Citation Nr: 1804041	
Decision Date: 01/22/18    Archive Date: 01/31/18

DOCKET NO.  14-08 214	)	DATE
	)
	)

On appeal from the
Department of Veterans Affairs Regional Office in Nashville, Tennessee


THE ISSUE

Entitlement to a waiver of recovery of an overpayment of non-service-connected pension benefits in the total amount of $73,174.00.


REPRESENTATION

Appellant represented by:	Disabled American Veterans


ATTORNEY FOR THE BOARD

 N. Pendleton, Associate Counsel






INTRODUCTION

The Veteran has active duty service in the U.S. Navy from July 1969 to April 1970.

This matter is before the Board of Veterans' Appeals (Board) on appeal from a Decision of Waiver of Indebtedness by the Department of Veterans Affairs (VA) Regional Office (RO) in Nashville, Tennessee, which denied the Veteran's request for waiver of recovery of overpayment of non-service-connected pension.  

In a third party correspondence, dated August 17, 2015, the Veteran requested a videoconference hearing before a Veterans Law Judge. In January 2017, VA notified the Veteran that he was scheduled for a videoconference hearing to take place on January 25, 2017. This notice was mailed to the Veteran's last known address of record.  It was not returned as undeliverable by the postal service.  The Veteran failed to report for this scheduled hearing without good cause.  VA has received no communication, written or otherwise, from the Veteran pertaining to the hearing.  Because the Veteran has failed to appear for his scheduled hearing without good cause and there has been no request for postponement, his request for a hearing is considered withdrawn.  38 C.F.R. § 20.704(d) (2014). 

Additionally, the Veteran submitted evidence post-certification to the Board. A waiver of RO consideration of additional evidence submitted post certification to the Board is presumed given the date of the Veteran's substantive appeal. See 38 C.F.R. §  7105(e). 

Finally, the Veteran sent a letter in August 2015 requesting that the appeal and videoconference hearing be expedited based on financial hardship. (See August 2015 Third Party Correspondence).  In response, the VA sent a letter in January 2017, seeking supporting documentation of his severe financial problems; yet, no response was provided. Accordingly, the Veteran's request is denied. 




FINDINGS OF FACT

1. The Veteran has not challenged the amount of the debt, which has been calculated in the amount of $73,174.00.

2. The Veteran's failure to report his incarceration and excess income due to his supplemental security income (SSA benefits) created the debt. While there is no specific evidence to show that the Veteran willfully committed fraud, misrepresentation, or an act of bad faith in the creation of the debts, recovery of overpayment would not be inequitable or against good conscience as any financial hardship is outweighed by fault and unjust enrichment.


CONCLUSION OF LAW

1. There is a valid debt resulting from an overpayment of benefits in the total amount of $73,174.00. 38 U.S.C. §§ 1503, 5112 (2017); 38 C.F.R. §§ 3.23, 3.103, 3.271, 3.272, 3.500, 3.501 (2017).

2. The criteria for waiver for recovery of overpayment of NSC pension benefits, in the amount of $73,174.00 have not been met. 38 U.S.C. § 5302 (2017); 38 C.F.R. § 1.963, 1.965, 3.666 (2017). 


REASONS AND BASES FOR FINDINGS AND CONCLUSION

The Veteran has appealed the denial of a waiver of recovery of overpayment of benefits in the amount of $73,174.00, resulting from two debts (1) $6,296.16 during a period of incarceration and (2) $67,915.84 due to his receipt of social security income. He asserts that he was unaware that he was required to report his incarceration or SSA benefits. 

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. § 5302; 38 C.F.R. § 1.962. An overpayment may arise from most benefits programs administered pursuant to VA law including, most pertinent to this case, compensation for non-service connected disabilities. See 38 C.F.R. § 1.956(a).

The purpose of VA pension benefits is to provide a subsistence income to disabled wartime veterans whose income would not otherwise be sufficient to meet their needs. Pension benefits are based upon total family income and the amount of pension benefits is adjusted based upon the number of dependents the Veteran supports. Recipients of pension income are required to report any changes in income and number or status of their dependents in a timely fashion. 38 U.S.C. §§ 1521, 1522. The notice must be made when the recipient acquires knowledge that he will begin to receive additional income. 38 C.F.R. § 3.660 (a)(1). 

In determining income for the purposes of non-service-connected disability pension benefits, "[p]ayments of any kind from any source shall be counted as income during the 12-month annualization period in which received unless specifically excluded by [38 C.F.R.] § 3.272." 38 C.F.R. § 3.271 (a). Income from Social Security is not specifically excluded under 38 C.F.R. § 3.272. The rate at which a Veteran may be paid pension is reduced by the amount of that Veteran's countable annual income. 38 C.F.R. § 3.23.

If any individual to or for whom pension is being paid under a public or private law administered by the Department of Veterans Affairs is imprisoned in a Federal, State or local penal institution as the result of conviction of a felony or misdemeanor, such pension payments will be discontinued effected on the 61st day of imprisonment following conviction.  38 C.F.R. § 3.666; 38 U.S.C. § 1505.

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 VAOPGCPREC 6-98; Shaper v. Derwinski, 1 Vet. App. 430 (1991).   In this regard, the Board notes that the Veteran has not challenged the amount of the debt, which has been calculated to total $73,174.00, but rather, as discussed below, alleged that he was not aware that he was required to report incarceration or income. (See March 2014 VA Form 9). Moreover, he asserted that he is unable to repay the debt as his sole source of income is SSA benefits in the amount of $1,283.00 per month. He asserted his rent each month exceeds that month by $200, not counting his food and other necessities. Id. He submitted a Financial Status Report in June 2013, indicating his monthly expenses total approximately $1,825.00, including, food, clothing and shelter. (See Financial Status Report dated June 2013). 

After consideration of the record, the Board finds the creation of the debt in the amount of $73,174.00 is valid, as the Veteran received benefits to which he was not legally entitled.

VA awarded the Veteran non-service connected pension benefits effective as of the date of receipt of his claim, August 8, 2003. Notice of his entitlement was accompanied by information with set forth factors affecting the right to payment.   In November 2012, VA notified the Veteran that he was overpaid non-service-connected pension as a result of his failure to report a period of incarceration exceeding 60 days following the conviction of a misdemeanor.  The VA proposed to stop his benefits effective January 18, 2012 to July 23, 2012, the date of his release.  

In a February 25, 2013 letter, the Committee and the Nashville RO provided the Veteran with notice of the provisions of 38 C.F.R. § 3.655 and 38 U.S.C. § 1505, and determined that the debt was properly created based on the Veteran's failure to report his incarceration (See February 2013 Notification Letter and March 2013 DMC- First Demand Letter).  The Veteran's pension benefits were discontinued.  The VA also noted that his pension was being discontinued due to excessive income from SSA benefits.  The SSA informed the VA that the Veteran had been receiving SSA benefits, effective December 2006, with the first check issued in January 2007. 

As of February 1, 2007, his SSA benefits comprised of annual income of $14,604.00 per year. The maximum annual income limit for VA non-service-connected pension benefits is $10.929.00.  Therefore, he was no longer eligible to receive a VA pension. He was informed that he would be notified as to the amount of the overpayment and how he could repay the debt. 

On March 9, 2013, VA notified the Veteran that he had been overpaid a non-service-connected pension in the amount of $6,296.16 for the period of incarceration via letter from VA's Debt Management Center (DMC). A Notice of Rights and Obligations describing the Veteran's rights to contest the debt and request a waver was enclosed in the letter. 

The second debt was created in the amount of $67,915.84 due to excessive income from Social Security income in May 2013. In June 11, 2013, the VA responded to the Veteran's inquiry as to the status of his pension benefits, and affirmed that he was no longer receiving benefits due to excessive income from his SSA benefits as of February 1, 2007. The same day, the Veteran timely submitted a waiver request of the debt of $73,174.00.  In July 2013, the VA Committee on Waivers denied his waiver request. 

In light of the above, the Board finds that the Veteran's contentions are not persuasive.  The Veteran should have been aware that he was not entitled to VA pension benefits during periods of incarceration because he has a prior incident of overpayment, suggesting he is aware of the procedures necessary to avoid overpayment.

Specifically, in a letter dated August 26, 2005, the Veteran was notified that he received an overpayment due to incarceration for a misdemeanor. (See Legacy Documents- August 2005 Notification Letter). Records show he committed the crimes of driving under the influence (DUI) and driving on a suspended license on November 13, 2004. He was committed to a penal institution on November 18, 2004 and completed his sentence of 120 days, with a scheduled release of March 12, 2005.  (See Legacy Documents- May 2005 Notification Letter and May 2005 Notice to Department of Veterans Affairs of Veteran or Beneficiary Incarcerated in Penal Institution).  He was not entitled to VA benefits from January 18, 2005 to March 12, 2005, the date of his release. Given the overpayment, the Agency sent the Veteran a letter on September 11, 2005 indicating that they would withhold subsequent pension payments until the overpayment was resolved. (See Legacy Documents- September 2005 DMC - First Demand Letter).  

As for his SSA benefits, the Veteran received several notices that described his duty to report changes in income, to include Social Security income. At the very least, his initial award letter in August 2003 detailed his responsibility to inform the VA of income from all sources (including SSA benefits). Yet, he failed to do so.  Therefore, the debt is valid.

Once it is determined that the indebtedness was validly created, but before moving on to the matter of waiver of the charged indebtedness, the Board must make a finding if fraud, misrepresentation or bad faith by the debtor in creation of the overpayment occurred. If so, waiver of the overpayment is automatically precluded and further analysis is not warranted. See 38 C.F.R. § 1.962, 1.965. VA regulations define "bad faith' 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/services 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 consequence, and results in a loss to the government. 38 C.F.R. § 1.965(b).

In the July 2013 decision, the Committee on Waivers declined to make a finding as to whether the overpayment resulted from fraud, misrepresentation or bad faith; and decided to make the determination on the waiver decision based on the elements that defined equity and good conscience.  

There certainly is some indication that the Veteran sought unfair advantage. Yet, the record does not wholly support a finding that fraud, misrepresentation, or bad faith was involved in the creation of the debt. As such, the Board must now proceed to the question of whether the recovery of the overpayment would be against equity and good conscience." See 38 U.S.C. § 5302; 38 C.F.R. § 1.963(a). 

Regulations outline the meaning of the phrase "equity and good conscience" in 38 U.S.C. § 5302, providing that the standard "equity and good conscience" will be applied to the facts and circumstances in a particular case that indicates 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 inclusive: (1) fault of the debtor - where actions of the debtors contribute to the creation of the debt; (2) balancing of faults - weighting fault of the debtor vs. the fault of the VA; (3) Undue hardship. Whether collection would deprive the debtor or his or her 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 VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965. As noted, the overpayment at issue stems from VA pension payments when the Veteran was incarcerated as well as a period where he was receiving VA pension benefits at the same time as SSA benefits.

The first and second elements pertain to the fault of the debtor versus the fault of the VA.  In this regard, the Board notes that the Veteran did not report that he was incarcerated. In November 2012, VA notified the Veteran that he was overpaid a non-service-connected pension as a result of his failure to report his incarceration and proposed to terminate his pension. The VA provided him with 60 days to minimize the effects of his overpayment through written statement, such as requesting a cessation of payments during his incarceration, but he failed to do so. 

The Board has considered the Veteran's history of seizures, alcoholism and depression as mitigating factors that might impair his judgement; yet, there is no evidence from a physician or other medical professional that he was incapable of communicating with the VA at that time. On the contrary, his hand-written substantive appeal (Form 9) suggests that he is capable of communicating effectively. The Veteran failed to provide any evidence that he was prohibited from sending mail or otherwise incapable of being in contact with the VA during his incarceration. 

As for his excess income due to SSA benefits, the Veteran received multiple notices from the VA instructing him to inform the VA immediately if there was ever any change in his income. In a February 2013 letter, the VA notified him that the Social Security Administration (SSA) reported he was receiving both SSA benefits and a VA pension at the same time and that SSA benefits are countable income.

The SSA informed the VA that he first began receiving payments in January 2007 and that as of February 1, 2007, his monthly income; including SSA benefits exceeded the income limit for receipt of the pension. The VA informed the Veteran that he was no longer eligible to receive a VA pension, suggested that he suspend his benefits to avoid any further overpayment, and gave him 60 days to submit evidence to show any reason that the VA should not adjust his benefits.  While he responded, providing he was unaware of his obligations to report, the evidence of record suggests otherwise.

Therefore, he was solely at fault in the creation of the overpayment because he did not accurately report his periods of incarceration or his SSA benefits. VA discovered this discrepancy on its own accord. The VA was not at fault in the creation of the overpayment.  

Concerning element (3), undue hardship, the Board finds that collection would not deprive the debtor or his family of basic necessities. The Veteran reported that he is single with no dependents.  During his period of incarceration, he was provided with all of the necessities of life; food, clothing and shelter. There is no evidence that repayment of the first debt, while he was incarcerated, would deprive him of his necessities during that period of time. There is also no indication that repayment of both debts would deprive him of necessities to date. The Board acknowledges the Veteran's statement that he lost his apartment in August 2015 and that his monthly rent in Nashville, Tennessee exceeded his SSA benefits by nearly $200, or approximately $1500 per month. However, there is no evidence of record that indicates the Veteran has not found a more affordable housing option.  After eliminating the cost of his $1500 per month apartment, his financial statement report indicates his monthly expenses total less than $400. With a monthly income of $1,217.00, and monthly expenses of approximately $400, he should be able to cover his monthly expenses with some surplus while the debt was repaid. He has submitted no further evidence of financial hardship since August 2015. The Board believes that recoupment of this debt does not cause financial hardship.

In regard to elements (4) and (5), whether collection would defeat the purpose of the benefit and whether failure to collect would cause unjust enrichment to the debtor, the Board finds that the evidence weighs against the Veteran's request for waiver. Collection would not defeat the purpose of the benefit. The Veteran was in receipt of benefits to which he was not entitled due to a period of incarceration and a change in his household income which allowed his monthly household bills be covered by SSA benefits rather than by his VA pension.

Failure to make restitution would result in unfair gain to the debtor. Unjust enrichment of the Veteran would result if the government was not repaid of the period of pension benefits to which the Veteran was not entitled. VA payment of pension benefits, by law, cannot be paid to a person incarcerated in excess of 60 days. Additionally, the Veteran failed to report his SSA benefits, allowing VA to make payments of a pension for several years without knowledge. VA pension benefits were intended to compensate the Veteran for his inability to work or earn income due to non-service connected disabilities. There is no evidence to show that he took any action to report his incarceration or his receipt of social security benefits despite being repeatedly informed of his obligation to do so. Under such circumstances, to allow him to retain VA pension benefits would constitute as unjust enrichment. 

Finally, there is no indication that the Veteran changed position to his detriment in reliance upon his granted VA benefit, element (6).  There is no indication that the Veteran's reliance on VA benefits resulted in a relinquishment of any other valuable or legal right. 

Thus, the elements of equity and good conscious are not in the Veteran's favor. 
In summary, the Board has considered the elements of equity and good conscience. It has concluded that the negative evidence outweighs the positive evidence that the facts in this case do not demonstrate that the recovery of overpayment is against equity and good conscience. Most significantly, the Veteran is solely at fault of the creation of debt and the failure to repay the debt would result in unfair gain to him. The only reason this debt was created was because of the Veteran's decision to not report incarceration or countable income for several years. Waiver of recovery would result in unjust enrichment. The Board finds that waiver of recovery cannot be granted in this manner.

As the preponderance of the evidence is against the petition for waiver of recover, the benefit of the doubt rule does not apply, and the appeal in the matter must be denied. 38 U.S.C. § 5107(b). 


ORDER


Entitlement to a waiver of recovery of the overpayment of VA NSC pension benefits in the amount of $73,174.00 is denied.




____________________________________________
M. TENNER
Veterans Law Judge, Board of Veterans' Appeals



Department of Veterans Affairs