The costs of corruption are well-known and well-documented across the globe. Companies that engage in bribery and corruption are subject to fines and penalties under such anti-corruption laws as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act. Individuals who accept bribes can be prosecuted under the U.K. Bribery Act and for money-laundering under U.S. law. Government officials can have their ill-gotten gains sized under the US Kleptocracy Act and other laws requiring forfeiture and return of assets.

However we are currently seeing another cost of corruption played out involving Venezuela and its national energy company, Petróleos de Venezuela (PDVSA). This summer, the company had attempted to swap out debts to prevent a potential default on outstanding obligations. The proposal, reported by Bloomberg, had entailed swapping $5.3 Billion of debt obligations due in 2017 for new debt obligations, to become due in 2020. The bonds were to be “backed by a “first-priority lien” on a 50.1 percent stake in Citgo Holding Inc., the unit that owns its U.S. refining arm. This debt swap offer expired on Oct. 1 and it fell far short of even 50 pervent of the bonds tendered.

While the instability in the worldwide price in crude oil is certainly a reason for some forbearance by the bond holders, The Man From FCPA also sees the insipid hand of corruption at play. The Venezuelan government has been alleged to have engaged in high level and significant amounts of corruption. PDVSA specifically is recognized as a corrupt entity. Anyone in the energy space has either heard the rumors or worse, experienced how the Venezuelan government used the entity as not only a cash machine but also an extra-curricular machine to create cash to fund bribery and corruption. It was so bad that Wall Street Journal had reported that it took the bribe of a Rolex watch to secure a meeting with mid-level PDVSA officials.

All of this means there is little to no trust in the world business community that PDVSA will pay out on this extended bonds or that the collateral of its CITGO shares can ever be exercised. Chalk the PDVSA bond offering failure as another example of the effects of corruption.