Citation Nr: 1327576 Decision Date: 08/28/13 Archive Date: 09/05/13 DOCKET NO. 08-03 394A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in North Little Rock, Arkansas THE ISSUE Whether an overpayment of VA compensation benefits in the amount of $1,652.47 was properly created and entitlement to waiver of recovery of that debt. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD L. A. Rein, Counsel INTRODUCTION The Veteran served on active duty from May 1976 to May 1979 and from January 1981 to May 1987. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a May 2007 decision by the Department of Veterans Affairs (VA) Debt Management Center in St. Paul, Minnesota. The Veteran requested that he be afforded a hearing before the Board when he submitted his substantive appeal in February 2008. A hearing before the Board was held in April 2009. However, the Veteran indicated that he did not desire to give any testimony because the RO was still working on his claim. Therefore, the Board finds that the Veteran's request for hearing on that issue was satisfied as he elected to not provide testimony. The Board remanded the Veteran's claim for additional development in July 2011. The issues of entitlement to an increased rating for a right wrist disability and the issue of a contested claim for apportionment of the Veteran's benefits are addressed in separate decisions. FINDINGS OF FACT 1. The Veteran was incarcerated in October 2006, but he did not report his incarceration to VA until February 2007. Therefore, the Veteran's failure to timely report his incarceration created the debt. 2. There is no indication that the Veteran engaged in fraud, misrepresentation, or bad faith in creating the overpayment. 3. A recovery of the overpaid VA compensation benefits would not result in an undue hardship of the Veteran. 4. The recovery of the overpayment did not tend to defeat the purpose for which the benefits were intended when taking into account Congress' specific instruction to reduce VA benefits to the 10 percent level when a Veteran is incarcerated for a felony lasting over 60 days. 5. A failure by the Veteran to make restitution would result in unfair gain to the Veteran because he received monetary benefits to which he was not entitled. 6. There is no indication the Veteran relinquished a valuable right or incurred a legal obligation in reliance upon the additional benefits received. CONCLUSION OF LAW An overpayment in the amount of $1,652.47 was properly created, and the criteria for waiver of recovery of the overpayment have not been met. 38 U.S.C.A. §§ 5107, 5112, 5302, 5313 (West 2002) 38 C.F.R. §§ 1.962, 1.963, 1.965, 3.665 (2012). REASONS AND BASES FOR FINDINGS AND CONCLUSION 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 (West 2002); 38 C.F.R. § 3.159 (2012). In February 2007, the RO received a letter from the Veteran stating that he was currently incarcerated in the Arkansas Department of Corrections. A February 2007 inmate population search showed that the Veteran was serving a prison sentence for probation revocation of "Man. Delv. possession of controlled substance" and non-support, sentence length of 60 months. A February 2007 VA and SSA prisoner computer match showed that the Veteran's date of confinement was in October 2006. In a February 2007 letter the RO proposed to reduce the Veteran's benefits as the result of his incarceration. He was advised that the law required that the payment of VA compensation benefits be reduced to the lesser of the two following amounts on the 61st day of incarceration following conviction of a felony: (a) the amount payable for disability rated as 10 percent disabling if the combined disability rating is 20 percent or more, or (b) the amount equal to half of the 10 percent rate if the combined rating is 10 percent. 38 C.F.R. § 3.665 (2012). Under the circumstances, the Veteran was informed that the law required that his compensation benefits be reduced to $112 per month effective November 28, 2006. He was also advised that if he had dependents, they might be entitled to an apportioned share of the compensation benefits while the Veteran was incarcerated. The letter also provided that he was entitled to a 60-day due process period in which he could submit evidence. He was also advised that if he did not waive the 60-day period and continued to accept payments at the present rate, he might be liable to repay all or part of the benefits received during that period. In March 2007, the RO received a response letter from the Veteran in which he requested to file a claim for apportionment for his daughter before his 60 day claim to file was to expire. In an April 2007 letter, the Veteran advised the RO that he received another check in the full amount instead of the reduced compensation benefits. In an April 2007 letter, the Veteran was advised that his amended disability compensation award was reduced to $112.00, effective November 28, 2006, and $115.00, effective December 1, 2006. The Veteran was advised that the adjustment resulted in an overpayment of benefits which had been pain to him. He would be notified of the exact amount of overpayment and given information about repayment. In a May 2007 letter from VA's Debt Management Center, the Veteran was advised that he received $2,155.90 more than he was entitled to receive. He was advised that since he was receiving VA benefits, VA planned to withhold those benefits until the amount he was overpaid was recouped. The withholding was scheduled to begin on August 2007. In July 2007, the RO received a letter from the Veteran's representative requesting a waiver of VA overpayment. In July 2007, the committee on waivers and compromises determined that the current principle amount owed was $2,155.90. In October 2007, the request for a waiver of VA compensation benefit debt for $2,155.90 was denied. The Committee found that there was no fraud, misrepresentation, or bad faith on behalf of the Veteran. It was noted that the Veteran was significantly at fault in the creation of the debt because the Veteran should have known to report any period of incarceration in a timely manner. The Committee on Waivers also found that he received an unjust enrichment at government expense. In equity and good conscience, a waiver could not be granted. He was advised of payment options available to him. In December 2007, the Veteran submitted a request for reinstatement of VA benefits at the full rate based on his release from the Arkansas Department of Corrections. A December 2007 report of contact shows that VA personnel spoke with the records clerk at the Wrightsville Prison. The records clerk advised that the Veteran was incarcerated at the county jail in October 2006 after being convicted in September 2006. He was transferred to prison in November 2006 and was released in December 2007. A December 2007 statement of the case shows that there was a need for correction and the amount of overpayment was reduced to $2,082.50 based on a miscalculation. The Veteran was advised that his compensation would be restored to the full rate that same month. In March 2012, the Board remanded this matter to recalculate the Veteran debt, taking account of any apportionment paid, and issue a paid due audit. In May 2012 an audit was performed. The Veteran was incarcerated as of October [redacted], 2006. Compensation must be reduced after the 61st day of incarceration, in this case, December 5, 2006, at which time the Veteran was entitled to benefits at the 10 percent rate only. The Veteran's compensation was restored to full benefits in December 2007. For the period beginning on December 2006, the Veteran's benefits were reduced. However, he continued to receive the full benefit amount until May 2007. In May 2007, VA began withholding money from the checks issued to the Veteran to repay the prior debt incurred from the check issued from December to April 2007. The audit revealed that for the period from October 2006 to March 2009, the Veteran was due $11,249.53. However, he was paid a total of $12,902.00. Thus, the correct amount of the overpayment was $1,652.47. The audit determined that $2,155.90 was previously withheld to repay the debt. Hence, a one time payment of $503.43 was processed to the Veteran on May 11, 2012. The Veteran asserts that beginning in February 2007, when he initially informed VA of his incarceration, and in communications thereafter, he attempted to prevent the overpayment. He essentially contends that it is not his fault that VA continued to pay him at the full compensation rate; therefore, a waiver should be granted. 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). The Veteran has not challenged the amount of the debt, which, based on a recent audit, has been calculated in the amount of $1,652.47, but rather, as discussed below, alleged that VA was aware of his incarceration and thus, it was not properly created. In the May 2007 decision and December 2007 statement of the case, the Veteran was provided with notice of the provisions of 38 C.F.R. § 3.665 and 38 U.S.C.A. § 5313, respectively, and determined that the debt was properly created based on the Veteran's incarceration. In this case, as a matter of law, the Veteran's entitlement to disability benefits greater than 10 percent was not warranted beginning on and after October 2006 until his release in December 2007, and any payments in excess of that entitlement properly represents an overpayment. The Veteran does not challenge nor does the Board find error in the audit provided by the RO at any time during the appeal, to include the most recent audit in May 2012, showing that the amount of overpayment was corrected to $1,652.47, as opposed to the prior finding of an overpayment of $2,082.50, a determination favorable to the Veteran. The Veteran received a one-time payment of $503.43 based on that finding. Therefore, the Board concludes that $1,652.47 is a valid debt resulting from reduction in compensation due to incarceration. A Veteran who is incarcerated in a Federal, State or Local penal institution in excess of 60 days for conviction of a felony will not be paid compensation benefits in excess of that amount specified in 38 C.F.R. § 3.665 beginning on the 61st day of incarceration. 38 U.S.C.A. § 5313(a)(1) (West 2002); 38 C.F.R. § 3.665(a) (2012). For Veteran's receiving the 10 percent compensation rate, benefits are reduced to the five percent rate. 38 C.F.R. § 3.665(d) (2012). The Board must render an independent determination with regard to whether there was any fraud, misrepresentation, or bad faith on the part of the appellant with respect to the creation of an overpayment. Ridings v. Brown, 6 Vet. App. 544 (1994). The Board finds no evidence in the claims file of any intent to deceive or to seek unfair advantage by the Veteran in the creation of the indebtedness. The Veteran was imprisoned and while he should have informed VA in a timely manner of his status, the Board finds that his failure to do so was not an act of fraud, misrepresentation, or bad faith. In cases where there is no fraud, misrepresentation, or bad faith on an appellant's part with respect to the creation of the overpayment at issue, waiver is not precluded. 38 U.S.C.A. § 5302(a) (West 2002). In order to adjudicate the appeal the Board must determine whether recovery of the indebtedness would be against equity and good conscience. The pertinent regulation in this case provides that the standard of equity and good conscience will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a) (2012). 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 because of the delay in informing VA of his incarceration. 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, as he was prohibited from receiving full 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) (2012). 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 Board acknowledges the Veteran's argument that the overpayment was not processed in a timely fashion, thus causing the overpayment. However, the Board again notes that the RO was not notified of the incarceration until February 2007, and that the RO promptly provided the Veteran with a February 2007 letter that advised the Veteran that he might be liable for repayment of benefits. While the letter also notified him that he could waive the 60-day due process period to avoid further overpayment, he did not do so. The Board has concluded that the RO processed this case within a reasonable time, and that the Veteran was duly notified of the possibility of debt. In summary, the Veteran is at fault in this case. The next question for consideration is whether collection of the debt would cause the Veteran undue financial hardship. Here, unfortunately, the Veteran has not been cooperative in providing financial information. In March 2012, the RO issued the Veteran a VA Form 21-0788, Information Regarding Apportionment of Beneficiary's Award, in conjunction with a separate claim for apportionment. However, he failed to respond with the requested information. The duty to assist is not a one-way street. If a veteran wishes help in developing his claim, he cannot passively wait for it in those circumstances where he may or should have information that is essential in obtaining evidence. Wood v. Derwinski, 1 Vet. App. 190 (1991). In this case, the debt was previously repaid at the time the Veteran was incarcerated and thereafter in the form of withholding from the Veteran's VA benefits checks. The amount of the overpayment has been paid and no additional deductions are required. Absent full and complete financial information, the Board concludes that while recovery of the overpayment might have caused some hardship, any hardship was not undue, as he had no personal ongoing expenses being incurred during his incarceration and there is no indication that recoupment affected the Veteran's ability to provide support to any dependent. 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 recovery of the overpayment did not tend to defeat the purpose for which the benefits were intended when taking into account Congress' specific instruction to reduce VA benefits to the 10 percent level when a Veteran is incarcerated for a felony lasting greater than 60 days. 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 disability compensation payments at the full-time rate after the Veteran was incarcerated for more than a decade. The additional full payments were not warranted starting 61 days after incarceration. 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 disability benefits at a non-reduced rate. 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 sole fault in the creation of the debt, and the retention of the overpayment would therefore unfairly enrich the Veteran. Moreover, repayment of the debt would not deprive the Veteran or his family of the ability to provide for basic necessities of life, and recovery of the overpayment would not defeat the purpose for which the benefits were intended. Furthermore, he did not relinquish a valuable right or incur a legal obligation in reliance on VA continuing to pay disability benefits at a non-reduced rate. Therefore, 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) (West 2002); Gilbert v. Derwinski, 1 Vet. App. 49 (1990). ORDER The Veteran's debt of $1,652.47, incurred as a result of an overpayment of VA compensation benefits during his incarceration, is valid, and a waiver of recovery of an overpayment of that debt is denied. ____________________________________________ Harvey P. Roberts Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs