Citation Nr: 20031806 Decision Date: 05/06/20 Archive Date: 05/06/20 DOCKET NO. 13-15 861 DATE: May 6, 2020 ORDER Entitlement to a waiver of an overpayment of nonservice-connected pension benefits in the amount of $49,467.30 is denied. FINDINGS OF FACT 1. The overpayment was created by the Veteran’s failure to report his income, despite his knowledge that he was required to report any change in income, and that an overpayment would likely result from failure to do so. 2. The Veteran was at fault in the creation of the indebtedness at issue, and he is guilty of misrepresentation; the Committee on Waivers and Compromises has made a finding that the debt created by the overpayment was not created in bad faith. 3. The recouping of the $49,467.30 in overpaid benefits would not deprive the Veteran of basic necessities. 4. The recovery of the overpayment at issue would not defeat the purpose for which they were awarded, as the nonservice-connected pension benefits were intended to provide a minimum level of financial security to the Veteran, and such benefits are reduced dollar-for-dollar based on income. 5. The failure to make restitution in this case would result in unfair gain to the Veteran. 6. The Veteran did not relinquish a valuable right or incur a legal obligation in reliance on the VA overpayment. CONCLUSION OF LAW The criteria for waiver of recovery of the overpayment of VA nonservice-connected disability pension benefits, in the calculated amount of $49,467.30, have not been met. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965 (2019). REASONS AND BASES FOR FINDING AND CONCLUSION The Veteran served on active duty in the U.S. Army from November 1974 to November 1976. This matter comes before the Board of Veterans’ Appeals (Board) on appeal from a determination by the Committee on Waivers and Compromises of the Department of Veterans Affairs (VA) Regional Office (RO) in Milwaukee, Wisconsin. The Veteran testified before the undersigned Veterans Law Judge at a July 2018 videoconference hearing. A transcript of the hearing has been included in the claims file. This matter was remanded in February 2019 for additional development and due process considerations. A supplemental statement of the case was most recently issued in December 2019. The case was returned to the Board for appellate consideration. Duties to Notify and Assist The Veterans Claims Assistance Act of 2000 (VCAA) imposes obligations on VA to provide claimants with notice and assistance. 38 U.S.C. §§ 5102, 5103, 5103A, 5107, 5126; Honoring America's Veterans and Caring for Camp Lejeune Families Act of 2012, Pub. L. No. 112-154, §§ 504, 505, 126 Stat. 1165, 1191-93; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a) (2019). Nevertheless, VCAA provisions are not applicable to waiver of recovery of overpayment claims found in 38 U.S.C. § 5300, because Chapter 53 contains its own notice provisions. See Barger v. Principi, 16 Vet. App. 132, 138 (2002); see also Lueras v. Principi, 18 Vet. App. 435, 438-39 (2004) (noting that VCAA provisions are inapplicable to waiver of indebtedness claims). In any event, the Board points out that the RO, in the decision on waiver of indebtedness, and in an accompanying letter, has explained to the Veteran the bases for denial of the claim, and afforded her the opportunity to present information and evidence in support of the claim. The Veteran has not referenced any pertinent, obtainable evidence that remains outstanding. Accordingly, the Board finds that these actions satisfy any duty to notify and assist the Veteran. Therefore, the Board finds that no further action is necessary under the VCAA. Entitlement to a waiver of overpayment of nonservice-connected pension benefits in the amount of $49,467.30 The purpose of VA pension benefits is to provide a subsistence income for veterans of a period of war who are totally disabled, and who are otherwise unable to maintain a basic, minimal income level. 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. In determining income for the purposes of nonservice-connected pension benefits, payments of any kind from any source shall be counted as income during the 12-month period in which received unless specifically excluded by 38 C.F.R. § 3.272. See 38 C.F.R. § 3.271(a). A veteran who is receiving a pension must notify VA of any material change or expected change in income which would affect entitlement to receive, or the rate of, the benefit being paid. 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). 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. An overpayment may arise from virtually any benefits program administered pursuant to VA law, including pension, compensation, dependency and indemnity compensation, education educational assistance benefits and subsistence allowance, insurance benefits, burial and plot allowances, clothing allowance, and automobile or other conveyance and adaptive equipment allowances. 38 C.F.R. § 1.956(a). Recovery of overpayment of any benefits made under laws administered by VA may 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. 38 U.S.C. § 5302(c); 38 C.F.R. § 1.963(a). If there is no indication of fraud, misrepresentation, or bad faith in the record, the indebtedness shall be waived if the recovery of the overpayment would be against equity and good conscience. 38 U.S.C. § 5301(a); 38 C.F.R. §§ 1.962, 1.965. The Board notes that neither the statute nor the code contains a definition of fraud that is specifically applicable to waiver cases. VA General Counsel has indicated that “the existence or lack of fraud is a case-specific conclusion based on all facts in each instance.” VAOPGCPREC 4-85 (September 16, 1985). However, the opinion also emphasized that the burden of proof is on VA to establish fraud, and that if the evidence is in balance, as to any element, the burden of proof would not be carried. Id. For misrepresentation, there must be willful misrepresentation of a material fact or willful failure to disclose a material fact. The misrepresentation must be more than non-willful or mere inadvertence. 38 C.F.R. §§ 1.962 (b), 1.965(b). 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 consequences, and results in a loss to the government. 38 C.F.R. § 1.965(b). In Richards v. Brown, 9 Vet. App. 255 (1996), the Court found that the operative language in 38 C.F.R. § 1.965(b)(2) limits bad faith to cases in which there is an intent to seek an unfair advantage. Consideration of equity and good conscience is intended to reach a result that is not unduly favorable or adverse to either the claimant or the Government. It is intended to achieve a result that is fair. 38 C.F.R. § 1.965(a). Six non-exclusive elements are set forth in the regulations that must be addressed to determine whether the facts and circumstances in a particular case dictate that collection of an overpayment would be against equity and good conscience. The six non-exclusive elements, consist of: (1) the fault of the debtor; (2) balancing of faults between the debtor and VA; (3) undue hardship of collection on the debtor; (4) a defeat of the purpose of an existing benefit to the veteran; (5) the unjust enrichment of the veteran; and (6) whether the veteran changed positions to his/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) (holding that VA must address all relevant factors in determining whether to exercise its equitable discretion in a waiver of indebtedness claim). The propriety and amount of the overpayment at issue are matters that are integral to a waiver determination. A debtor may dispute the amount or existence of a debt, which is a right that may be exercised separately from a request for waiver or at the same time. See 38 C.F.R. § 1.911(c)(1); see also VA O.G.C. Prec. Op. No. 6-98, published at 63 Fed. Reg. 31,264 (1998). When a veteran raises the validity of the debt as part of a waiver application, it is arbitrary and capricious and an abuse of discretion to adjudicate the waiver application without first deciding the veteran's challenge to the lawfulness of the debt asserted against him or her. Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991); see also Narron v. West, 13 Vet. App. 223 (1999). In May 2005, the Veteran was granted entitlement to nonservice-connected pension benefits, effective December 8, 2004. He was informed that the “rate of VA pension upon the amount of family income and the number of dependents. Your benefits may be affected by any changes in the amount of family income and marital or dependency status of you or your dependents.” He was also informed that VA must adjust the payments whenever this income changes, and that he “must notify [VA] immediately if there is a change in any condition affecting your right to continued payments. Failure to notify [VA] of these changes immediately will result in an overpayment which is subject to recovery.” The Veteran was provided with this notice again in November 2006, August 2007, November 2007, November 2008, and December 2009. The Board also notes that the Veteran previously received a waiver of overpayment in the amount of $37,789.90, in February 2010, and was informed of income reporting requirements in connection with the creation of the overpayment and VA’s grant of a waiver. In his December 2004 application for nonservice-connected pension, he indicated that he was his wife’s sole financial support, and that he and his wife had no income; he also indicated that he had 2 children that were dependents. He also indicated that he was not in receipt of any Social Security Administration benefits. Information received by the VA Pension Management Center (PMC) from another government agency in 2012 reflects that the Veteran failed to report income from employment from February 1, 2009 through June 27, 2012. The information indicates received indicated that the Veteran’s income exceeded his expenses by $763 per month; a VA Form 5655 (Financial Status Report), received in March 2013 indicates that the Veteran’s income exceeded his expenses by $374 per month. In this regard, the Board observes that the PMC processed an Income Verification Match (IVM) confirming the Veteran’s household income. IVM is a secure procedure by which VA may obtain income information from the Social Security Administration (SSA) and the Internal Revenue Service (IRS), in order to verify income amounts that are reported to VA. The adjudication of this matter involves information provided by SSA and the IRS, but does not directly cite information included in any IVM report that has not been verified by the Veteran. Therefore, the text of this decision is not subject to the additional protections required under the IVM procedures. The Board observes that the Veteran does not dispute the validity of the overpayment or the amount of the overpayment; to this point, the Veteran testified at his July 2018 hearing before the undersigned that the overpayment was his fault and that he knowingly chose to collect nonservice-connected pension benefits while working. (see hearing transcript, pages 2 – 3). In this regard, the Veteran alleges that he should be entitled to a waiver because it would create a hardship for him if VA was to collect the overpayment. The Board observes that the Committee on Waivers and Compromises, in February 2013, found that the Veteran was not entitled to a waiver because his monthly income exceeded his expenses by $760 per month; the Committee’s report indicates that this finding is based on financial information received in August 2012. The Board notes that there are several Social Security Administration inquiries of record, but only a November 2019 inquiry reflects that the Veteran’s current payment is $698 per month; prior monthly payments in July 2017, December 2017, December 2018, and December 2019 are also noted. In July 2012, VA’s Debt Management Center informed the Veteran that the overpayment amount was determined to be $49,467.30, and the Veteran was duly informed of his options for repayment. In February 2013, the Veteran requested a waiver on the basis that recovery would create an undue hardship. The Veteran submitted a VA Form 20-5655 (Financial Status Report) associated with the claims folder, received in March 2013, reflects that the Veteran’s income exceeds his expenses by $374; the Veteran reported no income whatsoever, despite testifying before the undersigned that he was in receipt of Social Security benefits. To this point, the Board observes that the VA Form 5655 reflects a handwritten notation that the Veteran had a total monthly income of $1510. The Veteran’s argument that he is entitled to a waiver because it would create a hardship for him if VA was to collect the overpayment fails. The Board observes that, in response to the February 2019 Board remand, the Veteran was requested to provide additional Financial Status Reports demonstrating the extent to which is income and expenses would preclude collection of the debt. However, despite multiple attempts to obtain this information by VA, the Veteran failed to respond with the requested information. See Wood v. Derwinski, 1 Vet. App. 190, 193 (1991). As such, the Board must rely upon the financial information of record which reflects that he has a net monthly income of $374 - $760 per month. After consideration of the record and the applicable regulatory provisions, it is clear that the Veteran knowingly failed to report his income, and as such he willfully failed to disclose a material fact. The misrepresentation was done purposefully, and with resulting loss to the government. As noted above, the Veteran was repeatedly instructed to report income and any changes in income, and advised that his pension award was based on income. The Veteran was in receipt of VA benefits for nearly five years at the time VA first learned of the Veteran’s income in excess of pension limits. Although the Veteran was unemployed and receiving no income at the time of his December 2004 application and for several years thereafter, the Veteran’s failure to report his income in 2008, 2009, 2010, 2011, and 2012 was the direct cause of the overpayment of VA benefits, and represents a willful intention on his part to seek an unfair advantage. Moreover, recovery of the overpayment at issue would not defeat the purpose for which the nonservice-connected pension benefits were awarded, as the nonservice-connected pension benefits were intended to provide a minimum level of financial security to the Veteran, and such benefits are reduced dollar-for-dollar based on income. When the Veteran accepted VA’s payment of nonservice-connected pension benefits, he was informed of the requirement that he report all income he receives to VA. To this point, the Veteran is charged with knowledge of the laws addressing nonservice-connected pension benefits when he accepted payment of nonservice-connected pension benefits; he was duly informed of the requirement that he report all income that he receives to VA at the time of his claim and upon receipt of benefits and at least once a year for the duration of the time he received such benefits. A claimed lack of knowledge of VA procedure does not assist in obtaining the benefit sought. See Morris v. Derwinski, 1 Vet. App. 260, 265 (1991) (ignorance of the law was not a valid basis for a claimant to assert that he/she should be awarded a benefit because the claimant was unaware of the applicable law(s)). In short, the Veteran misrepresented his financial status, such that it would not weigh against equity and good conscience to deny his waiver request. The Veteran was at fault in the creation of the debt because it was his responsibility to immediately report any changes in household income and his failure to do so resulted in his unjust enrichment at government expense. In view of the above, the Board concludes that the Veteran’s actions constituted misrepresentation. Since misrepresentation in the creation of the $49,467.30 pension overpayment has been shown, waiver of recovery of this amount is precluded by law. 38 U.S.C. § 5302(c); 38 C.F.R. §§ 1.962, 1.965. Hence, the principles of equity and good conscience, such as any current financial hardship, are not applicable. Waiver of recovery of overpayment is denied. GAYLE STROMMEN Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board Hallie E. Brokowsky, Counsel The Board’s decision in this case is binding only with respect to the instant matter decided. This decision is not precedential and does not establish VA policies or interpretations of general applicability. 38 C.F.R. § 20.1303.