It is one of the more dubious FCPA enforcement theories there is.

It has never been subjected to judicial scrutiny.

It is a relatively new enforcement theory when one considers that the Foreign Corrupt Practices Act was enacted in 1977.

It is an enforcement theory that has been used 35 times in corporate enforcement actions since introduced to the FCPA context in 2002 and thus is one of the more obvious reasons for the general increase in FCPA enforcement in the modern era. (See here).

It is the enforcement theory that employees (such as physicians, nurses, mid-wives, lab personnel, etc.) of certain foreign health care systems are “foreign officials” under the FCPA and thus occupy a status akin to a President or Prime Minister.

It is believed that this enforcement theory has never been used to criminally charge an individual with FCPA offenses …. until now.

Earlier this week, the DOJ criminally charged David Ferrera and Marc Tilman with FCPA and related offenses. (See here for the first report).

According to the indictment, filed in the C.D. of California, Ferrera (a U.S. citizen) was a Senior Executive of Medical Company #2 and an owner of Medical Company #3. As stated in the indictment:

“Medical Company #2 … was a medical device company incorporated in Delaware with its principal place of business in the Central District of California. Medical Company #2 was a wholly-owned subsidiary of Medical Company #1. Medical Company #2 previously did business as a California-based medical device company prior to its acquisition by Medical Company #1 in or around 2016 (“Medical Company #3”). Medical Company #2 sold medical devices, including “coils” used to treat brain aneurysms and other vascular conditions.”

According to this article about Ferrera:

“In 2011, Ferrera co-founded Blockade Medical. The company focused on neurovascular devices and quickly earned attention for its coil technologies used to treat aneurysms.

[…]

Blockade grew fast and was acquired in 2016 by Balt Extrusion. Ferrera moved to France to serve as Chief Technology Officer of Balt Global, where he continued advancing tools for both hemorrhagic and ischemic stroke.”

According to the indictment, Tilman (a citizen and resident of Belgium) owned and operated Consulting Company (based in Belgium) and was also an owner of Medical Company #3.

According to the indictment

“Centre Hospitalier Universitaire de Reims, including its hospital, Maison Blanche, was a French state-owned and state-controlled public university hospital (“CHU Reims”). CHU Reims was wholly owned and controlled by the government of France and performed a function that France treated as its own. CHU Reims was an “instrumentality” of a foreign government, and CHU Reims’s officers and employees were “foreign officials,” as those terms are used in the FCPA …

Foreign Official was a citizen of France and an employee of CHU Reims. Foreign Official was a “foreign official,” as that term is defined in the FCPA …”

The indictment alleges

“It was part of the conspiracy that defendants FERRERA and TILMAN, together and with others, would and did offer to pay, promise to pay, and authorize the payment of bribes, directly and indirectly, to and for the benefit of Foreign Official, in order to
induce Foreign Official to use and cause CHU Reims to purchase Medical Company #1’s and Medical Company #2’s medical devices — specifically, “coils” used to treat brain aneurysms and other vascular conditions.

It was further part of the conspiracy that defendants FERRERA and TILMAN, together and with others, would and did cause Medical Company #2 to make payments to Consulting Company — through the use of sham consulting agreements, fake invoices, and purported bonus payments — for the purpose of paying bribes to Foreign Official.

It was further part of the conspiracy that defendants FERRERA and TILMAN, together and with others, would and did take steps to conceal the scheme by, among other ways: (i) discussing the scheme via personal email accounts and encrypted messaging applications; (ii) using coded language to refer to bribes and bribe
amounts, including terms such as “training” and “bonuses,” and referring to Foreign Official as “our friend”; (iii) creating sham consulting agreements and fraudulent invoices to give the appearance of legitimacy to the bribe payments; and (iv) using Consulting Company to pay bribes, with money defendant TILMAN received from
Medical Company #2, to Foreign Official into accounts in France held or beneficially controlled by Foreign Official.”

FERRERA and TILMAN are charged with conspiracy to violate the FCPA’s anti bribery provisions, FCPA anti-bribery violations, conspiracy to commit money laundering, and money laundering.