Citation Nr: 0811658 Decision Date: 04/09/08 Archive Date: 04/23/08 DOCKET NO. 05-05 830 ) DATE ) ) Received on appeal from the Department of Veterans Affairs Regional Office in St. Petersburg, Florida THE ISSUE Entitlement to waiver of recovery of an overpayment of improved disability pension benefits, in the calculated amount of $23,377.77. (The issues of entitlement to service connection for a psychiatric disorder (variously claimed and diagnosed) and entitlement to a total disability rating based on individual unemployability due to service-connected disabilities (TDIU) are the subject of a separate Board decision.) ATTORNEY FOR THE BOARD J. Parker, Counsel INTRODUCTION The veteran had active military service from June 1966 to April 1970. This matter comes before the Board of Veterans' Appeals (Board) on appeal from an April 2002 determination by the VA Regional Office (RO) Committee on Waivers and Compromises (Committee) in New York, New York, which denied waiver of recovery of the assessed overpayment on the basis of finding of fraud and bad faith. The veteran entered a notice of disagreement with this decision in April 2002; the New York, New York RO issued a statement of the case in February 2005; and the veteran entered a substantive appeal in February 2005. The veteran indicated that he had permanently moved to Florida, and in February 2005 the case was transferred to the RO in St. Petersburg, Florida. FINDINGS OF FACT 1. The veteran was a VA benefits counselor from May 1979 to March 1996, when he was placed on leave, pending disability retirement, and was started on leave without pay in June 1996. 2. The veteran was incarcerated on a felony conviction beginning February 9, 1999, which incarceration lasted until April 5, 2001; and the veteran did not notify VA of his felony incarceration. 3. A RO letter dated in September 1999 notified the veteran of entitlement to disability pension benefits, effective from August 1996, and included notice that VA would discontinue pension benefits payable to a person who is incarcerated in excess of 60 days as a result of felony conviction 4. The veteran's failure to disclose his felony incarceration to VA constituted unfair or deceptive dealing to seek an unfair advantage; the September 1999 notice and the veteran's VA experience as a benefits counselor shows he had knowledge that an overpayment would result from receiving pension payments after the 61st day of felony incarceration; and the veteran's failure to disclose his incarceration and continued receipt of pension payments while incarcerated resulted in a loss to the government in the amount of $23,377.77. CONCLUSION OF LAW Waiver of the recovery of an overpayment of improved pension benefits in the calculated amount of $23,377.77, is precluded by bad faith on the veteran's part. 38 U.S.C.A. § 5302(c) (West 2002 & Supp. 2007); 38 C.F.R. §§ 1.962(b), 1.963(a), 1.963a(b), 1.965(b) (2007). REASONS AND BASES FOR FINDINGS AND CONCLUSION Notice and Assistance The United States Court of Appeals for Veterans Claims (Court) has held that the notice and duty to assist requirements of 38 U.S.C.A. §§ 5103, 5103A (West 2002 & Supp. 2007) and 38 C.F.R. § 3.159 (2007) do not apply to a claim for waiver of recovery of an overpayment. The Court also observed that the statute pertaining to waiver claims, 38 U.S.C.A. § 5302, includes its own notice procedures. Barger v. Principi, 16 Vet. App. 132 (2002). In addition, notice and duty to assist provisions have no effect on an appeal where the law, and not the underlying facts or development of the facts are dispositive in a matter. Manning v. Principi, 16 Vet. App. 534, 542-43 (2002). See also Dela Cruz v. Principi, 15 Vet. App. 143, 149 (2001); Mason v. Principi, 16 Vet. App. 129 (2002); see also VAOPGCPREC 5-2004. Bad Faith as a Bar to Waiver The law precludes waiver of recovery of an overpayment of any indebtedness 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 requesting waiver of recovery of the overpayment. 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.962(b), 1.963(a), 1.963a(b), 1.965(b). In order to establish actual fraud, it must be determined that there was willful misrepresentation of a material fact, or the willful failure to disclose a material fact, with the intent of obtaining or retaining eligibility for VA benefits. It must be shown that the willful intent to either misrepresent or fail to disclose was done with the debtor's knowledge that such misrepresentation or failure would result in the erroneous award or erroneous retention of VA benefits. Essentially, there must be a finding that the person willfully failed to disclose a material fact or willfully misrepresented a material fact, and there must be a finding that the debtor had knowledge that such misrepresentation of failure would result in an erroneous award or erroneous retention of VA benefits. 38 C.F.R. § 1.962(b). Misrepresentation is defined as any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts. Further, misrepresentation is an untrue statement of fact, and incorrect or false representation, and that which, if accepted, leads the mind to an apprehension of a condition other and different from that which exists. Colloquially, it is understood to mean a statement made to deceive or mislead. Black's Law Dictionary, 1001 (6th ed. 1990). The misrepresentation must be more than non-willful or mere inadvertence. 38 C.F.R. § 1.962(b). Bad faith is defined as unfair or deceptive dealing by one who seeks to gain thereby at another's expense. A debtor's conduct in connection with a debt arising from participation in a VA benefits/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government. 38 C.F.R. § 1.965(b)(2). In this case, the record reflects that the veteran was a VA benefits counselor from May 1979 to March 1996. He was placed on leave without pay in June 1996, pending disability retirement, which was subsequently denied. In August 1996, the veteran filed for VA non-service- connected disability pension benefits. The veteran did not fully report employment information in his VA application, as he did not report the dates of employment or income he had received from employment. In the pension claim, the veteran also indicated that he was married, and that neither he nor his wife had any net worth or any income whatsoever. In January 1999 (VA Report of Contact), the veteran again reported that from August 1996 to the present neither he nor his spouse had received any source of income, and that neither he nor his wife had any net worth. The veteran was advised that pension benefits were based on disability and income, and that he was to report any income changes. The veteran was incarcerated on a felony conviction beginning February 9, 1999, which incarceration lasted until April 5, 2001. This information was verified. A RO letter dated in September 1999 notified the veteran of entitlement to disability pension benefits, effective from August 1996. The letter included VA Form 21-8768 (Disability Award Pension Attachment) that included notice that VA would discontinue pension benefits payable to a person who is incarcerated in excess of 60 days as a result of felony conviction, and that the spouse of the veteran may be entitled to benefits at the death pension rate from the date benefits to an incarcerated veteran are discontinued if the spouse's claim is received within one year after notice to the veteran. Following verification of the veteran's felony incarceration, a July 2001 letter to the veteran proposed to adjust pension benefits, and adjustment was made effective from April 10, 1999, the 61st day of felony incarceration. In October 2001, the proposed adjustment was made, a letter is sent to the veteran detailing the rates and dates of his adjusted award. In October 2001, the Debt Management Center sent the veteran an overpayment letter. In April 2002, the Committee denied the veteran's request for wavier of recovery of the assessed overpayment based on a finding of fraud and bad faith in the creation of the overpayment. In its decision, the Committee indicated that the veteran was had been notified of his specific obligations as a benefits recipient on many occasions to notify VA of his incarceration. The Committee found that the veteran's failure to do so constituted bad faith and fraud and that, waiver of recovery of the indebtedness was precluded by law. After a review of the evidence, the Board finds that the veteran's failure to disclose his incarceration to VA constituted unfair or deceptive dealing to seek an unfair advantage. His VA veterans benefits counselor experience and the September 1999 pension award notice show the veteran had knowledge of the likely consequences of failing to report his felony incarceration -payment of full pension benefits during the period of felony incarceration in excess of 60 days for which he was not entitled to any pension benefits - and that such actions would create an overpayment. From the September 1999 notice of VA benefits and that VA would discontinue pension benefits payable to a person who is incarcerated in excess of 60 days as a result of felony conviction, the veteran was in receipt of pension payments that he knew he was not entitled to. The September 1999 letter placed the veteran on notice of the need to notify VA of a felony incarceration. In addition, because the veteran had been a VA benefits counselor, he was well aware of the fact that he needed to notify VA of his felony incarceration, both because the 61st day of felony incarceration constituted a basis for reduction of pension benefits, and because the long-term incarceration constituted a change of address. Following the September 1999 notice that VA would discontinue pension benefits payable to a person who is incarcerated in excess of 60 days as a result of felony conviction, the veteran kept silent as to his incarceration, all the while receiving full VA pension benefits. The veteran's failure to disclose his incarceration and continued receipt of pension payments during his felony incarceration resulted in a loss to the government. The veteran received and negotiated the retroactive pension check in the amount of $34,674 while he was still in prison. The veteran's October 2001 statement that "VA had knowledge at all times of my situation" is untrue and without any basis in fact. VA was unaware of the veteran's incarceration at the time pension benefits were awarded in September 1999. The record is negative for any evidence that, from the time the veteran was incarcerated in February 1999, he informed VA either of his incarceration or of his change of address. It was VA that discovered the veteran's incarceration, as the veteran did not disclose the fact of incarceration to VA. For these reasons, the Board concludes that the veteran's actions constituted acts of bad faith on his part and were the direct cause of the pension overpayment at issue. The evidence establishes a willful intent on the veteran's part to obtain VA benefits to which he was not entitled. The finding of bad faith on the part of the veteran constitutes an absolute bar to waiver of recovery of the overpayment in question. 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.965(b). The Board finds that the veteran's conduct, under the circumstances, constitutes bad faith and is a bar to waiver of recovery of the indebtedness of the amount of $23,377.77. 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.965(b). ORDER A waiver of the recovery of an overpayment of disability pension benefits in the calculated amount of $23,377.77, is precluded by evidence of bad faith on the veteran's part. ____________________________________________ A. BRYANT Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs