A New York Health Scandal Feeds U.S.-Russian Tensions

U.S. Secretary of State John Kerry and Russian counterpart Foreign Minister Sergey Lavrov
U.S. Secretary of State John Kerry and Russian counterpart Foreign Minister Sergey Lavrov
Kirill Belyaninov, Sergei Strokan and Elena Chernenko

MOSCOW — Last week's U.S. criminal complaint alleging that Russian diplomats in New York systematically defrauded Medicaid reads like a low-down scam at its worse. Moscow, however, is convinced that it is actually the latest geopolitical chess move, the result of deteriorating relations between the two countries.

As the accused diplomats prepare to return to Russia, many sources think that the allegations of Medicaid fraud are politically motivated. The real issue, they suspect, involves the Magnitsky Act, U.S. legislation passed last year to punish Russian officials who were thought responsible for the death of Sergei Magnitsky, a lawyer and auditor who died in a Moscow prison in 2009 after investigating fraud involving Russian tax officials.

The U.S. Attorney’s office claims categorically that Russian diplomats took advantage of a federally funded program for the poor. “A multitude of Russian diplomats and their spouses ran a scam on the health care system designed to help Americans in need,” U.S. Attorney Preet Bharara said at a news conference last week.

Preet Bharara lays out his case (Bryan Smith/ZUMA)

According to the investigation, most of the accused diplomats have already left the United States, and only 11 involved in the complaint remain. Five work at the Russian mission to the United Nations, one works at the Russian embassy in Washington and the rest are spouses. All of them will return to Russia soon. In total, the accusations involved 49 Russian citizens — 25 former and current diplomats and members of their families who are alleged to have bilked Medicaid out of $1.5 million over a nine-year period.

The criminal case was filed after an investigation involving the FBI, the Secret Service and the IRS. The U.S. Attorney’s office explained that they noticed an unusually large number of applications for Medicaid from Russian diplomatic services employees in New York.

The applications all involved services that Medicaid provides for the poor in relation to pregnancy, births and child care. According to the investigation, 63 babies were born to employees at the Russian diplomatic missions in the United States between 2004 and 2013, and the parents of 58 of those babies applied for and received Medicaid benefits.

The primary accusation against the Russian diplomats is that they submitted false income information, substantially misstating their earnings. For example, Vitalii Sagura, an employee of the consulate in New York, claimed in a Medicaid document — provided by the consulate itself, according to the investigation — that he earned $29,000 per year, although his actual salary was $5,160 per month. He received services worth $37,000. Another Russian employee claimed that he and his wife were brother and sister and also received substantial benefits.

In some cases, the employees took no pains to hide their real incomes. Timur Salomatin, for example, a secretary at the UN Mission, submitted an application for a credit card in 2011 that declared his income as $8,333 per month. At the same, according to the investigation, the diplomat’s family was receiving services worth $31,000 from Medicaid.

Hidden motives?

In Moscow, people see a political motive behind the accusations. According to Russian diplomatic sources, there is an international practice for dealing with questions regarding diplomatic mission employees. If the host country has concerns about particular diplomats, the government will approach the diplomatic mission and ask for an explanation. Sometimes the problems are resolved after the diplomatic mission has an opportunity to provide an explanation, and sometimes law enforcement agencies move to take the appropriate action.

Russian embassy in Washington (Kent Wang)

“When the Americans, just like the Russians or any other country, had issues in relation to the actions of diplomatic employees, they contacted representatives of the Russian Federation for an explanation,” one Russian diplomatic source says. “All problems are resolved according to a working protocol. But to wait nine years while a law was being broken and not bring it up once, and then to present a completed investigation — that is politically motivated.

“There seems to have been a need to make a show, which they did. But to complete an investigation into diplomats in violation of the Vienna convention, collect information without verifying them using available and legal means, that is outside of the law.”

Another Russian diplomatic source who is in the United States and is familiar with the situation asserts that the case is a set-up. “The Americans regularly consulted with Russian diplomatic representatives about various issues related to Russian diplomats’ presence in the United States. And this question never came up,” he says. What’s more, he says, the State Department frequently confirmed that foreign diplomats were eligible to participate in Medicaid.

According to Paul MacCready, a former FBI officer, the investigation may reflect conflicts between the U.S. State Department and law enforcement agencies. “Usually, the State Department puts the brakes on these kinds of cases, and often informs the embassy,” he says. “Then the diplomat in question quietly leaves the country. But it looks like that kind of outcome didn’t work for the FBI or for the U.S. Attorney’s office, which had spent a year and a half on the investigation.”

