Wow! U.S. Charges Dozens of Russian Diplomats in Medicaid Fraud Scheme

by Andrew C. McCarthy

The Justice Department and the FBI today announced charges against 49 current and former Russian diplomats and their spouses in a nine-year scheme to defraud the Medicaid program. Manhattan U.S. attorney Preet Bharara declared, “The charges expose shameful and systemic corruption among Russian diplomats in New York.”

The press release put out by the FBI explains:

The investigation revealed the widespread submission of falsified applications for Medicaid benefits associated with medical costs for prenatal care, birth, and young children by the defendants, which enabled the defendants to obtain Medicaid benefits that they were not otherwise entitled to receive. Approximately $1,500,000 in fraudulently received benefits were obtained by the defendants and dozens of other co-conspirators not named in the complaint. In general, the defendants underreported their income to an amount below or at the applicable Medicaid eligibility level in order to qualify for Medicaid benefits. In support of the underreported income, the defendants generally submitted letters signed by employees of the Mission, Consulate, or Trade Representation, purporting to corroborate that the falsely underreported income was the true income amount. The defendants’ true income was often hundreds, if not thousands, of dollars more per month than what was falsely reported to Medicaid….

In addition, one set of defendants failed to disclose their marriage on their initial Medicaid application—falsely claiming that they were brother and sister instead of husband and wife. As a result, those defendants failed to disclose any income the husband earned from the Mission. Because of their lies, they received almost $21,000 in Medicaid income to which they were not entitled. Three other defendants falsely claimed that their children—Russian nationals residing in the United States pursuant to visas issued by the Department of State reflecting their Russian citizenship—were citizens of the United States in order to obtain Medicaid benefits for their children. To support these lies, a United States Social Security card was provided for one application, and both a United States Social Security Card and a birth certificate issued by the New York City Department of Mental Health and Hygiene was provided in support of another application.

Moreover, before, during, and after the time that the defendants applied for and received hundreds of thousands of dollars in Medicaid benefits, they spent tens of thousands of dollars on luxury items, including cruise vacations and purchases such as watches, shoes, and jewelry, at stores such as Tiffany & Co., Jimmy Choo, Prada, Bloomingdale’s, and Burberry.

Many interesting parts of the story, and intriguing questions, are not addressed by the press release. The big question, of course, is: What motivated the government to announce these charges at this time?

Although the Russian fraud scheme has apparently gone on for a decade and has been investigated for some time, there is no indictment in the case, as you would expect for a case ultimately headed to trial. What was publicly filed today was a complaint . . . supported by an agent’s affidavit setting forth a very expansive description of the conspiracy. Of the 49 defendants charged, only eleven are still in the United States. That is, there is no chance of a big prosecution here: Russia is obviously not going to extradite anyone, and most if not all of those still here will have diplomatic immunity (spouses generally enjoy the same immunity as their diplomat husband or wife). They may be declared persona non grata and sent home, but they are not going to be tried for fraud.

Clearly, the point of this exercise today — the charges against dozens of diplomats who will not be tried, the lengthy narrative complaint, the bells-n-whistles press release — is to embarrass Putin’s government. Having been involved in my share of prosecutions that raise diplomatic concerns, I can tell you that they get more inter-agency attention than any other kind of case. This is not a situation in which the U.S. attorney in Manhattan and the FBI’s New York Field Office have gone off the reservation. You can bet that this case went up every flagpole imaginable — not just at Main Justice and FBI headquarters, but at the State Department and the White House (because presidents must not be blindsided by agency actions that might affect sensitive international relationships and diplomacy).

Snowden payback? Syria? Who knows what’s going on here. The only thing we can say with certainty is that, in most instances, diplomatic misconduct — even heinous misconduct — is handled quietly, in a manner designed to deal with the problem (usually, to expel the rogue diplomat) with a minimum of embarrassment for the country involved or the injection of unnecessary tension into the relationship between that country and the United States. Somebody, however, decided that this episode of systematic, longstanding Russian fraud and deceit should get maximum media attention.

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