Citation Nr: 1324664 Decision Date: 08/02/13 Archive Date: 08/13/13 DOCKET NO. 04-16 750A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Manila, the Republic of the Philippines THE ISSUE Whether an overpayment of VA educational assistance benefits in the amount of $24,529.40 was properly created. WITNESS AT HEARING ON APPEAL The Veteran ATTORNEY FOR THE BOARD S. Dale, Counsel INTRODUCTION The Veteran served on active duty from March 1973 to March 1999. The Veteran died in December 2010, and the appellant is his surviving spouse and has been substituted as the Appellant for the claim that had been on appeal at the time of his death. 38 U.S.C.A. § 5121A (West 2012).. This case comes before the Board of Veterans' Appeals (Board) on appeal from a July 2003 rating decision of the Department of Veterans Affairs (VA) Regional Office (RO) in Muskogee, Oklahoma which found an overpayment in the amount of $24,529.40 had been created. The Veteran appealed, and in January 2009, the Board denied the claim. The appellant appealed to the U.S. Court of Appeals for Veterans Claims (Court). In a March 2011 Memorandum Decision, the Court vacated the Board decision and remanded the matter for readjudication. In August 2011, following a number of Court actions which need not be detailed at this point, the Court substituted the Veteran's surviving spouse as the proper appellant. In January 2012, the Board remanded the claim for additional development. The Veteran testified at a videoconference hearing at the RO in Manila, the Republic of the Philippines in September 2007. This transcript has been associated with the file. Issues not presently before the Board As noted above, the Board remanded the Veteran's claim presently on appeal in January 2012. In a separate adjudicative action dated in January 2012, the Board remanded the matters of (1) entitlement to an additional allowance for M.M.B.S. as a dependent mother and (2) entitlement to service connection for diabetes mellitus, type II, to include as secondary to herbicide exposure, for further development. To date, those claims have not been returned to the Board, and thus, the Board does not have jurisdiction them at this time. Those issues will be the subject of a separate Board decision when they are returned to the Board for further appellate proceedings. Representation During his lifetime, the Veteran was represented in all matters before VA by a private attorney, in whose favor the Veteran had submitted a completed VA Form 21-22a (Appointment of an Individual as Claimant's Representative). However, the appellant, who has been substituted for the Veteran in this case, has not filed the appropriate documentation for representation, to include a VA Form 21-22 of the duly appointed representative. 38 C.F.R. § 14.631(a) (2012). A power of attorney, executed on either VA Form 21-22 (Appointment of Veterans Service Organization as Claimant's Representative) or VA Form 21-22a, is required to represent a claimant before VA and to authorize VA's disclosure of information to any person or organization representing a claimant before VA. 38 C.F.R. § 14.631(a) (2012). In June 2012, the Board sent the appellant a letter which provided information to her with respect to obtaining representation in this matter. In July 2013 submission, the appellant conveyed that she wished to proceed with the present appeal as a pro se claimant. See a July 2013 submission from the appellant. In light of above, the Board will proceed with adjudication of the appeal with the appellant as a pro se claimant. FINDINGS OF FACT 1. Fraud, misrepresentation, or bad faith, are not shown in the creation of the overpayment. 2. The overpayment was solely the result of VA administrative error. CONCLUSION OF LAW The overpayment of Chapter 30 educational assistance benefits in the amount of $24,529.40 was based solely upon VA administrative error, such that the debt was not valid, and the overpayment was not properly created. 38 U.S.C.A. §§ 5112, 5302 (West 2002 & Supp. 2012); 38 C.F.R. §§ 1.956, 1.962, 3.500, 21.5824(a) (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSION The overpayment at issue in the present appeal was created following VA findings of fraud by the Ramon Magsaysay Technological University (RMTU) in the Philippines. In July 2003 rating decision, the RO found an overpayment in the amount of $24,529.40 had been created. The Veteran appealed. The Veteran died in December 2010, and the Appellant is his surviving spouse. In August 2011, she was substituted as the proper appellant as the Veteran's surviving spouse. The law provides that VA will approve and will authorize payment of educational assistance for an individual's enrollment in any course or subject which a State approving agency has approved and which forms a part of a program of education as defined by 38 C.F.R. § 21.7020(b)(23). 38 U.S.C.A. § 3002(3) (West 2002); 38 C.F.R. § 21.7120 (2012). A program of education, in pertinent part, is any unit course or subject or combination of courses or subjects, which is pursued at an educational institution. 38 C.F.R. § 21.7020(b)(23) (2012). The Veteran had been found to be eligible for Chapter 30 education benefits. Therefore, he was entitled to a monthly benefit for the period of time he was enrolled in, and satisfactorily pursuing an approved program of education. 38 U.S.C.A. § 3014 (West 2002); 38 C.F.R. § 21.7070 (2012). The term attendance means the presence of a veteran (i) in the class where the approved course is being taught in which he is enrolled, or (ii) at a training establishment, or (iii) any other place of instruction, training or study designated by the educational institution or training establishment where the veteran is enrolled and is pursuing a program of education. 38 C.F.R. § 20.7042(b)(2) (2012). In order to receive educational assistance for pursuit of program of education, an individual must demonstrate satisfactory pursuit of a program, satisfactory conduct, and satisfactory attendance. 38 C.F.R. § 21.7153(c) (2012). VA will discontinue educational assistance if the individual does not maintain such progress and conduct. Id. The amount of overpayment of educational assistance paid to a veteran constitutes a liability of that veteran. 38 C.F.R. § 21.7144(b) (2012). 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; 38 C.F.R. § 1.962. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation (DIC), educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956(a). The amount of overpayment of educational assistance paid to a veteran constitutes a liability of that veteran. 38 C.F.R. § 21.7144(b). An individual who is receiving educational assistance under programs authorized by 38 U.S.C. Chapters 30, 31, 32, 34, 35 or 36 may not receive concurrently either educational assistance or subsistence allowance under §§ 21.5700, 21.5800 and 21.5900 series of regulations for the same program of education, but may receive them sequentially. 38 C.F.R. § 21.5824(a). 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 Schaper v. Derwinski, 1 Vet. App. 430 (1991). VA's General Counsel has reinforced this obligation by holding that 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, 63 Fed. Reg. 31264 (1998). In order for the Board to determine that the overpayment was not properly created, such that the debt was not valid, it must be established that the veteran was legally entitled to the benefits in question or, if there was no legal entitlement, then it must be shown that VA was solely responsible for the veteran being erroneously paid benefits. 38 U.S.C.A. § 5112(b) (9), (10) (West 2002 & Supp. 2012); 38 C.F.R. § 3.500(b)(2) (2012); Jordan v. Brown, 10 Vet. App. 171 (1997). 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, 55 Fed. Reg. 27757 (1990). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous. Id. If a debt is the result solely of administrative error, the effective date of the reduction of benefits is the date of the last payment based on this error and, consequently, there will be no overpayment charged for an overpayment attributable to administrative error. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. § 3.500(b). Where, however, an erroneous award is based on an act of commission or omission by a payee or with the payee's knowledge, the effective date of the discontinuance of the erroneous payment is the date the award became erroneous, but not earlier than the date entitlement ceased. 38 U.S.C.A. § 5112(b)(9); 38 C.F.R. § 3.500(b). Pursuant to VA law, the term "fraud" is defined as "an act committed when a person knowingly makes or causes to be made or conspires, combines, aids, or assists in, agrees to, arranges for, or in any way procures the making or presentation of a false or fraudulent affidavit, declaration, certificate, statement, voucher, or paper, concerning any claim for benefits under any of the laws administered by the Department of Veterans Affairs (except laws relating to insurance benefits)." 38 C.F.R. § 3.901(a). VA has also defined "fraud" as "an intentional misrepresentation of fact, or the intentional failure to disclose pertinent facts, for the purpose of obtaining or retaining . . . eligibility for [VA] benefits, with knowledge that the misrepresentation or failure to disclose may result in the erroneous award or retention of such benefits." 38 U.S.C.A. § 501; 38 C.F.R. § 3.1(aa)(2). The history of this claim is summarized as follows: as of October 2002, there were 60 veterans enrolled at RMTU. An October 2002 educational compliance survey of RMTU found a number of discrepancies in their records. A 100 percent compliance audit was initiated in February 2003. This audit examined records associated with all 60 veteran students at RMTU. It found discrepancies in all 60 records, to include the absence of final grades for certain courses or for entire semesters; different signatures or penmanship appearing on certificates of registration, and indications that some students received credits consistent with only part-time enrollment even though they were receiving VA benefits for full-time enrollment. As a result of these findings, the Manila RO conducted a field investigation in May 2003. The investigators determined that veteran students were listed as enrolled at RMTU, as full time students, solely to collect VA benefits, but that they never really attended classes. The investigators concluded that the "scheme" had been ongoing for decades. In July 2003 rating decision, the RO found an overpayment in the amount of $24,529.40 had been created. The Veteran appealed. In February 2004, the Criminal Investigation Division of the VA Office of Inspector General (OIG) in San Francisco, California, completed a report following an investigation. The OIG concluded that fraud was committed by all of the 60 veterans who had attended RMTU, and it was their recommendation that all administrative action be taken to recover monetary damages suffered by VA and to forfeit the benefits of the involved veterans. However, based on the complexities and expense of prosecuting individuals in the Philippines, the OIG decided not to proceed with a criminal investigation of the matter. In January 2009, the Board denied the claim. The Veteran appealed to the Court. In March 2011, the Court vacated the Board decision and remanded the claim. In January 2012, the Board remanded the claim for additional development. The Board noted that VA had concluded that sixty veterans, including the one that is the subject of this appeal, were not regularly attending classes at RMTU, but were instead receiving course credit in return for buying supplies and other "gifts" for the school and for individual instructors. With regard to the underlying evidence, the Board noted that the record contained summaries of Education Compliance Surveys and a field investigation, as well as a memorandum report from OIG. The Board stated that while the conclusions provided in these reports are of probative value in the Board's adjudication, the reports may not contain underlying evidence which would permit a full and complete evaluation specific to the Veteran that is the subject of this appeal. The Board therefore found that a remand was necessary to obtain any additional information and evidence associated with these surveys and investigations that might contain information specific to the Veteran that is the subject of this decision, including any interviews, documentation, and notes (emphasis added). The Board directed that the RO make reasonable efforts to obtain any information and evidence associated with the October 2002, February 2003, and May 2003 VA Educational Compliance Surveys (ECS) and field investigation, including any information that pertains specifically to the Veteran such as interviews, or RMTU records, and that they make reasonable efforts to obtain any information and evidence associated with the VA's OIG investigation, as summarized in a February 2004 report, including any information that pertains specifically to the Veteran such as interviews, and RMTU records (emphasis added). Following the Board's January 2012 remand, the RO undertook the directed development. In an electronic mail ("email"), dated in March 2012, an employee at the Manila RO stated, "I have no additional evidence to provide. Again, all original and complete records of compliance surveys, filed investigations, and deposition were already forwarded to Muskogee and OIG immediately after we concluded our actions." In April 2012, VA's Office of Inspector General stated, "All relevant material has been turned over to Muskogee." The Board finds that the overpayment of VA educational assistance benefits in the amount of $24,529.40 was not properly created. As an initial matter, the Veteran was legally entitled to the benefits in question. Furthermore, there is no evidence to show that the Veteran's actions nor his failure to act contributed to payment of an erroneous award. 38 U.S.C.A. § 5112(b) (9), (10); 38 C.F.R. § 3.500(b)(2); Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Although the RO's creation of the overpayment was based on a finding of fraud by the Veteran, the Court's April 2011 Order stated that VA must determine that the Veteran "specifically participated in a scheme to defraud the VA," and show how he "specifically deviated from the standards for receiving educational assistance benefits." In this case, RMTU was determined to have participated in fraud, and there is a great deal of evidence indicating that RMTU was engaged in systematic fraud involving its enrolled veterans. However, very little of this evidence specifically pertains to the Veteran, and none of it shows that the Veteran was personally aware of RMTU's fraud, or that he was personally aware that his educational benefits were erroneously being paid. In this regard, some of the ECS/OIG reports are redacted. The Veteran never admitted to any wrongdoing, and he denied any wrongdoing during a September 2007 videoconference hearing. In an undated, signed joint statement (apparently associated with the ECS), he indicated that he regularly attended his required classes. An "official transcript of records," dated in August 2003, indicates that the Veteran was enrolled full-time for four semesters between 2001 and 2003, as well as for two summer semesters (at six credits each), with passing grades in all classes. Finally, an October 2003 RMTU certification, signed by five RMTU employees, states that the Veteran attended all required classes, and that, "This school does not and would not issue a diploma nor a transcript of records to a veteran indicating completed subjects if the veteran had not attended all required classes for those subjects on the Veteran's transcript of records." In summary, the evidence is insufficient to show that the Veteran made an intentional misrepresentation of fact, or an intentional failure to disclose pertinent facts, for the purpose of obtaining or retaining eligibility for VA benefits, with knowledge that the misrepresentation or failure to disclose may result in the erroneous award or retention of such benefits. See 38 U.S.C.A. § 5302; 38 C.F.R. §§ 3.1(aa)(2), 3.901(a). It therefore appears that the July 2003 creation of the overpayment was an administrative error, based upon a misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90. Therefore, it follows that the overpayment was due to sole VA error. As such, the overpayment was not properly created, and the appeal is granted. As a final matter, the notice and duty to assist provisions of the Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096 (Nov. 9, 2000) are relevant to Chapter 51 of Title 38 of the United States Code and do not apply in validity of debt cases which are governed by Chapter 53. Barger v. Principi, 16 Vet. App. 132, 138 (2002). In any event, in light of the favorable decision as it relates to the issue of the whether this debt was validly created, no further discussion of notification or assistance is necessary at this point. ORDER The overpayment of $24,529.40 was not properly created, and the appeal is granted. ____________________________________________ L. M. BARNARD Acting Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs