Citation Nr: 1126853 Decision Date: 07/19/11 Archive Date: 07/29/11 DOCKET NO. 09-46 088 ) DATE ) ) On appeal from the Department of Veterans Affairs (VA) Regional Office (RO) in Milwaukee, Wisconsin THE ISSUE Entitlement to a waiver of the recovery of an overpayment of pension benefits, in the amount of $4,375.64. REPRESENTATION Veteran represented by: Disabled American Veterans ATTORNEY FOR THE BOARD Matthew Blackwelder, Counsel INTRODUCTION The Veteran had active military service from July 1971 to December 1972. This appeal comes to the Board of Veterans' Appeals (Board) from an August 2009 rating decision. FINDINGS OF FACT 1. The amount of overpaid pension benefits is $4,375.64. 2. The Veteran was at fault in the creation of the overpayment of pension benefits because, despite the notice provided to him, he did not timely notify VA of his incarceration. VA was not at fault in the creation of the overpayment of the benefits. 3. The failure of the Government to insist upon its right to repayment would result in unjust enrichment of the Veteran, inasmuch as he accepted benefits to which he was not entitled, based on his incarceration. 4. Collection of that indebtedness would not defeat the purpose of the benefit program, or otherwise be inequitable. CONCLUSION OF LAW Recovery of the overpayment of VA pension benefits, in the amount of $4,375.64, is not against equity and good conscience. 38 U.S.C.A. §§ 5107, 5302 (West 2002); 38 C.F.R. §§ 1.963, 1.965 (2010). REASONS AND BASES FOR FINDINGS AND CONCLUSION Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), 38 U.S.C.A. § 5100 et seq; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a), made several amendments to the law governing certain VA claims, to include redefining VA's duty-to-assist and notification obligations. However, these changes are not applicable to claims such as the one decided herein. See Barger v. Principi, 16 Vet. App. 132 (2002). The United States Court of Appeals for Veterans Claims (Court) in Barger held that the VCAA, with its expanded duties, is not applicable to cases involving waiver of recovery of overpayment claims, pointing out that the statute at issue in such cases was not found in Title 38, United States Code, Chapter 51. Analysis The law provides that if any person to whom pension is being paid is imprisoned as the result of conviction of a felony or misdemeanor, such pension payments will be discontinued effective on the 61st day of imprisonment following conviction. 38 C.F.R. § 3.666. In this case, an overpayment of $4,375.64 was created when the Veteran was incarcerated from March 14, 2006 to October 13, 2006, but failed to inform VA of his incarceration. The Veteran does not dispute the creation of the overpayment, and no evidence has been received contesting the propriety of the creation of the overpayment. As such, the analysis will turn to whether waiver of the overpayment is appropriate. According to the applicable law and regulations, recovery of overpayments of any benefits made under the laws administered by VA shall be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver and if the recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C.A. § 5302; 38 C.F.R. §§ 1.962, 1.963(a), 1.965. The Committee on Overpayments determined in August 2006 that there was no fraud, misrepresentation, or bad faith on the part of the Veteran in the creation of the overpayment, thus removing any legal impediment to the granting of a waiver in this matter. The question now before the Board is whether the facts dictate that a waiver should be granted under the standard of "equity and good conscience." The phrase "equity and good conscience" means the arrival 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 the debtor, (2) balancing of faults between the debtor and VA, (3) undue hardship of collection on the debtor, (4) defeat of the purpose of an existing benefit to the appellant, (5) unjust enrichment of the appellant, and (6) whether the appellant changed positions to his or her detriment in reliance upon a granted VA benefit. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.965(a). The standard of "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. 38 C.F.R. § 1.965(a). The Veteran asserts that he is entitled to a waiver of recovery of the overpayment because he was unaware of the law that prevented him from collecting his full benefit while incarcerated, and because of the financial hardship that would result if the debt were not waived. As noted, the Board must determine whether a waiver should be granted under the standard of "equity and good conscience." The first factor is to consider the fault of the debtor in creating the debt. The Veteran argues that he was unaware of the law requiring him to notify VA if he was incarcerated. However, the Supreme Court has held that everyone dealing with the Government is charged with knowledge of federal statues and lawfully promulgated agency regulations. Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380, 384-385 (1947). Regulations are binding on all who seek to come within their sphere, "regardless of actual knowledge of what is in the [r]egulations or of the hardship resulting from innocent ignorance." Id. at 385, Morris (John) v. Derwinski, 1 Vet. App. 260, 265 (1991). Accordingly, the Veteran's argument of lack of actual knowledge is insufficient to show lack of fault. Furthermore, it cannot be said that VA was at fault for the Veteran's lack of knowledge as a review of the record shows that the Veteran was informed on multiple occasions by VA as to his responsibility in receiving non-service connected pension. For example, in the letter accompanying the March 2005 rating decision awarding non-service connected pension it was plainly explained to the Veteran that certain obligations accompanied the award of VA pension. Specifically, the Veteran was told that it was his responsibility to inform VA if his income changed, if his medical expenses were reduced or if his address or phone number changed. It was also noted in the letter that a VA Form 21-8768 "Disability Pension Award Attachment-Important Information" was being included. There is a presumption of regularity under which it is presumed that government officials "have properly discharged their official duties." United States v. Chem. Found., Inc., 272 U.S. 1, 14-15 (1926); Mindenhall v. Brown, 7 Vet. App. 271, 274 (1994) (VA need only mail notice to the last address of record for the presumption to attach). This presumption of regularity in the administrative process may be rebutted by "clear evidence to the contrary." Schoolman v. West, 12 Vet. App. 307, 310 (1999). As correspondence sent to the Veteran indicated that VA Form 21-8768 was provided to the Veteran, the Board finds that the presumption of regularity attaches and it is therefore presumed the Veteran was in fact provided with the form. Form 21-8768 specifically states that: Your benefits will be discontinued effective the 61st day of incarceration in a Federal, State or local penal institution following conviction for a felony or misdemeanor... IMPORTANT Notify us immediately if there is a change in any condition affecting your right to continued payments. Failure to notify us of these changes immediately will result in an overpayment which is subject to recovery. As such, the Veteran was clearly on notice that if he had a change in his living situation, he had an obligation to inform VA. He was also explicitly informed that failure to notify VA of important changes would result in an overpayment that would be subject to recovery. In April 2005, in conjunction with his clarifying of direct deposit information, the Veteran was again reminded to notify VA about any change in mailing address. As such, the Veteran cannot argue that VA did not make an effort to inform him of his responsibilities. The RO was eventually notified of the Veteran's incarceration based on a Social Security Administration (SSA) prison match, and took appropriate action thereafter to stop the Veteran's VA benefits. See 38 C.F.R. § 3.666. Thus, when weighing the faults in the creation of the debt, the facts of this case clearly show that the Veteran must bear the entirety of the fault. VA acted appropriately in informing the Veteran of his responsibilities which accompanied his receipt of non-service connected pension benefits, and VA acted in a timely manner to reduce the Veteran's benefits once informed of his incarceration. The next consideration is whether requiring repayment of the overpayment would impose undue hardship of collection on the debtor, thereby defeating the purpose of the benefit to the Veteran. With regard to whether collection of the overpayment would defeat the purpose of the benefit, the Board notes that withholding of benefits or recovery would not nullify the objective for which benefits were intended since the Veteran was paid benefits even though he was incarcerated at the government's expense. The Veteran would be unjustly enriched if the benefits were not recovered, since failure to make restitution would result in unfair gain to the Veteran, as he was erroneously paid benefits to which he was not entitled. It is noted that one of the reasons that benefit money is reduced during incarceration is that the government is assuming the responsibility, meaning cost, to house and feed an incarcerated Veteran. The Board has also considered whether the Veteran would suffer undue financial hardship if forced to repay the debt at issue, but since he provided conflicting financial status information, it is concluded he would not. In this regard, in May 2008, the Veteran indicated that his net monthly income was $930. His expenses included $238 for rent, $200 for food, and $40 for utilities and heat, bringing his total expenses to $478. Thus, it shows an income in excess of expenses in the amount of $452. In August 2009, the Veteran's reported expenses increased sharply. He indicated that his net monthly income was $985. His expenses included $274 for rent, 250 for food, $48 for utilities and heat, $200 for phone/cable, $50 for clothing, $75 for transportation, and $100 for toiletries/cleaning/laundry, bringing his total reported expenses to $997. While the Veteran's expenses undoubtedly increased, it would seem these reported expenses cover far more than basic necessities, particularly the television and telephone expenses. Thus, on this record the Board cannot conclude repayment would produce undue financial hardship. In his substantive appeal, the Veteran argued that all the pension money he received while in prison was used to pay his rent and utilities. However, this statement appears to be implausible on its face as even in 2009 the Veteran's rent and utilities totaled less than $350 while the Veteran was receiving $985. Although the monthly pension payout was lower in 2006 than it is currently, the fact remains that the Veteran's statement appears to be patently false or at the very least exaggerated, as to say all his money was going to rent and utilities would imply that he would not have had any money for necessities such as food at that time. The Veteran has also asserted that he was deemed incompetent for VA purposes in February 2006, but was not appointed a fiduciary until February 2008, several years after his incarceration; and he believes that he should therefore not be held accountable for his failure to notify VA of his incarceration. The Board has carefully considered this argument, but ultimately considers it unpersuasive. The RO issued a proposal of incompetency for the Veteran in October 2005 based on the report of a May 2005 VA examination. In the examination report, the examiner explained that the Veteran was not competent for VA purposes, because he had repeatedly demonstrated his inability to manage his funds when any were available, as he continued to use his money to purchase illicit substances without apparent regard for his basic needs such as food. As such, the Veteran was not found incompetent because of mental incapacity, but rather because he used his government pension to purchase illicit substances rather than basic necessities such as food. Furthermore, the fact remains that after being declared incompetent in a February 2006 and prior to a guardian be appointed, the Veteran, on his own, promptly filed a notice of disagreement that was received in March 2006 (while the Veteran was actually incarcerated). As such, it may be reasonably inferred the Veteran had the capacity to communicate appropriately on the matters at issue here. There is also no indication that the Veteran changed positions to his detriment in reliance upon the pension that was paid to him while incarcerated. In sum, the Board concludes that the negative evidence outweighs the positive evidence and that the facts in this case do not demonstrate that the recovery of the overpayment would be against equity and good conscience. 38 U.S.C.A. § 5107(b). Financial hardship is not shown, the overpayment is the fault of the Veteran and not the fault of VA, and the Veteran would be unjustly enriched if he were allowed to keep the benefits to which he was not entitled. In essence, the elements of equity and good conscience are not in the Veteran's favor. (CONTINUED ON NEXT PAGE) ORDER Waiver of the recovery of an overpayment of pension benefits, in the amount of $4,375.64, is denied. ____________________________________________ MICHAEL E. KILCOYNE Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs