Russian diplomats cheated U.S. health care program in "shameful" scheme, feds say

NEW YORK -- Dozens of current or former Russian diplomats and their spouses enjoyed luxury vacations and spent tens of thousands of dollars on concert tickets, fine clothing and helicopter rides as they lied about their incomes to get the U.S. government to pay their health care bills with money meant for the poor, federal prosecutors said Thursday.

The diplomats were among 49 individuals charged in a complaint unsealed in federal court in Manhattan, though no arrests were made and only 11 of the diplomats and their spouses remained in the United States. The complaint said Medicaid, a health care program for the poor, lost about $1.5 million in the scheme since 2004.

"Diplomacy should be about extending hands, not picking pockets in the host country," U.S. Attorney Preet Bharara told a Manhattan news conference. He called it "shameful and systemic corruption."

Russia's Deputy Foreign Minister Sergei Ryabkov said in remarks carried by the Interfax news agency that "we are bewildered by making the information about accusations of alleged tax and other offenses by Russian embassy personnel available to the media."

"It's not clear why the relevant agencies have considered it possible to make these accusations public before discussing them through diplomatic channels," he said.

"We can't make any comment on that until we receive a clear explanation of the charges against our citizens from the U.S. authorities," Ryabkov added.

Russian officials at the United Nations did not immediately comment.

The complaint alleges that the defendants submitted fraudulent applications for medical benefits for pregnancies, births and care for young children. Federal prosecutors said the diplomats qualified for Medicaid benefits by underreporting their income, often by tens of thousands of dollars.

Bharara said it was a case "we would be prosecuting and making arrests in, but for immunity." Still, he added, participation in crimes by diplomats generally leads to expulsion from a country.

"Being a diplomat does not give you the right to commit health care fraud," said George Venizelos, head of the FBI's New York office. He said 25 current and former diplomats and 24 of their spouses joined with dozens of co-conspirators not identified in court papers to carry out the fraud.

"The defendants selfishly took advantage of a health care system designed to help the unfortunate," Venizelos said.

In court papers, FBI agent Jeremy Robertson described an 18-month investigation, saying investigators had discovered a pattern of falsified applications.

He said 58 of the 63 births attributed to Russian diplomats and their spouses in New York City between 2004 and 2013 were funded through Medicaid, which is largely federally funded but includes money from state and local governments.

Robertson wrote that the diplomats and their spouses generally underreported household income to an amount below the applicable Medicaid eligibility level, and some of them lied about the citizenship status of their children to obtain continuing health coverage for them.

Meanwhile, the diplomats and their spouses spent tens of thousands of dollars on vacations, fancy watches, expensive jewelry and designer clothing at luxury retail stores including Bloomingdale's, Tiffany & Co., Jimmy Choo, Swarovski and others, the court papers said.

The complaint said they also spent tens of thousands of dollars on electronic merchandise at Apple Inc. stores and elsewhere. Authorities said they also bought concert tickets, robotic cleaning devices and chartered helicopters.

Court papers noted that prior to June 2011 Russian diplomats including some of the defendants received their salaries in cash. The complaint said diplomats underreported their incomes to qualify for Medicaid but gave more accurate descriptions of salaries to qualify for credit cards.

Charges in the criminal complaint included conspiracy to commit health care fraud, conspiracy to steal government funds and make false statements relating to health care matters.