Citation Nr: 1825035	
Decision Date: 04/25/18    Archive Date: 05/03/18

DOCKET NO.  12-12 468	)	DATE
	)
	)

On appeal from the
Department of Veterans Affairs Regional Office in Winston-Salem, North Carolina


THE ISSUE

Entitlement to a waiver of recovery of an overpayment of pension benefits in the amount of $28,737.67, to include the question of whether the indebtedness was properly created.


REPRESENTATION

Veteran represented by:	North Carolina Division of Veterans Affairs


WITNESS AT HEARING ON APPEAL

Veteran


ATTORNEY FOR THE BOARD

L. Edwards Andersen, Counsel

INTRODUCTION

The Veteran had active service from May 1986 to June 1991.

This matter comes before the Board of Veterans' Appeals (BVA or Board) from a May 2011 decision issued by the Committee on Waivers and Compromises at the Department of Veterans Affairs (VA) Regional Office (RO) in Philadelphia, Pennsylvania, which denied the Veteran's request for waiver of the recovery of an overpayment of VA pension benefits in the amount of $28,737.67. Jurisdiction over the case was later transferred to the Winston-Salem, North Carolina, RO.

The Veteran requested a hearing before the Board. The requested hearing was conducted in October 2016 by the undersigned Veterans Law Judge. A transcript is associated with the claims file.

In June 2017, the Board remanded this claim for additional development.  That development having been completed, the claim is now ready for appellate review.


FINDINGS OF FACT

1. The Veteran's VA pension was terminated effective October 21, 2008 due to fugitive felon status, resulting in an overpayment in the amount of $28,737.67.

2. VA appropriately calculated an overpayment of VA pension benefits in the amount of $28,737.67.

3. The Veteran is primarily at fault in the generation of the debt.

4. Recovery of the overpayment would be against equity and good conscience.



CONCLUSIONS OF LAW

1. The overpayment of pension benefits in the amount of $28,737.67 was properly calculated. 38 U.S.C. §§ 501, 5112, 5314, 5904 (2012); 38 C.F.R. §§ 1.911, 1.912a, 3.500(b)(2), 14.636 (2017).

2. The criteria for waiver of overpayment of pension benefits in the amount of $28,737.67 have been met. 38 U.S.C. § 5302 (2012); 38 C.F.R. §§ 1.914, 1.962, 1.963, 1.965 (2017).


REASONS AND BASES FOR FINDINGS AND CONCLUSIONS

I. Duties to Notify and Assist

The Veterans Claims Assistance Act of 2000 (VCAA) enhanced VA's duty to notify and assist claimants in substantiating their claims for VA benefits. 38 U.S.C. §§ 5100, 5102, 5103, 5103A, 5107, 5126 (2012); 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a) (2017). In Barger v. Principi, 16 Vet. App. 132 (2002), the United States Court of Appeals for Veterans Claims (Court) held that the VCAA, with its expanded duties, is not applicable to cases involving the waiver of recovery of overpayment claims, noting that the statute at issue in such cases is found in Chapter 53, Title 38, United States Code; therefore, the VCAA is not for application in this matter.

II. Facts & Analysis

The Veteran requests a waiver of the recovery of the overpayment of VA pension benefits in the amount of $28,737.67. 

In this case, the Veteran had an outstanding felony warrant for obstructing justice, issued by North Carolina, from October 2008. The Veteran acknowledges payment of $28,737.67 from October 2008 to September 2010, and states he was unaware of the outstanding felony warrant due to receiving in-patient treatment for his service-connected posttraumatic stress disorder (PTSD).

Effective December 27, 2001, 38 U.S.C.A. § 5313B was enacted by Congress which provides that a Veteran may not be paid compensation benefits for any period during which such Veteran is a fugitive felon. A "fugitive felon" is defined by 38 U.S.C. § 5313B (b) as including a person fleeing to avoid prosecution, custody, or confinement relating to a felony offense, as well as a person violating a condition of probation or parole imposed for a felony.

The implementing regulation governing pensions for fugitive felons, under 38 C.F.R. § 3.666 (e) (2016), provides that: (1) Pension is not payable on behalf of a Veteran for any period during which he or she is a fugitive felon; (2) the term "fugitive felon" means a person who is a fugitive by reason of: (i) Fleeing to avoid prosecution, or custody or confinement after conviction, for an offense, or an attempt to commit an offense, which is a felony under the laws of the place from which the person flees; or (ii) Violating a condition of probation or parole imposed for commission of a felony under the Federal or State law. The term "felony" includes a high misdemeanor under the laws of a State which characterizes as high misdemeanors offenses that would be felony offenses under Federal law. 38 C.F.R. § 3.666 (e)(3).

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.

The legal provisions pertaining to the collection of debts owed by reason of participation in a VA benefits program are contained in 38 C.F.R. § 1.911. Under section 1.911, when VA has determined that a debt exists by reason of an administrative decision or by operation of law, VA shall promptly demand, in writing, payment of the debt. VA shall notify the debtor of his or her rights and remedies and the consequences of failure to cooperate with collection efforts. This notification was performed in a September 2010 letter.

The debtor has the right to dispute the existence or amount of the debt, to request waiver of collection of the debt, to a hearing on the waiver request, and to appeal the Department of Veterans Affairs decision underlying the debt. These rights can be exercised separately or simultaneously. 38 C.F.R. § 1.911 (c). In this case, the Veteran has also requested a waiver of the debt in question.

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. Generally, there are only two circumstances, which will lead to a determination that an overpayment was not properly created. First, if it is established that the Appellant is legally entitled to the benefits in question, the debt being assessed is not valid and the overpayment was not properly created. Second, where the Appellant is not legally entitled to the benefits, there are certain circumstances where a showing that VA was solely responsible for the Appellant being erroneously paid benefits can form the basis for finding that the overpayment was not properly created. In this regard, the effective date of a reduction or discontinuance of compensation, dependency and indemnity compensation, or pension by reason of an erroneous award based solely on administrative error or error in judgment shall be the date of last payment. 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2). Administrative errors include all administrative decisions of entitlement, whether based upon mistake of fact, misunderstanding of controlling regulations or instructions, or misapplication of law. VAOPGPREC 2-90 (July 17, 1989), 55 Fed. Reg. 27757  (1990). Sole administrative error connotes that the Veteran neither had knowledge of nor should have been aware of the erroneous award. Further, neither the Veteran's actions nor his or her failure to act must have contributed to payment pursuant to the erroneous award. Jordan v. Brown, 10 Vet. App. 171 (1997) (sole administrative error is not present if the payee knew, or should have known, that the payments were erroneous). Thus, a finding of sole administrative error requires not only error on the part of VA, but that the beneficiary is unaware that the payments are erroneous.

In an April 1998 decision, the RO granted the Veteran's claim for entitlement to nonservice-connected pension benefits. The RO subsequently received notice in April 2009 from VA's Office of Inspector General (OIG), Fugitive Felon Program, which included an Investigative Summary Form showing an outstanding felony warrant for the Veteran's arrest that had been issued by the North Carolina Department of Corrections. The charge was obstructing justice, and the report states it was issued in October 2008.

Accordingly, in June 2010, the RO notified the Veteran that he had an outstanding warrant and indicated they were providing him with the opportunity to clear his warrant before terminating his pension benefits, retroactively from the date of his warrant, October 21, 2008, because he would be classified as a fugitive felon under VA law and regulations. In August 2010, the RO notified the Veteran that his pension benefits were terminated. The VA's Debt Management Center then calculated an overpayment of benefits, and resulting indebtedness by the Veteran, in the amount of $28,737.67. 

