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 33 times 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.
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.
This post traces the origins and prominence of this theory, contains comments from the former DOJ FCPA enforcement attorney who came up with this theory, and highlights a data point relevant to the legitimacy and validity of this theory.
Below is a list of DOJ and/or SEC enforcement actions based on the enforcement theory that employees of certain foreign health care systems are “foreign officials” under the FCPA. (In addition to the below enforcement actions, a minor component of certain other enforcement actions (i.e. Siemens and Tyco) also contained this enforcement theory).
Each enforcement action listed below highlights the company involved, the year of the enforcement action, whether it was a DOJ or SEC enforcement action and the “foreign officials” involved as alleged by the DOJ and/or SEC.
Syncor (2002 – DOJ and SEC Enforcement Action)
Physicians employed by hospitals owned by the legal authorities in Taiwan.
Four doctors at government-owned hospitals in Mexico and doctors employed by hospitals owned by foreign government in Belgium, Luxembourg, and France.
Schering-Plough (2002 – SEC Enforcement Action)
Director of the Silesian Health Fund, one of sixteen regional government health authorities in Poland.
Diagnostic Products Corp. (2005 – DOJ Enforcement Action)
Laboratory personnel and doctors employed by hospitals owned by the Chinese government.
Micrus Corp. (2005 – DOJ Enforcement Action)
Physicians at state-owned hospitals in France, Germany, Turkey and Spain.
Immucor (2007 – SEC Enforcement Action)
Director of a public hospital in Italy.
AGA Medical (2008 – DOJ Enforcement Action)
Individuals associated with hospitals owned and operated by the Chinese government.
Johnson & Johnson (2011 – DOJ and SEC Enforcement Action)
Health care providers who worked at publicly-owned hospitals in Greece, Poland, and Romania.
Smith & Nephew (2012 – DOJ and SEC Enforcement Action)
Health care providers who worked at publicly-owned hospitals in Greece.
Biomet (2012 – DOJ and SEC Enforcement Action)
Health care providers who worked at publicly-owned hospitals in Argentina, Brazil, and China.
Orthofix (2012 – DOJ and SEC Enforcement Action)
Individuals associated with Instituto Mexicano del Seguro Social, the Mexican government-owned healthcare and social services institution.
Pfizer (2012 – DOJ and SEC Enforcement Action)
Physicians, pharmacologists and senior government officials, who were employed by foreign governments or instrumentalities of foreign governments, including in Bulgaria, Croatia, Kazakhstan, and Russia. Doctors employed by Chinese government healthcare institutions, the Czech government, Italian government healthcare institutions, the government of Serbia, the Indonesian government, and healthcare institutions owned or controlled by the Pakistani government.
Eli Lilly (2012 – SEC Enforcement Action)
Chinese ”government-employed physicians”
“Government health officials in a Brazilian state”
Payments to “a small charitable foundation that was founded and administered by the head of one of the regional [Poland] government health authorities”
Philips Electronics (2013 – SEC Enforcement Action)
“Public officials of Polish healthcare facilities”
Stryker (2013 – SEC Enforcement Action)
“Various government employees including public health care professionals in Mexico, Poland, Romania, Argentina, and Greece”
“Foreign officials employed by a Mexican governmental agency responsible for providing social security for government employees”
“Foreign official then employed as the director of a public hospital in Poland,” “a state-employed healthcare professional” in Poland
A person “waiting to be confirmed as chief physician” at a public hospital in Romania
“Physicians employed in the public healthcare system” of Argentina
“A foreign official who served as a prominent professor at the Greek University, and was the director of medical clinics at two public hospitals affiliated with the Greek University”
Bio-Rad (2014 – DOJ and SEC Enforcement Action)
Among the foreign officials alleged were officials at government-owned hospitals and laboratories in Vietnam.
Bruker (2014 – SEC Enforcement Action)
Individuals employed by state owned life science entities (“SOEs”) in China.
Mead-Johnson (2015 – SEC Enforcement Action)
Certain health care professionals at state-owned hospitals in China.
Bristol-Myers Squibb (2015 – SEC Enforcement Action)
Various health care providers at state-owned and state-controlled hospitals in China.
SciClone (2016 – SEC Enforcement Action)
“Healthcare professionals (“HCPs”) who were employed by state-owned hospitals in China.”
Olympus (2016 – DOJ Enforcement Action)
Healthcare professionals in Brazil, Bolivia, Colombia, Argentina, Mexico, and Costa Rica.
Novartis (2016 – SEC Enforcement Action)
Chinese healthcare professionals.
Analogic (2016 – DOJ and SEC Enforcement Action)
Individuals at “hospitals or other medical facilities that were controlled by the government of Russia.”
AstraZeneca (2016 – SEC Enforcement Action)
“Health care providers, at state-owned and state-controlled entities in China and Russia.”
GlaxcoSmithKline (2016 – SEC Enforcement Action)
Healthcare professionals in China.
Teva Pharma (2016 – DOJ and SEC Enforcement Action)
Physicians and other healthcare providers at state-owned and state-managed hospitals and healthcare facilities in Mexico.
Alere (2017 – SEC Enforcement Action)
Individuals associated with a “set of entities known as an Entidad Promotora de Salud, or EPS, which provided health insurance services for their members. These entities were created by Colombian law as part of the Colombian government’s efforts to provide universal health benefits to its citizens. Under this system, EPSs were responsible for organizing and guaranteeing the provision of health services for their enrolled participants and managing their participants’ health risks. Among other things, EPSs contracted for health services on behalf of their participants through a network of public, private, and their own health service providers. EPSs were both private and government controlled.”
Orthofix (2017 – SEC Enforcement Action)
“Doctors employed at government-owned hospitals.”
Sanofi (2018 – SEC Enforcement Action)
Healthcare professionals in Jordan, Lebanon, Syria,Palestine, Bahrain, Kuwait, Qatar, Yemen, Oman, and the United Arab Emirates.
Stryker (2018 – SEC Enforcement Action)
Health care professionals in India, Kuwait, and China.
Fresenius (2019 – DOJ and SEC Enforcement Action)
Physicians and other healthcare personnel in Angola, Saudi Arabia, Morocco, Spain, Turkey, Gabon, Benin, Burkina Faso, Senegal, Ivory Coast, Niger, Cameroon China, Serbia, Bosnia, and Mexico.
Cardinal Health (2019 – SEC Enforcement Action)
Healthcare professionals in China who provided marketing services to the company and to other employees of state-owned retail entities who had influence over purchasing decisions related to the company’s products.
Novartis (2019 – SEC Enforcement Action)
Employees of state-owned and state-controlled hospitals and clinics in Greece (“Greek State HCPs”) and other HCPs in Greece; Employees of state-owned and state-controlled hospitals and clinics in Vietnam; HCPs in South Korea.
Alexion (2019 – SEC Enforcement Action)
Healthcare professionals (HCPs) employed at state-owned healthcare institutions in Turkey and Turkish Ministry of Health officials; HCPs employed at state-owned healthcare institutions in Russia.
As highlighted above, the first use of this enforcement theory occurred in the 2002 Syncor enforcement action. Then, Peter Clark headed the DOJ’s FCPA Unit. I asked him via e-mail the origins of this theory, whether it was internally debated, etc.
His e-mail response, published with his permission, was as follows. “There was no debate or dissent – the line prosecutors and I all agreed on the charge. While it may have been the first time a government-employed doctor was described as a government official in charging language, there was nothing novel [in the sense that we were striking out in a direction no one had ever thought of previously] or particularly aggressive about it.”
A useful data point in examining the legitimacy and validity of this enforcement theory may be found in analyzing the number of criminal charges filed against individuals associated with the above companies based on this theory.
The answers is zero, zilch, nada.
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