Citation Nr: 21007205 Decision Date: 02/09/21 Archive Date: 02/09/21 DOCKET NO. 12-27 666A DATE: February 9, 2021 ORDER Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) nonservice-connected pension in the amount of $53,095.00 is denied. FINDINGS OF FACT 1. The Veteran’s entitlement to VA pension benefits was terminated effective September 1, 2004, and this resulted in an overpayment in the amount of $53,095.00; this action was proper. 2. The Veteran committed misrepresentation and bad faith in the creation of the debt. CONCLUSIONS OF LAW 1. An overpayment of $53,095.00 in VA benefits was properly created. 38 U.S.C. §§ 101, 1503, 1521, 1541, 5110, 5313; 38 C.F.R. §§ 3.21, 3.23, 3.271, 3.272. 2. Waiver of the recovery of an overpayment in the amount of $53,095.00 of the Veteran's VA benefits is precluded by a finding of bad faith on the part of the Veteran. 38 U.S.C. § 5302 (a); 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Veteran served on active duty from October 1972 to October 1974 and from June 1975 to June 1978. This matter is before the Board of Veterans’ Appeals (Board) on appeal from a February 2012 decision of the Department of Veterans Affairs (VA) Committee on Waivers and Compromises (COWC) at the VA Regional Office (RO) in St. Paul, Minnesota, which denied the Veteran’s request for waiver. Jurisdiction of the Veteran’s claims file currently resides with the St. Petersburg, Florida RO. The Veteran initially requested a Board hearing in his October 2012 substantive appeal. However, in January 2017, the Veteran withdrew his request. The Board of Veterans’ Affairs (Board) remanded this case in November 2017 and in April 2019 for the Regional Office (RO) to associate with the record various pertinent documents pertaining to the overpayment issues. The April 2019 remand also directed the RO to obtain an updated financial status report from the Veteran. Regarding the remand directives, the RO has provided instructions as to where the following documents are located in the claims file: the January 20, 2010 letter sent from VA to the Veteran regarding his spouse’s discovered income, the transcript of the hearing held before the Committee held on July 9, 2012. In May 2020, the Veteran was notified that the following documents are lost and that further attempts to locate them would be futile: a copy of the February 8, 2012 decision by the Committee denying the Veteran’s waiver request due to a finding of bad faith, document dated August 24, 2012 upholding the denial of waiver. The Board notes that there is a discrepancy in the date and reported income and expenses of the financial status report noted in the November 2017 remand directive and the financial status report the RO listed in its development actions in the July 2020 Supplemental Statement of the Case (SSOC). However, there are multiple financial status reports associated with the record and the Veteran has not responded to attempts to obtain an updated financial status report pursuant to the April 2019 remand directive. As such, the Board finds that there has been substantial compliance with the Board’s remand directives. For VA purposes, an overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled. See 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 educational assistance benefits. 38 C.F.R. § 1.956 (a). VA regulations provide that, when an indebtedness is assessed, the debtor has the right to: informally dispute the existence or amount of the debt, appeal the VA decision underlying the debt, and request waiver of collection of the debt. 38 C.F.R. § 1.911 (c). These rights can be exercised separately or simultaneously. See Schaper v. Derwinski, 1 Vet. App. 430, 434 (1991). Basic entitlement to pension exists if a veteran of a period or periods of war (as defined in 38 C.F.R. § 3.3 (a)) meets certain net worth requirements and does not have an annual income in excess of the applicable maximum annual pension rate (MAPR), and is either age 65 or older or is permanently and totally disabled from nonservice-connected disability not due to the veteran’s own willful misconduct. See 38 U.S.C. §§ 1521 (a) and (j), 5312; 38 C.F.R. §§ 3.3 (a), 3.23(a). Pension is not payable to a veteran whose annual income exceeds the rates set forth in 38 U.S.C. § 1521. Improved pension provides for maximum income levels under which eligibility is based and this amount is offset by annual income of the recipient minus any excepted unreimbursed medical expenses. For the purpose of determining initial entitlement, or for resuming payments on an award which was previously discontinued, the monthly rate of pension payable to a beneficiary shall be computed by reducing the beneficiary’s applicable maximum pension rate by the beneficiary’s annual rate of countable income on the effective date of entitlement and dividing the remainder by 12; whenever there is a change in a beneficiary’s annual rate of countable income, the monthly rate of pension payable shall be computed by reducing the beneficiary’s applicable MAPR by the beneficiary’s new annual rate of countable income on the effective date of the change in the annual rate of income, and dividing the remainder by 12. 38 C.F.R. § 3.273. For the purpose of computing income for improved pension, payments of any kind from any source shall be counted as income during the 12-month annualization period in which received unless specifically excluded under 38 C.F.R. § 3.272. 