Russian diplomats accused of Medicaid fraud in New York

WASHINGTON — Current and former Russian diplomats in New York claimed poverty to fraudulently collect Medicaid for their pregnant wives and children while shopping at Prada and Tiffany’s and taking cruise vacations, the U.S. government charged Thursday.

The Justice Department said 49 Russians or their spouses currently or formerly attached to the Russian Consulate, United Nations or trade missions illegally collected $1.5 million in benefits over about a decade in New York City.

Income levels were falsified in Medicaid applications signed by senior Russian officials in what U.S. Atty. Preet Bharara called “shameful and systemic corruption among Russian diplomats in New York.” The diplomats’ actual income, the Justice Department said, “was often hundreds, if not thousands, of dollars more per month.”

One diplomat reported his salary to be $60,000 a year, the Justice Department said, but his family was paying for more than $50,000 in purchases.

“Diplomacy should be about extending hands, not picking pockets in the host country,” said Bharara, the U.S. attorney for New York’s southern district.

The FBI’s 18-month investigation threatened to further strain already tense relations between the two countries. Russian officials in New York and Washington did not immediately respond to the charges, but the State Department went out of its way to minimize the damage.

“We don’t think this should affect our bilateral relationship with Russia,” said State Department deputy spokeswoman Marie Harf. “Quite frankly, there are too many important issues we have to work on together. The justice system will proceed in the way that it does here in the states, and we don’t think it should impact our relationship.”

The Interfax news agency in Moscow quoted Russian Deputy Foreign Minister Sergei Ryabkov as saying the Russian government was “bewildered” that the State Department had not consulted the Russian government before the charges were filed.

Ryabkov told Itar-Tass, Russia’s state news agency, that the charges catered to “Russophobic forces.”

It is unclear whether any of the diplomats will face justice. Most of those charged are no longer in the U.S., and the 11 who are may have diplomatic immunity.

The State Department would not address the immunity issue Thursday, but Bharara alluded to it at a New York news conference. In a case like this, he said, authorities “would be prosecuting and making arrests ... but for immunity.” He added, according to the Associated Press, that diplomats who commit crimes are generally expelled from the country.

The Russians allegedly exploited a loophole in Medicaid application procedures that allows pregnant women to receive immediate approval for prenatal care based on a quick assessment of their and their spouses’ income, apparently limited to little more than the applications.

But diplomats and their families are typically not eligible for Medicaid. Although application procedures generally assume that children born in the U.S. are U.S. citizens and therefore eligible for coverage, children born in the U.S. to Russian diplomats generally do not get citizenship, the Justice Department said.

From 2004 to 2013, the Justice Department said, Medicaid illegally paid for 58 of 63 births to Russian diplomats or their spouses.

The defendants face charges of conspiracy to commit healthcare fraud, which carries a maximum 10-year prison sentence, and conspiracy to steal government funds and make false statements relating to healthcare, which carries a five-year term.

tim.phelps@latimes.com