it crashed onto the scene in Las Vegas,” Veitch said in an interview on Wednesday.

In 2010, he prepared a document outlining the business opportunity and presented it to Allen & Company, the boutique investment bank.Early the next year, he presented the idea to Virgin, and both sides signed a nondisclosure agreement that stipulated that Virgin could not act on the information it obtained from Veitch for three years.

By May 2011, the two sides had largely come to terms on the financial agreement. With that in hand, Veitch went about securing the services of ship-builders in Germany, and a letter of intent from a bank to provide debt financing for the cost of building the ships.

Months later, in August, Meyer Werft, one of the world’s biggest ship builders, began working on the project. About the same time, Veitch arranged for debt financing from KfW, a German bank “that specialises in financing shipbuilding projects.” At the high point of their relationship in October 2011, Branson taped a video promotion expounding on the opportunity and mentioning Veitch.

“Cruise has the potential to be one of our biggest, sexiest businesses, hence our excitement,” Branson said in the video. “We are also pleased to be working with Colin Veitch, the teams of Meyer Werft and KfW IPEX-Bank.”

Within weeks of the video being made, Veitch presented the business plan to Allen & Company’s managing directors, including the former Central Intelligence Agency director George Tenet and Bill Bradley, the former senator.

The bank’s founder, Herbert Allen, was enthusiastic about the deal, the complaint says, and Qatar’s sovereign wealth fund was considering investing in it. As late as January 2012, an Allen & Company investor presentation portrays a Virgin-branded “ultra” cruise line, and names Veitch as a core part of the team.

In the suit, Veitch says the relationship deteriorated when Virgin sought to change the terms of the agreement. Initially, Virgin was content to receive a licensing fee and small percentage of profits.

But Veitch claims that in February 2012, as Virgin realised how lucrative the cruise line could be, it tried to renegotiate its agreements. Instead of asking for a licensing fee and a small portion of profits, it now wanted most of the profits, leaving Veitch as what he described as “an indentured servant”.

Veitch claims that after he refused Virgin’s new terms, the two sides stopped working together. His lawyers, meanwhile, reminded Virgin of the nondisclosure agreement, which it said it would respect. Then, in December, Virgin Cruises was announced.