Citation Nr: 1443582 Decision Date: 09/30/14 Archive Date: 10/06/14 DOCKET NO. 11-31 695A ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania THE ISSUE Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs disability pension in the amount of $31,548. ATTORNEY FOR THE BOARD M. Scott Walker, Counsel INTRODUCTION The Veteran served on active duty from February 1951 to March 1953. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a January 2011 decision of the Department of Veterans Affairs (VA) Regional Office and Insurance Center (RO) in Philadelphia, Pennsylvania. FINDINGS OF FACT 1. The Veteran's indebtedness in the amount of $31,548 was validly created. 2. The Veteran is not shown to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment. 3. The Veteran was in receipt of disability income from October 18, 1988, based on Social Security Administration (SSA) disability benefits, as well as medical expenses; VA discovered unreported income in 2006 in the amount of $251,755.23; any VA fault in the creation of this debt is outweighed by the fault of the Veteran. 4. A waiver of repayment of this debt would result in unfair enrichment to the Veteran; recovery of this overpayment will not subject him to undue hardship sufficient to warrant a waiver of the debt. 5. Recovery of the amount of the remaining debt in the calculated amount of $31,548 would not be against equity and good conscience. CONCLUSION OF LAW The criteria for waiver of recovery of an overpayment of VA disability compensation benefits in the amount of $31,548 have not been met. 38 U.S.C.A. § 5302 (West 2002); 38 C.F.R. §§ 1.956, 1.962, 1.963, 1.965 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSION Duty to Notify and Assist As provided for by the Veterans Claims Assistance Act of 2000 (VCAA), VA has a duty to notify and assist claimants in substantiating a claim for VA benefits. 38 U.S.C.A. §§ 5100 , 5102, 5103, 5103A, 5107, 5126 (West 2002 & Supp. 2013); 38 C.F.R. §§ 3.102 , 3.156(a), 3.159, 3.326(a) (2013). Notably, the VCAA does not apply to the issue at hand. See Barger v. Principi, 16 Vet. App. 132 (2002); see generally Smith (Claudus) v. Gober, 14 Vet. App. 227, 230 (2000). The statute governing waiver claims, however, has its own notice provisions. 38 U.S.C.A. § 5302 (West 2002). In a waiver of overpayment claim, the payee must be notified of his right to dispute the debt and request a waiver of the debt with a description of the procedures for submitting the application. The Veteran was sent proper notice of the overpayment debt in April 2010. Accordingly, the notice provisions with regard to this appeal have been met. Validity of the Debt 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). 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 (2013). An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. See 38 C.F.R. § 1.956(a) (2013). In this case, the Veteran has been in receipt of VA disability pension from October 18, 1988, to the present. However, in 2006, VA discovered that the Veteran failed to report additional income in the amount of $251,755.23. At that time, the Veteran's disability pension award was based on reported SSA income for the Veteran and his spouse, as well as medical expenses. In April 2010, VA requested that the Veteran return VA Form 5655, a Financial Status Report (FSR), and to submit VA Form 21-0516, Improved Eligibility Verification Report (EVR), so as to accurately reflect his income from 2006 to the present. The Veteran did not respond to these requests in a timely fashion. 38 C.F.R. § 3.652(a) (2013). The April 2010 letter indicated that the Veteran's benefit was awarded based on $0.00 of assets and net worth. In May 2010, the Veteran stated that the amount of $251,755.23, discovered in a bank account, represented the accumulation from a lifetime of savings, prior to retirement, and lottery prizes. In October 2010, he clarified that he had the money in a certificate of deposit for more than 20 years, and that he always provided paperwork to the state of Puerto Rico. He argued that VA was "charging" him a sum of money that he possessed before he was granted pension due to disability. VA terminated the Veteran's pension as of January 1, 2006, and it was determined that this action created an overpayment in the amount of $31,548. In its January 2011 decision, the RO indicated that the Veteran had reported zero income and zero assets on the EVRs from 2006 forward. Here, the Veteran has failed to demonstrate that he was not in possession of $251,755.23 at the time the unreported income was discovered. Accordingly, the Board concludes the overpayment in question is a valid debt because the Veteran received benefits to which he was not entitled. See 38 U.S.C.A. § 5112(b)(2); 38 C.F.R. §§ 3.501, 3.652(a) (2013). Waiver of Overpayment The Veteran seeks waiver of recovery of an overpayment of VA disability pension in the amount of $31,548. The Veteran asserts that he is not at fault in the creation of this debt, and that collection of this debt would result in undue hardship. While the Board has determined that the debt in question is valid, there shall be no recovery of overpayment of VA benefits if it is determined that recovery would be against equity and good conscience. See 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.962 (2013). The standard "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. The decision reached should not be unduly favorable or adverse to either side. The phrase "equity and good conscience" means arriving at a fair decision between the Veteran and the Government. The Veteran requested a waiver of the recovery of the debt at issue. He completed a May 2010 EVR which showed that he received zero income from 2006 forward, although he later noted that he supplemented his income with the interest from his large annuity. See Statement, September 2010. The Veteran's request for a waiver of the overpayment was referred to the Committee on Waivers and Compromises (Committee) in September 2010. In January 2011, the Committee considered the Veteran's claim for a waiver. The Committee made a specific determination that there was no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue. However, the Committee further determined that the overpayment of VA disability pension benefits in the amount of $31,548 resulted in an unfair financial gain at the expense of the U.S. government, amounting to unjust enrichment, and that the recovery thereof would not be against equity and good conscience. The Committee found that change of position and defeat of purpose were not applicable. In cases where there is no fraud, misrepresentation, or bad faith on the Veteran's part with respect to the creation of the overpayment at issue, and, therefore, waiver is not precluded pursuant to 38 U.S.C.A. § 5302(a), in order to dispose of the matter on appeal, 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) (2013). 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. See 38 C.F.R. § 1.965(a) (2013). In making this determination, consideration is given to the following elements, which are not intended to be all-inclusive: (1) fault of the debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue Hardship (whether collection would deprive the 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); and (6) changing position to one's detriment (reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation). See 38 C.F.R. § 1.965 (2013). In the evaluation of whether equity and good conscience necessitates a favorable waiver decision, the Board must consider all the specifically enumerated elements applicable to a particular case. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994); Cullen v. Brown, 5 Vet. App. 510, 512 (1993). If warranted, the Board may waive a portion of the debt. See Jordan v. Brown, 10 Vet. App. 171 (1997). When, in fully weighing and balancing each equitable factor, there is an approximate balance of positive and negative evidence as to any material issue, VA shall give the Veteran the benefit of the doubt. See 38 U.S.C.A. § 5107(b). See also Dela Cruz v. Principi, 15 Vet. App. 143, 148-49 (2001). In consideration of the standards of equity and good conscious, the Committee determined that unjust enrichment outweighed any claimed financial hardship. The Board concurs, finding that while the facts of this case do not reveal fraud, misrepresentation, or bad faith on the Veteran's part in the creation of the overpayment in question, collection of the overpayment would not be against "equity and good conscience." See 38 U.S.C.A. § 5302(a); 38 C.F.R. § 1.963(a) (2013). As mentioned, pursuant to 38 C.F.R. § 1.965, 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. See 38 C.F.R. § 1.965(a). The first and second elements pertain to the fault of the debtor versus the fault of VA. The responsibility in the creation of the overpayment of benefits rests with the Veteran, inasmuch as it was due to his failure to submit timely and accurate reporting of his actual income and assets, even after assets totaling $251,755.23 were discovered. Thus, the Board finds that the Veteran bears primary fault in the creation of the overpayment at issue. With respect to the third element, whether the Veteran would be subjected to undue hardship if the debt were recovered, the Veteran has never indicated that the collection thereof would create any specific hardship. He has argued that the collection would have an adverse effect on his financial picture, as he is elderly and unable to work. He also noted that he suffered a massive heart attack, presumably resulting in high medical bills. However, as the overpayment of pension benefits is a valid debt to the U.S. Government, and the Veteran has not submitted a recent FSR to demonstrate actual financial hardship should the debt be collected, none is found by the Board. Even assuming that recovery of the valid debt would create some hardship, financial hardship alone is not sufficient to constitute undue hardship for VA purposes. Undue hardship is defined as depriving the debtor or his family of basic necessities. 38 C.F.R. § 1.965(a)(3). Basic necessities constitute food, clothing, and shelter, and the evidence of record is insufficient to show that recovery of the overpayment in this case would deprive him of basic necessities for VA purposes. Accordingly, this factor alone is not sufficient to warrant a waiver of an otherwise valid debt. The fourth element of equity and good conscience also fails to support the waiver of overpayment in this case. Again, the fourth element to be addressed is whether recovery of the overpayment would defeat the purpose for which the benefits were intended. Here, VA awarded VA disability pension to which the Veteran was deemed entitled due to his reports of zero income and zero assets, save for SSA disability for him and his spouse. As evidence of record clearly demonstrates that the Veteran was in possession of assets greater than a quarter million dollars in 2006, the reduction of this benefit would not defeat the purpose for which the benefit was intended, as the Veteran would not have qualified for disability pension in the first instance had such assets been disclosed. Also for consideration is whether a waiver of overpayment would cause "unjust enrichment." Put another way, the Board must contemplate whether failure to make restitution would result in unfair gain. Here, the Veteran clearly received assistance to which he was not entitled. The Veteran received from VA a total of $31,548 during a period in which his assets vastly exceeded that which was reported. In the absence of any evidence that the Veteran did actually have possession of such assets, which he has never asserted in this case, the Board cannot conclude that the monies given to the Veteran did not provide an unfair financial gain. Accordingly, the Veteran would be unjustly enriched by waiver of the overpayment in this case. The sixth element to be considered is whether reliance on VA benefits resulted in the Veteran relinquishing a valuable right or incurring a legal obligation. The Veteran has not claimed that he relinquished any right or incurred any legal obligation or that he relied upon VA to his detriment, nor is there any evidence of such. Thus, this sixth element does not support the Veteran's request for a waiver of overpayment. Finally, the record does not demonstrate any additional factors which should be considered in adjudicating the Veteran's claim for a waiver of the indebtedness, nor has the Veteran identified any such factors. After weighing all of the enumerated factors, the Board finds that total recovery of the overpayment does not violate the principles of equity and good conscience. In reaching this conclusion, the Board has considered the Veteran's statements in support of his application for a waiver of recovery of an overpayment. Again, principles of equity and good conscience do not preclude recovery of the overpayment here. As the preponderance of the evidence is against his claim, the "benefit-of-the-doubt" rule does not apply and the claim must be denied. See 38 U.S.C.A. § 5107(b) (West 2002); 38 C.F.R. § 3.102, 4.3; Gilbert v. Derwinski, 1 Vet. App. 49, 50 (1990). ORDER The appeal for a waiver of the recovery of an overpayment of VA disability pension in the amount of $31,548 is denied. ____________________________________________ M. TENNER Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs