Citation Nr: 9808640 Decision Date: 03/23/98 Archive Date: 04/14/98 DOCKET NO. 96-33 085 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Montgomery, Alabama THE ISSUE Entitlement to waiver of the recovery of an overpayment of vocational rehabilitation subsistence benefits, in the calculated amount of $1,344.67. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD D. Jeffers INTRODUCTION The appellant served on active duty from September 1980 to January 1990. This case comes before the Board of Veterans’ Appeals (Board) from a May 1996 decision of the Committee on Waivers and Compromises (Committee) of the Montgomery, Alabama, Department of Veterans Affairs (VA), Regional Office (RO), which denied the veteran’s request for waiver of the recovery of an overpayment of Chapter 31 benefits, in the calculated amount of $1,344.67; this determination was based on findings that the veteran attended the Police Academy at Jacksonville State University for personal reasons having to do with his employment, rather than in satisfaction of his degree requirements, and his failure to obtain authorization from VA or his counselor prior thereto constituted bad faith, which precluded waiver. The veteran filed a timely notice of disagreement, and was issued a statement of the case in June 1996. CONTENTIONS OF APPELLANT ON APPEAL The veteran and his representative contend, in effect, that he is entitled to waiver of recovery of the overpayment of vocational rehabilitation subsistence benefits in question. In this regard, the veteran alleges he discussed enrollment in the Police Academy with his case manger months before attendance. He maintains that his case manger told him that because academy attendance would count as 15 credits towards his degree, he would continue to receive checks. Therefore, he believes that he should not be required to pay the overpayment created in association with vocational subsistence benefits. He also contends that repayment of the indebtedness would cause him undue financial hardship. DECISION OF THE BOARD The Board, in accordance with the provisions of 38 U.S.C.A. § 7104 (West 1991 & Supp. 1997), has reviewed and considered all of the evidence and material of record in the veteran’s claims file. Based on its review of the relevant evidence in this matter, and for the following reasons and bases, it is the decision of the Board that the record does not support a finding of bad faith on the part of the veteran. FINDINGS OF FACT 1. All evidence necessary for an equitable disposition of the veteran’s claim has been obtained by the RO. 2. The RO denied waiver of recovery of the debt based on a finding that the veteran acted in bad faith when he attended the Police Academy at Jacksonville State University for personal reasons having to do with his employment, rather than in satisfaction of this degree requirements, and failed to obtain authorization from VA or his counselor prior thereto. 3. The current evidentiary record reflects no evidence that the veteran harbored a willful intent to seek an unfair advantage over VA when he attended the Police Academy at Jacksonville State University. CONCLUSION OF LAW The record on appeal does not establish that the veteran exhibited bad faith in the creation of the overpayment of vocational rehabilitation subsistence benefits, in the calculated amount of $1,344.67; therefore, waiver of indebtedness is not precluded. 38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. § 1.965(b) (1997). REASONS AND BASES FOR FINDINGS AND CONCLUSION The veteran’s claim is well grounded within the meaning of 38 U.S.C.A. § 5107(a) (West 1991). That is, the Board finds that he has presented a claim which is plausible. The Board is also satisfied that all relevant facts have been properly developed. The record is devoid of any indication that there are other records available which should be obtained. Therefore, no further development is required in order to comply with the duty to assist mandated by 38 U.S.C.A. § 5107(a) (West 1991). The veteran served on active duty from September 1980 to January 1990. By rating decision issued in June 1990, he was granted service connection for impingement syndrome of the right shoulder and assigned a 10 percent disability rating. The veteran was subsequently granted an increased rating to 20 percent by rating action issued in October 1991. It was later determined that the veteran was eligible for vocational rehabilitation subsistence benefits from the VA, and he enrolled in a business management degree program at Snead State Community College (SSCC) in the Spring semester of 1994. A June 1994 Special Report of Training shows that the veteran presented for initial supervision and introduction to his case manager, at which time it was noted that the veteran was employed as a jailer for the Marshall County Sheriff’s Office. As his main objective was to go into probation and juvenile case management, the veteran requested and his case manager approved a change of objective to criminal justice with an emphasis in probation and juvenile case management. The counselor noted that because of the veteran’s current employment and personal goals of being a probation officer, a Bachelor of Science Degree (B.S.) in criminal justice from Jacksonville State University (JSU) was more suitable than a business management degree. The veteran took courses at SSCC from the Spring semester of 1994 through the Fall semester of 1995. A September 1995 letter from the RO to the veteran informed him of a legislative rate change regarding his benefits for the period of October 1, 1995, to August 28, 1996. An undated Special Report of Training, developed by Danny Stewart, a VA vocational rehabilitation specialist, noted that the veteran had been approved for a B.S. in criminal justice at JSU. It was indicated that, since entering the program, the veteran had been employed with the Marshall County Sheriff’s Department. It was further noted that the veteran did not register at JSU as was planned, but was presently attending the police academy at Jacksonville. Since this was not part of his rehabilitation plan and the two training facilities were in no way related, Mr. Stewart felt that the veteran’s program should be reconsidered. It was further noted that all expenses at the police academy were paid by Marshall County, and, therefore, VA should not be obligated for this training. As the veteran never enrolled at JSU, Mr. Stewart indicated that action was being taken to stop his subsistence allowance on the last date of attendance at SSCC. By letter dated March 8, 1996, the veteran was informed that his Vocational Rehabilitation subsistence allowance had been stopped, effective December 2, 1995. It was further noted that this adjustment had resulted in an overpayment in the calculated amount of $1, 344.67. In a telephone Report of Contact with the veteran dated March 19, 1996, Kenneth Anderson, the veteran’s case manager, indicated that the veteran attended the Police Academy at JSU during the past term. The veteran requested a transfer back to SSCC beginning March 28, 1996. In April 1996, the veteran requested a waiver of overpayment, noting that upon completion of the school term at SSCC which ended on December 2, 1995, he attended the Police Academy at JSU for one semester. He noted that the training was needed in order to advance to a job in his career field for which he was going to school. He further claimed that repayment of this debt would cause undue financial hardship and submitted a VA Form 20-5655, Financial Status Report, in support thereof. In May 1996, the Committee notified the veteran that his request for a waiver was denied because of a determination that he demonstrated bad faith when he attended the Police Academy at JSU without prior approval by the VA, and, by his own admission, such attendance was desired for personal reasons having to do with his employment. It was noted that the determination that he exercised bad faith was an absolute bar to his waiver request. He was advised of his appellate rights. Parenthetically, the Board notes that on May 30, 1996, the RO received a copy of a JSU Grade Report, which indicated that the veteran had received 15 credits for his Police Academy attendance. The Board further notes that an August 1996 SSCC transcript indicated that 13.5 credits had been accepted from JSU. The Transcript Guide on the reverse side of the report indicated that “[c]ourses and credits transferred from other institutions will be reflected on the Snead College transcript only if courses are applicable towards a degree at Snead.” The law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness where anyone of the following elements is found to exist: (1) fraud; (2) misrepresentation; and (3) bad faith. 38 U.S.C.A. § 5302 (West 1991). The Board’s review of the record reflects that the Committee has resolved this question against the veteran, finding, in essence, that his inaction represented the intentional behavior to obtain Government benefits to which he was not entitled, which is necessary for a finding of fraud, misrepresentation, or bad faith. As a preliminary matter, the Board will address a change in the law regarding bad faith cases as a result of a precedent decision of the United States Court of Veterans Appeals (Court). The Board notes that the phrase “bad faith” is defined in the Veterans Benefits Administration (VBA) CIRCULAR 20-90-5, dated February 12, 1990, as a “... willful intention on the part of the claimant to seek an unfair advantage or to neglect or refuse to fulfill some duty or contractual obligation.” (Emphasis added). Although such circulars, when effective, provide substantive rules which are the equivalent of a VA regulation, Fugere v. Derwinski, 1 Vet. App. 103, 107 (1990), this particular circular was recently rescinded. See VBA CIRCULAR 20-96-5, dated August 28, 1996. However, prior to being rescinded, a recent decision of the Court invalidated the use of the above-cited emphasized phrase as an appropriate basis for a bad faith determination. See Richards v. Brown, 9 Vet. App. 255 (1996). In Richards, the Court stated, “... the operative language in 38 C.F.R. § 1.965(b)(2) limits bad faith to cases in which there is an intent to seek an unfair advantage, the same test as only one of the two alternative tests provided for under the VA CIRCULAR [20-90-5].” Richards, 9 Vet. App. at 257. Thus, the Court held that the use of the phrase “neglect or refuse to fulfill some duty or contractual obligation” found in VA CIR. 20-90-5 was, “... inconsistent with the regulation [and therefore] cannot be an appropriate basis for a bad faith determination.” Richards at 258. The Court’s holding in Richards is set forth for its instructional value and because it is not clear from the Committee’s May 1996 decision whether the invalidated language found in VBA CIR. 20-90-5 formed the underlying basis of its findings of bad faith in this case. As discussed herein, the Board, in applying the valid regulatory criteria (willful intention on the part of the claimant to seek an unfair advantage), finds no evidence of bad faith on the part of the veteran. After thoroughly reviewing the evidentiary record, the Board is of the opinion that it has not been shown that the veteran’s failure to obtain prior approval for attending the Police Academy at JSU involved an intent to receive an unfair advantage. Rather, as contended above, the veteran reasonably believed that he would be given credit towards his criminal justice degree for his coursework at the Police Academy. Significantly, a May 1996 Grade Report indicated that the veteran had been awarded 15 credits by JSU for his Police Academy attendance. Moreover, an August 1996 transcript indicated that 13.5 of those credits had been accepted by SSCC as being applicable towards a degree at Snead. Therefore, a showing of intention to take unfair advantage of the Government has not been made. Under these circumstances, waiver of recovery of the overpayment of vocational rehabilitation subsistence benefits, in the calculated amount of $1,344.67, is not precluded because of bad faith. In reaching this conclusion, however, the Board intimates no opinion as to whether waiver of the recovery of the overpayment is otherwise in order. ORDER Having found that waiver of recovery of the overpayment of vocational rehabilitation subsistence benefits is not precluded by bad faith, the appeal is granted. REMAND In view of the favorable decision regarding the absence of a statutory bar to consideration of waiver of recovery of the overpayment of vocational rehabilitation subsistence benefits, the case must be remanded to the Committee for additional development and adjudication. The issue remains as to whether recovery of the overpayment should be waived under the standard of equity and good conscience. Since the statement of the case indicates that this issue was not adjudicated by the RO, the Board may not now address the question of whether recovery of the overpayment would be against equity and good conscience; to do so would result in prejudice to the veteran, as he has not had adequate notice and opportunity to be heard with regard to the standards applicable to equity and good conscience. Bernard v. Brown, 4 Vet. App. 384 (1993). In light of the foregoing, and in keeping with VA’s duty to assist claimants in the development of facts pertaining to their claims, 38 U.S.C.A. § 5107(a) (West 1991); 38 C.F.R. § 3.103(a) (1997), the Board finds that further development is in order prior to appellate disposition of this case. Accordingly, the Board hereby REMANDS this case to the RO for the following actions: 1. The veteran should be furnished a Financial Status Report (VA Form 20- 5655), and be afforded the opportunity to provide current income and expense data. 2. The RO should set forth in the record a written paid-and-due audit of the veteran’s vocational rehabilitation benefits for the period of the assessed overpayment on a month-by-month basis. A copy of the written audit should be inserted into the claims folder and another provided to the veteran. 3. Thereafter, the Committee should then consider the veteran’s request for waiver, in light of the available record, with full consideration given to all elements of the principles of equity and good conscience set forth by 38 C.F.R. § 1.965(a) (1997). A formal, written, record of the Committee’ s decision, including an analysis of the various elements to be considered, should be prepared and placed in the claims folder. A supplemental statement of the case is not the appropriate means for accomplishing this task, under proper appellate guidelines. 4. In the event the determination remains adverse to the veteran, he and his representative should be furnished a supplemental statement of the case in accordance with the provisions of 38 U.S.C.A. § 7105 (West 1991), which fully sets forth all laws and regulations pertaining to his appeal, including 38 C.F.R. §§ 1.963, 1.965 (1997). This document should further reflect detailed reasons and bases for the decision reached. A reasonable period of time in which to respond should be given. Thereafter, the case should then be returned to the Board for further appellate consideration, if otherwise in order. By this REMAND the Board intimates no opinion, either factual or legal, as to the ultimate determination warranted in this case. The purpose of the REMAND is to further develop the record. No action is required of the veteran until he receives further notice. This claim must be afforded expeditious treatment by the RO. The law requires that all claims that are remanded by the Board of Veterans’ Appeals or by the United States Court of Veterans Appeals for additional development or other appropriate action must be handled in an expeditious manner. See The Veterans’ Benefits Improvements Act of 1994, Pub. L. No. 103-446, § 302, 108 Stat. 4645, 4658 (1994), 38 U.S.C.A. § 5101 (West Supp. 1997) (Historical and Statutory Notes). In addition, VBA’s ADJUDICATION PROCEDURE MANUAL, M21-1, Part IV, directs the ROs to provide expeditious handling of all cases that have been remanded by the Board and the Court. See M21-1, Part IV, paras. 8.44-8.45 and 38.02-38.03. A. BRYANT Member, Board of Veterans' Appeals NOTICE OF APPELLATE RIGHTS: Under 38 U.S.C.A. § 7266 (West 1991 & Supp. 1997), a decision of the Board of Veterans’ Appeals granting less than the complete benefit, or benefits, sought on appeal is appealable to the United States Court of Veterans Appeals within 120 days from the date of mailing of notice of the decision, provided that a Notice of Disagreement concerning an issue which was before the Board was filed with the agency of original jurisdiction on or after November 18, 1988. Veterans’ Judicial Review Act, Pub. L. No. 100-687, § 402, 102 Stat. 4105, 4122 (1988). The date that appears on the face of this decision constitutes the date of mailing and the copy of this decision that you have received is your notice of the action taken on your appeal by the Board of Veterans’ Appeals. Appellate rights do not attach to those issues addressed in the remand portion of the Board’s decision, because a remand is in the nature of a preliminary order and does not constitute a decision of the Board on the merits of your appeal. 38 C.F.R. § 20.1100(b) (1996). - 2 -