Citation Nr: 1311167 Decision Date: 04/04/13 Archive Date: 04/19/13 DOCKET NO. 10-48 147 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Muskogee, Oklahoma THE ISSUE Entitlement to waiver of recovery of an overpayment of VA educational benefits in the calculated amount of $3,000.00. ATTORNEY FOR THE BOARD K. K. Buckley, Counsel INTRODUCTION The Veteran served on active duty from May 1981 to May 1984. This matter comes before the Board of Veterans' Appeals (Board) on appeal from an April 2010 decision of the Department of Veterans Affairs (VA) Regional Office (RO) in Muskogee, Oklahoma. FINDINGS OF FACT 1. In October 2009, the Veteran requested advanced payment of VA educational assistance benefits in the amount of $3,000.00, thereby creating a valid debt. 2. In October 2009, the Veteran had not applied for VA education benefits for the Fall 2009 term and was not eligible for VA education benefits. CONCLUSIONS OF LAW 1. The debt created by the advance payment of VA educational assistance benefits in the amount of $3,000.00 is valid. 38 U.S.C.A. §§ 501, 3323 (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.911, 21.9695 (2012). 2. Waiver of recovery of the overpayment of VA educational benefits in the calculated amount of $3000.00 is precluded by reason of misrepresentation of a material fact and bad faith on the part of the Veteran. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veterans Claims Assistance Act of 2000 (VCAA) describes VA's duty to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100, 5102, 5103A, 5106, 5107, 5126 (West 2002 & Supp. 2012); 38 C.F.R. §§ 3.102, 3.156(a), 3.159 and 3.326(a) (2012). The United States Court of Appeals for Veterans Claims (Court), however, has consistently held that the VCAA notice provisions do not apply in waiver cases. Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132, 138 (2002). Nevertheless, the Board has reviewed the case for purposes of ascertaining that the Veteran has had a fair opportunity to present arguments and evidence in support of his request for a waiver of overpayment. The Board concludes from this review that the requirements for the fair development of the claim have been met. A waiver of indebtedness may be authorized in a case in which collection of the debt would be against equity and good conscience. 38 U.S.C.A. § 5302(b). In essence, "equity and good conscience" means fairness to both the Veteran and to the government. 38 C.F.R. § 1.965(a) (2012). Under the regulation, "equity and good conscience" involves a variety of elements: (1). fault of the debtor, (2). balancing of the faults, (3). undue hardship, (4) whether recovery would defeat the purpose of the benefit, (5). unjust enrichment, and (6). changing position to one's detriment. 38 C.F.R. § 1.965. The list of elements is not all-inclusive. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). However, the law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness where any one of the following elements is found to exist: (1). fraud; (2). misrepresentation of a material fact; (3). bad faith. 38 U.S.C.A. § 5302(c) (West 2002); 38 C.F.R. § 1.965(b) (2012). Only one of the three elements (fraud, misrepresentation, or bad faith) need be shown to preclude consideration of waiver of recovery of the indebtedness. 38 U.S.C.A. § 5302(c). In other words, any indication that a claimant committed fraud, misrepresentation of a material fact, or bad faith in connection with his receipt of VA benefits precludes the Board from granting a waiver of recovery of the overpayment. This parallels the "clean hands" doctrine familiar in equity cases; only if a Veteran is free from all taint of fraud in connection with his claim for benefits may waiver on account of "equity and good conscience" be considered. See Farless v. Derwinski, 2 Vet. App. 555 (1992). 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. Richards v. Brown, 9 Vet. App. 255 (1996); 38 C.F.R. § 1.965(b) (2012). On September 25, 2009, the Secretary announced that VA had authorized emergency checks for up to $3,000.00 to be given to students who had applied for educational benefits and who had not yet received their government payment. It was noted that students should be focusing on their studies, not worrying about financial difficulties. Delays in educational assistance payments were in part due to the overwhelming popularity of the Post-9/11 GI Bill resulting in tens of thousands of claimants. Significantly, the announcement made clear that the advanced money would be deducted from future education payments. Here, it is undisputed that the Veteran applied for the $3,000.00 advance payment. A history of educational assistance payment indicates that he received $3,000.00 on October 28, 2009. According to the RO, when the Veteran made the request for the advance payment, he certified that he would have to repay the advance. In January 2010, the Debt Management Center established the debt for the advance payment and notified the Veteran that it was necessary to recoup the $3,000.00. The Veteran contends that he was entitled to the $3,000.00 and that he does not owe the money in question. In March 2010, he submitted a Financial Status Report reflecting a net monthly salary of $1420.00 for himself and $796.00 for his spouse. The Veteran also noted that he had total monthly expenses of $2442.00. 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. Schaper v. Derwinski, 1 Vet. App. 430 (1991). Where the validity of a debt is challenged that issue must be developed before the issue of entitlement to waiver of the debt can be considered. VAOGCPREC 6-98 (1998), 63 Fed. Reg. 31264 (1998). The Veteran claims that he was entitled to the $3,000.00 in question as he was properly enrolled in an educational program in the Fall of 2009. Accordingly, the Veteran has challenged the validity of the debt itself, and therefore the Board must consider that portion of the claim before the issue of entitlement to waiver of the debt can be considered. VAOGCPREC 6-98 (1998), 63 Fed. Reg. 31264 (1998). Crucially, the Veteran has not set forth any persuasive arguments as to why the debt is not valid. As will be explained below, the Board finds the $3000.00 debt to be valid and, additionally, finds that waiver of recovery of the overpayment is precluded by reason of misrepresentation of a material fact and bad faith on the part of the Veteran. The Veteran initially applied for an advance payment for the Fall 2009 term of school by certifying that he was eligible for VA educational benefits under Chapters 30, 32, 33, 1606, or 1607. See the statement of the case (SOC) dated August 2010. Accordingly, the Board has considered whether the Veteran was eligible for any such benefits. The Board initially notes that the Veteran is ineligible for Chapter 33 benefits as he had no active service after September 10, 2001. 38 U.S.C.A. § 3311(a). Additionally, because he was not in the reserves or the selective service, he is not eligible for education benefits under Chapters 1606 or 1607. With respect to Chapter 30 eligibility, an individual may be entitled to educational assistance if he first entered on active duty as a member of the Armed Forces after June 30, 1985, or was eligible for educational assistance allowance under Chapter 34 as of December 31, 1989. 38 U.S.C.A. § 3011(a)(1); 38 C.F.R. § 21.7040. In this case, the evidence of record indicates that the Veteran first entered active duty in May 1981, therefore, he did not qualify for Chapter 30 educational benefits under 38 U.S.C.A. § 3011(a)(1)(A). Pursuant to 38 U.S.C.A. § 3011(a)(1)(b), veterans with remaining Chapter 34 eligibility may, under certain conditions, qualify for continued educational assistance under Chapter 30. For purposes of Chapter 34, the term ''eligible veteran'' means any veteran who (A) served on active duty for a period of more than 180 days, any part of which occurred after January 31, 1955, and before January 1, 1977, and was discharged or released therefrom under conditions other than dishonorable; or (B) contracted with the Armed Forces and was enlisted in or assigned to a reserve component prior to January 1, 1977, and as a result of such enlistment or assignment served on active duty for a period of more than 180 days, any part of which commenced within 12 months after January 1, 1977, and was discharged or released from such active duty under conditions other than dishonorable; or (C) was discharged or released from active duty, any part of which was performed after January 31, 1955, and before January 1, 1977, or following entrance into active service from an enlistment provided for under clause (B) of this paragraph, because of a service-connected disability. 38 U.S.C.A. § 3452(a)(1). Here, the Veteran served on active duty from May 1981 to May 1984 and there is no indication that he was enlisted in or assigned to a reserve component prior to January 1, 1977. Accordingly, he does not meet the eligibility requirements for Chapter 34. See 38 U.S.C.A. § 3452(a)(1). Entitlement to benefits under Chapter 32 requires that a veteran is not eligible for educational assistance under Chapter 34 and entered military service between January 1, 1977, and July 1, 1985, served on active duty for more than 180 days on or after January 1, 1977, and was discharged or released under conditions other than dishonorable, or entered military service between January 1, 1977, and July 1, 1985, and was discharged or released from active duty after January 1, 1977, for a service-connected disability. 38 U.S.C.A. § 3202(1)(A). A veteran establishes eligibility for education benefits under Chapter 32 by enrolling in the program and participating during active service prior to July 1, 1985. Each person electing to participate in the program shall agree to have a monthly deduction made from the person's military pay in an amount ranging from $25 to $100. A lump sum payment may be made in lieu of the monthly payments. See 32 U.S.C.A. § 3222. In this case, the Veteran is potentially eligible for Chapter 32 benefits based upon his service from May 1981 to May 1984. The Board recognizes that there is no record that the Veteran enrolled in the program and agreed to a monthly deduction from his military pay. However, even affording the Veteran all benefit of the doubt that he did, in fact, properly enroll in the program, the evidence demonstrates that he was no longer eligible for Chapter 32 benefits at the time of his October 2009 application for advance payment. Pursuant to 38 U.S.C.A. § 3232(a)(1), educational assistance benefits shall not be afforded an eligible veteran under this chapter more than 10 years after the date of such veteran's last discharge or release from active duty. Therefore, as the Veteran was released from active duty in May 1984 and there is no evidence that he filed for an extension, his delimiting date was no later than May 1994. Accordingly, the Veteran's education benefits had expired more than fifteen years before his October 2009 application for advance payment of VA education benefits. Thus, there is no evidence that the Veteran was entitled to receive VA educational benefits at the time of his October 2009 application for advanced payment. The October 2009 advance was, essentially, a loan which was to be paid back by offsets from future education benefits. The Veteran certified in his October 28, 2009, application that he was qualified for education benefits. As the advance payment by definition necessitated the creation of a debt, and because the Veteran himself certified that he was qualified for education benefits, the Board concludes that the debt in the amount of $3,000.00 for an advance payment of educational assistance benefits was properly created. Generally, an overpayment of educational assistance constitutes a liability for that individual. 38 U.S.C.A. § 3323 (West Supp. 2012); 38 C.F.R. § 21.9695 (2012). In April 2010, the RO denied the Veteran's claim for a waiver of that debt on the basis of bad faith, stating that there was no evidence that the Veteran was enrolled in school during the Fall of 2009 or that he had applied for VA education benefits. The Board notes that the Veteran subsequently submitted evidence that demonstrates he was enrolled in fifteen credit hours of schooling in the Fall of 2009. However, in the October 2010 supplemental statement of the case (SSOC), VA indicated that although the Veteran was enrolled in the Fall 2009 semester, there was no evidence that he had applied for VA education benefits. After consideration of the record, the Board agrees with the RO's finding of bad faith. In addition, the Board finds that the Veteran misrepresented a material fact in his application for advance payment. Consequently, a waiver of recovery of that overpayment is automatically precluded. Specifically, when the Veteran submitted the application seeking an advance payment of educational benefits in October 2009, he certified that he was entitled to VA education benefits and had applied for said benefits. As indicated above, the evidence of record demonstrates that any eligibility the Veteran did have for VA education benefits expired more than fifteen years prior to his application for advance payment. Moreover, there is no evidence that the Veteran specifically applied for VA education benefits, as he represented in his October 2009 application for advance payment. In view of the above, the Board concludes that the Veteran's application for advance payment included a misrepresentation of a material fact, and that his actions in submitting the application constituted bad faith. Specifically, the Veteran committed a misrepresentation of material fact when he certified his eligibility for VA education benefits in his October 2009 application for advance payment. He further misrepresented himself when he stated that he had previously applied for VA education benefits, which he did not. Additionally, in completing the application form, he certified that his representations contained therein were true and correct to the best of his knowledge and belief. Consequently, his actions in submitting this claim form were done in bad faith. Accordingly, as the Veteran committed a material misrepresentation of fact and acted in bad faith in the creation of the $3000.00 educational benefits overpayment, waiver of recovery of this amount is precluded by law. 38 U.S.C.A. § 5302(c); 38 C.F.R. §§ 1.962, 1.965. Hence, the principles of equity and good conscience, such as any current financial hardship, are not applicable. A material misrepresentation of fact and bad faith are shown by the preponderance of the evidence, and thus the benefit-of-the-doubt rule does not apply. See 38 U.S.C.A. § 5107(b). Waiver of recovery of overpayment is therefore denied. ORDER A debt was validly created by the overpayment of VA education benefits in the original amount of $3,000.00; the appeal of this issue is denied. Waiver of recovery of an advance payment of VA educational assistance benefits in the amount of $3,000.00 is denied. ____________________________________________ THOMAS J. DANNAHER Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs