Citation Nr: 18156824 Decision Date: 12/11/18 Archive Date: 12/10/18 DOCKET NO. 15-42 104 DATE: December 11, 2018 ORDER The retroactive reduction of the Veteran’s Department of Veterans Affairs (VA) compensation benefits on the 61st day of incarceration was proper and entitlement to waiver of recovery of the overpayment of VA compensation benefits in the amount of $78,793.40 is denied. FINDING OF FACT 1. In December 2007, the Veteran was notified that he was receiving VA compensation benefits at the 50 percent rate; he was provided a VA Form 21-8764; subsequently, he was furnished additional VA Forms 21-8764. 2. The Veteran was subsequently incarcerated, but did not report his incarceration to VA. 3. In October 2014, VA discovered that the Veteran had been incarcerated since October 2012; also in October 2014, the Veteran was advised that VA proposed to retroactively reduce his VA benefits based on his incarceration. 4. In February 2015, the RO properly retroactively reduced the Veteran’s VA compensation benefits to the 10 percent rate effective the 61st day of his incarceration in December 2012 which created an overpayment debt in the amount of $78,793.40. 5. A financial status report reflected income did not exceed expenses. 6. The Veteran is not demonstrated to have committed fraud, misrepresentation, or bad faith in the creation of the overpayment. 7. The Veteran was at fault in the creation of the debt in failing to promptly report he was incarcerated. 8. Waiver of the assessed overpayment would result in unfair enrichment to the Veteran. 9. While there is some financial hardship, that factor is outweighed by the other elements of equity and good conscience. 10. Denial of waiver would not defeat the purpose of the award of VA benefits. 11. There is no indication that the Veteran relinquished a valuable right or incurred a legal obligation in reliance upon the benefits received. CONCLUSIONS OF LAW 1. The retroactive reduction of the Veteran’s VA compensation benefits to the 10 percent rate effective the 61st day of his incarceration in December 2012 was proper. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 3.655. 2. Recovery of the overpayment of the VA compensation benefits in the amount of $78,793.40 would not be contrary to the principles of equity and good conscience. 38 U.S.C. § 5302; 38 C.F.R. § 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served on active duty in the United States Army from August 2000 to December 2004. The Veteran is represented in this case pursuant to 38 C.F.R. § 14.630. This provision allows for representation by an individual unaccredited by VA for one time only. The Veteran completed the necessary requirements with the filing of a VA Form 21-22a signed by him and the representative stating that no compensation would be paid or charged for the services. 38 C.F.R. § 14.630 (a). In December 2007, the Veteran was notified that he was receiving VA compensation benefits at the 50 percent rate. He was provided a VA Form 21-8764; subsequently, he was furnished additional VA Forms 21-8764. The VA Form 21-8764 states, in pertinent part, that compensation is subject to future adjustment, and that “benefits will be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony.” In October 2014, VA discovered that the Veteran had been incarcerated since October 2012. That same month, the Veteran was advised that VA proposed to retroactively reduce his VA benefits based on his incarceration. In February 2015, the RO properly retroactively reduced the Veteran’s VA compensation benefits to the 10 percent rate effective the 61st day of his incarceration in December 2012 which created an overpayment debt in the amount of $78,793.40. A financial status report reflected that income did not exceed expenses. Under pertinent VA laws and regulations, any individual who is entitled to compensation or to dependency and indemnity compensation and who is incarcerated in a Federal, State, local, or other penal institution or correctional facility for a period in excess of sixty days for conviction of a felony (where, as here, committed after October 7, 1980) shall not be paid such compensation or dependency and indemnity compensation, for the period beginning on the sixty-first day of such incarceration and ending on the day such incarceration ends, in an amount that exceeds (A) in the case of a veteran with a service-connected disability rated at 20 percent or more, the rate of compensation payable under section 1114(a) of this title; or (B) in the case of a veteran with a service-connected disability not rated at 20 percent or more or in the case of a surviving spouse, parent, or child, one-half of the rate of compensation payable under section 1114(a) of this title. 38 U.S.C. § 5313 (a); 38 C.F.R. § 3.665 (a). An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. 38 U.S.C. § 5302; 38 C.F.R. § 1.962. Thus, the RO properly reduced the Veteran’s benefits because he was incarcerated and that matter is not disputed. The RO reduced the benefits to the 10 percent rate from the 61st date of incarceration, as indicated above. The Committee on Waivers and Compromises (Committee) of the RO determined that there was no fraud, misrepresentation, or bad faith on the Veteran’s part with respect to the creation of the overpayment at issue, but the Committee further determined that recovery of the overpayment of VA compensation benefits would not be against equity and good conscience. VA law provides that recovery of overpayment of any benefits 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; 38 C.F.R. § 1.963 (a). The standard “Equity and Good Conscience” will be applied when the facts and circumstances in a particular case indicate a need for reasonableness and moderation in the exercise of the government’s rights. In making this determination, consideration will be given to the following elements, which are not intended to be all-inclusive: (1) Fault of the debtor. Where actions of the debtor contribute to the creation of the debt. (2) Balancing of faults. Weighing fault of the 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. See 38 U.S.C. § 5302; 38 C.F.R. § 1.965 (a). In this case, the Committee found, and the Board agrees, that there is no evidence demonstrating that the indebtedness resulted from fraud, misrepresentation, or bad faith on the Veteran’s part. Therefore, waiver of indebtedness is not precluded if shown that it would be against the principles of equity and good conscience to require the Veteran to repay the debt to the government. 38 C.F.R. §§ 1.963, 1.965. As to the principles of equity and good conscience part of the Board’s analysis, the record shows the Veteran was solely at fault in the creation of the debt in failing to report his change in status to incarcerated felon. Similarly, the Board finds that the Veteran’s receipt of VA compensation benefits that he was not entitled to because he was incarcerated results in unfair enrichment to him. As to whether the recovery of the assessed overpayment would deprive the Veteran of basic necessities, the Board notes that the financial status report indicated that expenses exceed income, but the Board notes that the Veteran receives all of his care from the penal institution. Moreover, while there is some financial hardship, that factor is outweighed by the other elements of equity and good conscience. As to whether collection of the debt would defeat the purpose of paying the benefits by nullifying the objective for which the benefits were intended, the Board notes that the rating schedule is intended to compensate a claimant for average impairments in earning capacity resulting from service-connected disability in civil occupations. 38 U.S.C. § 1155. “Generally, the degrees of disability specified in the rating schedule are considered adequate to compensate for considerable loss of working time from exacerbations or illnesses proportionate to the severity of the several grades of disability.” 38 C.F.R. § 4.1. However, the Veteran received these monies due to his incarcerated status and therefore had no earning capacity. Therefore, the Board finds that collection of the debt would not defeat the purpose of paying the benefits. Lastly, the Board finds that there is no indication in the record that reliance on the overpaid benefits resulted in the Veteran’s relinquishment of a valuable right or the incurrence of a legal obligation. After weighing all the evidence of record, the Board finds that recovery of the overpayment would not be against equity and good conscience. Any claimed hardship is outweighed by the fact that the Veteran was solely at fault in the creation of the debt, that he was unjustly enriched by having received and retained benefits, that collection of the debt would not defeat the purpose of paying the benefits, and that there is no indication that reliance on the overpaid benefits resulted in the relinquishment of a valuable right or the incurrence of a legal obligation. (Continued on the next page)   When all the evidence is assembled VA is then responsible for determining whether the evidence supports the claim or is in relative equipoise, with the claimant prevailing in either event, or whether a preponderance of the evidence is against the claim in which case the claim is denied. Gilbert v. Derwinski, 1 Vet. App. 49, 55 (1990); Ortiz v. Principi, 274 F. 3d 1361 (Fed. Cir. 2001). In this case, the Board finds that the preponderance of the evidence in this case is against the Veteran’s claim for a waiver and therefore the benefit of the doubt doctrine does not apply. S. L. Kennedy Veterans Law Judge Board of Veterans’ Appeals ATTORNEY FOR THE BOARD J. Connolly, Counsel