Most folks think of FCPA violations as they apply outside the United States. But corruption is certainly universal and has direct impact here in the U.S. That point was once again driven home to The Man From FCPA when reports indicated that Petrobras will soon consider offers to sell a refinery located in Pasadena, a city immediately adjacent to Houston, which has been the subject of bribery allegations for years and is integral to the Petrobras corruption scandal.

Petrobras bought the refinery for $1.2bn in 2006 from Astra Oil, which had purchased it the year before for only $42.5 million. Brazilian regulators believe the company was directed to overpay for the purchase of the refinery by corrupt Petrobras officials who were then rebated the excess money into their Swiss bank accounts by the seller. This corrupt sale was only one part of the greater Petrobras corruption investigation, dubbed Operation Car Wash.

As bad as all of this was for Petrobras and Brazil, it also negatively impacted the citizens of Pasadena, Houston, and surrounding Harris County in Texas. The refinery has become one of the leading environmental violators in all of the state of Texas, which is known for its notoriously lax, industry-friendly environmental standards to begin with. The Texas Commission on Environmental Quality (TCEQ) had fined the refinery over $450,00 since Petrobras took over. Petrobras’ responses were telling.

It denied, of course, that it had violated any environmental regulations. Yet, its second response was tied directly to the corruption engaged in when the plant was purchased. Simply put, because the purchase price was so astronomical due to the corruption involved, there was no money for the refinery to engage in routine repairs or upgrades or even keep the plant in environmental regulatory compliance.

What does all of this mean for Petrobras going forward? First and foremost, it will certainly take a financial bath on the sales price. Equally importantly will be the regulatory tail going forward. What purchaser would be willing to risk purchasing a plant known as an environmental violator without knowing the full extent of the environment liabilities it is purchasing. Further, given the Byzantine corporate structure of Petrobras, how could a buyer ever be certain it would not be stuck with some FCPA liability going forward?

These are just some of the local effects of corruption at home in the United States

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