Citation Nr: 1127519	
Decision Date: 07/22/11    Archive Date: 07/29/11

DOCKET NO.  06-27 137	)	DATE
	)
	)

On appeal from the
Department of Veterans Affairs Regional Office in St. Petersburg, Florida


THE ISSUES

1.  Whether a debt created based on overpayment of compensation due to fugitive felon status in the amount of $52,138.13 is valid.

2.  Entitlement to waiver of recovery of an overpayment of VA compensation in the amount of $52,138.13.


REPRESENTATION

Appellant represented by:	Disabled American Veterans


ATTORNEY FOR THE BOARD

J. Juliano, Associate Counsel

INTRODUCTION

The Veteran had active service from December 1967 to October 1971.

These matters come before the Board of Veterans' Appeals (Board) on appeal from a February 2004 decision of the Department of Veterans Affairs (VA) Regional Office (RO) located in St. Petersburg, Florida, and from an October 2005 decision of the Committee on Waivers and Compromises (Committee) in St. Petersburg, Florida.

In May 2008, the Veteran testified before the undersigned Veterans Law Judge at a Travel Board hearing at the RO located in St. Petersburg, Florida.  A transcript of the proceeding has been associated with the claims file.

In August 2008, the Board remanded these matters for further development.  Such development has been completed and associated with the claims file, and these matters are returned to the Board for further review.


FINDINGS OF FACT

1.  The Veteran's VA compensation was terminated effective December 27, 2001 through October 20, 2003 due to fugitive felon status, resulting in an overpayment in the amount of $52,138.13.

2.  There was no fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the debt.

3.  While fault is shown on the Veteran's part in creation of the debt, no detrimental reliance is shown, and there would be no undue hardship to the extent repayment of $36,252 were required, recovery of this debt would defeat the purpose of VA's disability compensation program and, therefore, partial repayment of $15,886.13 is shown to be against equity and good conscience.


CONCLUSIONS OF LAW

1.  The debt created by overpayment of compensation based on fugitive felon status in the amount of $52,138.13 is valid.  38 U.S.C.A. §§ 5302, 5313B (West 2002); 38 C.F.R. §§ 1.962, 3.665 (2010).
 
2.  The criteria for entitlement to a partial waiver of recovery of overpayment of VA compensation in the amount of $15,886.13 are met.  38 U.S.C.A. § 5302(a) (West 2002); 38 C.F.R. § 1.962, 1.963, 1.965 (2010).


REASONS AND BASES FOR FINDINGS AND CONCLUSION

I.  Preliminary Matters

The Veterans Claims Assistance Act of 2000 (VCAA), describes VA's duty to notify and assist claimants in substantiating a claim for VA benefits.  38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126 (West 2002 & Supp. 2010); 38 C.F.R. §§ 3.102, 3.156(a), 3.159 and 3.326(a) (2010).  The Court of Appeals for Veterans Claims (Court), however, has consistently held that the VCAA provisions do not apply in validity of debt and waiver of overpayment cases.  See Schaper v. Derwinski, 1 Vet. App. 430 (1991) (challenging validity of debt); Reyes v. Nicholson, 21 Vet. App. 370 (2007) (waiver of recovery of overpayments) (citing Barger v. Principi, 16 Vet. App. 132 (2002)).

Regardless, as noted above, the Board previously remanded this matter in August 2008 so that the RO would request copies of any court records relating to the Veteran's 1986 bench warrant and October 2003 minute order from the Los Angeles County Superior Court.  Pursuant to the Board's remand directive, the Board notes that several requests were made by the RO by telephone, facsimile, and by mail to obtain any available records.  In that regard, the Board notes that no additional records were available.  In light of the significant development procedures completed by the RO, the Board finds that there was substantial compliance with the Board's remand directive.  See Stegall v. West, 11 Vet. App. 268 (1998) (duty to ensure compliance with Board remand order).

In addition, the Board notes that 38 C.F.R. § 3.105(h) provides that no award of compensation may be discontinued by reason of information received concerning a veteran's status unless the veteran is notified of the contemplated action and is provided 60 days for the presentation of evidence that the benefits should be continued.  In that regard, the Board notes that a July 2003 notice from the RO proposed to terminate the Veteran's compensation benefit payments effective December 27, 2001 due to his status as a fugitive felon, and the Veteran was provided with 60 days to submit evidence (and a February 2004 decision terminated payment).

II.  Analysis

A.  Validity of the Debt

An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled.  38 C.F.R. § 1.962.  The issue of the validity of the debt is a threshold determination that must be made prior to a decision on a request for waiver of the overpayment.  See Schaper v. Derwinski, 1 Vet. App. 430 (1991).

Effective December 27, 2001, 38 U.S.C.A. § 5313B was enacted by Congress which provides that a veteran may not be paid compensation benefits for any period during which such veteran is a fugitive felon.  A "fugitive felon" is defined by 38 U.S.C.A. § 5313B(b) as including a person fleeing to avoid prosecution, custody, or confinement relating to a felony offense, as well as a person violating a condition of probation or parole imposed for a felony.

By way of background, the record reflects that in December 1986, a bench warrant was issued for the Veteran's arrest by the Los Angeles Superior Court in California with regard to a felony drug possession offense.  See VA OIG Report, Fugitive Felon Program, July 2003; Minute Order, Los Angeles Superior Court, October 21, 2003; Cal. Pen. Code § 11350(a) (felony drug possession statute).  The Veteran admits that the bench warrant relates to his violation of his probation for a felony drug offense by leaving the State of California in 1986 and moving initially to Massachusetts, and later to Florida, where evidence reflects that he has resided (at the same address in Cocoa) since at least August 2001.  See Hearing Transcript at 5-7; Status of Dependents Questionnaire, August 2001 (front and back); Form 9 appeal, December 2007.  The Veteran testified that he left California to seek treatment for drug addiction.  See also VA Examination Report, February 1991 (Veteran reported he returned to Massachusetts to get clean from drugs).  In that regard, the Board acknowledges a July 2003 VA OIG Fugitive Felon Program report reflects that the OIG learned of the Veteran's outstanding bench warrant and notified the RO.  In July 2003, the RO sent a notice to the Veteran proposing to terminate his compensation benefit payments effective December 27, 2001 due to the outstanding warrant.  The Veteran submitted a copy of an October 21, 2003 minute order of the Los Angeles County Superior Court that reflects that he was represented by counsel (but did not appear himself) at the hearing, that he no longer resided in the State of California, that the bench warrant issued in December 1986 relating to the felony drug possession offense was recalled, and the Veteran's probation was terminated.  A February 2004 RO decision effectuated the termination proposed in the July 2003 notice (effective December 27, 2001 through October 20, 2003, see COWC decision, January 2006), thereby creating a debt of $52,138.13.  

As noted above, the Veteran admits that he left the State of California in 1986, and that moving out of state violated his probation for the felony drug possession offense (albeit the Board acknowledges that the Veteran testified that, at the time he left, he did not know or understand that he was violating his probation by leaving the State of California and that he did not know that he had an outstanding bench warrant when he was notified of such by VA in July 2003).  Because a "fugitive felon" for 38 U.S.C.A. § 5313B(b) purposes includes a person violating a condition of probation imposed for a felony, and because the Veteran admits he violated his probation for a felony drug offense (see Cal. Pen. Code § 11350(a)) by leaving the State of California in 1986, the Board finds that the debt created from the date of enactment of 38 U.S.C.A. § 5313B(b), December 27, 2001, through October 20, 2003, the day before the bench warrant was recalled and probation terminated, is valid.  The Board notes in this regard that the Court recently interpreted the language of § 5313B and held "the plain language is unambiguous:  The violation of a condition of probation makes one a fugitive felon."  See Mountford v. Shinseki, __ Vet. App. __, 2011 WL 2462940 (June 21, 2011).  

The Board again acknowledges that the Veteran testified that he was unaware that he was violating his probation by leaving the State of California in 1986, and that he was unaware of the existence of the outstanding December 1986 bench warrant when he was notified of its existence by VA in July 2003 (shortly after which he hired a private attorney and had the warrant recalled on October 21, 2003).  See Transcript at 9-10; Brief, May 2001 at 3.  In that regard, the Board acknowledges that in cases interpreting 42 U.S.C.A. § 1382(e)(4)(A), which prohibits payment of certain Social Security Administration (SSA) benefits to fugitive felons, courts have held that in order to "avoid prosecution," an individual would first have to know that he or she was facing prosecution.  See Oteze Fowlkes v. Adamec, 432 F.3d 90, 96-97 (2nd Cir. 2005) (holding that for SSA purposes, the words "to avoid prosecution" confirms that for flight to result in a suspension of benefits, it must be undertaken with a specific intent to avoid prosecution); see also VA General Counsel in VAOPGCPREC 7-2002 (noting that VA's fugitive felon provision was modeled after, among other statutes, the SSA provisions prohibiting payments to fugitive felons).  The Board notes, however, that this case involves whether the Veteran constitutes a fugitive felon not only by way of avoiding prosecution, but also solely by way of violating his probation (and the Board notes that 42 U.S.C.A. § 1382(e)(4)(A) for SSA cases likewise define a "fugitive felon" as including one who solely violates probation for a felony).  In other words, regardless as to whether the Veteran intended to avoid prosecution in this case by leaving the State of California in 1986 (i.e., by "fleeing" prosecution), because he admittedly violated his probation for a felony offense by leaving California, regardless as to whether it was intentional, he constituted a "fugitive felon" for VA purposes.  In fact, the Board adds that in the recent case of Mountford in which the Court held that a veteran constituted a fugitive felon by violating his probation, it was undisputed that the veteran in that case was unaware that he had an outstanding warrant for his arrest due to violating his probation.  See Mountford v. Shinseki, __ Vet. App. __, 2011 WL 2462940 (June 21, 2011).  Similarly, courts have held recently that, unlike SSA fugitive felon cases involving "avoiding prosecution," SSA fugitive felon cases regarding violation of probation do not involve any intent element.  See Robbins v. Astrue, 2009 WL 214564 (Dist. Maine 2009).  In any event, the Board notes that the Veteran admitted to a VA clinician in Virginia in March 1992 that he had legal problems in California because he "jumped" his probation.

The Board also acknowledges that the Veteran's representative argues that because the December 1986 bench warrant was recalled in October 2003, it was essentially "rendered null and void."  See Notice of Disagreement, November 2006.  The Board notes, however, that there is no factual basis for such an assertion in the Los Angeles County Superior Court's minute order, and there is no legal basis in the applicable state code (in fact, the Veteran's representative cites Black's Law Dictionary in support of his contention), and the Veteran has not submitted any copies of any court documents or otherwise in support of such a contention.  The Board also acknowledges the contention of the Veteran's representative that VA is unable to "satisfactorily establish" that the Veteran was fleeing to avoid prosecution (or, presumably, that the Veteran violated his probation) because a negative response was received in response to the RO's requests for records to the Los Angeles County Superior Court.  The Board finds, however, that the minute order and VA OIG report are entirely consistent with each other (in fact, the December 1986 warrant number on the OIG report matches the warrant number on the October 2003 minute order), and that these records alone serve to establish that the Veteran had an outstanding bench warrant for his arrest relating to a felony drug possession offense from December 1986 until October 21, 2003, when it was recalled.  The Veteran himself also admits that he was "in jail" for the "felony" in July 1986, and that he violated his probation by leaving the state of California in 1986 (albeit to seek substance abuse treatment).  See Statement, March 2004; Hearing Transcript at 5-7; see also VA Treatment Record, March 1992.

As a final matter regarding the validity of the debt, the Board notes that review of the calculations performed by the RO in the paid and due audit reveals no discrepancies regarding the amount of the debt, and the Veteran himself has not disputed the calculation of the debt.  Thus, the Board holds that the declaration of the debt in the amount of $52,138.13 was valid.  

B.  Waiver of Overpayment

The provisions of 38 U.S.C.A. § 5302(c) prohibit the waiver of a debt where there exists in connection with the claim for such waiver an indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver.  Similarly, 38 C.F.R. § 1.965(b) precludes waiver upon a finding of (1) fraud or misrepresentation of a material fact, or (2) bad faith.

If the debtor's conduct is deemed not to have constituted fraud, misrepresentation of a material fact, or bad faith, the request for waiver will be evaluated pursuant to the principles of "equity and good conscience."  38 U.S.C.A. § 5302(a) (West 2002).

VA regulation 38 C.F.R. § 1.965(a) provides that "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the government's rights.  The decision reached should not be unduly favorable or adverse to either side.  The phrase equity and good conscience means arriving at a fair decision between the obligor and the government.  In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: (1) fault of debtor - where actions of the debtor contribute to creation of the debt; (2) balancing of faults - weighing fault of the debtor against VA's fault; (3) undue hardship - whether collection would deprive the debtor or family of basic necessities; (4) defeat the purpose - whether withholding of benefits or recovery would nullify the objective for which the benefits were intended; (5) unjust enrichment - failure to make restitution would result in unfair gain to the debtor; and (6) changing position to one's detriment - reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation.  38 C.F.R. § 1.965(a) (2010).

As an initial matter, the Board notes that the Veteran is service-connected for PTSD, which is currently assigned a 100 percent disability rating, effective December 5, 1991.  See Rating Decision, October 1993.

In March 2004, the Veteran requested a waiver of recovery of overpayment and submitted a Form 5655 Financial Status Report.

An October 2005 COWC decision denied the Veteran's request for a waiver.  The COWC did not find fraud, misrepresentation, or bad faith.  It did, however, find that the Veteran was at fault for knowingly violating his drug offense probation by leaving the state (and by using drugs) and accepting VA compensation benefits.  COWC also found that the collection of the debt would not create an undue hardship because his total household monthly income was $3,620 and monthly expenses were $2,490 (per his March 2004 Form 5655) leaving a monthly net income of $1,130, and because the Veteran had listed assets on his Form 5655 totaling $132,297.

Initially, the Board must consider whether there was any evidence of fraud, misrepresentation, or bad faith on the Veteran's part.  See 38 U.S.C.A. § 5302(c) (West 2002).  As noted above, the COWC did not find these factors to be present in this case, and the Board similarly finds that waiver should not be precluded solely on the basis of such factors.  While the evidence indicates that, at least in 1992, the Veteran knew he had violated his probation in California and had some legal problems as a result, there is no indication in the record that the Veteran intended to commit fraud or intentionally misrepresented facts, particularly between 2001 and 2003.  Further, there is no indication the Veteran was being deceptive or purposely seeking an unfair advantage knowing that it would result in a loss to the government.  See 38 C.F.R. § 1.965(b) (2010).

The Board must next address the equitable considerations in this case.  Regarding the first and second elements of equity and good conscience under 38 C.F.R. § 1.965(a), fault of the debtor and balancing of faults, the Board finds that the Veteran bears fault in the creation of the debt because he admittedly violated his probation for a felony drug offense in 1986 by leaving the State of California, thereby causing the bench warrant, and he failed to have the matter recalled or notify VA until October 21, 2003.

With regard to the third element under 38 C.F.R. § 1.965(a), undue hardship, as noted by the COWC, the Veteran's March 2004 Form 5655 financial information reflects that the Veteran himself reported a positive net income after expenses of $1,120 per month, as well as assets totaling $132,297, including $33,252 of cash.  As noted above, the Veteran's request for waiver of overpayment was denied by way of an October 2005 COWC decision.  It appears that the Veteran began repayments of $750 per month shortly thereafter.  In his March 2006 Form 9 appeal, the Veteran asserted that the repayments were causing an undue financial hardship.  He submitted an updated monthly income and expense statement in September 2006 reflecting that his monthly expenses exceeded his monthly gross income by $459.  In light of all of the above, the Board finds that repayment would not cause an undue hardship to the extent of the amount of the Veteran's cash assets he reported on his Form 5655, as well as to the extent he was able to repay the $750 per month from his monthly net income from around November 2005 (shortly after the COWC decision) through February 2006 (as the Veteran claimed an undue hardship in March 2006).  Specifically, the Board finds that no undue hardship would result if repayment of $36,252 were required (calculated as $33,252 cash assets, plus four months of $750 repayments from monthly net income, although the Board notes that it is not suggesting that the Veteran be required to make any sort of lump sum repayment of this amount from his savings).

With regard to the fourth element under 38 C.F.R. § 1.965(a), whether repayment of the debt would nullify the objective for which the VA benefits were intended, the Board notes that VA disability compensation is intended, among other things, to compensate veterans for impairment of daily functioning due to service-connected disability.  As noted above, the Veteran is service-connected for PTSD, which has been rated as 100 percent disabling since 1991, which rating acknowledges significant functional impairment.  In that regard, the Board notes that the medical evidence of record reflects a long history of drug addiction and multiple hospital admissions for detox dating back to at least 1981.  See, e.g., VA Hospitalization Records, November 1981, February 1986, September 1986, May 1991, August 1991, December 1991 to January 1992.  Several of these VA hospitalization records for drug detoxification also note the Veteran's diagnosed PTSD.  Also, the Board notes that the bench warrant was issued in 1986 relating to a drug offense, and the Veteran admits that he left the State of California in 1986 to seek treatment for drug addiction.  His report to a VA examiner in February 1991 (PTSD) that he left the state to get treatment is entirely consistent with the Veteran's statement at the Board hearing in that regard.  The February 1991 VA examination report relating to the Veteran's claim for service connection for PTSD also reflects that the Veteran reported that he used alcohol and drugs to "damp or block" his PTSD symptoms.  Similarly, at a February 1992 DRO hearing relating to an increased rating claim for the Veteran's PTSD (before it was 100 percent rated), the Veteran testified that he used heroin because of his experiences in Vietnam and the resulting stress and flashbacks (and "mental pain").  See Transcript at 1.  While none of these records include a medical opinion explicitly relating the Veteran's drug addiction to his service-connected PTSD, the Board finds that based on a review of all of the medical evidence of record in tandem with all of the Veteran's statements, the Board finds that the Veteran's drug use may be attributed, at least in part, to his service-connected PTSD.  Therefore, the Board finds that to require repayment of compensation benefits for his service-connected PTSD would, to some extent, nullify the objective for which the compensation benefits were intended.

With regard to the fifth element, unjust enrichment, the Board notes that certainly waiver of repayment of the debt would leave the Veteran unjustly enriched, as he received significant payments for which he was not entitled by law.  

With regard to the sixth and final element, changing position to one's detriment, the Board does not find evidence of detrimental reliance in the record.

As shown above, the Board acknowledges that the Veteran was at fault for creation of the debt, and that there would be no undue hardship if repayment in the amount of $36,252 were required, and there was no detrimental reliance on the payments.  At the same time, the Board finds in this particular case that repayment of the debt would nullify the objective for which the VA benefits were intended, which weighs against the "unfairness" of such.  In light of all of the above, the Board finds that repayment of a portion of the debt in the amount of $15,886.13 ($52,138.13 minus $36,252) in this particular case would be against "equity and good conscience," and, therefore, that a waiver should of overpayment should be granted in the amount of $15,886.13.  38 U.S.C.A. § 5302(a) (West 2002).


ORDER

The debt created based on overpayment of compensation due to fugitive felon status in the amount of $52,138.13 is valid.

Entitlement to a partial waiver of recovery of an overpayment in the amount of $15,886.13 is granted. 



____________________________________________
MICHAEL LANE
Veterans Law Judge, Board of Veterans' Appeals


Department of Veterans Affairs