Citation Nr: 1752719 Decision Date: 11/16/17 Archive Date: 11/22/17 DOCKET NO. 10-20 149 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania THE ISSUE Entitlement to waiver of recovery of an overpayment of compensation benefits in the calculated amount of $16,692.40, to include the issue of the validity of the debt. REPRESENTATION Appellant represented by: Disabled American Veterans ATTORNEY FOR THE BOARD R. Behlen, Associate Counsel INTRODUCTION The appellant served on active duty in the Army from June 1974 to June 1976. In a September 2009 decision, the Department of Veterans Affairs (VA) Regional Office (RO) in St. Petersburg, Florida, terminated the appellant's VA compensation from December 19, 2008, to May 27, 2009, based on his status as a fugitive felon. In November 2009, a corrective determination was issued, terminating compensation effective November 19, 2008, the date on which an arrest warrant was actually issued. This matter came to the Board of Veterans' Appeals (Board) on appeal from a December 2009 decision of the Committee on Waivers and Compromises (COWC) at the RO in Philadelphia, Pennsylvania, which denied a waiver of recovery of the indebtedness created as a result of the retroactive termination of the appellant's VA compensation based on his fugitive felon status. The RO initially incorrectly informed the appellant, his then-fiduciary, and the representative that such overpayment was created due to incarceration. See December 2009 letter. However, this inaccuracy was corrected in later correspondence, where it was explained that it was the appellant's fugitive felon status which led to the creation of such overpayment. See e.g. March 2010 Statement of the Case (SOC). Further, in a November 2009 letter, the RO stated that the discontinuation of benefits was due to his status as a fugitive felon. An NOD was received in March 2010. An SOC was issued in April 2010. A timely substantive appeal was received in May 2010. The Board remanded this matter in January 2014. A Supplemental Statement of the Case (SSOC) was issued in June 2017. A review of the record shows that the RO has substantially complied with all remand instructions. The appellant and his representative have not contended otherwise. Stegall v. West, 11 Vet. App. 268 (1998). FINDINGS OF FACT 1. The appellant was a fugitive felon for VA purposes from November 19, 2008, to May 27, 2009. 2. Due to the appellant's fugitive felon status from November 19, 2008, to May 27, 2009, an overpayment of VA compensation benefits of $16,692.40 was created. 3. The appellant was solely at fault in the creation of the overpayment at issue and waiver of the overpaid benefits would result in an unfair gain to him. These factors outweigh any other considerations, including claimed financial hardship. CONCLUSIONS OF LAW 1. An overpayment of VA compensation was properly created for the period from November 19, 2008, to May 27, 2009, due to the appellant's fugitive felon status. 38 U.S.C. §§ 5103(a), 5103A, 5313B (2012); 38 C.F.R. §§ 1.911, 3.665(n) (2017). 2. Recovery of the overpayment of VA compensation benefits in the calculated amount of $16,692.40 does not violate the principles of equity and good conscience. 38 U.S.C. §§ 5107, 5302 (2012); 38 C.F.R. §§ 1.963(a), 1.965(a) (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSION I. Veterans Claims Assistance Act of 2000 (VCAA) As a preliminary matter, the Board notes that the VCAA does not apply in this case, given the nature of the issues on appeal. See e.g. Reyes v. Nicholson, 21 Vet. App. 370 (2007); Schaper v. Derwinski, 1 Vet. App. 430 (1991); Lueras v. Principi, 18 Vet. App. 435 (2004); Barger v. Principi, 16 Vet. App. 132 (2002); 38 U.S.C. §§ 5103, 5103A. II. Applicable Law A. Fugitive Felon Status Compensation is not payable on behalf of a veteran for any period during which such veteran is a fugitive felon. A fugitive felon means a person who is a fugitive by reason of fleeing to avoid prosecution, or custody or confinement after conviction, for an offense or an attempt to commit an offense, which is a felony under the laws of the place from which the person flees; or violating a condition or probation or parole imposed for commission of a felony under the Federal or State law. 38 C.F.R. § 3.665(n). The statute which bars Veterans from receiving VA benefits while they are "fugitive felons," does not require an adjudication of guilt or knowledge of the outstanding arrest warrant. Mountford v. Shinseki, 24 Vet. App. 443 (2011). B. Waiver The Board notes that overpayments created by the retroactive discontinuance of VA benefits will be subject to recovery unless waived. 38 C.F.R. § 3.660. Recovery of overpayment of any benefits made under laws administered by the 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. § 5302(c); 38 C.F.R. §§ 1.963(a), 1.965(b). The standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights. 38 C.F.R. § 1.965(a). In such a determination, consideration will be given to six elements which include the degree of fault of the debtor; a balancing of fault between the debtor and VA; whether recovery of the overpayment would cause undue financial hardship to the debtor, or result in unjust enrichment; and whether repayment of the debt would defeat the purpose for which it was intended. 38 U.S.C. § 5302; 38 C.F.R. § 1.965. III. Analysis A. Validity of Debt During the relevant period on appeal, the appellant was service-connected for schizophrenia, undifferentiated type, rated as 100 percent. In June 2009, VA received information that a warrant had been issued for the appellant's arrest by the Osceola County Sheriff's Office. The RO sent a letter to the appellant in July 2009, informing him that his benefits would cease unless his status as a fugitive felon had been corrected. In a September 2009 letter, the appellant was informed by the RO that his benefits had been terminated, effective December 19, 2008, based on his status as a fugitive felon. In view of such retroactive termination of benefits, the appellant was informed in October 2009 that he had received an overpayment in benefits in the amount of $25,126.20. That calculated overpayment was ultimately modified to $16,692.40. The record on appeal indicates that the appellant's VA compensation was terminated effective November 19, 2008, and reinstated May 27, 2009, because the appellant was a fugitive felon from November 19, 2008, when the warrant was issued, to May 27, 2009, when he was arrested pursuant to such warrant. The appellant and his representative do not contend otherwise. Therefore, in the absence of evidence to the contrary, the Board concludes that the appellant was a fugitive felon from November 19, 2008, to May 27, 2009. Compensation is not payable on behalf of a veteran for any period during which such veteran is a fugitive felon. 38 C.F.R. § 3.665(n). Under these circumstances, the debt at issue in this case is valid. B. Waiver of Indebtedness Having determined that the debt at issue in this case is valid, the Board will next consider whether the debt may be waived. As set forth above, any indication that a claimant committed fraud, misrepresentation of a material fact, or bad faith in connection with his receipt of VA benefits precludes the Board from granting a waiver of recovery of the overpayment. This parallels the "clean hands" doctrine familiar in equity cases; only if a claimant is free from all taint of fraud in connection with his claim for benefits may waiver on account of "equity and good conscience" be considered. See Farless v. Derwinski, 2 Vet. App. 555 (1992). In this case, the COWC has determined that the appellant did not exhibit fraud, misrepresentation, or bad faith in the creation of the instant overpayment; and the Board will not disturb that finding. Absent an indication of fraud, the next issue to be addressed is whether a collection of the debt from the appellant would be contrary to the principles of equity and good conscience. Such a determination requires consideration of the degree of fault of the debtor; a balancing of fault between the debtor and VA; whether recovery of the overpayment would cause undue financial hardship to the debtor, or result in unjust enrichment; and whether repayment of the debt would defeat the purpose for which it was intended. 38 U.S.C. § 5302; 38 C.F.R. § 1.965. With respect to the first element, the Board initially finds that the fault in the creation of the overpayment at issue lies exclusively with the appellant, as it was caused by his failure to adhere to the terms and conditions of his parole, resulting in the issuance of a warrant for his arrest. The appellant's actions were the sole cause of the overpayment in this case. The second element concerns "balancing of faults." 38 C.F.R. § 1.965(a)(2). This element requires weighing the fault of the debtor against the fault of VA. In this regard, the debt in this case was created after a warrant was issued for the appellant's arrest based on his failure to adhere to the terms and conditions of his parole, and it remained outstanding until he was arrested. The Board finds that VA bears no fault in the creation of this debt. In fact, the record shows that VA took prompt action to terminate the appellant's compensation once it received notification of his fugitive felon status. The next element to be considered is "undue hardship," described as "[w]hether collection would deprive debtor or family of basic necessities." 38 C.F.R. § 1.965(a)(3). In this respect, the record shows that the appellant is in receipt of Social Security Administration (SSA) benefits since as early as July 1991, and his VA compensation has been resumed since the warrant was cleared. The November 2009 Financial Status Report indicates that the appellant's expenses, which include a $300 monthly cable bill, exceed his income by $77. A May 2010 Financial Status Report fails to include his VA compensation. A statement from the appellant was received in March 2010, which stated that he had not paid his rent, electric, cable, car, or insurance bills for two months, and that he has a girlfriend and three minors who depend upon him. A statement from the appellant's then-fiduciary was received in April 2010, which stated that, without monthly VA benefit payments, the appellant would be unable to live. In his substantive appeal received in May 2010, the appellant contended that collection of the debt would be an undue hardship and deprive him and his family of basic necessities, although no specifics were provided. With consideration of his income from both VA and SSA, the Board finds that the evidence of record fails to demonstrate that collection of the debt at issue here would result in undue financial hardship or result in undue hardship. The appellant's reported monthly expenses include a significant amount for at least one item beyond what would reasonably be deemed essentials, i.e. a large payment for a cable bill. Based on the information available, the Board finds undue hardship has not been established. Regardless, as set forth above, the Board concludes that the substantial element of fault and the unjust enrichment would outweigh any other factor, including financial hardship. The next element to be considered is whether recovery of the overpayment at issue would defeat the purpose for which the benefits were intended. 38 C.F.R. § 1.965(a)(4). In this case, the appellant was not legally entitled to VA compensation during the period in question. Rather, he was statutorily prohibited from receiving VA compensation during the period he was a fugitive felon pursuant to the legislation intended to deny fugitives the means to maintain themselves in that status. See e.g. VAOPGCPREC 7-2002 (Dec. 3, 2002). The Board finds that the purpose and intent of the fugitive felon statute outweighs any consideration as to the purpose of VA compensation benefits in this case. In other words, repayment of the debt at issue would not conflict with the objective underlying the appellant's VA compensation benefits, as he was legally barred from receiving those benefits during the time period in which that debt was granted. The fifth element involves "unjust enrichment," i.e., the concept that failure to make restitution would result in unfair gain to the debtor. 38 C.F.R. § 1.965(a)(5). In this case, the appellant received VA compensation to which he was not legally entitled. Waiver of this debt would therefore result in a windfall and produce unfair gain to the appellant. The failure of the Government to insist on its right to repayment of this debt would result in the appellant's unjust enrichment at the expense of the taxpayer, and it would negatively impact other VA beneficiaries as resources for their care are not unlimited. The final element to be considered is whether reliance on VA benefits resulted in the appellant relinquishing a valuable right or incurring a legal obligation. 38 C.F.R. § 1.965(a)(6). It has not been contended that the appellant relinquished any right or incurred any legal obligation in reliance on receipt of compensation benefits, nor is there any evidence that he did. After carefully weighing all relevant factors set forth above, and considering the benefit of the doubt doctrine set forth in 38 U.S.C. § 5107, the Board finds that recovery of the compensation indebtedness in the calculated amount of $16,692.40 does not violate the principles of equity and good conscience. As discussed above, the Board finds that the significant fault on the part of the appellant and the unjust enrichment which would accrue from a waiver outweigh any factors that would tend to support a waiver of recovery of the overpayment in this case, including claimed financial hardship. Under such circumstances, the request for waiver is denied. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963. ORDER An overpayment of $16,692.40 was properly created due to the appellant's fugitive felon status from November 19, 2008, to May 27, 2009. Entitlement to waiver of recovery of an overpayment of compensation benefits in the amount of $16,692.40 is denied. ______________________________________________ K. Conner Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs