Citation Nr: 1307863 Decision Date: 03/08/13 Archive Date: 03/11/13 DOCKET NO. 06-22 645 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office and Insurance Center in Philadelphia, Pennsylvania THE ISSUE Entitlement to waiver of recovery of an overpayment of nonservice-connected pension benefits in the amount of $4,859.00 (US dollars). (The issue of entitlement to special monthly pension is addressed in a separate action by the Board.) REPRESENTATION Appellant represented by: The American Legion WITNESSES AT HEARING ON APPEAL Veteran ATTORNEY FOR THE BOARD A.G. Alderman, Counsel INTRODUCTION The Veteran had active military service from January to November 1969. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a February 2005 decision by the Department of Veterans Affairs (VA), Debt Management Center, in St. Paul, Minnesota. The case was transferred to the Regional Office and Insurance Center (RO) in Philadelphia, Pennsylvania. The Board would note that the appellant lives in the geographical area that is serviced by the St. Petersburg, Florida, Regional Office. In September 2009, the Board found that the Veteran's request seeking waiver of the $4,859.00 was timely and remanded the matter back to the RO for adjudication of entitlement to a waiver of the overpayment. In June 2011, the Board remanded the claim for the scheduling of a hearing before a member of the Board. A hearing was held before the Board via videoconference in December 2012. A transcript of the hearing has been associated with the claims file. FINDINGS OF FACT 1. The overpayment of pension benefits in the amount of $4,859 was properly created. 2. There is no indication that the Veteran engaged in fraud, misrepresentation, or bad faith in creating the alleged overpayment. 3. The Veteran's failure to report his incarceration is the sole cause of the overpayment. 4. A waiver of repayment of this debt would result in unfair enrichment to the Veteran; recovery of this overpayment will not subject him to undue hardship. 5. Denial of the waiver request would not defeat the purpose of the award of VA disability compensation benefits. 6. There is no indication the Veteran relinquished a valuable right or incurred a legal obligation in reliance upon the additional benefits received. CONCLUSIONS OF LAW 1. There is a valid debt resulting from an overpayment of benefits in the amount of $4,859. 38 U.S.C.A. §§ 1503, 1542, 5112 (West 2002 & Supp. 2012); 38 C.F.R. §§ 3.23, 3.103, 3.271, 3.272, 3.500, 3.501 (2012). 2. The criteria for waiver of recovery of the $4,859 overpayment have not been met. 38 U.S.C.A. §§ 5107, 5302(a) (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.956(a), 1.962, 1.963(a), 1.965(a) (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran has appealed the denial of waiver of recovery of overpayment of benefits in the amount of $4,859. He argues that VA was informed of his incarceration but continued to pay his monthly pension, resulting in the overpayment. Accordingly, he seeks a waiver of the overpayment which was allegedly due to VA's delayed action. The preliminary issue of the validity of a debt is a threshold determination that must be made prior to a decision on a request for waiver of the indebtedness. See VAOPGCPREC 6-98; Schaper v. Derwinski, 1 Vet. App. 430 (1991). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. § 1.962 (2012). An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956(a) (2012). Once it is determined that the indebtedness was validly created, but before moving on to the matter of waiver of the charged indebtedness, if there is a finding of fraud, misrepresentation, or bad faith by the debtor in the creation of the overpayment, then waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 C.F.R. §§ 1.962, 1.963, 1.965(b) (2012). VA regulations define "bad faith" as unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, 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). After it has been determined that the debt is valid and that fraud, misrepresentation and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against equity and good conscience. The phrase "equity and good conscience" means arriving at a fair decision between the obligor and the government. See 38 C.F.R. § 1.965. 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 - where actions of the debtors contribute to the creation of the debt; (2) Balancing of faults - weighing fault of the debtor vs. the fault of the VA; (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 benefits were intended; (5) Unjust enrichment - failure to make restitution would result in unfair gain to the debtor; (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. It is the Board's responsibility to evaluate the entire record on appeal. See 38 U.S.C.A. § 7104(a) (West 2002). When there is an approximate balance in the evidence regarding the merits of an issue material to the determination of the matter, the benefit of the doubt in resolving each such issue shall be given to the claimant. 38 U.S.C.A. § 5107(b) (West 2002); 38 C.F.R. § 3.102 (2012). In December 2002, the Veteran's monthly payment was adjusted and he was advised to notify VA in writing immediately of any change of address. He was jailed on July 24, 2003 and paroled on September 8, 2005. The Veteran did not inform VA of his incarceration; rather, he told the correctional facility about his receipt of VA benefits and believed that the correctional facility notified VA of his imprisonment. However, the correctional facility did not inform VA of his incarcerated status and VA continued to pay benefits, resulting in overpayment. VA did not discover his incarcerated status until September 2004 when his information was identified via Social Security Administration (SSA) prison match. On November 8, 2004, VA informed him that his benefits should have been terminated beginning on the 61st day of his incarceration. 38 U.S.C.A. § 1505 (West 2002); 38 C.F.R. § 3.666. Notably, the letter was sent to the Veteran's home address and not the prison; however, this procedure is consistent with the VA's Adjudication Procedures Manual ("M21-MR"), Part X, Subpart 15, Chapter 2, Section i. VA provided the Veteran with 60 days to respond to the notice of termination of benefits. VA calculated the benefits that he should have been paid from September 22, 2003, the 61st day of his imprisonment, until February 12, 2005, the date VA took action to terminate the pension award. This calculation revealed an overpayment of benefits in the amount of $4,859. Since the Veteran did not inform VA of his incarceration and was paid full benefits from September 22, 2003 until February 12, 2005, the Board finds that the overpayment is valid. While it is arguable that VA should have stopped benefits in September 2004, the M21-MR provides investigation procedures to determine incarcerated status when a match is found via SSA Prison match prior to terminating benefits. Had the Veteran directly informed VA of his imprisonment, the overpayment would not have occurred. Since the overpayment is valid, the Board must determine whether waiver is precluded by fraud, misrepresentation, or bad faith in the creation of the overpayment. In this case, the Board finds no evidence of these preclusions. The Veteran was imprisoned. While he should have informed VA of his status, the Board finds that his failure to do so was not an act of fraud, misrepresentation, or bad faith. The remaining question before the Board then is whether recovery of the overpayment would be against equity and good conscience. 38 C.F.R. § 1.965(a); Ridings v. Brown, 6 Vet. App. 544 (1994). In determining whether the recovery of the overpayment would be against equity and good conscience, the first consideration is whether the Veteran was at fault in the creation of the overpayment. In this case, the Board finds that the Veteran was solely at fault in the creation of the overpayment. He argues that the correctional facility informed VA about his incarceration and that VA continued to deposit his pension to his bank account despite being informed of his incarceration. In support of his argument are letters from VA dated November 2004 and February 2005 which show notice of his incarceration and of the accruing overpayment. The Veteran believes that the overpayment was VA's fault as VA continued to deposit monthly sums despite having notice of his incarceration. However, the claims file does not show that the correctional facility notified VA of his status and even if the correctional facility indicated that it would inform VA of his incarceration, the Veteran had a duty to ensure that VA was notified of his change of address and imprisonment. Despite his arguments, the Board finds that the Veteran was ultimately responsible for informing VA of his incarcerated status and failed to ensure that VA was so informed. As noted above, VA was not directly informed of his incarceration and was indirectly notified via the SSA prison match system, at which time VA began an investigation to stop benefits. Prior to VA's action to terminate benefits, he continued to accept benefits to which he knew or should have known that he was not entitled. The question of fault is a different question than that of fraud or bad faith. Persons dealing with the Government are charged with knowledge of Federal statutes and lawfully promulgated agency regulations, regardless of whether the individual has actual knowledge of the regulation. Morris v. Derwinski, 1 Vet. App. 261 (1991); Fed. Crop Ins. Corp. v. Merrill, 332 U.S. 380 (1947). As the Veteran may be charged with knowledge of an agency regulation whether or not he had actual notice, in this case that he was prohibited from receiving payments while he was incarcerated, he is at fault in the creation of the debt. The second element to consider is the balancing of faults, which requires a weighing of the fault of the debtor against the fault of VA. 38 C.F.R. § 1.965(a)(2). The Board finds that VA acted promptly once it became aware of the overpayment and was not at fault for the creation of the debt. The lack of fault on the part of the VA does not outweigh the fault on the part of the Veteran in the creation of the debt. That weighs against a finding that recovery of the overpayment would be against equity and good conscience. The next question for consideration is whether collection of the debt would cause the Veteran undue financial hardship. Here, the Veteran's debt has already been repaid and he has not argued that repayment caused financial hardship. The Board must consider whether reliance on the benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that he relinquished a valuable right or incurred a legal obligation in reliance on VA continuing to pay non-service-connected pension. The Board must also consider whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. In this case, the purpose of non-service connected VA pension would not be defeated. The purpose of non-service connected disability pension benefits is to compensate impairment in earning capacity due to a non-service-connected disorder. 38 U.S.C.A. § 1501 et. seq. In light of the purpose underlying such benefits, the Board finds that repayment of the debt at issue in this case would not conflict with the objective underlying the benefits, as the Veteran was not entitled to benefits during the period of time he was incarcerated. Thus, repayment of the debt did not nullify the purpose for which the benefits were intended, since pension benefits may not be paid for any period during which the Veteran is incarcerated. The Board also finds that failure to make restitution would unfairly enrich the Veteran because he received monetary benefits to which he was not entitled. VA continued to make payments after the Veteran was incarcerated. Payments were not warranted starting 61 days after incarceration. While the Veteran argues that he was unaware that the correctional facility did not notify VA of his imprisonment and did not know that VA continued to deposit funds in his account, he had the duty to contact VA about his incarcerated status and to maintain his personal funds. The fact that he was unaware of these facts and did not have access to his bank account while he was incarcerated is not a defense. Under such circumstances, to allow the Veteran to retain the overpaid compensation would constitute unjust enrichment. Finally, the Board must consider whether reliance on the benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. The Veteran has not contended, nor does the evidence show, that he relinquished a valuable right or incurred a legal obligation in reliance on VA continuing to pay pension benefits. In sum, the Board finds that the principles of equity and good conscience would not be violated if VA were to recover the overpayment in question. The Veteran has been found to be at fault in the creation of the debt, and the retention of the overpayment would therefore unfairly enrich the Veteran. Moreover, repayment of the debt did not deprive the Veteran of the ability to provide for basic necessities of life and recovery of the overpayment did not defeat the purpose for which the benefits were intended. Accordingly, the Board finds that the preponderance of the evidence is against the Veteran's claim and waiver of recovery of the overpayment of VA compensation benefits is not warranted. 38 U.S.C.A. § 5107(b); Gilbert v. Derwinski, 1 Vet. App. 49 (1990). With respect to VA's duties to notify and assist the Veteran with this claim, the provisions that set forth notice and assistance requirements on the part of VA in the adjudication of certain claims are not applicable to requests for waiver of recovery of overpayments. Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132 (2002); 38 U.S.C.A. § 5103A; 38 C.F.R. § 3.159. ORDER A debt was validly created by the overpayment of service-connected disability compensation benefits in the original amount of $4,859. Waiver of the recovery of the overpayment of disability compensation benefits in the amount of $4,859 is denied. ______________________________________________ L. M. BARNARD Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs