World News /15 Dec 2013

Medicaid Fraud Case Threatens U.S.-Russian Relations

Last week, FBI New York Field Office Assistant Director, George Venizelos, and New York US Attorney, Preet Bharara, broke the news about a nine-year insurance fraud scheme carried out by Russian diplomats based in New York. Now, there’s talk of strain developing in the otherwise improving relations between the United States and Russia. The FBI announced their investigation into 49 Russian diplomats and their spouses living in New York and receiving aid from Medicaid benefits for prenatal care under false information. In these cases, diplomats took advantage of Medicaid’s provision to supply healthcare to non-citizens who fit eligibility requirements and provided the appropriate documentation.

In most cases, diplomats lied about their salaries in order to qualify for prenatal Medicaid benefits, reporting monthly and yearly incomes sometimes as much as 50 percent less than their actual income (which comes directly from the Russian government and is not subject to United States taxation). These false claims have been tracked as far back as 2004, to as recently as August of this year.

Reactions among government officials seemed to spiral into a finger pointing blame game rather quickly.

Making a general observation regarding the corruption of the issue, FBI Assistant Director, George Venizelos, said in a press release, “The United States government values its long-standing relationship with foreign diplomats and diplomatic establishments for cooperation on many issues. Unfortunately, as detailed in the complaint, some Russian officials in New York allowed these defendants to take advantage of that relationship.”

In a news conference last week, New York US Attorney Bharara commented, “Diplomacy should be about extending hands, not picking pockets in the host country.”

Though generally true, Venizelos and Bharara’s statements have been countered aggressively by spokespeople from Russia. Deputy Foreign Minister Sergei Ryabkov has defined the investigation as “a cheap spin effort, no more than a desire to fulfill the order of Russophobic forces in the United States.”

Going even further, Ryabkov brought the state of US international relations with Russia into question by explicitly labeling the investigation as an attempt to create conflict, “We regret that attempt to stir up another conflict or dispute, particularly in view of the fact that Moscow and Washington recently have developed a good format of ties regarding big international issues.”

The losses from the Russian diplomats’ scheme on Medicaid are not completely inconsequential – some 1.5 million dollars in falsely claimed aid has been distributed to the accused over the course of nine years. Additionally, investigations into the purchasing history of many of these diplomatic families reveal extravagant expenditures at upscale retailers such as Apple, Jimmy Choo, Prada, and Bloomingdale’s.

Yet despite the heated correspondence from officials on both sides of the conflict and the nature of the crime, which has also revealed some serious faults in US healthcare policy into the limelight, it seems unlikely that this incident will cause serious repercussions in US relations with Russia. Most of the defendants moved back to Russia years ago and only six diplomats and five spouses still live in the US. Charges facing the accused add up to a maximum 15-year prison sentence, but will most likely result in the defendant’s expulsion from the country.

The deputy spokeswoman for the U.S. State Department, Marie Harf, admits her doubt that the investigation will make an impact on foreign relations with Russia by suggesting, “I don’t think I would […] draw a broad generalization about our relationship with Russia based on a handful of some current Russian officials and some former who are charged with an alleged crime. I think the relationship is much bigger and deeper and broader and more complicated than that.”

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