Russian Diplomats Charged with Benefit Fraud

By David Seminara, December 6, 2013

According to the New York Times, and a host of other publications, the U.S. Attorney in Manhattan, Preet Bharara, announced on Thursday that he had charged 49 Russian diplomats, including 11 currently in the country and 38 now serving elsewhere, in a $1.5 million Medicaid fraud case. The Times article notes that insurance fraud schemes have been "dominated by immigrants from the former Soviet Union for years", but the fact that this incident involves dozens of diplomats posted in New York and the apparent complicity of the Russian government is a huge scandal.

Over a nine-year period, from 2004-2013, Russian diplomats and their spouses in New York had 63 babies, 58 of them (92 percent) were to diplomatic families receiving Medicaid benefits (a largely federally funded program to provide health care to low-income families) they shouldn't have been entitled to. The diplomats provided bogus income verification statements from their employer, grossly understating their incomes so they could qualify for the benefits, which, given the scale of the fraud here, indicates that at least in New York benefit fraud was apparently a de-facto Russian government policy.

According to the U.S. Attorney's charges, the diplomats were also spending tens of thousands of dollars on vacations and luxury goods at retailers like Tiffany & Company and Bloomingdale's while they were also bilking U.S. taxpayers. The Times cited one example, of a second secretary named Mikhail Kuleshov, serving at Russia's U.N. Mission in New York, who made about $60,000 and had free housing but managed to collect about $21,000 in Medicaid benefits he wasn't entitled to by understating his income.

Russia's Deputy Foreign Minister, Sergei Ryabkov, didn't bother to deny the substance of the charges, or apologize, but instead made a lame complaint that the U.S. government didn't privately notify them of the charges. He also lobbed a vague complaint at U.S. diplomats, saying "We have many claims against American diplomats in Moscow." Who knows what kind of claims he's referring to, but you can be sure that U.S. diplomats aren't committing benefit fraud in their host countries.

A State Department spokesperson, Marie Harf, also apparently failed to summon any outrage, or even disapproval of the charges.

"We don't think this should affect our bilateral relationship with Russia," she said, according to the Times. "Quite frankly, there are too many important issues we have to work on together."

The defendants were charged with one count of conspiracy to commit health care fraud and one count of conspiracy to steal government funds and make false statements relating to health care matters. These crimes carry maximum sentences of 10 years and five years in prison. Bharara said at the news conference that the State Department could seek a waiver of diplomatic immunity from the Russian government for the 11 who are still in the country to allow them to be prosecuted. There is no chance that will happen, so in all likelihood the 11 will simply be required to leave the country. The worst part is that without a court case, there is no mechanism to force these con artists, or their government, to repay the money they essentially stole from U.S. taxpayers.

As a former diplomat, I can confirm that some diplomats, a small minority to be sure, pull the same sort of immigration scams as other migrants, including filing baseless asylum claims, using their status to smuggle other migrants into the United States, and committing identity and benefit fraud. And as Jon Feere pointed out in a 2011 Backgrounder, some also try to obtain U.S. passports for their children who are born in the United States, even through they aren't entitled to citizenship by U.S. law.

If Russian diplomats are committing benefit fraud, imagine how many other immigrants are doing so undetected. Obviously there are plenty of Americans committing fraud as well, but I think you could make a strong argument that cultural factors make immigrants even more likely to commit benefits fraud against the government.

If you look at the countries that send us the most immigrants, nearly all of them score poorly on Transparency International's Corruption Perceptions Index. We don't get a whole lot of immigrants from countries like New Zealand, Denmark, and Sweden, who are near the top of that table (least corrupt), but we have plenty of migrants from countries at the back of the list (most corrupt). High migration countries like the Dominican Republic, Haiti, Venezuela, Guyana, Honduras, Russia, Ukraine, Vietnam, Guatemala, Nigeria, Mexico, Bangladesh, Pakistan, Egypt, India, and the Philippines are all deemed deeply corrupt countries.

The fact that you come from a corrupt country doesn't mean you will also be corrupt. And obviously many people want to leave these countries because they are so corrupt, but if you are used to a system where the government is deeply corrupt, taking whatever you can from a system that shafted you seems positively rational, not criminal. Russia is such a deeply corrupt country that one has to wonder if these 49 diplomats even felt like what they were doing was wrong, or just a common everyday scam.

It looks like these diplomats will get away with their crimes, thanks to their diplomatic immunity. We could impose some kind of sanctions, but then the Russians would retaliate against our diplomats. But we should get tough on immigrants (and everyone else) who defraud the government via benefit fraud. Give them their day in court, but if they're found guilty, deport them and bar them re-entry for life. A strong message needs to be sent that Americans won't tolerate being conned.