Citation Nr: 21009232 Decision Date: 02/22/21 Archive Date: 02/22/21 DOCKET NO. 15-24 552 DATE: February 22, 2021 REMANDED 1. The challenge to the propriety of the creation of an overpayment, ensuing from an incarceration-based retroactive reduction of the amount of the Department of Veterans Affairs (VA) disability compensation benefits, is remanded. 2. The challenge to the amount of the overpayment, ensuing from an incarceration-based retroactive reduction of the amount of VA disability compensation benefits, is remanded. 3. The claim for a waiver of the debt ensuing from an overpayment, which arose from an incarceration-based retroactive reduction of the amount of VA disability compensation benefits, is remanded. REASONS FOR REMAND The Veteran had active duty from June 1968 to June 1971. These matters come before the Board of Veterans’ Appeals (Board) on his appeal from the May 2014 demand letter issued by Debt Management Center (DMC), which notified the Veteran that an overpayment in the amount of $74,942.50 was charged to him, and the debt ensuing from the overpayment would be recouped by incremental withholdings from his VA disability compensation benefits, as well as the Veteran’s appeal from the August 2014 decision issued by the Committee on Waivers and Compromises (COWC), which denied him a waiver of said debt upon asserting that the overpayment period underlying the debt was from January 1, 2012, to April 30, 2014. In September 2018, the Board remanded these matters to the Regional Office (RO) upon observing that the Veteran’s June 2014 lay statement, being an informal notice of disagreement (NOD), challenged the propriety of the creation of his overpayment on the grounds that VA was timely notified of his incarceration, and the overpayment was a result of a sole administrative error on the part of VA. In addition, the September 2018 Board decision found that the Veteran was also challenging the amount of his overpayment. In light of the Veteran’s August 2014 challenge to COWC’s denial of his waiver claim, which operated as an additional NOD, the Board pointed out that, under Schaper v. Derwinski, 1 Vet. App. 430, 437 (1991), the Veteran’s challenges to the propriety of the creation of his overpayment and to the amount of his overpayment debt had to be resolved prior to adjudicating his waiver claim. Therefore, the Board remanded these matters for further development, to include an audit of the amount of the Veteran’s overpayment and resolution of his challenge to the propriety of the creation of his overpayment, to include his assertion of a sole administrative error. In July 2020, the RO associated a Report of Incarceration generated by the Texas Department of Criminal Justice (TDCJ) with the claims file. The July 2020 Report of Incarceration showed that the Veteran had two incarcerations prior to 2011; those incarcerations are unrelated to the matters at bar. The July 2020 Report of Incarceration also stated that, sometimes between March 2014 and August 2015, the Veteran was released on parole from his confinement at a correctional facility, the operations of which were within the jurisdiction of an unidentified political subdivision, i.e., a facility that might have been outside TDCJ’s jurisdiction. The July 2020 Report of Incarceration further indicated that this incarceration was a confinement distinct and different from the pre-2011 incarceration. However, the July 2020 Report of Incarceration shed no light on the beginning date of this post-2011 incarceration. In September 2020, the RO associated one more Report of Incarceration with the claims file. The September 2020 Report of Incarceration indicated that the Veteran was incarcerated in March 2012 and, in May 2012, transported to Arkansas Department of Correction (ADOC) to serve “a” term of imprisonment. Given that the reduction in the amount of the Veteran’s disability compensation benefits should have been triggered on the 61st day of his confinement, the Veteran’s transfer from one correctional facility to another is of no relevance to the inquiry at hand since none of these facilities were a community correctional center or a similar facility allowing the Veteran to leave its grounds during the day. Thus, under the September 2020 Report of Incarceration, the reduction in the amount of the Veteran’s benefits should have taken place in May 2012, i.e., on the 61st day after his March 2012 incarceration. It follows that, read jointly, the September 2020 Report of Incarceration and the July 2020 Report of Incarceration suggested that the portion of the Veteran’s period of incarceration, during which the amount of his VA benefits was subject to reduction for the purposes of the overpayment analysis conducted here, began in May 2012, on the 61at day after his March 2012 incarceration, and ended on the date of his release on parole, which occurred sometimes between March 2014 and August 2015. However, later in September 2020, the RO associated another Report of Incarceration with the claims file. This second September 2020 Report of Incarceration cannot be reconciled with either the September 2020 Report of Incarceration or the July 2020 Report of Incarceration. This is so because the second September 2020 Report of Incarceration showed that the Veteran was incarcerated in May 2012 (rather than in March 2012) and then released on parole in August 2012, rather than sometimes between March 2014 and August 2015. In other words, under the second September 2020 Report of Incarceration, the period during which the amount of the Veteran’s disability compensation benefits should have been reduced based on his incarceration had to run from the 61st day after his May 2012 confinement (thus, from a date in July 2012) to his parole in August 2012, i.e., for about five weeks. Also in September 2020, the RO generated a document purporting to operate as an audit of the Veteran’s overpayment amount. The purported audit covered the period from January 2012 throughout April 2014 and indicated that, during this period, the Veteran’s disability compensation benefits would have amounted to $78,542.20, had they been paid in full. No other analysis was conducted. Therefore, the purported audit neither clarified how the $78,542.20 amount of the Veteran’s full benefits during the period from January 2012 throughout April 2014 was relevant for the purposes of determining the Veteran’s overpayment, which should have been calculated as the difference between, on the one hand, the amount of his benefits that were actually paid during the period of the overpayment and, on the other hand, the amount corresponding to a 10 percent disability rate during the very same overpayment period. Critically, the period of the overpayment is the period that started on the 61st day of the Veteran’s incarceration and ended on the date of his release, to include release on parole. Here, because the Veteran’s 61st day of confinement occurred either in May 2012 or in July 2012, but assuredly not in January 2012, and the Veteran’s incarceration ended either in August 2012 or sometimes between March 2014 and August 2015, but assuredly not in April 2014, the purported audit – which utilized the period from January 2012 throughout April 2014, is inapposite to the inquiry at hand, even if the Board were to factor out that the purported audit provided solely a calculation of the Veteran’s full benefits rather than a calculation of the difference between the funds that had actually been disbursed and the 10-percent-rate amount that should have been disbursed. Correspondingly, the purported audit failed to comply with the Board’s September 2018 remand directive within the meaning of Stegall v. West, 11 Vet. App. 268 (1998). Later in September 2020, the RO issued a Notification Letter stating that the RO “corrected” the beginning date of the overpayment period, during which the Veteran was only entitled to receipt of the amount equal to a 10 percent rating. The Notification Letter stated that the “correction” was performed by moving the beginning date of the overpayment period to May 14, 2012 (hence suggesting that the Veteran was deemed incarcerated 61 days prior, in March 2012), and by the RO’s assumption that the Veteran was released on parole in August 2014, without clarifying how the release date was determined. Moreover, the RO did not state how these changes affected the calculation of the amount of the Veteran’s overpayment, hence suggesting that the amount of his debt did not change, even though the period underlying the Veteran’s overpayment changed, which is a mathematical non sequitur. Moreover, adding to the confusion, the September 2020 Notification Letter stated that, upon his August 24, 2014, release from ADOC confinement, the Veteran was “then” reincarcerated at a TDCJ facility, and that reincarceration took place on August 27, 2012. Based on that asserted “reincarceration,” the RO calculated the beginning date of the second overpayment period, during which the amount of the Veteran’s disability compensation benefits had to be reduced, as October 24, 2012, apparently on the grounds that the RO deemed October 24, 2012, to be the 61st day after the Veteran’s August 27, 2012, “reincarceration.” The RO’s September 2020 Notification Letter did not state when the Veteran was released from “reincarceration-based” confinement at the TDCJ facility. However, the 61st day from August 27th is October 26th, not October 24th. Further, and critical here, being incarcerated at the ADOC facility in either March 2012 or May 2012, and then released on parole from his confinement at that facility in August 2014, the Veteran could not possibly have been “reincarcerated” at the TDCJ facility on August 27, 2012. This is so because August 27, 2012, took place after May 2012 (and even after July 2012), but before August 2014. In other words, while, legally, the Veteran could have been serving two sentences concurrently while being physically incarcerated in a single correctional facility, be that facility within the ADOC or TDCJ jurisdiction, the Veteran could not have served two different sentences being physically incarcerated at two different correctional facilities at the same time. Simply put, the Veteran could not have been physically reincarcerated at a TDCJ facility at the time when he was still incarcerated at a ADOC facility. A fortiori, he could not have had his overpayment created twice during the same period of time on the grounds that the RO, somehow, deemed him simultaneously confined at two different facilities at the same time. In October 2020, COWC affirmed its prior decision to deny the Veteran a waiver of his overpayment debt. Notably, COWC’s October 2020 finding was made without any discussion, to include without identifying the amount of the debt or the period of the overpayment underlying the debt, which is hardly surprising, given that the RO neither made any clarifications as to how it determined the “correct” period of overpayment nor disclosed the amount of the Veteran’s recalculated debt. Correspondingly, the October 2020 COWC decision is of no adjudicatory value. Later in October 2020, the RO issued a Supplemental Statement of the Case (SSOC) reading, “VA Award Action, September 17, 2020, corrected effective date of 61st day of incarceration to May 14, 2012. Action paid $17,261.07. $9,137.46 paid to Veteran 09/22/20 the rest of the monies paid off the debt. Veteran currently owes $0.00.” However, the correction of the beginning date of the period affecting the amount of the Veteran’s VA benefits based on his incarceration at the ADOC did not resolve any concern as to how the amount of his debt was calculated, even if the Board were to assume that the correction reflected the appropriate date. Moreover, in violation of Stegall, 11 Vet. App. 268, the Veteran’s assertion that the overpayment arose from a sole administrative error on the part of VA, i.e., the assertion that was expressly remanded for the RO’s adjudication, has not been addressed. Finally, the fact that the Veteran was awarded certain back-pay amounts, and DMC applied these amounts as recoupment of the overpayment debt, neither mooted nor otherwise affected the Veteran’s challenges to the creation and amount of his overpayment, or his claim for a waiver of his overpayment debt. This is so because, if the Veteran’s overpayment is invalidated, or if its amount is reduced, or if the Veteran’s waiver claim is granted, the funds unduly recouped from the Veteran would be remitted to him. Therefore, the issues of whether or how the Veteran’s debt has been recouped are no relevance to the analysis at hand. In light of the foregoing, while the Board regrets additional delay, a remand is required before the Board can adjudicate the Veteran’s challenges. The matters are REMANDED for the following action: 1. Compile a record necessary to determine the portion of the period of the Veteran’s incarceration underlying the overpayment referred to in DMC’s May 2014 demand letter. At a minimum, the record should include the evidence establishing the date of the Veteran’s incarceration following his conviction for a felony offence and the date of his release, to include release on parole. The RO is reminded that the Veteran could not have been physically confined at two different facilities at the same time, and – in the event he was serving concurrent sentences – the period of that incarceration does not provide a valid basis for creating the Veteran’s overpayment twice. 2. Upon completing the foregoing and all other developments deemed necessary, adjudicate the Veteran’s challenge to the propriety of the creation of the overpayment, to include his assertion of the sole administrative error on the part of VA, which is based on the Veteran’s assertion that VA was timely notified of his incarceration upon commencement of his confinement. 3. Upon completing the foregoing and all other developments deemed necessary, in the event it is determined that the Veteran’s overpayment was properly created and did not arise from a sole administrative error on the part of VA, conduct a paid and due audit of the Veteran’s account to determine the amount of his overpayment. At a minimum, the audit should state the period of the overpayment utilized for calculation of the overpayment, and calculate both the amount of funds actually disbursed to the Veteran during this period and the amount that should have been disbursed to the Veteran during the same period (an amount that should be equal to the amount corresponding to a 10 percent rating), as well as the difference between the amount of the funds disbursed and the amount that should have been disbursed during the overpayment period. 4. Upon completing the foregoing and all other developments deemed necessary, request the Veteran to submit a Financial Status Report (FSR) and afford him a reasonable opportunity to comply. 5. Upon completing the foregoing and all other developments deemed necessary, forward the record compiled under Step 1, the audit generated under Step 3, and the Veteran’s FSR procured under Step 4, to COWC for adjudication of the Veteran’s waiver claim. 6. Upon completing the foregoing and all other developments deemed necessary, issue the Veteran an Appeal Notification letter detailing the period of the overpayment and the evidence underlying that determination, as well as the amount of the overpayment and the evidence underlying that determination. 7. If any benefit sought on appeal remains denied, an SSOC should be furnished to the Veteran, and he should be afforded a reasonable opportunity to respond. 8. The Veteran has the right to submit additional evidence and argument on the matters the Board has remanded. Kutscherousky v. West, 12 Vet. App. 369 (1999). Cynthia M. Bruce Veterans Law Judge Board of Veterans’ Appeals Attorney for the Board Anna Kapellan, 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.