Bloomberg News

Russia Envoys Allegedly Bilked Medicaid as They Bought Prada (3)

December 06, 2013

Dozens of Russian diplomats and their spouses illegally obtained pregnancy and childbirth benefits from Medicaid while spending tens of thousands of dollars in places like Tiffany & Co. (TIF:US) and Prada, U.S. prosecutors said.

From 2004 to 2013, 58 of 63 births to Russian diplomats in New York were paid for by the federal program for the poor, according to a complaint unsealed yesterday in federal court in Manhattan. Defendants received about $500,000 in illegal benefits, the government said. Including conspirators not named in the complaint, the scheme netted about $1.5 million in benefits, the government said.

“Diplomacy should be about extending hands, not picking pockets in the host country,” U.S. Attorney Preet Bharara said yesterday in a statement. “The scam exploited a weakness in the Medicaid system, and the charges expose shameful and systemic corruption among Russian diplomats in New York.”

Russia denied the accusations, denouncing them as a “cheap PR stunt” pandering to “Russophobic forces” in the U.S. Ties between the former Cold War foes worsened after Russia in August granted political asylum to fugitive American security contractor Edward Snowden, prompting U.S. President Barack Obama to cancel a planned summit meeting with his Russian counterpart Vladimir Putin in Moscow in September.

Russian officials “allowed” the illegal actions, George Venizelos, FBI assistant director in charge in New York, said in the U.S. statement.

Diplomatic Immunity

Thirty-eight of 49 people charged have left the U.S., and none has been arrested, the government said.

Diplomats in the U.S. are protected from prosecution by American authorities. The State Department will ask Russia to waive diplomatic immunity, Bharara said yesterday at a press conference. If no waiver is granted, those charged who haven’t left will be expelled from the U.S. he said.

When applying for benefits, diplomats and their spouses would report incomes low enough for Medicaid eligibility, while credit card applications and bank records told a different story, according to the complaint.

An investigation allegedly found “systematic fraudulent submission of falsified applications for Medicaid benefits associated with medical costs for pregnancy, birth and young children by Russian diplomats” and their spouses. Defendants generally submitted letters signed by agency officials supporting the falsely reported income, prosecutors said.

Eligible Incomes

One diplomat at the Russian Mission to the United Nations reported his income on his wife’s Medicaid application as $3,000 a month, or $36,000 a year, the U.S. said. He applied for a credit card later, saying his income was $8,333 a month, or almost $100,000 a year, the U.S. said.

The government charged current and ex-diplomats and spouses with conspiring to commit health care fraud, steal government funds and make false statements about health care.

The diplomats worked at the UN Mission, the Russian Federation Consulate General in New York and the Trade Representation of the Russian Federation, the U.S. said.

Russian Deputy Foreign Minister Sergei Ryabkov said the investigation of the diplomats is based on “fabricated charges” and violates international norms, according to an interview with state news service Itar-Tass posted today on the foreign ministry’s Twitter Inc. account.

Any complaints against Russian diplomats in the U.S. should be addressed through diplomatic channels, Ryabkov said. Russia has “issues” with the actions of U.S. diplomatic staff on its territory, he said, without elaborating.

Went Shopping

While the Russian Mission couple claiming a $36,000 income were receiving Medicaid benefits, they used the credit card to make more than $50,000 in purchases at places such as Apple stores and Bloomingdale’s, according to the complaint.

Proof of citizenship isn’t required for pregnant women to receive Medicaid benefits because children born in the U.S. are presumed to acquire citizenship, according to the U.S. Attorney’s Office. Children born to Russian diplomats in the U.S. generally don’t become citizens, authorities said.

People employed in the U.S. by the Russian agencies are paid by that country’s government and aren’t subject to U.S., state or local taxes, and housing is largely covered by Russia, the U.S. said. Historically, the agencies have also paid medical expenses for their employees, the U.S. said.

The State Department routinely informs foreign envoys that they are expected to maintain health insurance coverage, agency spokeswoman Marie Harf said in a news briefing today in Washington. Diplomats can legally receive federally funded health care if they meet eligibility requirements, she said.

The case is U.S. v. Kuleshov, 13-mag-02711, U.S. District Court, Southern District of New York.

To contact the reporters on this story: Christie Smythe in federal court in Brooklyn, New York, at csmythe1@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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