Experts also note the central role of U.S. Attorney Preet Bharara — the highest-placed official on Russia’s “anti-Magnisky list.” Bharara earned that designation because of his key role in the successful extradition to the U.S. of accused Russian weapons dealers Viktor Bout and Konstantin Yaroshenko, a case Russia considered politically motivated.

“Both the moment that the government chose to publicize the accusations and the fact that the primary motor behind the investigation is the same group that acted against Bout and Yaroshenko are important in this story,” says Uri Rogulev, director of the American Studies Institute at Moscow State University. “The investigation took place over the course of more than a year, but was only released publicly now. That is related to the state of current Russian-American relations.”

In addition, Rogulev says that the Russian Ministry of Foreign Affairs recently gave the U.S. notice that it had opened a criminal human trafficking investigation into the U.S. practice of “rehoming” children adopted from Russia. “The scandal regarding the Russian diplomats could seem like a response to the scandal about an American Internet site for trading children,” he says.

The majority of people Kommersant spoke with were convinced that neither the U.S. nor Russia was interested in having the scandal blow up. Marie Harf, the State Department’s spokesperson, acknowledges that foreign diplomats sometimes “can receive medical help that is financed by the federal government.” She also says, “We don't think this should affect our bilateral relationship with Russia. Quite frankly, there are too many important issues we have to work on together.”

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7 Ways The Pandemic May Change The Airline Industry For Good

Will flying be greener? More comfortable? Less frequent? As the world eyes a post-COVID reality, we look at ways the airline industry has been changing through a pandemic that has devastated air travel.

Ready for (a different kind of) takeoff?

Carl-Johan Karlsson

It's hard to overstate the damage the pandemic has had on the airline industry, with global revenues dropping by 40% in 2020 and dozens of airlines around the world filing for bankruptcy. One moment last year when the gravity became particularly apparent was when Asian carriers (in countries with low COVID-19 rates) began offering "flights to nowhere" — starting and ending at the same airport as a way to earn some cash from would-be travelers who missed the in-flight experience.

More than a year later today, experts believe that air traffic won't return to normal levels until 2024.

But beyond the financial woes, the unprecedented slowdown in air travel may bring some silver linings as key aspects of the industry are bound to change once back in full spin, with some longer-term effects on aviation already emerging. Here are some major transformations to expect in the coming years:

Cleaner aviation fuel

The U.S. administration of President Joe Biden and the airline industry recently agreed to the ambitious goal of replacing all jet fuel with sustainable alternatives by 2050. Already in a decade, the U.S. aims to produce three billion gallons of sustainable fuel — about one-tenth of current total use — from waste, plants and other organic matter.

While greening the world's road transport has long been at the top of the climate agenda, aviation is not even included under the Paris Agreement. But with air travel responsible for roughly 12% of all CO2 emissions from transport, and stricter international regulation on the horizon, the industry is increasingly seeking sustainable alternatives to petroleum-based fuel.

Fees imposed on the airline industry should be funneled into a climate fund.

In Germany, state broadcaster Deutsche Welle reports that the world's first factory producing CO2-neutral kerosene recently started operations in the town of Wertle, in Lower Saxony. The plant, for which Lufthansa is set to become the pilot customer, will produce CO2-neutral kerosene through a circular production cycle incorporating sustainable and green energy sources and raw materials. Energy is supplied through wind turbines from the surrounding area, while the fuel's main ingredients are water and waste-generated CO2 coming from a nearby biogas plant.

Farther north, Norwegian Air Shuttle has recently submitted a recommendation to the government that fees imposed on the airline industry should be funneled into a climate fund aimed at developing cleaner aviation fuel, according to Norwegian news site E24. The airline also suggested that the government significantly reduce the tax burden on the industry over a longer period to allow airlines to recover from the pandemic.

Black-and-white photo of an ariplane shot from below flying across the sky and leaving condensation trails

High-flying ambitions for the sector

Joel & Jasmin Førestbird

Hydrogen and electrification

Some airline manufacturers are betting on hydrogen, with research suggesting that the abundant resource has the potential to match the flight distances and payload of a current fossil-fuel aircraft. If derived from renewable resources like sun and wind power, hydrogen — with an energy-density almost three times that of gasoline or diesel — could work as a fully sustainable aviation fuel that emits only water.

One example comes out of California, where fuel-cell specialist HyPoint has entered a partnership with Pennsylvania-based Piasecki Aircraft Corporation to manufacture 650-kilowatt hydrogen fuel cell systems for aircrafts. According to HyPoint, the system — scheduled for commercial availability product by 2025 — will have four times the energy density of existing lithium-ion batteries and double the specific power of existing hydrogen fuel-cell systems.

