"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."
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.
The case is unlikely to go to trial because the defendants have immunity, Bharara acknowledged.
Russia's Deputy Foreign Minister Sergei Ryabkov said in remarks carried by the Interfax news agency in Moscow that "we are bewildered" that the U.S. government publicized the charges before speaking to the Russian government.
"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. He said he could not comment on the case itself "until we receive a clear explanation of the charges against our citizens from the U.S. authorities."
The complaint alleges that the defendants — current and former diplomats and their spouses at the Russian Mission to the United Nations, the Russian consulate and Russian trade offices — 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.
"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.
Marie Harf, deputy spokeswoman for the U.S. State Department, said at a daily Washington briefing that the charges should not affect relations with Russia.
"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," she said.
She also said: "I don't think I would probably 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."
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.
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.
Pregnant women, no matter their immigration status, can get coverage under Medicaid, provided they meet other eligibility requirements, according to the New York Department of Health. 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.
Associated Press writer Edith Lederer in New York, Vladimir Isachenkov in Moscow and Deb Riechmann in Washington contributed to this report.
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