Citation Nr: 18153807 Decision Date: 11/29/18 Archive Date: 11/28/18 DOCKET NO. 15-38 762 DATE: November 29, 2018 ORDER The retroactive reduction of the Veteran’s VA disability benefits to a 10 percent payment rate beginning February 19, 2003 to June 26, 2003 was proper; restoration of VA disability benefits above the 10 percent rate during that period is denied. FINDING OF FACT 1. The Veteran was incarcerated following the conviction of a felony and probation violation for more than 60 days, from February 2003 to June 2003. 2. The Veteran’s conviction was not overturned on appeal. CONCLUSION OF LAW 1. The reduction of the Veteran’s VA compensation from February 2003 to June 2003 was proper. 2. The criteria for restoration of benefits due to a conviction overturned on appeal have not been met. 38 U.S.C. § 5313; 38 C.F.R. § 3.665(m) (2018). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran had active service from April 1997 to March 2000. In September 2015, the Veteran presented sworn testimony during a hearing with a local Decision Review Officer(DRO). A transcript of that proceeding is of record. 1. Restoration of disability compensation for the period of February 2003 to June 2003 The Veteran contends that his benefits should be restored in full for a period of incarceration from February 2003 to June 2003. The Board finds that the Veteran’s benefits were properly reduced, and that his felony conviction was not overturned on appeal. A veteran who is incarcerated in a federal, state, or local penal institution in excess of sixty days for conviction of a felony committed after October 7, 1980, and who has a combined rating of 20 percent or more shall not be paid compensation in excess of the amount payable for a disability evaluated as 10 percent disabling beginning on the 61st day of incarceration. 38 U.S.C. § 5313; 38 C.F.R. § 3.665. If a conviction is overturned on appeal, any compensation withheld under 38 C.F.R. § 3.665 as a result of incarceration for such conviction (less the amount of any apportionment) shall be restored to the beneficiary. C.F.R. § 3.665(m). By way of background, for the period in question in 2003, the Veteran had a combined disability rating of 70 percent. In April 2004, VA was notified of a felony arrest warrant for, and the subsequent incarceration of the Veteran for violations of probation. VA sent proper notice to the Veteran proposing to retroactively terminate benefits during the time of the fugitive felon warrant, and reduce his benefits during his incarceration, from February 19, 2003 until June 26, 2003 beginning on the 61st day of incarceration. In May 2004, VA sent a second notice of proposed reduction and termination to clarify and explain the terms of the proposed change in benefits. In July 2004, VA notified the Veteran of the retroactive termination and reduction in benefits, creating an indebtedness for overpayment during the time of the fugitive felon warrant and a reduction in benefits to the equivalent of a 10 percent rating for his incarceration from April 21, 2003 until June 26, 2003. The Veteran requested a waiver of that indebtedness which was denied by the RO in February 2005. The Veteran filed a notice of disagreement and the RO issued a Statement of the Case in March 2005. The Veteran did not perfect an appeal, and in February 2006 withdrew his claim for waiver of indebtedness. In November 2012, the Veteran filed a claim to reopen the waiver of indebtedness claim based on an overturned conviction under C.F.R. § 3.665(m). Evidence submitted included a probation modification document showing that in 2011, the Veteran’s felony 1999 conviction was reduced and modified from a felony to a misdemeanor. In November 2013, the RO confirmed its previous determination of reduction/termination of benefits and resulting indebtedness was proper. In March 2015, the Veteran contacted the RO to clarify that he is not challenging the termination of benefits during the fugitive felon warrant, but only his time of incarceration, from February 2003 to June 2003. At his September 2015 hearing, the Veteran argued that his conviction was overturned in 2011, and that C.F.R. § 3.665(m) applies, in that section 3.665 applies only to felony convictions, his conviction has been overturned to a misdemeanor so that a reduction is not appropriate, and that section 3.665(m) does not require application within one year of the reduction in benefits. The Board first finds that the 2004 reduction in benefits was proper. Following notification of the Veteran’s fugitive felon and incarceration status, the RO properly sent VA proposal and final reduction letters notifying the Veteran that compensation benefits were prohibited by VA regulation for the period of fugitive felon status, and that only a 10 percent evaluation was warranted for his period of incarceration, beginning on the 61st day of incarceration, or April 21, 2003 to continue through June 26, 2003. The Veteran does not argue the contrary. Secondly, section 3.665(m) speaks to conviction overturned on appeal, meaning the defendant appealed to a higher court and won, and as a result, was put back in the position as if he had never been convicted in the first place. See C.F.R. § 3.665. Additionally, the Board accepts that section 3.665(m) does not require that a conviction be overturned within one year. However, the Board finds that a restoration under section 3.665(m) is not available or appropriate in this case. The Veteran’s conviction was not overturned on appeal. The conviction itself still stands, but by application, not appeal to a higher court, the grading of the offense was reduced from a felony to a misdemeanor, and as such, does not fall within the confines of the regulation. See C.F.R. § 3.665(m). The Veteran’s claim for restoration of benefits from June 21, 2003 to June 26, 2003 is denied. MICHAEL A. HERMAN Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD M.E. Lee, Associate Counsel