Citation Nr: 1437814 Decision Date: 08/25/14 Archive Date: 09/03/14 DOCKET NO. 11-18 572A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Paul, Minnesota THE ISSUES 1. Entitlement to waiver of debt resulting from overpayment of VA death pension benefits in the amount of $20,000. 2. Whether the appellant's remaining death pension debt, currently calculated as $15,188, was properly created. ATTORNEY FOR THE BOARD Heather J. Harter, Counsel INTRODUCTION The veteran served on active duty from November 1950 to November 1952. He died in September 2002. The appellant is his widow. This matter comes before the Board of Veterans' Appeals (Board) from December 2010 and December 2011 decisions of the Committee on Waivers and Compromises (Committee) Department of Veterans Affairs (VA) Regional Office (RO) in St. Paul, Minnesota. Although the appellant lives in California, her pension benefits were handled by the Pension Management Center in St. Paul, and her debt matters are handled by the Debt Management Center in St. Paul. The Board has reviewed the appellant's physical pension file and also evidence available in her VA electronic files. The issue of whether the appellant's remaining death pension debt was properly created is addressed in the REMAND portion of the decision below and is REMANDED to the Agency of Original Jurisdiction (AOJ). FINDINGS OF FACT 1. After receiving notice of her debt to the VA in the amount of approximately $35,000, the appellant made a compromise offer to VA of payment of $2000 to settle her debt. 2. The RO rejected the appellant's offer, and entered a decision waiving $20,000 of her overall debt. 3. When the appellant disagreed with the waiver decision, indicating that she believed she owed nothing to VA, the RO rescinded the waiver decision and reinstated the entire debt. 4. This rescinded decision is contrary to the law and practice of VA. CONCLUSION OF LAW Waiver of $20,000 of the appellant's debt to the United States government resulting from the overpayment of death pension benefits is warranted. 38 U.S.C.A. §§ 501, 3720, 5107, 5302 (West 2002); 38 C.F.R. § 1.958, 1.969, 3.104 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSION Initially, the Board observes that claims for waiver of debt owed to the VA are governed by the provisions of Chapter 53 of Title 38 of the United States Code. This statute contains its own specific notice provisions. The provisions of the Veterans Claims Assistance Act of 2000 (VCAA), 38 U.S.C.A. § 5100 et seq. (West 2002) are relevant to a different chapter of title 38, and do not apply to this appeal. See Barger v. Principi, 16 Vet. App. 132 (2002). Death pension benefits are payable to the surviving spouse because of the non-service connected death of a veteran. Basic entitlement exists if the Veteran had qualifying wartime service or the Veteran at the time of death was receiving or was entitled to compensation for a service-connected disability based on service during a period of war. In addition, the surviving spouse must meet specified net worth requirements and have an annual income that does not exceed the applicable maximum annual pension rate (MAPR). 38 U.S.C.A. § 1541; 38 C.F.R. § 3.3(b)(4). Death pension, or widow's pension benefits are intended to provide subsistence for those in need, and are not intended to provide a supplement to more substantial income. Payments to the appellant of any kind from any source shall be counted as income during the twelve-month annualization period in which received, unless specifically excluded by law or regulation. Examples of income which must be counted include recurring payments, such as pension benefits from private employment, Social Security benefits, gross income from a business, farm or profession as reduced by the necessary operating expenses, and income from real and personal property. Examples of income which may be excluded include medical expenses and the profit from the sale of property. In the case of medical expenses, properly documented medical expenses in excess of five percent of the applicable maximum annual pension rate for the pension beneficiary may be used to reduce or offset countable income for VA pension purposes. 38 U.S.C.A. § 1503; 38 C.F.R. §§ 3.271, 3.272. Following the Veteran's death in September 2002, the appellant filed for death pension benefits in January 2003. In her application, she reported having no income whatsoever, to include no earnings, dividends, interest, or other recurring income. She also reported having no net worth, including no stocks, bonds, real estate, or other property. In other words, anyone reading her application for death pension benefits would reasonably conclude she was destitute, with no resources, no income, and no expectation of subsistence. She certified that these statements were true and complete to the best of her knowledge and belief when she signed her name at the bottom of the formal application form. The RO processed her application based upon this information, and for the next six years, continued to pay her the maximum death, or widow's pension benefit, predicated upon her report of having no income. She was mailed periodic notifications from VA of the requirement that she report any changes in her income, however. She also apparently was provided with yearly EVR (Eligibility Verification Report) forms from 2003 through 2007, and she apparently completed these forms, reporting no income. The forms themselves are not available for review, however other adjudicative references to them are contained in the file and these indicate that the appellant submitted the forms. As the RO continued to pay her at the maximum annual death pension rate, it is reasonable to conclude that she reported no income. Furthermore, the appellant continues to assert in her written contentions that she had not received other income. In 2006, the RO ran a routine income verification match with other government agencies. It revealed income from nine different sources during the year 2003, none of which the appellant had reported to VA. Furthermore, the total amount of this unreported income was greater than the maximum annual death pension rate. The RO independently verified the majority of this income, and in a June 2006 letter to the appellant, mailed to her address of record, requested her to verify the accuracy of this additional income information, or to reconcile the new information with the Eligibility Verification forms she had submitted. The appellant did not respond in any way to this letter. In 2007, the RO again performed an income verification match, which revealed ten additional sources of income during the year 2004, none of which the appellant had reported to VA. Again the total amount of this unreported income was greater than the maximum annual death pension rate. The RO independently verified the majority of this income, and in an April 2007 letter to the appellant, mailed to her address of record, requested her to verify the accuracy of this additional income information, or to reconcile the new information with the Eligibility Verification forms she had submitted. The appellant did not respond in any way to this letter. A November 2007 letter from the RO informed the appellant that beginning in December 2007, her monthly rate of death pension benefits would be $624, as the maximum annual death pension rate had been increased effective in December 2007 for a cost of living adjustment. This letter informed the appellant that the RO was calculating her net countable income as $0 based upon her own report and reminded her of the importance of reporting any change in income. It would appear that this letter was generated entirely without knowledge of the information revealed by the income verification matches. The appellant did not reply to this letter either. A December 2007 RO letter informed the appellant that she would not receive an Eligibility Verification Report form for the year 2008, because, "People with no income (other than their VA pension) do not have to complete an EVR [Eligibility Verification Report] form." This same letter reminded her, however, that she was responsible for reporting any changes in income. In 2008, the RO again performed an income verification match, which revealed nine additional sources of income during the year 2005, none of which the appellant had reported to VA. Again the total amount of this unreported income was greater than the maximum annual death pension rate. The RO independently verified the majority of this income, and in a letter to the appellant, mailed to her address of record, requested her to verify the accuracy of this additional income information, or to reconcile the new information with the Eligibility Verification forms she had submitted. The letter informed her that, "You must respond to this letter whether or not this income was received by you." The appellant did not respond in any way to this letter. In February 2008, the RO notified the appellant that they proposed to terminate her pension benefits from February 2003 to February 2005, based upon her unreported income, which exceeded the maximum annual rate of death pension. An April 2008 Compensation and Pension Award Form reflects that the appellant's net monthly rate of death pension payments was retroactively reduced to $0 a month from February 2003 through January 2005. In February 2005, her monthly rate was recalculated as $3 a month until December 2005, when it was increased to $26 a month, and December 2006, when it was calculated as $45 a month. A May 2008 letter from the RO provides these calculations to the appellant and also provides that because she had received more money than she was entitled to, an overpayment had been created, and that she would "receive a separate letter, which will explain how much we overpaid you, and how you can repay this debt." Although subsequent documents from VA refer to a May 2008 notice of debt, this separate letter is not contained in the file and thus not available for Board review. Later in 2008, the RO performed an income verification match, which revealed nine additional sources of income during the year 2006, none of which the appellant had reported to VA. The RO independently verified the majority of this income, and in a November 2008 letter to the appellant, mailed to her address of record, requested her to verify the accuracy of this additional income information, or to reconcile the new information with the Eligibility Verification forms she had submitted. The appellant did not respond in any way to this letter. A separate November 2008 letter to the appellant informed her that she would begin receiving pension benefits at the rate of $96 a month in December 2008. This rate appears to have been calculated based upon the independently-verified income from 2006, which the RO assumed would remain the same in 2008, compared with the maximum annual rate of death pension for 2008. The RO again ran an income verification match in 2009, which revealed nine additional sources of income during the year 2007, none of which the appellant had reported to VA. The RO independently verified the majority of this income, and in a letter to the appellant, mailed to her address of record, requested her to verify the accuracy of this additional income information, or to reconcile the new information with the Eligibility Verification forms she had submitted. Careful review of the available primary documentation reveals that in a January 2012 Financial Statement Report, the appellant revealed income from the Social Security Administration and from the California Retirement System; this January 2012 report constitutes her only acknowledgement of non-VA income sources. She vociferously denies any other income in written statements. Concurrently, but apparently entirely separate from the income match process, the RO informed the appellant in October 2009 that her pension payments would be retroactively stopped effective as of January 2008 because she had failed to complete and return the Eligibility Verification report form for the year 2008. The appellant contends that she always completed and returned the Eligibility Verification forms with which she was provided, and that she was not given such a form for January 2008, or she would have returned it as well. This particular statement is entirely credible, in light of the VA's December 2007 letter stating she would not be given an EVR form for 2008 and would not be required to fill out an EVR form again unless her income situation changed. A February 2010 Compensation and Pension Award Form reflects that the appellant's net monthly rate of death pension payments was retroactively reduced to $0 a month, effective in February 2006. The appellant was notified of this reduction in a July 2010 letter and again in February 2011. Unfortunately, as noted above, the Debt Management Center's original notification to the appellant of the amount of her overall debt (noted to be in May 2008) is not contained in the file, and thus not available for review by the Board. Similarly, the November 2009 notice of debt (reported in the December 2011 Decision on Waiver of Indebtedness) is not of record. It is clear that the appellant received some kind of notification of the debt by January 2010, because in that month she filed a financial status report upon which she notated that she was filing it in support of "compromise." Also on this form, she reported monthly retirement income of only $130 and monthly expenses of $2,300. In another letter received in January 2010, the appellant referred to the debt declared against her as, "this alleged debt," and offered to pay $2,000 in full payment of the debt. In February 2010, the Committee considered the appellant's January 2010 offer of compromise and rejected it. The decision reads, "This compromise offer would not be advantageous for the DVA (Department of Veterans Affairs) to accept. Another lump sum offer of $20,000 would be considered." An April 2010 internal VA document in which the Debt Management Center referred the appellant's debt to the Committee for consideration, reflects that the original principal amount of the debt was $35,188, the current (as of April 2010 presumably) principal amount of the debt was $35,548, and the amount to be considered for waiver was $948. No explanation is provided as to the calculation of any of these amounts in this document. A June 2010 letter to the appellant indicates that the RO had received her letter disputing the existence of her pension debt in the amount of $35,548. The letter indicates that the reason for her debt was her failure to provide an eligibility verification report, that the debt was properly established and the amount is correct. The letter then provides that if she wishes to dispute the debt itself, she must contact the RO within 30 days, and that, "If we do not hear from you within 30 days concerning your dispute, we will assume you are satisfied with our explanation and we will forward your waiver request to the Committee." Such an additional hoop for the appellant to jump through does not comport with the current precedential and regulatory scheme which requires the appellant only to request review of the creation of the debt once; because she had already done this, no further action on her part is required. Lastly, the letter referenced an enclosed "audit" of the appellant's account. Review to this audit shows that the appellant was paid $948 by VA from January 2008 to February 2009, although she should not have been paid anything during that period. The audit does not address the larger amount of $35,548, or the original principal amount of $35,188. In August 2010, the Committee issued a decision in which they waived $948. There is no reference in this document to the larger debt. Because collection of the debt of $948 has been waived by the Committee, this amount of money is not before the Board at this time. However, in the attempt to sort out what happened in this case, and because so much of the correspondence in this case references the $948, rather than the larger amount of debt, the Board has set forth this portion of the case history as well. According to the January 2011 Statement of the Case, the appellant requested a waiver in December 2010, and the waiver was denied in December 2010 on the basis that it was not timely filed in response to the May 2008 notification that a debt to the government had been created. The Statement of the Case similarly provided the explanation that the appellant had failed to file a timely request for waiver and therefore her request could not be considered. In December 2011, the Committee, apparently on its own motion, again raised and decided to partially grant the appellant's request for waiver of her debt. The Committee granted a waiver of $20,000, and denied the remaining amount of $15,548. The decision indicates that, "Due to the circumstances surrounding this case," the appellant's waiver request "is being considered timely." The letter informing the appellant of this decision indicates that if she does not agree with this decision, she should start an appeal of it by submitting a notice of disagreement. However, the letter continues on in bold type, "If you submit a notice of disagreement, the partial waiver grant may be rescinded and the full amount reconsidered. This could result in a full denial of your waiver request." The appellant disagreed with this decision, continuing to argue that she did not owe a debt to VA, because she did not have additional income. In April 2012, the Committee rescinded the prior grant and re-declared the debt in the amount of $35,188. It appears as though the Committee attempted to make a counter-offer of compromise to the appellant, rather than a waiver decision; however, the December 2011 decision was framed as a decision on a waiver of indebtedness and awarded a partial grant in the amount of $20,000. Rather than allowing the appellant to file an appeal as to the remaining $15,548, after a waiver of $20,000 was implemented, the Committee appears to be offering a compromise requiring the appellant to repay $15,548 of the original debt, in exchange for not having to repay the entire debt of $35,548. This is a classic compromise situation, rather than a waiver decision, as the Committee attempted to frame it. Governing law and regulation provides that VA may compromise a debt if it cannot collect the full amount for various reasons, including that the debtor is unable to pay the full amount in a reasonable time, or that there is significant doubt concerning VA's ability to prove its case in court. 31 U.S.C.A. § 3711; 38 C.F.R. § 1.931. The law also provides that a compromise that is accepted by VA shall be implemented by means of a mutual release, in which the debtor is released from further non-tax liability of the compromised debt in consideration of payment in full of the compromise amount. In such a case, VA is also released from any claims or causes of action that the debtor may have arising from the same transaction. 38 U.S.C.A. § 3711; 38 C.F.R. § 1.936. In other words, a compromise agreement is a final agreement by both parties which is not subject to appeal. There is no right of appeal from a decision rejecting a compromise offer. 38 C.F.R. § 1.958. A waiver decision, on the other hand, is subject to appeal, although only the debtor has standing to appeal the denial of waiver; the VA cannot appeal its own decisions. 38 C.F.R. § 1.958. In this case, the Committee appears to be mixing the two situations together, with nonsensical and confusing results. It appears that the Committee offered to waive repayment of $20,000, if the appellant would agree to pay the remaining debt of $15,548. However, the Committee phrased this "offer" as a "decision" in which they waived repayment of $20,000. The text of the waiver decision is clear that the Committee waived repayment of $20,000 under the standard of equity and good conscience. The decision was written using the form for a traditional waiver decision; rather than a letter form, which would be appropriate for a compromise offer. The text of the cover letter informing the appellant of this decision, however, reads as though the Committee was making an offer that had to be accepted as is, or the offer is void, which would be appropriate for a compromise offer, but not for a waiver decision. Because the Committee conflated the two processes and cannot have it both ways, the Board has decided to uphold the Committee's waiver of repayment of $20,000 of the appellant's debt to VA. The Committee was downright disingenuous in using the decision as leverage to essentially induce the appellant to drop her appeal as to the remaining debt. See e.g. 38 C.F.R. § 3.105. The proper means of seeking a compromise are clearly outlined in 38 C.F.R. § 1.930 through 1.936. See also 38 C.F.R. § 1.970. The Committee did not follow these procedures but rather issued a decision instating a partial grant of a waiver. Decisions on waivers are final and binding at the time VA issues written notification. 38 C.F.R. § 1.969(b); 3.104. While 38 C.F.R. § 1.969 allows for reversal or modification of a waiver decision, the basis for such revision or modification is new and material evidence, fraud, change in law or clear and unmistakable error. The April 2012 letter rescinding the December 2011 partial waiver did not discuss any of these factors but rather stated merely that the partial waiver was "not agreed upon" by the appellant. In other words, the April 2012 letter did not follow proper procedures for modifying or revising the waiver decision. Thus, the Board holds that the Committee's December 2011 decision was indeed a valid decision, which the Board will enforce. Only the remaining debt of $15,548, or $15,188, depending upon the exact calculation of the appellant's debt, remains at issue. Additional development is required prior to further appellate review, however, as outlined in the remand portion of this decision. ORDER Waiver of $20,000 of the appellant's death pension debt to the United States government is granted. REMAND With regard to the remaining debt, the Board notes that the RO already determined that the appellant did not engage in fraud, misrepresentation, or bad faith in the creation of the debt. The Board will not overturn this determination. The appellant's essential argument throughout this appeal process, has been that she does not have additional income. It may be a weak argument, given that the income verification match information is strong in and of itself and the RO independently verified most of her unreported income; however, it remains her argument, and she has made it consistently. We construe her contentions to be a challenge to the creation of her debt, now modified by the Board to her remaining debt, totaling some $15,000, rather than approximately $35,000. In this regard, the RO has not yet provided the appellant with an audit showing exactly how the amount of the debt was calculated. As noted above, the Debt Management Center's notification to the appellant of the amount of her overall debt is not contained in the file, and thus not available for review by the Board. Furthermore, the Committee's declaration of the appellant's debt and its determination that waiver was not appropriate, are not of record, if such a determination in fact took place. Therefore, upon remand, in addition to performing a thorough audit, the RO should attempt to locate all missing documentation for inclusion in the claims file. In the analysis of a waiver of indebtedness case, the question of whether the debt is valid (i.e., properly-created) is a critical component of the waiver question and this question must be resolved prior to deciding whether a waiver of the debt is in order. Schaper v. Derwinski, 1 Vet. App. 430 (1991). A crucial part of the issue of creation is an accurate accounting of the debt. In this regard, we note that it does not appear the appellant has been recently informed that unreimbursed medical expenses may be excluded from income for purposes of calculating pension benefits. Although she does not explicitly contend she has unreimbursed medical expenses, she did report in July 2011 that she was physically incapable of attending a hearing on this appeal. Therefore, after providing such notification and the appropriate forms for the appellant to record these expenses, if any, the RO should use all information available to calculate the amount of the appellant's remaining debt as precisely as possible. Also in this regard, the appellant has submitted documents from the Social Security Administration showing that a portion of her Social Security benefits are being garnished by the U.S. Treasury for the purpose of repaying her debt to VA. The RO should also obtain accurate information from the relevant government agencies as to how much of the debt has already been recouped. If the debt is deemed to have been invalidly created or if a waiver of all or part of the debt is eventually granted, this recouped money will have to be refunded to the appellant. If the debt is held to be validly created after a genuine and thorough analysis as required by Schaper, then the RO should proceed to apply the standard of equity and good conscience to the remaining amount of the appellant's debt. In this application, the RO will want to consider factors such as the poor communication within VA itself, with different offices within VA providing conflicting information to the appellant during this process. Also the fact that the VA allowed the appellant's debt to accumulate for more than two years after the initial income verification match was completed. These factors must be balanced against the appellant's very real misstatements as to her income and assets, which were revealed during the income verification match. It appears that throughout the appeal period, she had enjoyed additional sources of income for her support, and may not have been entitled to VA death pension benefits at any point. Accordingly, the case is REMANDED for the following action: 1. The RO should provide all appropriate notification to the appellant regarding what evidence is reviewed in determining whether the debt was validly created, and what evidence she can provide to support her position. In this regard, she should be provided with the appropriate Financial Status Report forms to report her income, assets, real estate, and expenses, to include medical expenses. 2. The RO should locate all missing Debt Management Center correspondence, such as the original May 2008 notification to the appellant of her debt, including the initial calculated amount, for inclusion in the claims file. If the Committee has indeed previously reviewed the appellant's request for waiver of the $35,000, this decision should be associated with the file as well. 3. The RO should then undertake an audit of the remaining debt, setting out exact figures and explaining the calculation of each figure, with appropriate references to the income verification match information, as necessary. That portion of the debt which has already been recouped through the reduction in the appellant's Social Security benefit payments must be accurately identified as well. Then the RO should undertake a thorough paid-and-due analysis of the creation of the debt identified and readjudicate the validity of the appellant's remaining death pension debt. 4. If the remaining debt is declared valid, the RO should provide the appellant with appropriate notification and then again refer the matter to the Committee for a review of her request for waiver, under the standard of equity and good conscience. If any benefit sought on appeal remains denied, the appellant, and her representative, if she chooses to designate one, should be furnished a supplemental statement of the case and given the opportunity to respond thereto. The appellant has the right to submit additional evidence and argument on the matter the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). This claim must be afforded expeditious treatment. The law requires that all claims that are remanded by the Board or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See 38 U.S.C.A. §§ 5109B, 7112 (West Supp. 2013). ______________________________________________ H. SEESEL Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs