"If her claim was rejected why wasn't she sent back to the USSR? Or is it Russia now? "
She should have been sent back to Latvia, but somehow she managed to avoid it. All the Baltic states (especially Latvia) have problems with large numbers of ethnic Russians who were settled there in the days when those countries were part of the Soviet empire. Many have not integrated too well into the new independent states, especially the older ones, for reasons of language, culture etc. And its not helped by the Russian govt claiming that they are being "persecuted". Somehow though these people don't actually want to go and live in Russia - no thank you!
Anyway, this particular lady should have gone back. I don't think this should be used as a stick to beat the EU though. People can claim benefits in the UK and not encessarily be EU citizens. Each case needs treating on its merits. Anyone who is on the make needs to be dealt with firmly.