Citation Nr: 1445274 Decision Date: 10/10/14 Archive Date: 10/16/14 DOCKET NO. 11-21 973 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in St. Paul, Minnesota THE ISSUE Entitlement to a waiver of the recovery of overpayment of VA pension benefits, in the amount of $24,781.40, to include whether the overpayment was properly created. REPRESENTATION Appellant represented by: Texas Veterans Commission ATTORNEY FOR THE BOARD M. Mac, Counsel INTRODUCTION The Veteran served on active duty from December 1971 to August 1973. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a November 2010 decision by the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA) Regional Office (RO) in St. Paul, Minnesota. In August 2013 the Board remanded the issue for further development. The Veteran has challenged the validity of his debt and thus the issue has been characterized as reflected on the title page. See Schaper v. Derwinski, 1 Vet. App. 430 (1991). The Virtual VA paperless claims processing system and the Veterans Benefits Management System (VBMS) have been reviewed. Virtual VA includes notice of the Veteran's bankruptcy dated in October 2013, the Veteran's August 2013 financial status report, and the Veteran's statements dated in June 2011 and July 2013. VBMS includes a duty to assist letter that was sent to the Veteran in February 2014. The other documents in the electronic files are either duplicative of the evidence of record or are not pertinent to the present appeal. FINDINGS OF FACT 1. For the period of July 19, 2008 to August 16, 2010, the Veteran was paid VA nonservice-connected pension benefits in the amount of $24,781.40; for that entire period, which began on the 61st day of his incarceration for a felony conviction, he was not entitled to nonservice-connected pension benefits resulting in a $24,781.40 overpayment. 2. Recovery of the overpayment would not be against equity and good conscience. CONCLUSION OF LAW An overpayment of VA pension benefits in the amount of $24,781.40 was properly created, and the Veteran is not entitled to waiver of recovery of the overpayment. 38 U.S.C.A. §§ 5302 (West 2002); 38 C.F.R. §§ 1.963, 1.965, 3.666 (2013). REASONS AND BASES FOR FINDINGS AND CONCLUSION 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 the claim. The VCAA duties to notify and to assist do not apply to the claim of waiver recovery of an overpayment of VA disability compensation. See Barger v. Principi, 16 Vet. App. 132, 138 (2002). In any event, it is noted that the Veteran had notification of the decision of the Committee on Waivers and Compromises, dated in November 2010, setting forth the general requirements of applicable law pertaining to a claim for waiver of recovery of an overpayment, and was advised as to the nature of the evidence necessary to substantiate his claim. In its decision, the RO's Committee on Waivers and Compromises also informed the Veteran of the reasons that his claim was denied and the evidence it had considered in denying the claim. The general advisements were reiterated in the statement of the case issued in May 2011. In short, the Veteran has been notified of the information or evidence necessary to substantiate his claim and the parties responsible for obtaining that evidence. Additionally, VA has provided the Veteran with the opportunity for a hearing but he declined a hearing. The Board is unaware of any additional evidence which is available in connection with this appeal. Analysis An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.962. The law provides that no pension under public or private laws administered by the Secretary shall be paid to or for an individual who has been imprisoned in a Federal, State, or local penal institution as a result of conviction of a felony or misdemeanor for any part of the period beginning 61 days after such individual's imprisonment begins and ending when such individual's imprisonment ends. 38 U.S.C.A. § 1505(a); 38 C.F.R. § 3.666. The pertinent facts in this case are as follows. In a rating decision in June 2006, the Veteran was granted nonservice-connected pension benefits. In a cover letter dated that same month, the RO notified the Veteran that his responsibilities included providing notification if his address or phone number changed. Prison records shows that the Veteran on May 19, 2008 was sentenced for 300 days for theft. He was again sentenced for theft on July 27, 2009 and was confined on September 3, 2009. An August 2010 prison record shows that the Veteran was released on August 16, 2010. In a letter dated in January 2010, the RO notified the Veteran that evidence was received showing that he was convicted of a felony and that pursuant to 38 C.F.R. § 3.666 his pension benefits would be terminated the 61st day of incarceration following his conviction. In a letter dated in September 2010 the RO notified the Veteran that due to his incarceration his pension benefits were terminated effective July 19, 2008. The RO advised the Veteran that he would be notified in a separate letter of the amount of the overpayment. In September 2010 the Debt Management Center notified the Veteran that an overpayment of $24,781.40 was created. VA in a letter in July 2011 confirmed that the Veteran's pension benefits were reinstated effective August 16, 2010, the day that he was released from prison. In March 2011 and in other statement dated in June 2011, July 2013, and May 2014, the Veteran contended that the overpayment was not due to his fault as his landlord and roommate were forging his signature and cashing his checks. He stated that he filed charges against the individuals. Correspondence dated in October 2013 shows that the Office of Inspector General declined to conduct an investigation of the alleged fraud concerning the Veteran's checks. The Veteran's most recent financial status report dated in August 2013 shows that his expenses exceed his income. In October 2013, VA received notice that the Veteran filed Chapter 13 bankruptcy. The 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). In the instant case the Veteran is not disputing the amount or the calculation of the debt but rather the validity of the debt as he did not actually received the benefit payments while incarcerated due to theft of his payment checks. As noted, the overpayment was properly created because more benefits were paid out than were authorized by law, and the payments were paid to an individual who the VA believed to be the Veteran. The issue of whether the Veteran actually received those payments is not relevant to whether the overpayment was properly created. Pursuant to 38 U.S.C.A. § 5302(c) and 38 C.F.R. § 1.965(b), a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of an overpayment. The Committee on Waivers and Compromises concluded in November 2010 that the facts in this case do not show the mandatory bars to waiver in the Veteran's case, and the Board agrees. As discussed above, the Veteran has stated that he was unaware of the debt as it was being created and did not defraud the government. The Committee on Waivers and Compromises then denied the Veteran's claim for waiver on the basis that recovery of the overpayment would not be against equity and good conscience as it would result in an unfair gain to the Veteran. 38 U.S.C.A. § 5302(a) ; 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. 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 obligor and the government. In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive: 1. Fault of the debtor. Whether the actions of the debtor contributed to the creation of the debt. 2. Balancing of faults. Weighing of the fault of the debtor against that of the 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. Whether failure to make restitution would result in unfair gain to the debtor. 6. Changing position to one's detriment. Whether reliance on VA benefits resulted in relinquishment of a valuable right or the incurrence of a legal obligation. 38 C.F.R. § 1.965(a). Based on a review of the entire record and having considered the contentions of the Veteran, the Board concludes that the Veteran was solely at fault in the creation of the overpayment. At the time the RO notified him of his pension award, he was instructed to inform VA if his address or phone number changed. He failed to do so when he was incarcerated, and in fact during his incarceration there is no evidence that he notified the VA of his whereabouts. In May 2014 he stated that he thought his checks would either continue to come or stop coming. It was not until VA received a VA and Social Security Computer Match printed in December 2009 that VA learned of his imprisonment. In short, the Board finds that the Veteran was duly informed of his obligation to report address changes, yet he failed to do so in a prompt manner, which led to the creation of the overpayment in this case. There is no indication of any fault on the part of the VA in the creation of the overpayment, since prompt action was taken by the RO to reduce benefits upon learning of the Veteran's incarceration. It is clear that the Veteran's actions, or lack of action, caused the overpayment without any fault on the part of the VA. In addition, the Board must also consider whether recovery of the debt would result in financial hardship to the Veteran. The Board recognizes that notice was received in October 2013 that the Veteran filed for bankruptcy. Nevertheless the overpayment in question was created during the Veteran's period of incarceration and payment of pension benefits as a result of conviction of a felony or misdemeanor from the 61st day of incarceration is barred by law pursuant to 38 C.F.R. § 3.666. Further, during the Veteran's period of incarceration he was provided with food, shelter, and clothing. Although he was married he did not have any dependents during his incarceration as he and his wife were separated and he did not provide her with any financial support. See May 2006 VA form 21-686c Declaration of Status of Dependents. In May 2011 he indicated that they were reunited however in June 2011 he stated that they could not reconcile. Another factor to be considered is whether the recovery of the overpayment would defeat the purpose for which the benefits were intended. Withholding benefits to recover the debt would not defeat the purpose of pension benefits because the Veteran was not entitled to such benefits during his period of incarceration which resulted in the creation of the debt. The Board also finds that failure to make restitution would result in unfair gain to the Veteran because he received monetary benefits to which he had no entitlement. VA made payments of pension benefits, without knowledge that the Veteran was in fact a ward of the state penal system. There is no evidence to show that he took any action to report his change of address and his incarceration. Under such circumstances, to allow him to retain VA pension benefits would constitute unjust enrichment. The Veteran asserts that he did not actually receive the monies that VA paid him during the overpayment period, because the payments were stolen from him. Therefore, he essentially alleges that it cannot be considered unfair gain. However, as previously stated, the VA payments in question were sent to the Veteran's last known address. His allegation of an intercepted check would not have happened if he had informed VA of his whereabouts. The Board must consider whether reliance on 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 had relinquished a valuable right or incurred a legal obligation in reliance on his VA pension benefits. During the cessation of payment of pension benefits the Veteran was in jail and was not incurring expenses. As discussed above he was not providing financial support to any dependents during his incarceration. In sum, the Board concludes that the facts of this case, when weighed against the various elements to be considered, do not demonstrate that recovery of the overpayment of benefits would be against equity and good conscience. Although the Veteran has financial hardship, he is solely at fault in the creation of the debt, and failure to repay the debt would result in unfair gain to him. Also, recovery of the overpayment would not defeat the purpose for which the benefits are intended, and he has not relinquished a valuable right or incurred a legal obligation in reliance on his VA benefits. As to the question of financial hardship, the Government's right to full restitution by law may not be moderated in the instant case as the Veteran's overpayment of pension benefits is due to his incarceration which he failed to report. As the preponderance of the evidence is against the petition for waiver, the benefit of the doubt rule does not apply, and the appeal in the matter must be denied. 38 U.S.C.A. § 5107(b). ORDER An overpayment of VA pension benefits in the amount of $24,781.40 was properly created, and waiver of recovery of the overpayment is denied. ____________________________________________ H. N. SCHWARTZ Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs