Citation Nr: 1319481 Decision Date: 06/17/13 Archive Date: 06/27/13 DOCKET NO. 12-09 623 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania THE ISSUE Whether the creation of the overpayment of Department of Veterans Affairs (VA) disability compensation benefits in the amount of $33,788.80 was proper. REPRESENTATION Appellant represented by: Military Order of the Purple Heart of the U.S.A. WITNESS AT HEARING ON APPEAL Veteran and his spouse ATTORNEY FOR THE BOARD J. Connolly, Counsel INTRODUCTION The Veteran served on active duty from August 1964 to August 1968. The Veteran served in combat and is a Purple Heart recipient. This matter comes to the Board of Veterans' Appeals (Board) on appeal from a decision of the VA Philadelphia, Pennsylvania, Regional Office (RO). In July 2012, the Veteran testified at a Travel Board hearing at the RO before the undersigned. Please note this appeal has been advanced on the Board's docket pursuant to 38 C.F.R. § 20.900(c) (2012). 38 U.S.C.A. § 7107(a)(2) (West 2002). FINDINGS OF FACT 1. In January 2007, the RO was notified that the Veteran was incarcerated due to a felony conviction. 2. A March 2007 VA and Department of Prisons Computer Match verified that the Veteran was incarcerated due to a felony conviction. 3. In May 2007, the penal institution where the Veteran was incarcerated erroneously informed the RO that the Veteran was convicted of a misdemeanor. 4. In May 2007, the Veteran's wife applied for an apportionment of his benefits. 5. In December 2007, the RO informed the Veteran that his benefits were not being reduced as he was convicted of a misdemeanor, but the notice was sent to the wrong address. 6. In April 2008, the RO reduced the Veteran's benefits retroactively from March 2007, based on his felony conviction and this action resulted in the creation of the debt at issue. 7. The creation of the overpayment was solely the result of VA administrative error; the Veteran's actions did not contribute to the creation of the debt. CONCLUSION OF LAW The overpayment of VA disability compensation benefits in the amount of $33,788.80 was not properly created as it was based solely upon VA administrative error. 38 U.S.C.A. §§ 5112, 5302 (West 2002 & Supp. 2012); 38 C.F.R. § 3.500 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSION There has been a significant change in the law with the enactment of the Veterans Claims Assistance Act of 2000 (VCAA). See 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326. The Veteran's claim is being granted. As such, any deficiencies with regard to VCAA are harmless and nonprejudicial. In a letter received in January 2007, the Veteran's spouse notified VA that the Veteran had been incarcerated. She stated that she had been told that the Veteran's VA compensation benefits would be reduced to 10 percent. Thus, it was essentially indicated that there had been a felony conviction. She related that this type of reduction would result in a hardship. Congress has provided that a Veteran who is incarcerated in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony is not to be paid compensation or dependency and indemnity compensation in excess of 10 percent (the rate of compensation payable under 38 U.S.C.A. § 1114(a)) beginning on the 61st day of incarceration. 38 U.S.C.A. § 5313; 38 C.F.R. § 3.665. For purposes of this section, a felony is any offense punishable by death or imprisonment for a term exceeding one year, unless specifically categorized as a misdemeanor under the law of the prosecuting jurisdiction. Id. Thereafter, a VA and Department of Prisons Computer Match dated in March 2007 generated information showing that the Veteran had been incarcerated for a felony offense. The RO then contacted the penal institution where the Veteran was incarcerated in order to determine more detailed information. In May 2007, the penal institution completed a VA Form 21-4193, Notice of Department of Veterans Affairs of Veteran or Beneficiary Incarcerated in Penal Institution. It was reported that the Veteran committed a misdemeanor in December 2004, was confined in July 2005, and was serving a 57 month sentence with a release date in March 2011. In May 2007,the Veteran wife requested an apportionment of the Veteran's benefits. At the Board hearing, she stated that when monies continued thereafter to be regularly deposited in her joint bank account with the Veteran, she assumed the apportionment was processed by the RO since the payments were not reduced. The funds were used to maintain the home. In a December 2007 letter from the RO, the Veteran was informed that since he had been incarcerated for a misdemeanor, his benefits would not be reduced, but the letter was not sent to his current prison address. At this juncture, the Board notes that the information from the penal institution was in direct conflict with the VA and Department of Prisons Computer Match which verified a felony conviction. In any event, the Veteran was not notified since his current address was not used. In February 2008, the Veteran was informed that VA proposed to reduce his benefits to the 10 percent rate. The notice was again sent to the wrong address. In April 2008, the RO reduced the Veteran's benefits retroactively from March 2007. The notice was sent to the Veteran's current address at the prison. In May 2008, the Veteran was notified at his prison address that his spouse had requested an apportionment of his VA compensation benefits. The Veteran's spouse was also sent a letter in which she was requested to submit additional information. Also, in May 2008, the Veteran was notified that an overpayment in the amount of $33,788.80, had been created. In an August 2008 letter, the Veteran's spouse was informed that a temporary apportionment in the amount of $2552 had been granted monthly for the period when the Veteran was incarcerated. This letter was incomplete because she was not told that she would not be paid the full amount, but rather at the 10 percent rate. The Veteran was also sent a letter, to his prison address, notifying him of the apportionment. He was noted that his monthly entitlement amount was $117 and the amount apportioned to his spouse was $2552. It appears that the available benefit for the spouse was the $117 amount, but the letter was unclear. Rather, it appeared that his spouse was being paid the higher amount, consistent with her letter. In January 2010, information was received from the Veteran including a financial status report as well as notice that the Veteran had been transferred to a community correctional facility. In response, the RO sent the Veteran a letter requesting clarification as to why he submitted a financial status report. The following month, the Veteran's representative clarified that the Veteran was seeking a waiver of the recovery of the debt. The Veteran's spouse also submitted correspondence indicating that a waiver was desired. In a February 2010 decision, the Veteran's request for a waiver of the recovery of the debt was denied as it was not timely received. In March 2010, correspondence was received from the Veteran's representative in which sole administrative error was asserted with regard to the creation of the debt as VA paid the Veteran as if he had been convicted of a misdemeanor, instead of a felony. In March 2011, the Veteran and his representative submitted correspondence requesting an update regarding the request for a waiver. Per a September 2011 Memorandum, it was confirmed that the Veteran had been convicted of a felony according to information received from the community correctional facility. The Veteran and his wife testified that after the Veteran had been incarcerated, his wife informed VA of the felony conviction. She thereafter requested an apportionment that apparently was not acted upon even though she thought an award had been made since the Veteran's compensation benefits were directly deposited into their joint account, which she thought was the apportionment award when they actually were the VA compensation benefits which had not been reduced to the incarcerated rate. It was pointed out that the RO had been notified of the felony conviction. VA regulations also provide that an adjustment to overpayment indebtedness may be warranted when the overpayment involved sole administrative error in which the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor failure to act must have contributed to payment pursuant to the erroneous award. 38 U.S.C.A. § 5112(b); 38 C.F.R. § 3.500(b)(1); Jordan v. Brown, 10 Vet. App. 171 (1997). Thus, a finding of administrative error requires not only error on the part of VA, but that the Veteran is unaware that the payments are erroneous. In sum, the RO was timely advised of the Veteran's felony conviction. The VA and Department of Prisons Computer Match dated in March 2007 generated information showing that the Veteran had been incarcerated for a felony offense. This match was also contemporaneous to the conviction. Thus, the felony conviction was confirmed and verified in a prompt manner. The subsequent information from the prison erroneously indicated that the Veteran had been convicted of a misdemeanor. However, given the report by the Veteran's wife, the length of the prison sentence, and the result of the VA and Department of Prisons Computer Match, the RO should have clarified this information promptly and reduced the Veteran's benefits. Instead, the RO continued to pay the Veteran at the full VA compensation rate, with no reduction. The monies were directly deposited into the Veteran's bank account, to which he had no access given that he was incarcerated. In addition, although the Veteran was notified that no reduction was being made due to his offense being a misdemeanor (according to the mistaken information), this notice was sent to the wrong address, not to the prison. Thus, the Veteran was not informed of VA's error so he did not have knowledge of it. Meanwhile, his spouse had applied for an apportionment which remained pending, but she thought had been approved, since monies continued to be deposited into the joint bank account. However, since she was not the beneficiary of the VA compensation benefits, the onus was on the RO to correct this error. Moreover, even in later letters, the RO confusingly indicated that she was entitled to the higher payment. In April 2008, the RO apparently realized that the Veteran was incarcerated for a felony as he was sent a letter at his prison address that his VA compensation benefits were retroactively reduced from March 2007. This retroactive reduction resulted in the overpayment at issue. The Board finds that the overpayment that was created in this case occurred due to sole administrative error. The Veteran had no knowledge that he was being paid at the full rate since he was in prison and the RO had been properly notified of his felony conviction. Although the RO sent him a letter which indicated that his award was mistakenly not reduced, this notice was not sent to his current address. His wife submitted an apportionment claim, so it was reasonable for him to believe that all funds were sent to her. He had no direct knowledge, per the record, that the wrong sum was deposited into his account given that the RO had been properly notified. Moreover, it even appears from later RO letters that the spouse was told she was entitled to the full amount, as was the Veteran. Further, neither the Veteran's actions nor failure to act contributed to payment pursuant to the erroneous award. As noted, the RO was properly notified, the Veteran reasonably assumed that the proper actions were being taken, his wife submitted an apportionment claim so it was reasonable for the Veteran to believe that all the monies were sent to her which is why he did not receive any, the Veteran did not have access to the bank account, VA did not notify him that the benefits had not been reduced, and he had no knowledge of any error or obligation on his part until April 2008, after which time the overpayment had already been created. Further, as noted, the later August 2008 letters implied that his wife was entitled to full amount of the compensation payments. The United States Court of Appeals for Veterans Claims (Court) noted that, "[s]tated another way, when an overpayment has been made by reason of an erroneous award based solely on administrative error, the reduction of that award cannot be made retroactive to form an overpayment debt owed to VA from the recipient of the erroneous award." Erickson v. West, 13 Vet. App. 495, 499 (2000). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits in excess of the amount to which he or she was entitled. 38 C.F.R. § 1.962 (2012). Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27757 (1990). In sum, the overpayment was solely the result of VA administrative error; the Veteran's actions did not contribute to the creation of the debt. The action to be taken was the responsibility of VA. In view of the finding that the overpayment was created solely as a result of VA administrative error, the Board finds that the RO's decision to continue paying the Veteran at the full rate as opposed to reducing his benefits based on a felony conviction was improper and that the resulting debt during that time period is not valid. ORDER The overpayment of VA disability compensation benefits in the amount of $33,788.80 was not properly created; and the appeal is granted based on an invalid debt. ______________________________________________ D. C. Spickler Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs