Citation Nr: 20046033 Decision Date: 07/09/20 Archive Date: 07/09/20 DOCKET NO. 16-01 631 DATE: July 9, 2020 ORDER Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $16,590.37 is denied. FINDINGS OF FACT 1. The Veteran was incarcerated after conviction of a felony on July 22, 2005. 2. The Regional Office (RO) retroactively reduced the Veteran’s compensation benefits from the 100 percent rate to the 10 percent rate effective September 20, 2005; this action resulted in an overpayment in the amount of $16,590.37. 3. The overpayment was not due to the Veteran’s fraud, misrepresentation or bad faith. 4. Recovery of the debt in this case in the amount of $16,590.37 is not against equity and good conscience. CONCLUSION OF LAW Recovery of the overpayment of the VA compensation benefits in the amount of $16,590.37 would not be contrary to the principles of equity and good conscience. 38 U.S.C. § 5302 (2012); 38 C.F.R. §§ 1.963(a), 1.965 (2019). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Veteran honorably served on active duty from September 1964 to October 1966. This matter is before the Board of Veterans’ Appeals (Board) on appeal from an October 2007 administrative decision of the Department of Veterans Affairs (VA) Committee on Waivers and Compromises (Committee). The Veteran testified regarding both the issue of validity of debt and waiver of recovery of the debt in a July 2010 hearing. The Veterans Law Judge (VLJ) from the July 2010 hearing denied the issue of validity of debt and remanded the matter of waiver of recovery of the debt. See January 2011 Board Decision. When the issue of waiver of recovery of debt came back before the Board, a second VLJ held a hearing in November 2018. As a result, a third VLJ has been assigned to participate in a panel decision in this case. The Veteran was offered the opportunity to testify at another hearing before the third VLJ, see Arneson v. Shinseki, 24 Vet. App. 379 (2011), but he waived his right to a third hearing in May 2020 correspondence. Both hearing transcripts are associated with the record. Accordingly, the Board will proceed with adjudication. At his November 2018 hearing, the Veteran testified regarding the subject of the January 2011 decision, validity of the debt in the amount of $16,590.37. While this decision addresses waiver of recovery of the $16,590.37 debt, it does not address the validity of the debt because that issue has already been finally adjudicated in the January 2011 decision. See 38 C.F.R. § 20.1100. If the Veteran would like to challenge the decision within VA adjudication processes, he may file a motion to for Reconsideration or a motion revise the Board decision on grounds of clear and unmistakable error (CUE). Reconsideration is accorded when there is an allegation of obvious error of fact or law, a discovery of new evidence in the form of relevant records or reports of the service department concerned, or an allegation that an allowance of benefits by the Board was materially influenced by false or fraudulent submitted by or on behalf of the Veteran. 38 C.F.R. § 20.1001. A motion for Reconsideration must be in writing and must include the name of the Veteran; the applicable Department of Veterans Affairs file number; and the date of the Board of Veterans’ Appeals decision, or decisions, to be reconsidered. It must also set forth clearly and specifically the alleged obvious error, or errors, of fact or law in the applicable decision, or decisions, of the Board or other appropriate basis for requesting Reconsideration. Failure to follow these requirements will result in a dismissal 38 C.F.R. § 20.1002. To be CUE, there must have been an error in the Board’s adjudication of the appeal which, had it not been made, would have manifestly changed the outcome when it was made. If it is not absolutely clear that a different result would have ensued, the error complained of cannot be CUE. 38 C.F.R. § 20.1403(c). A motion for revision of a decision based on CUE must be in writing and must be signed by the moving party or that party’s representative. The motion must include the name of the Veteran; the applicable Department of Veterans Affairs file number; and the date of the Board of Veterans’ Appeals decision to which the motion relates. 38 C.F.R. § 20.1404. The motion must set forth clearly and specifically the alleged clear and unmistakable error(s) of fact or law in the Board decision, the legal or factual basis for such allegations, and why the result would have been manifestly different but for the alleged error. Non-specific allegations of failure to follow regulations or failure to give due process, or any other general, non-specific allegations of error, are insufficient to satisfy the requirement of the previous sentence. Id. Failure to follow these requirements will result in a dismissal. Id If the Veteran would like to file a motion, it must be filed at the following address: Board of Veterans’ Appeals, P.O. Box 2706, Washington, DC 20038. Waiver of Recovery of $16,590.37 I. Legal Criteria 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. § 531(a); 38 C.F.R. § 3.665(a). 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 is given to the following elements, which are not intended to be all-inclusive: (1) fault of debtor (where actions of the debtors contribute to the creation of the debt); (2) balancing of faults (weighing fault of the debtor vs. the fault of VA); (3) undue hardship (whether collection would deprive the 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); and (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 C.F.R. § 1.965(a). When there is an approximate balance of positive and negative evidence regarding the merits of an issue, the benefit of the doubt shall be given to the Veteran. 38 U.S.C. § 5107(b); 38 C.F.R. § 3.102. If the preponderance of the evidence is against the claim, the claim is to be denied. Gilbert v. Derwinski, 1 Vet. App. 49, 55 (1990). II. Factual Background and Legal Analysis The Veteran has long been in receipt of a 100 percent rating for a total disability due to individual unemployability (TDIU). The Veteran has previously been notified through receipt of a VA form 21-8764 that his benefits would be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony. See March 1991 Notification Letter. In July 2005, the Veteran was incarcerated following a felony conviction. He did not inform VA of his incarceration at that time. The Regional Office (RO) was informed in September 2005 of his incarceration, but the evidence did not reflect whether it was after conviction of a felony. More information was received in February 2006 indicating that the Veteran was sentenced to five years. In March 2006, the RO sent the Veteran correspondence proposing that his benefits be reduced to the 10 percent rate. On March 21, 2006 it was finally confirmed that the Veteran had been incarcerated after conviction of felony. In accordance with VA law and regulation, the RO properly retroactively reduced the Veteran’s compensation benefits which were being paid at the 100 percent rate to the 10 percent rate effective September 2005; this action resulted in an overpayment in the amount of $16,590.37. See January 2011 Board Decision. 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. See December 2007 Committee Decision. Therefore, waiver of indebtedness is not precluded if it is 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 Board acknowledges that VA is partially at fault because of the limited development between September 2005 and February 2006. However, the record shows the Veteran was primarily at fault in the creation of the debt in failing to report his incarceration after conviction of felony. He had previously been informed regarding the requirement that he inform VA of this and that he would be reduced, as noted on his VA form 21-8764. He was notified of his obligation to report a felony incarceration and of the consequences if he failed to do so. The Veteran also bears the greater fault since he knew that he was in prison after being convicted of a felony while VA was on notice that the Veteran was in prison, but not the nature of the circumstances. Thus, the first two factors are not in the Veteran’s favor. The Veteran has stated that he has experienced hardship. See July 2010 Hearing Transcript; November 2018 Hearing Transcript. However, hardship in general is not the standard. The hardship must be one that deprives the Veteran or his family of their basic necessities. See 38 C.F.R. § 1.965(a)(3). In that regard, from September 2005 to September 2009, the Veteran received all of his basic necessities from the penal institution. Thus, his basic necessities were being met. Regarding the period after his release from incarceration, the Veteran was released on September 10, 2009 and his benefits were restored on November 18, 2009, effective the date of his release. See November 2009 Notification Letter. The Veteran’s testimony reflects that for the period between his release and restoration, he was relying on foodbanks and other charity programs in order to meet his basic necessities. See July 2010 Hearing Transcript. The Board thus finds that the Veteran was suffering undue hardship for approximately two months. According to his July 2010 testimony and his July 2010 submitted financial status report (dated November 3, 2009), the Veteran was paying back $500 a month to the debt but wanted to pay back $100 a month. See July 2010 Hearing Transcript; July 2010 Financial Status Report. His income was $3,250 a month after the $500 payment. See November 2009 Notification Letter (restoring his benefits back to $2,673 a month); July 2010 Financial Status Report (reflecting $2,100 in VA benefits and $1,150 in other income per month). His monthly expenses were listed as $1,800, leaving $1,450 net income per month. While he was also in credit debt in the amount of $30,000, the Veteran did not provide a monthly amount he was required to pay. See July 2010 Financial Status Report. Thus, the Board finds that he was able to pay for all of his basic necessity expenses, $500 towards the overpayment debt, and could use the remaining $1,450 net income towards his non-VA debts. In August 2010 the Veteran submitted a different financial status report also dated November 3, 2009. This form does not provide internally or externally consistent information and is, therefore, considered not credible regarding his financial position as of the time of the submission. Notably, the Veteran stated he had no income on one portion of the form and then in the remarks noted that he had Social Security income. This form additionally provided lower monthly expenses and nearly half as much debt compared to his July 2010 financial status report. To the extent that this report is probative, the Board notes that with his Social Security payment of $1,150 would cover the approximately $900 in monthly expenses and allow for some repayment of his VA debt and other debts. See July 2010 Financial Status Report; August 2010 Financial Status Report. Thus, the Board finds that for all but the two months the Veteran was awaiting his restoration, repayment of the debt did not result in a financial hardship that precluded the Veteran and his family from obtaining their basic necessities. 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, due to his incarcerated status, he had limited earning capacity at that time. Further, during the period that he was not incarcerated, recovery was limited to less than one-half of his other income and less than one-sixth of the Veteran’s VA compensation benefits. Withholding of his benefits does not negate the reasons for his compensation benefit because the Veteran was still being compensated for his impairment in earning capacity due to his service-connected disabilities and his other income more than compensates the debt repayments. If VA did not withhold the debt repayments from the Veteran’s VA benefits, VA would transfer the debt to the Department of Treasury for collection for his other government benefits. See 38 C.F.R. § 1.911(d)(4). The fact that a more streamlined process was used does not change whether it negates the nullifies the objective of paying his compensation benefits. Therefore, the Board finds that this element is not in favor of waiver of recovery. With respect to the remaining standards of equity, the Board finds that the Veteran’s receipt of disability compensation at the 100 percent rate when he should have received funds at the 10 percent rate represented monies that he received but for which he was not entitled because he was incarcerated and such receipt resulted in unfair enrichment to him. The Board also 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. There are no other facts and circumstances in this case that would indicate that waiver of recovery of the debt is warranted. The cumulative evidence shows that the Veteran was principally at fault in the creation of the debt and was capable of supplying his basic necessities for all but the two months he had not been restored. In the case of the two months he was not yet restored, Board finds that there was financial hardship; however, this one element does not outweigh the other five elements not in the Veteran’s favor for that time period, including fault of the Veteran, the balance of the fault between VA and the Veteran, defeat of purpose, unjust enrichment, and change of position to the Veteran’s detriment. After weighing all the evidence of record, the Board finds that recovery of the overpayment would not be against equity and good conscience. In this case, the Board finds that the preponderance of the evidence in this case is against the Veteran’s claim for a waiver of a recovery and therefore the benefit of the doubt doctrine does not apply. Jonathan Hager Veterans Law Judge Board of Veterans’ Appeals L. B. Cryan Veterans Law Judge Board of Veterans’ Appeals J.W. Francis Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board S. Lambert 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.