38 C.F.R. § 3.271 (a). As relevant here, in a January 2005 notification letter VA informed the Veteran that he was awarded nonservice-connected pension benefits and that he was awarded an additional amount for his spouse, A.M. The Veteran was informed that the pension benefit was awarded because his family had no income from September 1, 2004. The Veteran was notified of the obligation to provide prompt notice of any change in family income or net worth and that a failure to provide such would result in the creation of an overpayment which would be subject to recovery. It further stated that when reporting income, the total amount and source of all income received should be reported. In February 2008, a computer match revealed that the Veteran received unreported Social Security income. In July 2008, the Veteran submitted a dependency claim for a dependent spouse, A.M. The Veteran reported that he was married to A.M. in February 1985. The sections of the form related to termination of marriage and his spouse’s previous marriages were left blank. In August 2008, a Social Security inquiry report showed that the Veteran received entitlement to Social Security benefits in February 2008, and an Income Verification Match (IVM) showed that the Veteran’s spouse received unreported unearned income in 2006. The same month, a VA letter notified the Veteran that VA proposed to reduce his benefits because of the Social Security income. The notification letter requested that the Veteran submit evidence of Social Security benefits received since February 1, 2005, and provided his due process rights. Later in August 2008 the Veteran requested a hearing and submitted a financial status report showing monthly Social Security benefits for himself in the amount of $1,025.60. The Veteran reported no income for his spouse, but reported that she was employed from 1986 through January 2007. In a subsequent August 2008 phone call, the Veteran again requested a hearing, and reported that he began receiving Social Security benefits in 2008. The Veteran stated that he had verification of his Social Security benefits, but declined to provide verification of his Social Security benefits to correctly adjust his pension award prior to the hearing. In a January 2010 phone call, the Veteran was informed that Social Security income is countable for the purpose of calculating entitlement to VA nonservice-connected benefits and that any evidence presented at his hearing would be added to his countable income and would create an overpayment. The Veteran reasserted his desire for a hearing, but did not provide documentation of his Social Security benefits. A summary of evidence in the September 2012 Statement of the Case (SOC) indicates that a Social Security inquiry revealed that the Veteran’s spouse became entitled to Social Security benefits in December 2008 and was receiving a monthly benefit. The inquiry also revealed that she received a retroactive payment in November 2009. VA subsequently notified the Veteran of this information. The notification letter requested that the Veteran submit EVRs for the years 2006 through 2010, and provided his due process rights. In February 2010 the Veteran submitted a financial status report showing $1,220 income for himself in VA benefits. The Veteran reported no other income for himself and no income for his spouse. The Veteran also submitted a statement in February 2010 in which he asserted that income received by his spouse in 2006 is not countable income, as they divorced in January 2006 and remarried in 2007. In March 2010 the Veteran submitted an Eligibility Verification Report (EVR) dated January 1, 2010. The Veteran reported no income from any source for both himself and his spouse. In May 2010, the Veteran requested that his May 2010 hearing be rescheduled. In June 2010 the Veteran submitted a divorce judgement showing that he divorced his spouse, A.M., on September 12, 2005 and that they were remarried on August 15, 2007. In a July 2010 notification letter, VA notified the Veteran that his pension benefits were terminated effective January 1, 2006. VA informed the Veteran that VA wrote to him in September 2008 and January 2010 explaining that information was received regarding unreported income for his spouse in 2006. Further, VA noted that the Veteran was asked to submit fully completed Improved Pension Eligibility forms and financial status reports from January 1, 2006 onward. Because the Veteran did not submit the requested information, VA was unable to accurately determine his VA pension rate and his benefits were terminated. The Veteran was informed that the VA actions resulted in an overpayment. Upon review of the evidence submitted by the Veteran regarding his marital status, VA informed the Veteran in August 2010 that his pension benefits were restored as of January 1, 2006, but at a lower rate for the period that he was divorced. In a second letter, the Veteran was informed that the Pension Management Center had taken corrective action to restore his pension benefits after it was mistakenly reported that the Veteran was deceased. In a September 2010 notification letter, the Veteran was notified that his pension was reduced due to the removal of his spouse effective October 1, 2005, the first day of the first month after his divorce. Later that same month, the Veteran submitted an EVR showing no income from any source for him and his spouse. The Veteran also submitted a waiver request and a financial status report in which he reported $1,220 income from VA benefits. The Veteran reported no other sources of income for himself or his spouse, and no assets. In June 2011, VA again took action to reduce the pension benefit effective April 1, 2005, due to the discovery of Social Security income. The Veteran was also notified that VA proposed to stop his pension benefits effective September 1, 2004 due to the additional Social Security income and his spouse’s unreported earned income. The Veteran was provided with his due process rights. In July 2011, in support of his request for a waiver, the Veteran submitted a statement indicating monthly Social Security income “after deduction” of $988.00 for himself and $1,033.00 for his spouse. The Veteran also submitted a copy of his Social Security Award letter, dated August 13, 2008, showing that he became eligible for benefits in December 2007 and that his regular monthly payment is $929.00. The letter further indicated that the Veteran began receiving benefits in May 2008, and that he received a retroactive award at that time. At a September 2011 RO hearing, the Veteran testified that he was unaware that he could not receive VA pension benefits and Social Security benefits at the same time. The Veteran reported receiving a retroactive Social Security payment in 2007 or 2008 in the amount of $10,000. The Veteran’s spouse provided an award letter showing her entitlement to Social Security benefits. The Veteran was advised of his responsibility to submit information regarding his income. The Veteran was asked to submit the award letter for his retroactive Social Security award, and also to submit all income for his spouse from the date he began receiving a VA pension benefit, to include tax documents showing her earned income. A summary of evidence in the September 2012 Statement of the Case (SOC) indicates that the Veteran submitted a financial status report in October 2011 showing monthly household income of $2,467.00. The Veteran reported no available assets. In January 2012, VA terminated the Veteran’s pension benefit effective September 1, 2004 as the Veteran failed to respond to the due process letter sent in June 2011. In February 2012, the Veteran submitted Social Security award letters for himself and his spouse, and a statement of his spouse’s annual earnings from 1972 through 2005. Later that month, VA took action to restore the Veteran’s pension effective September 1, 2004. The pension was restored at a reduced rate based on the Veteran’s divorce and the submitted income information. In a February 2012 decision, the Committee on Waivers and Compromises (COWC) of the RO denied the Veteran’s request for waiver, upon finding that the Veteran acted in bad faith in the creation of the debt. The Veteran filed a Notice of Disagreement (NOD) with the COWC decision in March 2012 and was afforded a hearing in July 2012. The Veteran testified that he was unaware of the requirement to report his income and that he did not intend to submit false information. After a review of all the evidence, the Board finds that the termination of the Veteran’s nonservice-connected pension benefits was proper. The RO retroactively terminated the Veteran’s nonservice-connected pension, effective September 1, 2004. The Board notes that the RO provided proper notice and due process prior to termination of the Veteran’s nonservice-connected pension benefits. There is no argument that such procedures were not followed. Despite being notified on multiple occasions of the requirement to submit documentation regarding Social Security benefits and other income and the Veteran’s admission that he was in possession of such documentation, the Veteran declined to provide the information to VA without a hearing. The Veteran then requested to reschedule the May 2010 hearing and continued to decline to provide VA with the information necessary to accurately calculate his VA pension rate. After the September 2011 hearing, the Veteran continued to delay the submission of information requested in the June 2011 due process letter. As such, the Board finds that termination of the Veteran’s pension benefits effective September 1, 2004, was proper. Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) nonservice-connected pension in the amount of $53,095.00 After consideration of the record and the applicable regulatory provisions, the Board finds that the Veteran acted in bad faith and committed misrepresentation in his dealings with VA. The Veteran did this with the intent to seek an unfair advantage, with knowledge of the likely consequences, and with resulting loss to the government. VA law precludes waiver of recovery of an overpayment or waiver if found to exist: (1) fraud, (2) misrepresentation, or, (3) bad faith. 38 U.S.C. § 5302 (c); 38 C.F.R. § 1.965 (b). 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. It is the Board’s opinion whether the VA has not met the burden of proof in establishing actual fraudulent intent. 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). “Bad faith” refers to “unfair or deceptive dealing by one who seeks to gain thereby at another’s expense.” 38 C.F.R. § 1.965 (b)(2). Conduct by a claimant undertaken with intent to seek an unfair advantage, with knowledge of the likely consequences, and with resulting loss to the government is required for a showing of bad faith. Id. 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. There shall be no recovery of overpayment of VA benefits if it is determined that recovery would be against equity and good conscience. See 38 U.S.C. § 5302 (a); 38 C.F.R. § 1.962. 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. The decision reached should not be unduly favorable or adverse to either side. The phrase “equity and good conscience” means arriving at a fair decision between the appellant and the Government. The Veteran’s request for a waiver of the overpayment was referred to the COWC. As noted previously, 38 U.S.C. § 5302 (c) and 38 C.F.R. § 1.965 (b) indicate that a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of an overpayment. Here, the COWC concluded in its February 2012 decision on appeal that the facts in this case show that the mandatory bars to waiver apply in the present case. The COWC found evidence of bad faith in the creation of the debt, and the Board agrees. The Veteran failed to disclose a material fact when he misrepresented the history of his marital relationship to A.M. in a July 2008 request to add his spouse as a dependent. The Veteran reported that he married A.M. in August 1985 and that he was currently married to her. Only when the Veteran was informed that his spouse earned income in 2006 and that this income would affect his entitlement to pension benefits did the Veteran disclose the September 2005 divorce and August 2007 remarriage to his spouse. The Veteran was also informed on multiple occasions of the requirement that he submit documentation of his income, to include any changes to his or his family’s income from any source, to VA to determine his eligibility for pension benefits. The Veteran’s refusal to provide this information amounts to a willful failure to disclose a material fact. Notably, in an August 2008 phone call, the Veteran informed VA that he began receiving Social Security benefits in 2008 but declined to provide verification of his Social Security benefits to correctly adjust his pension award prior to a requested hearing. Further, in a January 2010 phone call, the Veteran was informed that Social Security income is countable for the purpose of calculating entitlement to VA non service-connected benefits and that any evidence presented at his hearing would be added to his countable income and would create an overpayment. The Veteran continued to decline to submit the required information. Further, the Veteran submitted multiple statements to VA which misrepresented his family income. The evidentiary record shows that the Veteran and his spouse began receiving Social Security benefits in May 2008 and December 2008, respectively. The Veteran’s spouse was employed through either 2005 or 2007. The Veteran’s spouse has also stated that she receives retirement income. However, the Veteran submitted financial status reports in August 2008 and in February 2010 in which he reported no income for his spouse. Further, the Veteran submitted EVRs dated January 2010 and September 2010 in which he reported no income for himself or his spouse. The Veteran was informed of his responsibility to report all family income to VA at the September 2011 hearing. The Board finds the Veteran’s actions during and after the September 2011 hearing to be of particular interest. The Veteran had declined to submit income information to VA prior to the hearing, under an assertion that he would provide the requested income-related information at the hearing. However, after the hearing, the Veteran continued to delay providing full documentation of his family income, to include his spouse’s Social Security benefits and retirement income. The Board finds the Veteran’s assertion that he did not report his income to VA because he did not understand that he could not receive VA pension and Social Security benefits concurrently, and because he did not understand the requirement that he had to report all income to VA, to be unavailing. As discussed above, the Veteran was informed by phone and in writing of these requirements. There is no evidence that the Veteran is incompetent or unable to manage his financial affairs. The Veteran has pursued claims for VA disability compensation during the relevant time period, and has submitted evidence and communicated with VA regarding the status of those claims. The Veteran is required to report all income not excluded under the law to determine his eligibility for VA pension benefits. The Veteran is charged with constructive knowledge of all governmental laws and regulations, and there is no evidence supporting a finding that the Veteran was unable to understand the applicable law. After consideration of the record and the applicable regulatory provisions, the Board finds that the Veteran acted in bad faith and committed misrepresentation in his dealings with VA. The Veteran did this with the intent to seek an unfair advantage, with knowledge of the likely consequences, and with resulting loss to the government. This action constituted bad faith. In addition, when the Veteran purposely misrepresented his marital history, submitted EVRs and financial status reports which misstated his family income, and declined to submit his Social Security benefit award letter, the Veteran engaged in willful misrepresentation of a material fact and willful failure to disclose a material fact, with the intent of retaining VA benefits after he was entitled to receive them. That action constituted misrepresentation. As a result of bad faith and misrepresentation, the overpayment in the amount of $53,095.00 was created. By failing to accurately and fully report his family income, the Veteran concealed relevant information. The Veteran’s actions cannot be deemed to be non-willful or mere inadvertence. The Board finds that the Veteran purposely did not inform VA that he and his spouse were receiving Social Security benefits and that his spouse had earned and unearned income during the period that they were married and while the Veteran was in receipt of VA pension benefits. That is, the Veteran willfully declined to inform VA accurately of changes in his family income so that he could wrongfully continue to receive VA benefits to which he was not entitled or to continue receiving VA benefits in excess of which he was entitled to receive. As such, the Board finds that the Veteran did in fact mislead the VA. Likewise, the Board does not find that the Veteran lacked the requisite knowledge of the likely consequences of failing to report his income accurately. As indicated above, the Veteran was fully informed that an overpayment which would be subject to recovery could result from a failure to report his income to VA. In light of the foregoing, the Board finds that the evidence establishes that the Veteran acted in bad faith and committed misrepresentation in the dealings with VA. When the overpayment of VA benefits results from such bad faith and misrepresentation on the part of the Veteran, waiver of this debt is precluded by law, regardless of the Veteran’s current financial status or any of the other elements of the standard of equity and good conscience. 38 U.S.C.§ 5302 (c); 38 C.F.R. § 1.965 (b). Accordingly, the appeal must be denied. See Gilbert v. Derwinski, 1 Vet. App. 49 (1990); Ortiz v. Principi, 274 F. 3d 1361 (Fed. Cir. 2001). TANYA SMITH Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board T. Bynum, Associate 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.