The Veteran was subject to an outstanding warrant issued by North Carolina in October 2008, affecting the Veteran's eligibility to receive pension benefits. Notice of the outstanding warrant was received by VA in April 2009. In June 2010, VA notified the Veteran of the warrant, and in August 2010, the RO sent the Veteran notice of an overpayment of benefits from October 2008 to September 2010, in the amount of $28,737.67. The calculations were clarified in a December 2017 supplemental statement of the case. The Board finds this amount was properly calculated. The RO acted timely and appropriately in taking action when notice of the outstanding warrant was received. Thus, the Board finds that the debt was validly created and calculated.

Next, having found that the debt was validly created and calculated, the Board must address whether a waiver of recovery of an overpayment may be granted. VA is authorized to grant a waiver of recovery of indebtedness when collection of the debt would be against "equity and good conscience." 38 U.S.C. § 5302 (a) (2012); 38 C.F.R. §§ 1.962, 1.963(a), 1.965 (2017). The standard of "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. The decision reached should not be unduly favorable or adverse to either side. Ridings v. Brown, 6 Vet. App. 544, 546 (1994).

The law, however, precludes a waiver of recovery of an overpayment or the collection of any indebtedness where any one of the following elements is found to exist: (1) fraud, (2) misrepresentation, or (3) bad faith. 38 U.S.C. § 5302 (c); 38 C.F.R. § 1.962 (b). "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/services program exhibits bad faith if such conduct, although not undertaken with actual fraudulent intent, if undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and results in a loss to the government. 38 C.F.R. § 1.965 (b). Consequently, before determining whether equity and good conscience affords the Veteran the right to a waiver, it first must be determined whether there was fraud, misrepresentation, or bad faith on his part in the creation of the debt. Id. 

Here, there is no indication that the Veteran was attempting to defraud the VA or intentionally misrepresent facts regarding his criminal status. His original application for non-service connection pension benefits also appears to be free of malfeasance. During a hearing in October 2016, the Veteran testified that he was unaware he had a warrant until he received notice from the VA in June 2010 because he was receiving in-patient care for symptoms due to his service-connected PTSD. The Board notes the Veteran is rated as 100 percent disabled due to his PTSD. The Veteran testified that he lived in North Carolina, but received treatment in Virginia, and informed his probation officer of his location, but that another probation officer took his case and he believes the information was not properly passed on. He asserts he had no knowledge of the warrant until he was back in North Carolina, after treatment, and was arrested while driving to dinner; he was then taken to jail. The Board finds no reason to find the Veteran not credible. There is simply no evidence in the record the Veteran was being deceptive or purposely seeking an unfair advantage knowing that it would result in a loss to the government. See 38 C.F.R. § 1.965 (b). The Board notes the Veteran is rated as 100 percent disabled due to his PTSD. The Veteran has been a long-standing resident of the same city in North Carolina for at least twenty-two years. The Board resolves doubt in favor of the Veteran and finds that the Veteran was unaware of the warrant. The Board does not find there was any evidence of fraud, misrepresentation, or bad faith on the Veteran's part. See 38 U.S.C. § 5302 (c).

The Board now turns to the remaining question of whether recovery of the overpayment would be against equity and good conscience. 38 C.F.R. § 1.965 (a); Ridings v. Brown, 6 Vet. App. 544 (1994). 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 all-inclusive: (1) the fault of the debtor, (2) balancing of faults between the debtor and VA, (3) undue hardship (whether collection would deprive the debtor of basic necessities), (4) defeat of the purpose for which the benefits were intended, (5) the unjust enrichment of the Appellant, and (6) whether the Appellant changed positions to his or her detriment in reliance upon a granted VA benefit. 38 U.S.C. § 5302; 38 C.F.R. § 1.965 (a). Each of the six elements must be addressed. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994).

In considering these factors, the Board initially finds that the fault in the creation of the overpayment at issue lies exclusively with the Veteran, as the overpayment was caused by his outstanding warrant, as discussed previously. The Board does not find evidence that VA was responsible for the creation of the debt. In this case, the Veteran was ultimately responsible for the issuance of the warrant against him. After the issuance of the warrant, he continued to accept benefits to which he should have known that he was not entitled. Further, VA was notified of the outstanding warrant in April 2009, provided the Veteran with an opportunity to clear the warrant, and when no response was received, took prompt action to reduce the Veteran's benefits.

The second element to consider is the balancing of faults, which requires a weighing of the fault of the debtor against the fault of VA. 38 C.F.R. § 1.965 (a)(2). After VA had discovered and confirmed the Veteran's outstanding warrant, the RO provided the Veteran with a timely August 2010 letter that notified him that his benefits would be reduced. He was then notified that an overpayment had been created in the amount of $28,737.67. Given that VA had to verify the warrant, confirm the overpayment, provide due process to the Veteran, and take further administrative action to finalize the reduction, the Board has concluded that VA processed this case within a reasonable timeframe.

The third element to be considered is "undue hardship," described as "[w]hether collection would deprive debtor or family of basic necessities." 38 C.F.R. § 1.965 (a)(3) (2017). The Veteran submitted a Financial Status Report, received in January 2011, indicating that he was not working, was not receiving any income, and had expenses of $1,300.00 a month, for utilities, food, and rent/mortgage and other daily living expenses. The Board notes that the Veteran was determined to be 100 percent disabled by PTSD, effective February 2014. It was also noted for the record in February 2015 that after the Veteran completed a PTSD program at the VA Medical Center, he would be homeless. The Board finds that recovery of the debt would cause financial hardship to the Veteran, and the recovery of the overpayment may deprive the Veteran of the basic necessities of life.

The next element to be considered is whether recovery of the overpayment at issue would defeat the purpose for which the benefits were intended. 38 C.F.R. § 1.965 (a)(4) (2017). VA's pension program provides monthly benefit payments to certain wartime Veterans with financial need, after consideration of the respective Veteran's financial position. In this case, recovery of the overpayment would defeat the purpose of the VA pension program of helping this Veteran, who is in financial need, to cope with his financial challenges. On this basis, and given the Veteran's severe service-connected psychiatric disability, the Board finds that there are limited means for the Veteran to assist in his own financial stability.

The fifth element involves "unjust enrichment," i.e., the concept that failure to make restitution would result in unfair gain to the debtor. 38 C.F.R. § 1.965 (a)(5) (2017). In this case, the Veteran was not legally entitled to VA pension during the period in question. VA continued to make pension payments prior to being notified that the Veteran had an outstanding warrant. However, given the Board's prior findings that the Veteran was unaware of the warrant status, waiver of this debt would therefore not result in a windfall and produce unfair gain to the Veteran. Under such circumstances, to allow the Veteran to retain the overpaid compensation would not constitute unjust enrichment.

The final element to be considered is whether reliance on VA benefits resulted in the Veteran relinquishing a valuable right or incurring a legal obligation. 38 C.F.R. § 1.965 (a)(6) (2017). The Veteran has not claimed that he relinquished any right or incurred any legal obligation in reliance on receipt of pension benefits, nor is there any evidence that he did.

After carefully weighing all relevant factors set forth above, and considering the benefit of the doubt doctrine set forth in 38 U.S.C. § 5107, the Board finds that recovery of the pension indebtedness in the calculated amount of $28,737.67 does violate the principles of equity and good conscience. As discussed above, the Board finds that the Veteran may be denied basic necessities, and would not result in unjust enrichment, in spite of the significant fault on the part of the Veteran. Under such circumstances, the request for waiver is granted. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963.


ORDER

The overpayment of VA benefits, in the calculated amount of $28,737.67, is a valid indebtedness.

Entitlement to a waiver of recovery of an overpayment, in the amount of              $28, 737.67, is granted.



____________________________________________
TANYA SMITH
Veterans Law Judge, Board of Veterans' Appeals

Department of Veterans Affairs