It seems that in Germany one could take an EASA medical and fail it, without the repercussions of the failure being reported to the Aviation Authority (LBA)! Would anyone from Germany please advise if this is indeed the case.
Not in my experience. Medical results and medical history will be transmitted online to the LBA. If one is denied a medical, the LBA does know about it the same minute. However, it takes around one or two weeks until the pilot gets a letter that tells him that he has to submit his license (and any prior issued licenses that are still valid) as well to the LBA and that he is not allowed to use the privileges of said licenses within the reach of the federal aviation law of germany. That is at least my personal experience, corrobated by the experienced of my colleagues. As i use one of the Lufthansa AMCs i would guess that it would be the same for most lufthansa pilots.
Anyway, it seems that that was not a factor here as the FO in question apparently held a valid medical and his next medical examination was due in june.