Meanwhile, Rolls-Royce is looking to smash the speed record of electrical flights with a newly designed 23-foot-long model. Christened the Spirit of Innovation, the small plane took off for the first time earlier this month and successfully managed a 15-minute long test flight. However, the company has announced plans to fly the machine faster than 300 mph (480 km/h) before the year is out, and also to sell similar propulsion systems to companies developing electrical air taxis or small commuter planes.

New aircraft designs

Airlines are also upgrading aircraft design to become more eco-friendly. Air France just received its first upgrade of a single-aisle, medium-haul aircraft in 33 years. Fleet director Nicolas Bertrand told French daily Les Echos that the new A220 — that will replace the old A320 model — will reduce operating costs by 10%, fuel consumption and CO2 emissions by 20% and noise footprint by 34%.

International first class will be very nearly a thing of the past.

The pandemic has also ushered in a new era of consumer demand where privacy and personal space is put above luxury. The retirement of older aircraft caused by COVID-19 means that international first class — already in steady decline over the last decades — will be very nearly a thing of the past. Instead, airplane manufacturers around the world (including Delta, China Eastern, JetBlue, British Airways and Shanghai Airlines) are betting on a new generation of super-business minisuites where passengers have a privacy door. The idea, which was introduced by Qatar Airways in 2017, is to offer more personal space than in regular business class but without the lavishness of first class.

Aerial view of Rome's Fiumicino airport

Aerial view of Rome's Fiumicino airport

Hygiene rankings  

Rome's Fiumicino Airport has become the first in the world to earn "the COVID-19 5-Star Airport Rating" from Skytrax, an international airline and airport review and ranking site, Italian daily La Repubblica reports. Skytrax, which publishes a yearly annual ranking of the world's best airports and issues the World Airport Awards, this year created a second list to specifically call out airports with the best health and hygiene standards.

Smoother check-in

​The pandemic has also accelerated the shift towards contactless traveling, with more airports harnessing the power of biometrics — such as facial recognition or fever screening — to reduce touchpoints and human contact. Similar technology can also be used to more efficiently scan physical objects, such as explosive detection. Ultimately, passengers will be able to "check-in" and go through a security screening anywhere at the airports, removing queues and bottlenecks.

Data privacy issues

​However, as pointed out in Canadian publication The Lawyer's Daily, increased use of AI and biometrics also means increased privacy concerns. For example, health and hygiene measures like digital vaccine passports also mean that airports can collect data on who has been vaccinated and the type of vaccine used.

Photo of planes at Auckland airport, New Zealand

Auckland Airport, New Zealand

Douglas Bagg

The billion-dollar question: Will we fly less?

At the end of the day, even with all these (mostly positive) changes that we've seen take shape over the past 18 months, the industry faces major uncertainty about whether air travel will ever return to the pre-COVID levels. Not only are people wary about being in crowded and closed airplanes, but the worth of long-distance business travel in particular is being questioned as many have seen that meetings can function remotely, via Zoom and other online apps.

Trying to forecast the future, experts point to the years following the 9/11 terrorist attacks as at least a partial blueprint for what a recovery might look like in the years ahead. Twenty years ago, as passenger enthusiasm for flying waned amid security fears following the attacks, airlines were forced to cancel flights and put planes into storage.

40% of Swedes intend to travel less

According to McKinsey, leisure trips and visits to family and friends rebounded faster than business flights, which took four years to return to pre-crisis levels in the UK. This time too, business travel is expected to lag, with the consulting firm estimating only 80% recovery of pre-pandemic levels by 2024.

But the COVID-19 crisis also came at a time when passengers were already rethinking their travel habits due to climate concerns, while worldwide lockdowns have ushered in a new era of remote working. In Sweden, a survey by the country's largest research company shows that 40% of the population intend to travel less even after the pandemic ends. Similarly in the UK, nearly 60% of adults said during the spring they intended to fly less after being vaccinated against COVID-19 — with climate change cited as a top reason for people wanting to reduce their number of flights, according to research by the University of Bristol.

At the same time, major companies are increasingly forced to face the music of the environmental movement, with several corporations rolling out climate targets over the last few years. Today, five of the 10 biggest buyers of corporate air travel in the US are technology companies: Amazon, IBM, Google, Apple and Microsoft, according to Taipei Times, all of which have set individual targets for environmental stewardship. As such, the era of flying across the Atlantic for a two-hour executive meeting is likely in its dying days.

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