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The agreements involving diplomatic immunity and consular officials are sometimes ambiguous, as the case of Raymond Allen Davis showed a few years back.

For consular officials, as opposed to diplomats and embassy officials, the immunity only applies to those actions taken that directly support their duties.

Even so this case in New York has political and social elites heads exploding all over India:

The way an Indian diplomat was treated by law enforcement officials in New York last week has touched off a furor in India, where politicians from across the political spectrum expressed outrage and the New Delhi police retaliated by removing security barriers that were meant to protect the American Embassy.

The diplomat, Devyani Khobragade, the deputy consul general in New York, was arrested last Thursday and accused of submitting false documents to obtain a work visa for her housekeeper and paying the housekeeper far less than the minimum legal wage. Indian officials said that Ms. Khobragade was arrested and handcuffed on the street as she was leaving her daughter at school, and that she was kept in a holding cell with drug addicts before she was released on $250,000 bail.

By far the most troubling part of the episode for Indians are assertions that Ms. Khobragade, 39, was strip-searched after her arrest. Some Indian newspapers published reports claiming that she was subjected to repeated cavity searches. The Indian national security adviser, Shivshankar Menon, has called such treatment “despicable” and “barbaric.”

The Indian government issued a statement the day after the arrest saying it was “shocked and appalled at the manner in which she has been humiliated by the U.S. authorities.” The foreign secretary, Sujatha Singh, summoned the American ambassador to India, Nancy J. Powell, and lodged a strong protest at the “unacceptable treatment” of the diplomat.

So what did she do?
Federal prosecutors say that the charges stem from a promise Ms. Khobragade made to American authorities that she would pay her housekeeper $4,500 a month. The prosecutors said she actually paid the housekeeper just $573 a month and made her work far more than 40 hours a week.

Ms. Khobragade’s lawyer said last week that she had pleaded not guilty and planned to challenge the arrest on grounds of diplomatic immunity. The charges against her carry maximum sentences of 10 years for visa fraud and five years for making a false declaration.

It is not unusual in India for domestic staff to be paid poorly and be required to work more than 60 hours a week; they are sometimes treated abominably. Reports of maids being imprisoned or abused by their employers are frequent.

Devyani Khobragade broke the law when she lied on the visa.  

What's more, given that she was stationed in New York City, she could have found a qualified housekeeper who spoke the language(s) that she needed for her children, if she had been willing to pay what she stated on the visa application.

My guess would be that she knowingly lied on the visa application for her housekeeper, because she had been told by someone in India's foreign service that the visa would be denied if she described the actual terms of employment.

So what she die was pretty repulsive, but I am not sure what to do?

Interestingly enough it turns out that  Khobragade is actually a Dalit (also called scheduled caste), and as such is certainly not high caste, though her background is certainly privileged.

Looking at the Wiki page for the incident, it appears that this began when her nanny, Sangeeta Richard (a name not mentioned in many of the news stories, because the help doesn't count, I guess) attempted to leave her employ, and get redress:

Sangeeta Richard was hired by Devyani Khobragade in November 2012 as a nanny and domestic servant. Richard left Khobragade's employment in June 2013 and hired an American immigration attorney to investigate the alleged visa fraud. Khobragade pursued the matter with the Delhi High Court, which issued an interim injunction against Richard, preventing her from taking legal action outside the Indian judiciary.The Metropolitan Magistrate of the South District Court in New Delhi then issued an arrest warrant for Richard and requested that the US government locate her.
I am not sure that the US attorney handled this in the most "Diplomatic" manner, but consider this time line. (after orange squiggle of doom)

November 2012: Richard arrived in the US and started to work for Dr Khobragade on November 23, 2012.

March 2013: Problems started with Richard, according to Dr Khobragade's lawsuit against her in the Delhi high court. It said that Richard wanted to work outside on her off days, but she was told that it was illegal according to her visa status, and also because she had an official passport.

June 23: Richard left DR Khobragade's home to buy groceries, and did not return. Dr Khobragade informed the matter to the consulate general, who informed the concerned authorities.

July 8: Richard visited an immigration attorney's firm in Manhattan, New York. A person present there told Rediff.com then that four individuals from the consulate soon arrived at the attorney's office.

There were discussions, and reports indicated Richard demanded a sum as her wages, and an ordinary Indian passport.

Meanwhile, her husband and child in India were taken into custody, according to the witness. A scared Richard spoke with them, and refused to leave the attorney's office premises.

The consulate officials remained outside. Later in the evening, the police were called and they took Richard away.

The Indian government revoked Richard's official passport the same day, which made her status illegal in the US.

The Indian embassy in Washington, DC requested the US State Department to locate Richard and return her to India.

September: The Delhi high court issued an order to restrain Richard from instituting any action or proceedings against Dr Khobragade outside India on the terms or conditions of her employment, according to a statement issued by the Indian embassy.

In his order on September 20, Justice Jayant Nath noted that any grievance about the terms of employment, salary or ill-treatment could only be adjudicated by an Indian court, since Richard and Dr Khobragade worked for the Government of India.

The high court also issued notice to Richard's husband Philip in Delhi. The case is scheduled for hearing in February.

Meanwhile, an arrest warrant was issued against Richard by the metropolitan magistrate of the south district court in New Delhi under Sections 387, 420 and 120B of the Indian Penal Code, according to the Indian embassy.

(More at the link, including a litany of similar cases)

It's pretty clear that the Indian foreign service wants to make an example of the Nanny.

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