Citation Nr: 1801906 Decision Date: 01/10/18 Archive Date: 01/23/18 DOCKET NO. 11-14 001 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Milwaukee, Wisconsin THE ISSUE Entitlement to a waiver of recovery of an overpayment of VA benefits in the amount of $11, 242.88. REPRESENTATION Appellant represented by: The American Legion WITNESS AT HEARING ON APPEAL Appellant ATTORNEY FOR THE BOARD Martha R. Luboch, Associate Counsel INTRODUCTION The Veteran served on active duty from June 1968 to January 1970. He died in July 2004, and the appellant is his surviving spouse. This matter comes before the Board of Veterans' Appeals (Board) on appeal from a November 2010 determination by the Department of Veterans Affairs (VA) Debt Management Center (DMC) in Ft. Snelling, Minnesota. The appeal has since been transferred to the jurisdiction of the Regional Office in Milwaukee, Wisconsin. In November 2012 and March 2015, the Board remanded this case for further development. The case has now been returned for appellate review. The appellant testified at a videoconference hearing before the undersigned Veterans Law Judge in February 2015. A transcript of the hearing is of record. FINDINGS OF FACT 1. The creation of the indebtedness in the amount of $ 24, 357.00 was the result of the appellant's failure to notify VA of income paid by the Social Security Administration. 2. By a January 2017 decision, the DMC waived recovery of a portion of the debt in the amount of $13,114.12; VA previously recovered $11,242.88 of the debt. 3. There was no fraud, misrepresentation, or bad faith on part of the appellant. 4. The appellant was solely at fault in the creation of the debt. 5. Recovery of the amount paid toward indebtedness of $ 11, 242.88 did not violate the standards of equity and good conscience. CONCLUSIONS OF LAW 1. An overpayment of a VA pension benefit in the amount of $24, 357.00 was validly created. 38 U.S.C. § 1521 (2012). 2. The requirements for waiver of recovery of the overpayment for the amount already paid by the appellant in an amount calculated as $11, 242.88 have not been met. 38 U.S.C. §§ 5107, 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965 (2017). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Board previously remanded this case in November 2012 and April 2015 to obtain additional documentation concerning the appellant's overpayment and request for waiver; adjudicate whether the underlying debt and subsequent overpayment was valid; and readjudicate the appellant's request for waiver of recovery of the overpayment. Outstanding documentation was obtained. There is a written audit that has been added to the claims file, and the Debt Management Center sent the appellant a letter in August 2016 explaining the debt and why it was validly created. Additionally, by a January 2017 decision, the Debt Management Center determined as follows: The Committee still finds you at fault in the creation of this debt regarding receipt of unreported income. As a recipient of VA death pension benefits, it was your responsibility to immediately report changes in your income to ensure that your monthly benefit amount was properly adjusted. Your failure to do so resulted in an unjust enrichment at government expense. You have already repaid $11,242.88 of the debt, and it is not VA policy to return funds that you were not entitled to receive. Repayment of that portion of the debt did not defeat the purpose of benefits that you were not entitled to receive. Therefore, the Committee denied $11,242.88 of the debt. . . the Committee determined that it is fair and equitable to waive the remaining debt balance in the amount of $13,114.12. Thus, the Board concludes that there has been substantial compliance with its prior remand directives. I. Validity of Overpayment In general, an overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled, and may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, or any other form of benefits. See 38 U.S.C. § 5302; 38 C.F.R. §§ 1.956 (a), 1.962 (2017) Because death pension benefits is a need-based program, the maximum allowable pension rate (MAPR) as prescribed by law is offset by the appellant's countable income, which includes income from most sources, including any eligible dependents. Such sources typically include regular earnings, disability and retirement payments, interest and dividend payments from annuities, and net income from farming or a business. Some expenses, such as unreimbursed medical expenses that are in excess of five percent of MAPR, may also be reduced from countable income. 38 U.S.C. § 1503(a); 38 C.F.R. §§ 3.260, 3.261, 3.262. Nonrecurring income or expenses (i.e. a transaction on a one-time basis) will be annualized over a 12-month period receipt of the income or the expense. 38 C.F.R. §§ 3.271(c), 3.272(h) (2017). Audits performed on the pension the appellant has received during the period on appeal reveal that, because of SSA income, she received VA benefits in excess of that to which she was entitled for approximately three and a half years (February 2006 to August 2009) resulting in an overpayment of VA benefits in the calculated amount of $24,357. The appellant has not disputed receiving this income and has instead stated "the VA granted me pension when my husband died because I did not have any income. Later, I started to receive social security disability. I also received a pension check from VA at the same time. I did not know that I could not receive pension and social security disability at the same time." To the extent that the appellant contends that the debt was paid in full after the RO awarded service-connection benefits for PTSD, the Board notes that in March 2013, the appellant was sent a letter indicating "you will receive a payment in the amount of $23, 669.00, in approximately 15 days." At that time, the appellant had already begun her appeal for a waiver request. The appellant acknowledges that she received a check from VA related to the grant of the Veteran's accrued benefits for service-connected PTSD and there is no indication that any monies from overpayment were withheld from the check. Given the foregoing, it is concluded an overpayment in the amount of $24, 357.00 had been properly created. II. Overpayment Waiver With respect to a waiver over recovery of the overpayment, the record shows that in a January 2017 decision, the recovery of that portion of the debt in the amount of $13,114.12 that had not been already recovered was waived. At that point, VA had already recovered $11,242.88 of the debt. As the appellant's debt is satisfied, the issue before the Board is whether the appellant is entitled to a retroactive waiver of her debt, which would result in a refund under 38 C.F.R. § 1.967, of $11,242.88. Any indebtedness can be waived only when the following factors are determined to exist: (1) 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, (2) collection of such indebtedness would be against equity and good conscience. See 38 U.S.C § 5302(c); 38 C.F.R. § 1.963(a). A finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of the overpayment. The phrase "Bad faith" is defined in VA regulations as "unfair or deceptive dealing by one who seeks to gain thereby at another's expense. Thus, a debtor's conduct in connection with a debt arising from participation in a VA benefits program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, is undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government." See 38 C.F.R. § 1.965(b)(2). The controlling legal criteria provide that 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. See 38 C.F.R. § 1.965(a). 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 U.S. Government. In making this determination, consideration will be given to the following elements, which are not intended to be all-inclusive: (1) whether the actions of the debtor contributed to the creation of the debt; (2) a weighing of the fault of the debtor against VA's fault in the creation of the debt; (3) whether collection of the debt would deprive the debtor of basic necessities, or create undue hardship; (4) whether withholding of benefits would defeat the objective for which the benefits were intended; (5) whether failure to make restitution would result in an unfair gain to the debtor; and (6) whether the appellant's reliance on VA benefits resulted in relinquishment of a valuable right or incurrence of a legal obligation. See 38 U.S.C. § 5302; 38 C.F.R. § 1.965. Here, as noted above, the appellant does not dispute that she was in receipt of social security disability and VA pension. She has alleged that she was not aware that she could not receive both. At her Board hearing she stated that she didn't seek social security disability as an income and therefore she was under the assumption that she could receive both pension and social security disability. By a June 2006 notification letter the appellant was advised that she would be received pension benefits. This letter specifically stated "you are responsible to tell us right away if: your income or the income of your dependents changes (i.e., earnings, Social Security Benefits (emphasis added), lottery and gambling winnings). There is no indication in the claims file that the appellant was not in receipt of this letter and various other letters (e.g. December 2008 eligibility verification report) conveying the same information. Thus, it cannot be said that VA contributed to the creation of the debt and creation of the debt falls squarely with the appellant. With regard to whether collection of the debt would deprive the debtor of basic necessities, or create undue hardship, the Board again notes that the DMC has waived all outstanding overpayment debt. The only debt in question relates to the debt already paid. As a result, the Board finds that this debt would not deprive the debtor of basic necessities as it has already been recovered. Similarly, not waiving this debt would not defeat the objective for which the benefits were intended as the appellant has shown that she was able to continue on the benefits provided. A May 2010 financial status report indicates that while VA was recovering the overpayment, the appellant's monthly expenses exceeded her income by approximately $55.00. However, the appellant was able to pay for basic necessities to specifically include rent, food, utilities, heat, water, and her phone. The Board acknowledges that in August 2016 the appellant submitted a financial status report which indicates that her monthly expenses exceed her monthly income by approximately $300. However, DMC considered this information when it found that the appellant experienced undue hardship and granted the waiver of the remaining debt owed. Furthermore, while the appellant has reported debt, she also reported that her daughter lives with her and works sometimes to help her pay her bills. Even still, waiving the amount paid would not defeat the objective for which the benefits were intended because despite the debt, the appellant continues to support herself, her daughter, and her granddaughter with the benefit. Next, reimbursing the appellant for the money she already paid would unfairly enrich her because she would be compensated with funds that she was not entitled to receive. Finally, the appellant has not contended, nor does the evidence show, that she relinquished a valuable right or incurred a legal obligation in reliance on VA's continued payment of pension benefits. The Board is sympathetic to the appellant's reports of hardship, but the principles of equity and good conscience were not violated when VA recovered the overpayment in question. The preponderance of the evidence is against the appellant's claim, and waiver of recovery of the overpayment of VA pension benefits in the calculated amount of $11, 242.88 not warranted. See 38 U.S.C. § 5107(b); Ortiz v. Principi, 274 F.3d 1361, 1364 (Fed. Cir. 2001). ORDER Waiver of recovery of an overpayment of VA pension benefits in the amount of $11, 242.88 is denied. ____________________________________________ MICHAEL E. KILCOYNE Veterans Law Judge, Board of Veterans' Appeals Department of Veterans Affairs