Citation Nr: 18154792 Decision Date: 11/30/18 Archive Date: 11/30/18 DOCKET NO. 16-00 588 DATE: November 30, 2018 ORDER Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $30,055.61 is denied. FINDINGS OF FACT 1. This overpayment was not due to the Veteran’s fraud, misrepresentation or bad faith. 2. The Veteran received full compensation benefits after 61 days of incarceration following conviction of a felony, with fault on his part for not notifying VA of his incarceration. 3. There is no undue hardship; the evidence does not demonstrate that collection of the overpayment debt would deprive debtor or family of basic necessities. 4. The recovery of the overpayment would in part defeat the purpose for which the benefits were intended, namely, adequate compensation for loss of working time reflective of the average impairment in earning capacity resulting from service-connected diseases and injuries and their residual conditions in civil occupations. 5. Waiver of recovery of the overpayment would constitute an unjust enrichment to the Veteran by paying full disability compensation benefits for an individual that was incarcerated after conviction of a felony. 6. The evidence does not show that the Veteran incurred a legal obligation or changed his position to his detriment in reliance upon the receipt of VA benefits. CONCLUSION OF LAW Recovery of the overpayment of VA compensation benefits in the amount of $30,055.61 would not be against equity and good conscience and, therefore, may not be waived. 38 U.S.C. §§ 5107, 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran served on active duty from April 2003 to June 2006. The Veteran’s overpayment debt is due to the retroactive adjustment of his disability compensation benefits from January 21, 2012, which was the 61st day following confinement following conviction of a felony in November 2011. See 38 C.F.R. § 3.665 (explaining that benefits are subject to a reduction beginning on the 61st day of incarceration for conviction of a felony committed after October 7, 1980). Historically, the Veteran has been in receipt of disability compensation benefits for various service-connected disabilities. A January 2007 notification letter of a January 2007 rating decision included a VA Form 21-8764 enclosure that informed the Veteran about his rights to receive disability compensation benefits and that benefits will be reduced upon incarceration in excess of 60 days for conviction of a felony. The notification advised the Veteran to promptly advise VA if there was a change in any condition affecting his right to continued payments and indicated that failure to notify may result in a debt. The Board initially notes that the Veteran contends he was unaware that he was required to report his incarceration or its effects on his compensation benefits, but the record does not contain any notice of returned or undeliverable mail relating to the January 2007 notification letter and rating decision. As such, the Board finds the Veteran’s statements alone do not constitute clear evidence to rebut the presumption of regularity that the January 2007 correspondence was delivered to the Veteran. See Rizzo v. Shinseki, 580 F.3d 1288, 1292 (Fed. Cir. 2008) (the presumption of regularity provides that, in absence of clear evidence to the contrary, it is presumed that public officers have properly discharged their official duties); see also Ashley v. Derwinski, 2 Vet. App. 307, 309 (1992) (explaining that the appellant, not VA, bears the burden of producing clear evidence that VA did not follow its regular mailing practices to rebut the presumption). Therefore, the Board finds he received notice of the potential for reduction of benefits due to incarceration. In May 2012, VA was notified by a VA and Social Security (SSA) prisoner computer match that the Veteran was presently incarcerated since November [redacted], 2011. In March 2013, VA also received a notice of the Veteran’s incarceration indicating he was sentenced to 22 years. The Veteran was notified in an April 2015 letter that his benefits were reduced, effective January 2012, due to his incarceration and an April 2015 Debt Management Center (DMC) first demand letter assessed a debt of $30,055.61. In June 2015, the Veteran disagreed, requested a waiver of the debt, and returned a VA Form 5655, Financial Status Report, that showed income equal to his VA benefits and about $800.00 in monthly expenses to support his dependent son, with no reported assets or additional expenses. He contended that he was not responsible for the debt because the compensation award was not being used by his person while in prison, but was paying for his obligations such as his mortgage, insurance, and support for his child. He also indicated that recoupment would cause undue hardship to his dependent child and his mother, his child’s caretaker. The Board notes that the Veteran also expressed disagreement with the reduction of his compensation benefits but finds the Veteran is not challenging the validity of the debt, as he conceded in his November 2015 notice of disagreement that he was obligated to pay the debt. Rather he is proposing adjustments to the amount of benefits being withheld to repay the debt due to his contentions relating to hardship as discussed below in the merits of his waiver request. See Schaper v. Derwinski, 1 Vet. App. 430 (1991) (indicating this otherwise would be the threshold preliminary determination). In a September 2015 decision on waiver of indebtedness, the Committee on Waivers and Compromises (COWC) did not find fraud, misrepresentation, or bad faith on the Veteran’s part. The Board agrees with this determination. The COWC further found that the overpayment was created due to the reduction of compensation benefits to 10 percent during the Veteran’s incarceration and that he was significantly at fault for failing to advise VA of any change in position. The COWC also found repayment would not cause undue hardship as his basic necessities were provided for due to his incarcerated status, failure to make restitution would result in an unfair gain to the debtor as he received compensation payments greater than what he was entitled, and failure to repay the debt would result in unjust enrichment at the government’s expense. COWC placed heavy weight on the Veteran’s fault and resulting unjust enrichment. In cases where there is no fraud, misrepresentation, or bad faith on the Veteran’s part with respect to the creation of the overpayment at issue, waiver is not precluded pursuant to 38 U.S.C. § 5302(a). Rather, the Board must determine whether recovery of the indebtedness would be against equity and good conscience, thereby permitting waiver under 38 U.S.C. § 5302(a) and 38 C.F.R. §§ 1.963(a), 1.965(a). The standard of “equity and good conscience” will be applied when the facts and circumstances indicate a need for reasonableness and moderation in the exercise of the Government’s rights. 38 C.F.R. § 1.965(a) (outlining the elements of equity and good conscience as: (1) fault of debtor, where actions of the debtor contribute to creation of the debt; (2) balancing of faults, weighing fault of debtor against VA 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 VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation.). The first and second elements pertain to the fault of the debtor versus the fault of VA. In this case, the Veteran has generally argued that VA was at fault because he was unaware that incarceration resulted in reduction in compensation benefits and also provided argument that he was entitled to his full compensation rate because the benefits were being used by his mother to pay for his bills and provide for his dependent son while he was incarcerated. However, the Board finds the Veteran at fault in the creation of the overpayment of compensation benefits because he was notified to update VA for any change in status that affected his compensation benefits prior to his incarceration. Further, the Board notes that once VA properly disbursed the Veteran’s payments, those payments were out of VA control and consideration of fault is not affected by where such funds were applied. Evidence of record indicates the Veteran was notified in 2007 that incarceration due to felony conviction affected compensation benefits and the Veteran did not affirmatively notify VA of his incarceration. Rather VA was advised by SSA. The Board agrees with the COWC’s finding of fault on the Veteran’s part. With regard to the third element, the Board finds the evidence does not support a finding that recoupment of the overpayment debt would result in undue hardship especially in light of the fact that all of the Veteran’s necessities of life are being provided for by the State. See Stone v. Derwinski, 2 Vet. App. 56, 58 (1992) (explaining that undue hardship exists where collection, in installments if necessary, would seriously impair the veteran’s ability to provide himself with the necessities of life, including food, clothing, shelter, and medical attention, through examination of his current financial status with attention to his future prospects). The Board acknowledges the Veteran’s contentions that recoupment of the debt would cause undue hardship to his dependent son who is under the care of his mother; however, the evidence of record also does not support a finding that collection would seriously hinder his son’s access to basic necessities. Specifically, in support of a claim for apportionment, the Veteran’s mother reported that she provided for his dependent son, which included expenses for daycare, activities, food and medical cost. She provided a statement of her monthly income and expenses and a billing statement for his son’s after-school care. None of the documentation indicated the Veteran’s dependent son’s basic necessities would not be provided for if his overpayment debt was recouped. The Board acknowledges some hardship on the part of the Veteran’s dependent son due to the collection of the overpayment; however, as there is no evidence that the collection would deprive the debtor or his family of basic necessities, the Board concludes that recoupment of the overpayment debt does not result in undue hardship. Further, the Board finds the remaining elements do not weigh in the Veteran’s favor. With regard to the fourth element, the recovery of the debt does in part defeat the underlying objective of the benefit (adequate compensation for loss of working time reflective of the average impairment in earning capacity) as any reduction of disability compensation benefits would. However, when considering the fifth element, the Board finds waiver of recovery of the overpayment would constitute an unjust enrichment to the Veteran because he would be allowed to retain funds to which he was not legally entitled. Finally, with regard to the sixth element, there is no indication that he incurred a legal obligation or changed his position to his detriment in reliance upon the receipt of VA disability compensation benefits. Based on the above, the Board finds the weight of the elements of equity and good conscience are not in the Veteran’s favor. Specifically, the Board finds the lack of undue hardship on the Veteran to be highly probative evidence weighing against his claim. Stone, 2 Vet. App. at 58 (explaining that the primary consideration in applying the standard of equity and good conscience is whether collection of indebtedness would constitute undue hardship). Further, although recovery of the debt does in part defeat the underlying objective of the benefit, there is evidence of fault on the part of the Veteran and a lack of reliance on the benefit to his detriment. Therefore, failure to make restitution would result in unfair gain to the debtor and unjust enrichment at the expense of the government. As such, the elements supporting recoupment of the overpayment debt outweigh the elements in favor of a waiver of recovery, particularly the lack of undue hardship and finding of fault. The Board concludes that recovery would not defeat the purpose for which the disability compensation benefits were intended. Accordingly, the standard of equity and good conscience may not be applied, waiver of recovery of the overpayment is not warranted, and the claim must be denied. Nathan Kroes Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD A. Odya-Weis, Counsel