Citation Nr: 0809640 Decision Date: 03/21/08 Archive Date: 04/03/08 DOCKET NO. 04-28 481A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Louis, Missouri THE ISSUE 1. Whether the overpayment of Department of Veterans Affairs compensation benefits in the amount of $18,153.59 was properly created. 2. Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs compensation benefits in the amount of $14,534.40. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD J. T. Hutcheson, Counsel INTRODUCTION The veteran had active duty for training from June 1973 to October 1973 and active service from January 1975 to May 1976. In March 2002, the St. Louis, Missouri, Regional Office (RO) proposed to reduce payment of the veteran's Department of Veterans Affairs (VA) disability compensation benefits to 10 percent based upon his felony conviction and incarceration. In May 2002, the RO retroactively reduced the veteran's VA disability compensation benefits as of September 15, 2001, and informed the veteran that the action resulted in an overpayment of VA disability compensation benefits to him. In June 2002, the veteran was informed in writing of an overpayment of VA disability compensation benefits in the amount of $18,153.59 and his appellate and waiver rights. This matter came before the Board of Veterans' Appeals (Board) on appeal from a May 2004 decision of the RO's Committee on Waivers and Compromises (Committee) which denied waiver of recovery of an overpayment of VA disability compensation benefits in the amount of $18,153.59. In December 2005, the Board remanded the veteran's appeal to the RO. In February 2007, the Board remanded the veteran's appeal to the RO. In September 2007, the Committee waived $3,619.19 of the calculated overpayment of VA disability compensation benefits. FINDINGS OF FACT 1. The veteran was incarcerated in a state penal institution on July 17, 2001, following his felony conviction. At the time of the veteran's incarceration, a 100 percent schedular evaluation was in effect for his service-connected disability. 2. The RO received official notification of the veteran's incarceration on November 28, 2001. 3. In May 2002, the RO retroactively reduced payment of the veteran's VA disability compensation benefits to 10 percent as of September 15, 2001. CONCLUSIONS OF LAW 1. The overpayment of VA disability compensation benefits in the amount of $18,153.59 was due to error solely on the part of the VA and therefore improperly created. 38 U.S.C.A. 5103, 5103A, 5107, 5313 (West 2002); 38 C.F.R. §§ 3.102, 3.159, 3.326(a), 3.665 (2007). 2. The issue of the veteran's entitlement to waiver of recovery of an overpayment of VA disability compensation benefits in the amount of $14,534.40 is now moot. 38 U.S.C.A. § 7105(d)(5) (West 2002). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I. Veterans Claims Assistance Act of 2000 In Pelegrini v. Principi, 18 Vet. App. 112 (2004), the United States Court of Appeals for Veterans Claims (Court) held, in part, that a Veterans Claims Assistance Act of 2000 (VCAA) notice, as required by 38 U.S.C.A. § 5103(a), must be provided to a claimant before the initial unfavorable RO decision on a claim for VA benefits. In reviewing the issue of whether the overpayment of VA disability compensation benefits in the amount of $18,153.59 was properly created, the Board observes that the veteran has not been issued a VCAA notice which addresses that issue. Notwithstanding this fact, the Board finds that appellate review of the veteran's claim would not constitute prejudicial error given the favorable resolution below. The Court has directed that the VCAA does not apply to requests for waiver of overpayment. Barger v. Principi, 16 Vet. App. 132, 138 (2002). II. Creation of the Debt A veteran who is incarcerated in a federal, state, or local penal institution in excess of 60 days for conviction of a felony committed after October 7, 1980, and has a combined rating of 20 percent or more shall not be paid compensation in excess of the amount payable for a disability evaluated as 10 percent disabling beginning on the 61st day of incarceration. 38 U.S.C.A. § 5313 (West 2001); 38 C.F.R. § 3.665 (2007). In November 2001, the Missouri Department of Corrections informed the VA that the veteran had been convicted of a felony and subsequently incarcerated on July 17, 2001. The report was received by the RO on November 28, 2001. In November 2001, the veteran informed the RO that he was incarcerated. In March 2002, the RO informed the veteran that it had received information that he had been incarcerated following a felony conviction and the provisions of 38 C.F.R.§ 3.665 required that his VA disability compensation be reduced to the amount payable for a disability evaluated as 10 percent disabling after his 61st day of incarceration. At the time, the veteran was in receipt of a 100 percent schedular evaluation. In May 2002, the RO effectuated the proposed reduction as of September 15, 2001. In June 2002, the veteran was informed in writing of an overpayment of VA disability compensation benefits in the amount of $18,153.59 and his waiver rights. The veteran and the Missouri Department of Corrections both informed the RO of the veteran's felony conviction and his subsequent July 17, 2001, incarceration in November 2001. The correctional facility's report was received by the RO on November 28, 2001. The veteran was not informed of either his duty to report his incarceration or his ineligibility to receive full payment of his VA compensation benefits prior to his receipt of the RO's March 2002 notice of the proposed reduction of his VA disability compensation benefits. Given the veteran's lack of express knowledge, the Board finds that the veteran was not at fault in the creation of that portion of the overpayment arising from compensation benefits paid prior to December 2001. In weighing the responsibility of the VA in the creation of that portion of the overpayment created in and after December 2001, the Board finds that the RO failed to take action to appropriately reduce the payment of his compensation benefits with all due haste. As the RO failed to reduce the veteran's VA compensation benefits in a timely manner, the Board concludes that the portion of the overpayment created in and after December 2001 was solely due to VA administrative error and thus improperly created. III. Waiver of Recovery Given the determination above that the overpayment in the calculated amount of $18,153.59 was improperly created, the issue of the veteran's entitlement to waiver of recovery of the remaining portion of the overpayment of VA disability compensation benefits in the amount of $14,534.40 is now moot. Accordingly, the veteran's claim is dismissed. 38 U.S.C.A. § 7105 (d)(5) (West 2002). ORDER An overpayment of VA disability compensation benefits in the amount of $18,153.59 was improperly created. The issue of waiver of recovery of an overpayment of VA disability compensation benefits in the amount of $14,534.40 is dismissed. ____________________________________________ MILO H. HAWLEY Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs