Citation Nr: 1610424 Decision Date: 03/15/16 Archive Date: 03/22/16 DOCKET NO. 09-39 370 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Portland, Oregon THE ISSUE Entitlement to waiver of recovery of an overpayment of VA compensation benefits in the calculated amount of $31,679.00. REPRESENTATION Veteran represented by: Disabled American Veterans ATTORNEY FOR THE BOARD J. H. Nilon, Counsel INTRODUCTION The Veteran served on active duty from August 1975 to May 1979. This matter comes before the Board of Veterans' Appeals (Board) on appeal of a January 2009 decision by the Committee on Waivers and Compromises (COWC) of the Department of Veterans Affairs (VA) Regional Office (RO) in St. Paul, Minnesota. VA's current Agency of Original Jurisdiction (AOJ) is the VA RO in Portland, Oregon. The Veteran was scheduled for a hearing before the Board in August 2011 but canceled the hearing because he was incarcerated. It appears from review of the file that the Veteran is still incarcerated and thus unable to attend a hearing. The Board will accordingly proceed with adjudication of the appeal as though the request for hearing had been withdrawn. In January 2014 the Board issued a decision denying the claim. The Veteran thereupon appealed the Board's decision to the United States Court of Appeals for Veterans Claims (Court). In December 2015 the Court issued an Order granting a Joint Motion of the Parties to vacate the Board's decision and to remand the case to the Board for further consideration. FINDINGS OF FACT 1. The Veteran received $31,679.00 in VA compensation benefits to which he was not entitled due to his incarceration, resulting in creation of the overpayment debt presently on appeal. 2. The Veteran has not challenged the validity of the creation of the debt. 3. The creation of the indebtedness in the amount of $31,679.00 is not shown to be the result of fraud, misrepresentation, or bad faith on the part of the Veteran. 4. The Veteran had greater fault than VA in the creation of the debt. 5. The recovery of the overpayment in the amount of $31,679.00 would not violate the standards of equity and good conscience. CONCLUSION OF LAW The requirements for waiver of recovery of the overpayment of compensation benefits in the calculated amount of $31,679.00 have not been met. 38 U.S.C.A. § 5302 (West 2014); 38 C.F.R. §§ 1.962, 1.963, 1.965 (2015). REASONS AND BASES FOR FINDINGS AND CONCLUSION Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA), Pub. L. No. 106-475, 114 Stat. 2096 (Nov. 9, 2000) (codified at 38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5106, 5107, and 5126 (West 2014)) redefined VA's duty to assist a claimant in the development of a claim. VA regulations for the implementation of the VCAA were codified as amended at 38 C.F.R. §§ 3.102, 3.156(a), 3.159, and 3.326(a) (2015). The provisions relating to notice and development found in the VCAA are not applicable to cases involving overpayment and indebtedness. Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132 (2002). Notwithstanding the fact that the notice and development provisions are not controlling in these matters, the Board has reviewed the case and determined that the Veteran has had a fair opportunity to present arguments and evidence in support of his claim. The Veteran requested a hearing before the Board, but as noted in the Introduction he is unable to attend a hearing due to his incarceration. Nonetheless, the RO has afforded the Veteran the opportunity to present information and evidence in support of the appeal, and he has done so. The Veteran has not identified any existing evidence that should be obtained before the appeal is adjudicated. The Board finds there is no indication in the record that any additional existing evidence relevant to the issue to be decided herein is available and not part of the claims file. Further, the recent Joint Motion for Remand, as incorporated by the Court's Order in December 2015, expressed no issues regarding duties to notice and assist; the Board is confident that if any additional VCAA defects existed in its January 2014 decision such defects would have been brought to the Court's attention in the interest of judicial economy. Therefore, the Board will proceed to the merits of the Veteran's appeal. Evidence and Analysis The factual background in this case is not in dispute. The Veteran has been in receipt of a total compensation rating based on individual unemployability (TDIU) since June 1, 1979, and special monthly compensation (SMC) at the "K" rate for loss of use of one eye has been in effect since June 28, 1989. In March 2005 the Portland RO sent notice to the Veteran that he was determined to be a fugitive felon, and that benefits would be suspended within 60 days if he did not respond by clearing the warrant. In June 2005, the Veteran's award was terminated effective on December 27, 2001, based on his status as a fugitive felon, which resulted in an overpayment of $100,977.79. The Veteran disagreed with the decision to terminate his benefits and argued that the debt was not properly created, but he did not perfect his appeal. A February 2007 document reflects that the Veteran was subsequently arrested and returned to the United States on November 8, 2006, where he remained pending trial. The Veteran was convicted of a felony and is currently serving a 20+ year sentence. The Veteran submitted another waiver request in August 2005, which was denied by COWC in September 2007. The Veteran did not appeal. On July 8, 2008, the Veteran was notified that his benefits were being restored effective from November 8, 2006, the date that his warrant was cleared by means of his extradition. The letter notes that he was being paid as a single veteran with two dependent children. The Veteran asserts on appeal that he never received these benefits, but it appears they were applied to his outstanding debt. See Overpayment Calculation projected for the period from November 2006 to January 2010. On July 14, 2008, the Debt Management Center (DMC) sent the Veteran a letter advising that his benefits would be withheld in full and would continue until the remaining debt (calculated as $48,543.25) was liquidated. As documented in a Report of Contact dated July 24, 2008, the RO contacted the Veteran's place of incarceration on that date and learned the Veteran had been convicted on July 11, 2007, and was incarcerated on that date with projected release on May 10, 2029. On the same date the RO notified the Veteran that VA proposed to reduce his benefits to the 10 percent rate based on his incarceration. In September 2008, the benefits were reduced effective on September 10, 2007 (61 days after conviction and incarceration), which resulted in the creation of another overpayment. In October 2008, the Veteran requested a waiver of the entire overpayment balance. The DMC referred the matter to the COWC. The referral sheet indicates that the amount to be considered for waiver was $31,679.60; which appears to be the increase in debt based on the second overpayment. In January 2009 the COWC issued the denial of request for waiver of indebtedness that is presently on appeal before the Board. When a veteran raises the issue of the validity of a debt as part of the waiver application, it is arbitrary and capricious, and an abuse of discretion, to adjudicate the waiver application without first deciding the veteran's challenge to the lawfulness of the debt asserted against him or her. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991). It does not appear that the Veteran is challenging the validity of the debt based on the adjustment due to incarceration. Hence, the Board will proceed directly to the merits of the waiver request. Recovery of overpayment of any benefits made under laws administered by VA shall be waived if there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver, and recovery of the indebtedness from the payee who received such benefits would be against equity and good conscience. 38 U.S.C.A. § 5302; 38 C.F.R. § 1.963(a). However, if there is an indication of fraud, misrepresentation, or bad faith in the creation of the overpayment, waiver of the overpayment is automatically precluded and further analysis is not warranted. See 38 U.S.C.A. § 5302(a); 38 C.F.R. §§ 1.962, 1.963, 1.965. The Board finds at the outset that there is no indication that the debt was the result of fraud, misrepresentation, or bad faith on the part of the Veteran. Accordingly, waiver of the overpayment is not precluded. The Veteran asserts that collection of the debt would cause financial hardship and thus violate equity and good conscience. 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 - where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults - weighing fault of the debtor against Department of Veterans Affairs 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 Department of Veterans Affairs benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a). Addressing first the question of balancing of faults, the Board finds the Veteran to have been more at fault than VA in the creation of the debt based on the reasons cited below. A September 2007 deferred rating decision states the Veteran's warrant was cleared in November 2006 and that since he was no longer a fugitive felon he would be eligible for restoration of full benefits, which would continue until the 61st day of incarceration, and to 10 percent disability payment from that date. The Veteran had actually been convicted and incarcerated on July 11, 2007, but VA was not aware of that fact until July 24, 2008, which resulted in the overpayment. There is arguably a degree of fault on the part of VA for failing to determine that the Veteran was convicted and incarcerated until a year after the event. However, the claims folder contains numerous written statements from the Veteran dated in 2007 and 2008 demonstrating he had actual knowledge that he would receive only 10 percent of his compensation following his 61st day of incarceration, and there is no indication the Veteran made any effort to notify VA of his actual date of his incarceration immediately following his felony conviction; had he done so, the overpayment debt would not have been created. In fact, the Veteran admits that he did not inform VA of his incarceration. The Veteran stated in his September 2009 Substantive Appeal that he did not feel obligated to report the date of incarceration because he had spoken to the RO in February 2007. However, the Veteran was not convicted of a felony until July 2007. Accordingly, the February 2007 contact with the RO cannot logically be interpreted as notification by the Veteran that he was incarcerated as of July 2007 for conviction of a felony. 38 C.F.R. § 3.665(a). Thus, the Board finds the actions of the Veteran contributed more to the creation of the debt than any fault of VA. Turning to the question of whether collection of the debt would cause undue hardship, the Veteran asserts he is unable to pay for items such as eye drops, reading glasses, stationery, excess postage, photocopy service, legal fees, overseas mail, and necessary toiletries in prison. He also asserts the food in prison is bad, and he wants to buy snacks and vitamins, and he similarly says the shoes provided by the prison are bad, and he would like to buy supportive shoes. He would also like to be able to buy a guitar, a television, or a deck of cards. In support of his contention the Veteran submitted a Financial Status Report (FSR) in July 2008 showing no monthly income but also showing no monthly expenses for food, rent or mortgage, or utilities. In regard to other living expenses, the Veteran has submitted charges from the prison commissary for toiletries, and price lists from the prison showing that prisoners must pay for dentures, eye examination, and eyeglasses. The Veteran also asserts that he cannot work in the prison due to physical disability and is accordingly unable to earn money to buy these goods and services. The Board finds on review that the goods and services cited by the Veteran do not constitute "basic necessities" as envisioned by the regulation. Although 38 C.F.R. § 1.965(a)(3) does not define "basic necessities," the regulation elsewhere defines the "necessities of life" as food, housing, clothing, transportation, and medical care. See 38 C.F.R. §§ 1.981(g) and 3.24(d)(6). The Veteran in this case has not asserted or suggested that collection of the debt would deprive him of food, shelter, clothing or basic medical care, and given the Veteran's circumstances access to transportation is frankly moot. There is nothing in the regulation to suggest that inability to purchase the toiletries, glasses, and medical and legal expenses as cited by the Veteran constitutes an undue hardship warranting waiver of overpayment. Thus, the collection of the overpayment would not deprive the Veteran of basic necessities. In applying the equitable principles in this case, the Board has found that the Veteran is more at fault than VA in the creation of the debt. Recovery of the debt would not defeat the purpose, since compensation benefits are not payable to a fugitive felon and are reduced during incarceration. Failure to recover the debt would represent unjust enrichment to the Veteran, since he will have been paid compensation benefits to which he was not legally entitled. The Veteran has not shown that he changed his position to his detriment in expectation of keeping the overpaid benefits on appeal. Although he asserts "undue hardship" the Board has found that recovery of the overpayment will not deprive him of the basic necessities of life. In sum, in weighing the equities a waiver of payment would be unduly favorable to the Veteran and unduly adverse to the Government. Accordingly, collection of the debt does not violate equity and good conscience, and the request for waiver must be denied. In reaching the above conclusion, the Board has considered the applicability of the benefit of the doubt doctrine. However, as the preponderance of the evidence is against the Veteran's claim, that doctrine is not applicable in the instant appeal. See 38 U.S.C.A. § 5107(b) (West 2014); Ortiz v. Principi, 274 F.3d 1361, 1364 (Fed. Cir. 2001); Gilbert v. Derwinski, 1 Vet. App. 49, 55-56 (1990). ORDER Waiver of recovery of an overpayment of VA compensation benefits in the calculated amount of $31,679.00 is denied. ____________________________________________ S. HENEKS Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs