Citation Nr: 1337789 Decision Date: 11/19/13 Archive Date: 12/06/13 DOCKET NO. 11-31 717 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Atlanta, Georgia THE ISSUE Entitlement to waiver of recovery of overpayment of nonservice-connected pension in the amount of $45,108.00. REPRESENTATION Appellant represented by: Disabled American Veterans WITNESS AT HEARING ON APPEAL The Veteran ATTORNEY FOR THE BOARD D. Johnson, Counsel INTRODUCTION Pursuant to 38 C.F.R. § 20.900(c), the appeal has been advanced on the Board's docket. The Veteran, who is the appellant, served on active duty from April 1969 to March 1971. This matter comes before the Board of Veterans' Appeals (Board) from a January 2011 decision of the Committee on Waivers and Compromises (Committee) that determined that there was no basis to waive recovery of an overpayment of $45,108.00 in nonservice-connected pension benefits. The Veteran appeared at a hearing before the undersigned Veterans Law Judge in May 2013. A transcript of the hearing is in the Veteran's file. FINDINGS OF FACT 1. The Veteran has been charged with an overpayment of pension benefits in the amount of $45,108.00, over the period from June 1, 2006, to May 1, 2010. 2. In balancing the fault of the Veteran against VA, VA is more at fault in creating the debt, but not totally at faulty and 60 percent or $27,064.00, of the debt plus a 10 percent exclusion for retirement benefits, which was the income source of the overpayment or $4,510, for a total waiver of $31,574.00. 3. The remainder of the debt, $13,534.00, is not waived and recovery of the remainder of debt is not against equity and good conscience, considering undue hardship and the purpose of pension benefits. CONCLUSIONS OF LAW 1. The amount of $31,574.00, due to overpayment of nonservice-connected pension, is waived under the standard of equity and good conscience. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.914, 1.962, 1.965, 3.666 (2013). 2. The remainder of the debt in the amount of $13,534.00, due to overpayment of nonservice-connected pension, is not waived under the standard of equity and good conscience. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.914, 1.962, 1.965, 3.666 (2013). The Veterans Claims Assistance Act of 2000 (VCAA) The VCAA, codified in part at 38 U.S.C.A. §§ 5103, 5103A, and implemented in part at 38 C.F.R § 3.159, amended VA's duties to notify and to assist a claimant in developing information and evidence necessary to substantiate a claim. The VCAA provisions do not apply to a case involving the waiver of recovery of overpayment. Barger v. Principi, 16 Vet. App. 132 (2002). General Legal Principles An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he 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, education 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). Whenever VA finds that an overpayment of benefits has been made to a Veteran or eligible person, the amount of such overpayment shall constitute a liability of such veteran or eligible person to the United States and may be recovered in the same manner as any debt. 38 U.S.C.A. § 3685(a) and (c). If the debt were the result solely of administrative error, the effective date of the reduction of benefits would be the date of the last payment based on this error; consequently, there would be no overpayment charged to the veteran for the portion of the overpayment attributable to administrative error. 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. §§ 3.500(b), 21.7635(q)(2); see Erickson v. West, 13 Vet. App. 495, 499 (2000). However, where 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. Jordan v. Brown, 10 Vet. App. 171, 174 (1997). Thus, a finding of administrative error requires not only error on the part of VA, but that the beneficiary was unaware that the payments were erroneous. 38 U.S.C.A. § 5112 (b)(2); 38 C.F.R. § 3.500(b). If the claimant fails to provide full disclosure of facts or due to the amount of the overpayment should know an error has been made, yet accepts the payment, the overpayment will not be considered due to administrative error. See VA Manual 22-4, Part III, § 2.03. An example when administrative error applies is when VA erroneously interprets the law to allow payment of greater benefits than the legislative intent. Another example of when administrative error does not apply is when the claimant accepts an amount that is patently excessive. Disability pension benefits maybe be authorized for veterans who meet disability (or age) and wartime service requirements. 38 U.S.C.A. §§ 1513, 1521. Disability pension is a need-based program, and, thus, subject to maximum income limitations. 38 U.S.C.A. §§ 1521, 1541. Improved disability pension will be paid at the maximum allowable rate, reduced by the amount of countable income. 38 U.S.C.A. §§ 1521, 1541; 38 C.F.R. § 3.23. Countable income for improved disability and death pension consists of payments of any kind from any source, unless specifically excluded. 38 C.F.R. § 3.271 (2013). Railroad Retirement, Civil Service Annuity, military retired pay, and other public or private retirement benefits are all counted at 90 cents on the dollar. 38 CFR 3.262(e)(2). Evidence In May 2006 the Veteran submitted a claim for nonservice-connected pension benefits. In August 2006, he submitted additional evidence in support of his claim including a letter that read, I, Robert L. Scott am receiving railroad disability as of starting date Aug. 05. You should have those and the paperwork I have sent. I am hoping that these would help in getting my disability. In a November 2006 rating decision, VA granted nonservice-connected pension benefits to the Veteran. The effective date of this award was May 5, 2006. In a letter sent to the Veteran in December 2006, VA informed the Veteran of its decision. This letter stated, "We awarded your benefit because you have no income from May 5, 2006." The letter also informed the Veteran that he was to tell VA if his income changed or his net worth increased. Virtual VA reflects that in November 2007, VA sent the Veteran notice that his monthly pension payment had been amended, that is increased, as he was to receive a cost of living adjustment effective December 1, 2007, and because it was their determination that his net countable income was $0.00. In December 2007, VA sent the Veteran a letter to inform him that he would not receive an Eligibility Verification Report (EVR) that year, with the explanation that people without income other than their VA pension did not have to complete that form. The letter also informed the Veteran that he was to notify VA if he began receiving Social Security payments or if he "starts" (emphasis in original) getting other income such as earnings, interest from savings, pension, or other payments from anyone. There is no record of response to that letter from the Veteran in the claim file. In August 2008, VA conducted an Income Verification Match (IVM) and discovered that in 2006 the Veteran had received interest on his Bank of America bank account in the amount of $35.00, and unearned income from the US Railroad Retirement Board in the amount of $2,317.00. In September 2008, VA sent notice to the Veteran and informed him that they were aware of his unreported income from 2006. He was asked to verify the income that had been discovered by VA from the IVM system. There is no record of the Veteran having submitted a written response to this letter. In September 2008 VA sent a letter to the US Railroad Retirement Board seeking to verify the Veteran's income. No response was received. In November 2008, VA sent the Veteran notice that his monthly pension payment had been amended, that is, increased, as he was to receive a cost of living adjustment effective December 1, 2008, and because it was their determination that his net countable income was $0.00. In December 2008, VA sent the Veteran a letter to inform him that he would not receive an EVR that year, again with the explanation that people without income other than their VA pension do not have to complete that form. The letter also informed the Veteran that he was to notify VA if he began receiving Social Security payments or if he "starts" (emphasis in original) getting other income such as earnings, interest from savings, pension, or other payments from anyone. There is no record of the Veteran having submitted a written response to the December 2008 letter. In July 2009, VA conducted another IVM and discovered that in 2007 the Veteran had received wages in the amount of $687.00 from AKAL Security Inc., and unearned income in the amount of $2,768.00 from the US Railroad Retirement Board. In September 2009 VA submitted another request for income verification to the US Railroad Retirement Board. In September 2009 the US Railroad Retirement Board provided written notification to VA that the Veteran had been paid a gross amount of $20, 732.64 in 2007, $21,136.08 in 2008, and was projected to receive $22, 245.00 in 2009. In September 2009, VA sent notice to the Veteran and informed him that they were aware of his unreported income from 2007. He was asked to verify the income that had been discovered by VA from the IVM system. There is no record of the Veteran having submitted a written response to this letter. VA shows that in December 2009 VA sent the Veteran a letter to inform him that he would not receive an EVR that year, again with the explanation that people without income other than their VA pension do not have to complete that form. The letter also informed the Veteran that he was to notify VA if he began receiving Social Security payments or if he "starts" (emphasis in original) getting other income such as earnings, interest from savings, pension, or other payments from anyone. In January 2010, VA sent notice to the Veteran that it proposed to stop his award effective February 1, 2007, because of the monies that he had received from the Railroad Retirement Board in 2007, 2008, and 2009. The Veteran was asked to complete an Improved Pension EVR and provide information for the years 2006 to the present. There is no record of the Veteran having submitted a written response to this form. In June 2010, VA stopped the Veteran's pension benefits effective June 1, 2006. In July 2010, the Veteran submitted a Financial Status Report. He reported that his income included Social Security benefits in the amount of $1853.00 and VA benefits in the amount of $985.00. His total monthly income was $2,848.00. He listed two cars as assets (a 2000 Mercury Cougar and a 1983 Nissan 280ZX), but did not provide the worth of the vehicles. Total monthly living expenses gleaned from the report were $1,950.00. In October 2010 the Veteran filed a request for waiver of the debt of $45,108.00. In a January 2011 decision the Committee on Waivers and Compromises denied the Veteran's request for waiver of the debt. The Committee found that the Veteran had not committed fraud, misrepresentation, or bad faith in creating the debt, but that collection of the overpayment would not be against equity and good conscience because the Veteran knew or should have known that he was not entitled to the benefit. It was also noted that failure to repay the debt would constitute unjust enrichment of the Veteran at the government's expense. The Committee also stated that it could not consider the Veteran's waiver request based on financial hardship because he had failed to completely fill out the Financial Status Report, VA Form 5655. In July 2013, the Veteran submitted a statement indicating that he had lost his home and was now homeless due to VA's efforts to recover the debt. He also submitted a copy of a sheriff's notice of a dispossessory warrant. Analysis When the validity of a debt has been challenged, it is improper to adjudicate an application for waiver without first determining the lawfulness of the debt asserted. Schaper v. Derwinski, 1 Vet. App. 430 (1991). The Veteran has not disputed the validity of the debt, but he has requested a waiver of the collection of the overpayment of $45, 108.00. He asserts that he does not owe the debt because it was created due solely to VA administrative error. The law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness when any one of the follow elements is found to exist: (1) Fraud, (2) misrepresentation, (3) bad faith. 38 U.S.C.A. § 5302. The Committee has determined that there was no indication that the debt of $45, 108.00, was the result of fraud, misrepresentation, or bad faith on the Veteran's part. As there is no evidence to reverse the finding of the Committee, the Board finds that there is no statutory bar to waiver of recovery of the overpayment. Where there is no fraud, misrepresentation, or bad faith on the Veteran's part in creating the overpayment, waiver is not precluded pursuant to 38 U.S.C.A. § 5302(a), and the Board must determine whether recovery of the indebtedness would be against 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 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). The elements of equity and good conscience are as follows: (1) fault of debtor, where actions of the debtor contribute to creation of the debt; (2) balancing of faults, weighing fault of debtor against VA fault; (3) undue hardship, whether collection would deprive debtor or family of basic necessities; (4) defeat the purpose, whether withholding of benefits or recovery would nullify the objective for which benefits were intended; (5) unjust enrichment, failure to make restitution would result in unfair gain to the debtor; (6) changing position to one's detriment, reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. The first and second elements pertain to the fault of the Veteran as the debtor versus the fault of the VA. The Board finds that VA was more at fault than the Veteran in creating the debt, but not totally at faulty. As for fault on the part of VA and the Veteran, in August 2006, the Veteran submitted a statement that he had started to receive Railroad disability. In November 2006, VA granted nonservice-connected pension and in letter in December 2006, notified the Veteran that the award was based on the fact that he had no income. The Veteran was also notified that he was to tell VA if his income changed or his net worth increased. In November 2007, VA sent the Veteran notice that his monthly pension payment had been amended, that is increased, as he was to receive a cost of living adjustment and because his net countable income was $0.00. In December 2007, VA notified the Veteran he was to notify VA if he began receiving Social Security payments or if he "starts" (emphasis in original) getting other income such as earnings, interest from savings, pension, or other payments from anyone. There is no record of response from the Veteran. In August 2008, Income Verification Match (IVM) by VA showed that the Veteran had unearned income from the US Railroad Retirement Board in the amount of $2,317.00. In September 2008, VA notified the Veteran that the he had unreported income from 2006. He was asked to verify the income. There is no record of response from the Veteran. In September 2008, VA sent a letter to the US Railroad Retirement Board seeking to verify the Veteran's income. No response was received. In November 2008, VA notified the Veteran that his monthly pension payment had increased due to a cost of living adjustment, and because his net countable income was $0.00. In December 2008, VA notified the Veteran that he would not receive a verification of income form, because his only income was VA pension. The Veteran was notified that he was to notify VA if he began receiving Social Security payments or if he "starts" (emphasis in original) getting other income such as earnings, interest from savings, pension, or other payments from anyone. There is no record of response from the Veteran. In July 2009, VA conducted another IVM and discovered that in 2007 the Veteran had received wages in the amount of $687.00 from AKAL Security Inc., and unearned income in the amount of $2,768.00 from the US Railroad Retirement Board. In September 2009, the US Railroad Retirement Board notified VA that the Veteran had been paid $20,732.64 in 2007, $21,136.08 in 2008, and was projected to receive $22, 245.00 in 2009. In September 2009, VA asked the Veteran to verify his income. There is no record of a response from the Veteran. In January 2010, VA sent notice to the Veteran that it proposed to stop his award effective February 1, 2007, because of the monies that he had received from the Railroad Retirement Board in 2007, 2008, and 2009. The Veteran was asked to complete an Improved Pension EVR and provide information for the years 2006 to the present. There is no record of response from the Veteran. The record shows a pattern by VA of paying the Veteran pension when VA had notice that the Veteran had unreported income. The Veteran also had a pattern of ignoring the notices to report his income. The Board finds that at least VA and the Veteran were equally at fault for the overpayment, that is, at fault for each creating at least 50 percent of the debt. Although the Veteran had an affirmative duty to report his income and that he was on notice that his pension was based on no income, and as he still accepted pension benefits, when he was also receiving Railroad Retirement, nevertheless, VA early in the process of administering the benefit VA was aware that the Veteran had unreported income and VA was in the better position to limited the amount of the overpayment by taking administrative action to suspend or terminate the benefit until the matter of income was resolved. For this reason, VA was more at fault than the Veteran in creating the overpayment. As for allocating the degree of fault, if the parties were equally at fault, the degree of fault in creating the overpayment would be 50 percent for each party. If one party was responsible for creating the entire the overpayment, the allocation would be 100 percent for one and zero percent for the other. As already determined while VA was more at fault than the Veteran, VA was not totally at fault so VA is not 100 percent accountable for the overpayment. The Board is then left in allocating the degree of faulty between 50 percent and 100 percent. Since the allocation of fault is based on equity and good conscience, the Board finds that a fair allocation of fault is 60 percent on part of VA and 40 percent on part of the Veteran. Therefore the Board waives 60 percent or $27,064.00, of the overpayment of $45,108.00. Also as it is not clear from the record that the total overpayment included a 10 percent exclusion for retirement benefits, which was almost if not the total income source of the overpayment, an additional 10 percent of the total overpayment of $45,108 or $4,510.00 is waived and the total waiver is $31,574.00. As for the remainder of the overpayment $13,534.00, considering the other factors of equity and good conscience, including undue hardship, in 2010 the Veteran reported that his total monthly income from Social Security and VA was $2848.00. He report monthly expenses for basic necessities, including a mortgage, utilities and insurance were $1,950.00. He reported installment debts of $275.00. As the Veteran's reported monthly income is greater than his monthly expenses, the Veteran can repay the debt without being deprived of basic necessities. The Board also finds that recovery of the overpayment would not defeat the purpose of pension, because the rate of pension was based on the fact the VA pension was the Veteran's only means of support. During the time of the overpayment the Veteran had additional means of support through his railroad retirement. The Board finds that the Veteran's failure to make restitution to VA would result in an unfair gain to the Veteran, that is, unjust enrichment. Although the Veteran's house was foreclosed, there is no evidence that the Veteran's reliance on VA benefits resulted in relinquishment of another valuable right. After consideration of the elements of equity and good conscience, the Board concludes that the recovery of the overpayment of the remainder of debt, $13,534.00, is not against equity and good conscience. ORDER Waiver of recovery of the overpayment of nonservice-connected pension benefits in the amount of $31,574.00, is granted. Waiver of recovery of the remainder of the overpayment in the amount of $13,534.00, is denied. ____________________________________________ George E. Guido Jr. Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs