Citation Nr: 1310633 Decision Date: 04/01/13 Archive Date: 04/11/13 DOCKET NO. 10-45 469 ) DATE ) ) On appeal from the Department of Veterans Affairs (VA) Regional Office and Insurance Center (RO) in Philadelphia, Pennsylvania THE ISSUE Entitlement to waiver of overpayment of pension benefits in the amount of $1,893. REPRESENTATION Veteran represented by: The American Legion ATTORNEY FOR THE BOARD Heather J. Harter, Counsel INTRODUCTION The Veteran served on active duty from January 1971 to June 1973. This matter comes before the Board of Veterans' Appeals (Board) from a July 2010 decision by the RO's Committee on Waivers and Compromises (Committee) which denied a waiver of the declared debt. Although the Veteran requested the opportunity to present sworn testimony during a hearing on appeal in his October 2010 substantive appeal, he later withdrew the request for a hearing in April 2011 correspondence from his representative. It appears that the Veteran has two debts which are currently being recouped. The first one is the subject of this decision. Nothing in this decision should be read as applicable to the second debt, which was created in February 2011, and over which the Board does not have jurisdiction. FINDING OF FACT The VA's fault in the creation of this debt is so significant as to outweigh the other factors in the case. CONCLUSION OF LAW Recovery of the pension overpayment indebtedness in the amount of $1,893 would be against equity and good conscience. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.914, 1.962, 1.965, 3.666 (2012). REASONS AND BASES FOR FINDING AND CONCLUSION The debt at issue was created when the Veteran was incarcerated for a period of 106 days from March through June 2009. The amount of the debt represents the amount of pension that the Veteran was paid during the last 45 days of his incarceration. The Veteran contends that he notified the VA of his incarceration and that VA failed to reduce his pension payments following 61 days as required by law. He contends he bears no fault in the creation of the debt and therefore requests a waiver of the declared overpayment debt. His representative additionally requests that the Board consider the Veteran's fragile mental state in our review so as to avoid any exacerbation of his service-connected disability. Duty to notify Claims for waiver of debt owed to the VA are governed by the provisions of Chapter 53 of Title 38 of the United States Code. This statute contains its own specific notice provisions. Review of the record shows that the veteran received notice of his debt which conforms to the requirements of 38 U.S.C.A. § 5302 and its implementing regulations. The United States Court of Appeals for Veterans Claims (Court) has held that the notice and duty to assist provisions of the Veterans Claims Assistance Act of 2000, Pub. L. No. 106-475, 114 Stat. 2096 (Nov. 9, 2000) (VCAA), which are relevant to a different chapter of title 38, and thus do not apply to this appeal. Barger v. Principi, 16 Vet. App. 132 (2002). In any event, the veteran is not prejudiced by the determination below. History and analysis The VA granted pension benefits to the Veteran in September 1992, based upon disabilities which precluded him from employment. These subsistence pension benefits remained in effect until October 2010, when an increase in the disability rating assigned to his service-connected disabilities was awarded so that his compensation benefit amount exceeded the amount of the pension benefit. VA law and regulations provide that if any individual to whom VA pension benefits are being paid is imprisoned in a Federal, State or local penal institution as the result of conviction of a felony or misdemeanor, such compensation payments will be discontinued effective on the 61st day of imprisonment following conviction. Apportionment of such pension benefits may be made to dependents of the prisoner under certain circumstances. 38 U.S.C.A. § 1505; 38 C.F.R. § 3.666. The evidence of record reflects that the Veteran was incarcerated on account of drug charges in March 2009. According to the July 2010 waiver decision, the Veteran submitted written notification of his incarceration in February 2009. This document is not contained within his VA claims file; however, the mention of it in the waiver decision is sufficient to prove that he notified the VA in a formal manner at that time. He also reported it to his VA primary care physician in February 2009. The treatment note reflecting his annual examination conducted in February 2009 reads as follows: "Here for annual examination. This was moved up due to back pain as noted last time, and his impending incarceration March-July." Later in the same report, his physician noted that he was a smoker, "not likely to stop at this point, as he is about to serve jail term Mar-July." It would appear that no action was taken to amend the Veteran's pension payments following receipt of his February 2009 notification. Furthermore, the information about the Veteran's incarceration was not communicated from the VA medical system to the VA benefits payment system and no action was taken to stop the Veteran's pension payments contemporaneously with his incarceration. In May 2010, nearly an entire year after the Veteran had served the first 61 days of his incarceration; the VA's Debt Management Center informed the Veteran of the amount of his debt and informed him that his pension benefit would be withheld effective in August 2010, to recoup the monies which were overpaid. The Veteran submitted a timely notice of disagreement and requested that a small sum of money be deducted from his VA benefit check each month until the total amount had been repaid. Accounting documents contained in the file reflect that eventually the sum of $53 a month was deducted from his pension payments. Upon review, the Board finds that the VA had constructive notice of the Veteran's incarceration within 61 days of that event, in the form of the VA medical records generated in February 2009, prior to his incarceration. At this time, the Veteran informed his physician of the upcoming incarceration and of the exact time period he would be incarcerated. As a practical matter, the VA employees responsible for authorizing monetary benefit payments do not comb through medical records looking for possible relevant information. Thus, it is clear that the medical records did not constitute actual notice. However, this is irrelevant to the analysis of this appeal, however, because any VA records are deemed to be constructively of record in proceedings before other parts of the overall VA organization. Bell v. Derwinski, 2 Vet. App. 611 (1992). More importantly, it appears they had actual notice as the waiver decision indicates that the Veteran indeed provided such actual notice in a timely fashion, prior to his incarceration. Validity In the analysis of a waiver of indebtedness case, VA must make an initial determination regarding whether the debt is valid before deciding whether a waiver of the debt is in order. Schaper v. Derwinski, 1 Vet. App. 430, 433-7 (1991). In this case, the debt was created because the VA continued to pay pension benefits to the Veteran during approximately six weeks when he was incarcerated and thus not entitled to receive pension benefits. Because these benefits were paid when the Veteran was not entitled to receive any money from the VA, the resulting overpayment debt was properly declared. If a debt was the result solely of administrative error, no overpayment may be charged to the Veteran for the portion of the overpayment attributable to administrative error. Jordan v. Brown, 10 Vet. App. 171 (1997). However, where an erroneous award is based on an act of commission or omission by a payee or with the payee's knowledge, sole administrative error is not present. Id. In Jordan, the Court also found that sole administrative error was not present if the payee knew, or should have known, that the payments were erroneous. In this case, the Veteran did notify the VA of his impending incarceration, and we can reasonably presume that he did so because he was aware of the requirement that pension cannot be paid after the first 61 days of incarceration. Furthermore, the money that was deposited into his bank account was spent, as the Veteran asserted that he could not pay it back in one or even several lump sum payments. Thus, we decline to find sole administrative error in the creation of this debt. Although the Veteran benefitted from the VA pension benefits which were erroneously paid, the VA was at fault in continuing to pay them, when VA had been notified of the incarceration. Absent sole administrative error, therefore, we find that the debt was valid. Waiver We next turn to the question of whether recovery of the properly-declared debt in the amount of $1,893 may be waived. The Veteran contends that he should not have to repay the debt as he did everything he could have done to prevent it. He also asserts that to repay the debt would cause him financial hardship. The Committee did not find fraud, misrepresentation, or bad faith on the part of the veteran with respect to the creation of the overpayment at issue. The Board, after an independent review of the record, concurs with this determination. Therefore, waiver is not precluded under the provisions set forth in 38 U.S.C.A. § 5302(a). However, to dispose of this matter on appeal, the Board must determine whether the recovery of the overpayment would be against the principles of equity and good conscience, thereby permitting waiver under 38 U.S.C.A. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). The regulation provides that the standard of 'equity and good conscience' will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). In such a determination consideration will be given to elements which include the degree of fault of the debtor; a balancing of fault between the debtor and VA; whether recovery of the overpayment would result in unjust enrichment, or cause undue financial hardship to the debtor; and whether repayment of the debt would defeat the purpose for which it was intended. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.965. With regard to 'fault,' it appears that the Committee was entirely incorrect in finding the Veteran at fault in this matter. Rather, it appears that the fault is almost entirely on the side of the VA. If the VA had responded to the Veteran's February 2009 notice of his upcoming incarceration in a timely manner, and had taken the proper steps to notify the officials responsible for authorizing the payment of monthly benefits at that time, the Veteran's pension benefits could reasonably have been stopped effective as of day 62 of his incarceration. However, no such action was taken. Rather, the authorizing officials inexplicably failed to take action until fifteen months after receiving the Veteran's notification. If the RO had taken action to terminate his pension benefit payments as early as June 2009, the overpayment could have been significantly minimized, to an amount representing two weeks of pension benefits, rather than six weeks' worth of benefits. The Veteran's fault consists only of spending the money which was deposited into his account, even though he probably knew and should have known in any case, that he was not entitled to those particular benefits. Thus, in weighing the respective faults of the two parties, we find ample fault on the part of the VA in the creation of this debt, and minimal fault on the part of the Veteran. As the fact pattern shows that the Veteran received pension benefits to which he was not entitled, it is reasonable to conclude that he was unjustly enriched. Thus, his failure to make restitution would result in unfair gain to the Veteran. In this regard, we note that the Veteran's obligation to the VA carries the same weight as any other obligations. As to the element of 'undue financial hardship,' the Board observes that the regulation provides that consideration should be given to whether collection of the indebtedness would deprive the debtor or his family of the basic necessities. Subsequent to the creation of the debt at issue, the Veteran was awarded a total disability rating for purposes of compensation based upon individual unemployability due to service-connected disabilities, effective in October 2010. This is a greater monetary benefit. Thus, his current financial situation is improved as compared to the point in time when this debt was declared. Especially as the debt was being collected in small monthly increments, the Board finds that collection of this indebtedness would not cause such severe hardship as to deprive the Veteran or his wife of basic necessities. There is no evidence that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits. There is no indication contained in the record that the veteran relied upon the VA or any assurance made by the VA to his detriment. The question of whether he changed his position to his own detriment is thus inapplicable to this case. The purpose of the VA pension program is to provide a subsistence living for veterans of a period of war who have no alternative means of support. In this case, the Veteran does not have alternative means of support, and indeed, relies upon his VA benefits for his subsistence. Thus, waiving the indebtedness resulting from the overpayment of VA pension benefits in this case would defeat the purpose of the VA pension benefit. See Cullen v. Brown, 5 Vet. App. 510 (1993). After having considered all the elements comprising the standard of equity and good conscience, the Board holds that the VA's fault in the creation of this debt far outweighs any other consideration. The fact that the VA could have avoided the creation of the debt altogether, or at least substantially minimized the amount of the debt, simply by performing its routine duties in a more prompt and timely manner is so significant that other considerations pale by comparison. The Board therefore holds that the evidence supports waiver of the debt resulting from the overpayment of pension benefits when the Veteran was incarcerated. ORDER Waiver of the declared debt resulting from the overpayment of pension benefits in the amount of $1,893 is granted. ____________________________________________ Mark W. Greenstreet Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs