Citation Nr: 21010714 Decision Date: 02/25/21 Archive Date: 02/25/21 DOCKET NO. 06-26 022 DATE: February 25, 2021 ORDER The overpayment in Department of Veterans Affairs (VA) compensation benefits, in the amount of $32,000.00, was not properly created at the time of the Veteran’s incarceration; the appeal is granted. Entitlement to a waiver of recovery of overpayment of VA compensation benefits in the amount of $32,000 is dismissed. FINDINGS OF FACT 1. The Veteran was incarcerated due to a felony on August 28, 2003; the 61st day of incarceration was October 28, 2003. 2. The Regional Office (RO) was promptly notified of the incarceration and of the Veteran’s address and information in that regard. 3. The RO delayed in retroactively reducing the Veteran’s compensation benefits which were being paid at the to the 10 percent rate, continued to pay those benefits to the Veteran’s spouse in an account over which the Veteran had no knowledge or control after his incarceration; this action resulted in an overpayment. 4. The Veteran neither had knowledge of nor should have been aware of the erroneous award of benefits and the error of the continued payment was not due to the Veteran’s actions or failure to act. CONCLUSIONS OF LAW 1. The overpayment of VA compensation benefits in the amount of $32,000 was not properly created and the debt is invalid. 38 U.S.C. §§ 5112, 5307, 5313 (b)(10); 38 C.F.R. §§ 3.500, 3.665(a). 2. The issue of entitlement to a waiver of recovery of the overpayment in the amount of $32,000 is dismissed. 38 U.S.C. § 5302; 38 C.F.R. §§ 1.962, 1.963, 1.965. REASONS AND BASES FOR FINDINGS AND CONCLUSIONS The Board notes that a new VA Form 21-22 was received in January 2021; however, as this request to change representatives was submitted more than 90 days following notification of certification and transfer of records and no evidence was presented to demonstrate good cause for the delay, the Board is denying the change for purposes of this appeal. 38 C.F.R. § 20.1305(b). 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. § 5313 (a); 38 C.F.R. § 3.665 (a). Prior to incarceration, the Veteran was awarded and in receipt of compensation benefits for service-connected disabilities rated at a combined 80 percent evaluation, with additional benefits based upon a total disability rating based on individual unemployability of the individual (TDIU). The RO received notification of the Veteran’s incarceration in correspondence from the Veteran’s spouse received on September 5, 2003. She reported that the Veteran was incarcerated on August 28, 2003 and requested an apportionment of his benefits. VA then proceeded to begin to process the apportionment claim. The 61st date of incarceration was October 28, 2003. In November 2003, the Veteran’s spouse provided further the detailed information regarding the Veteran’s incarceration and address. In April 2004, the RO received correspondence from the penal institution which provided an incarceration date of April 24, 2003 (four months prior to the date of incarceration reported by the Veteran’s spouse). In November 2004, the Veteran was notified that his compensation benefits would be reduced to $104 effective in June 2003, 61 days after the date provided by the penal institution. This proposed action was one year after the notice by the Veteran’s spouse of his incarceration. The proposed reduction in benefits was enacted as of November 3, 2004, and confirmed in correspondence to the Veteran on the same date. Prior to that time, the RO issued the full amount of VA compensation rather than the reduced amount (10 percent). This amount was directly deposited into the account which apparently the Veteran no longer had access to and was utilized by his spouse. Based upon the foregoing, an overpayment was created because the full compensation was paid instead of the 10 percent rate. Thereafter, the RO received further correspondence from the penal institution which showed that the Veteran initially reported to jail on April 24, 2003, but he was released to his home the next day to await available prison facilities. The Veteran eventually reported for the duration of his confinement in August 2003, as had been correctly reported by the Veteran’s spouse. Based upon this information, the RO changed the effective date for the reduction in compensation from June 23, 2003 to October 28, 2003, based upon the 61st day of actual confinement in a penal institution. This change in effective date reduced the duration of the overpayment, thereby reducing the amount of debt. So, from October 2003 to November 2004, the RO issued monetary benefits at a rate to which the Veteran was not entitled. In January 2010, the Board of Veterans’ Appeals issued a decision which determined that an appeal pertaining to validity of a debt in the amount of $856 (this debt was created because the Veteran was receiving additional compensation for a cost of living allowance at a rate for which he should not have received) was dismissed as it had been waived and that the overpayment of VA compensation benefits, in the approximate amount of $32,000, was properly created. The Board remanded the matter of entitlement to a waiver for the latter debt. The Veteran then appealed that portion of the Board’s January 2010 decision that found a valid debt resulted from the overpayment of VA compensation benefits during his incarceration to the United States Court of Appeals for Veterans Claims (Court). In an August 2011 Memorandum Decision, the Court set aside the Board’s decision that found the Veteran partially at fault for the creation of overpayment of VA compensation benefits and remanded the matter consistent with its decision. In July 2012, the Board remanded this case for further clarification with regard to the creation of the overpayment. The amount of disability compensation that a veteran can be paid while incarcerated is limited by statute and there is no dispute in this case that while the Veteran was incarcerated, VA continued to deposit the full disability compensation into an account held jointly by the Veteran and his spouse, even though the RO was aware that the Veteran was incarcerated. The RO eventually reduced the benefits about fourteen months after the Veteran’s payments should have been reduced. At that point, the RO began paying the Veteran the reduced rate, pursuant to 38 U.S.C. § 5313, and his spouse the remaining amount pursuant to 38 U.S.C. § 5307 (a)(1)(allowing for a spouse to receive benefits that a veteran would otherwise have been entitled to but for the incarceration via an apportionment). The RO also paid the Veteran’s spouse the amount that she was entitled to under 38 U.S.C. § 5307 (a)(1) for the past 14 months and created a debt against him for the amount that had been deposited into their joint account for the past fourteen months beyond the amount to which he was entitled under 38 U.S.C. § 5313. The Board noted that the continued deposits into the joint account for fourteen months were erroneous, and establish administrative error on the part of VA. The remaining question is whether the Veteran was partially at fault because he knew that his full disability compensation erroneously was being deposited into his joint record and misused those funds because the Veteran had asserted on appeal that the continued deposits into the joint account were due solely to administrative error on VA’s part, and that the effective day of the reduction in payments was limited to the date of the last payment, pursuant to 38 U.S.C. § 5112 (b)(10). The Board noted that the record did not reflect that the Veteran used any funds deposited into his joint account beyond the amount to which he was entitled by statute. However, it was not entirely clear as there were no bank records of the joint account of record. Rather, the available evidence in the record indicated that the Veteran’s spouse, not the Veteran, was using the benefits deposited into their joint account and she was entitled to a significant portion of those benefits. In an August 20, 2006 letter to the RO, the Veteran requested that his benefits be forwarded into his designated account at Trust Fund Centralized Banking in Pine Bluff, AR. He said that he requested this “on several occasions since August 2003 and....[VA] continue[s] to pay these monies into an account over which I have no control.” His September and October 2006 letters to the RO similarly requested payment into the Trust Fund Centralized Banking account. The determined that, prior to appellate consideration of the Veteran’s case, bank records of the joint account (“over which [the Veteran had] no control”) for the period from September 2003 (when the Veteran’s wife advised VA that he was incarcerated on August 28, 2003) to November 1, 2004 should be obtained, so the Board remanded for these records as well as a full accounting and accurate accounting to establish the amount of the Veteran’s indebtedness, to include the amount originally owed by him, and any amount that was paid or credited in remittance of hs debt. The Board also requested further financial clarification as to the debt. On remand, the RO was unable to obtain the bank account information because too much time had elapsed and the bank no longer retained that information. In addition, the financial clarification was insufficient so another remand was prepared with regard to audits which were not sufficiently completed per yet another Board remand in 2020. At that time, the Board noted that the following had previously been requested of the RO by the Board: 1. Prepare and associate with the claims file an itemized accounting of the Veteran’s debt to reflect the following: a) The amount of compensation paid to the Veteran during his incarceration from October 29, 2003 to April 22, 2008 (all payments with Veteran listed as payee, as opposed to any other beneficiaries listed as payee); b) The amount to which the Veteran was entitled during the period of his incarceration from October 2003 to April 2008; c) The difference between the amount entitled versus the amount paid, i.e. the original amount of overpayment; d) The amount of any funds withheld, paid, or otherwise credited towards the Veteran’s overpayment since the creation thereof, including the nature or source of any such credited amount if able to be determined; and e) The amount of the currently outstanding debt. Although in February 2014, an audit had been performed, it was determined to be incomplete. The period of the overpayment was noted to be from June 1, 2003 to November 30. 2004 which totaled $42,291.48. The total paid was noted to be $10,291.48 and the balance was noted to be $32,000.00. The period of the overpayment was incorrect in this audit as to the requested period was October 2003 to April 2008. In March 2015, another audit was performed. This time the overpayment period was from June 2003 to February 2013. Again, this was an incorrect time period. The audit was again reviewed a year later, but using that same incorrect period. The next month is was noted that the beginning balance was $42,291.48. In February 2018, another audit was performed from June 2003 to May 2008. This again is not the correct time period. It was noted that the Veteran owed an overpayment of $42,291.48; that $10,291.48 was paid; and that $32,000.00 was the balance. It then noted that $219.00 in funds were applied so, the balance was $31,781.00. It then noted that there was a waiver debt of $856.00 so, $32,637.00 was the debt owed. Again, this was not the correct time period. The Board indicated that the Veteran’s attorney had further alleged errors in the audit so another audit was performed in August 2018. That audit indicated that the period involved was October 2003 to April 2008. The amount paid to the Veteran (including a July 2008 refund) was $38,169.60. The amount due was $5,956.73. Thus, the total overpayment was $32,212.87. However, the debt balance was listed as $32,000.00. The audit then detailed how that balance of $32,000.00 had been recovered in full as of March 2013. Beneath that audit, was listed another audit dated from June 2003 to February 2013. For that period, it was noted that the amount paid to the Veteran was $190,491.20. The amount due to the Veteran was $179,343.72. It was noted that the overpayment was $11,147.48. Then, it was noted that there was a debt adjustment of $10,291.48. It was noted that there was a partial waiver grant of $856.00. Thereafter, correspondence was received from the Veteran’s attorney in which inconsistencies were noted. First, it was noted that previously, the debt was indicated to be $32,212.87, but the prior amount was listed as $42,291.48. The difference reflects the overpayment period. Second the $10,291.48 amount was questioned and indicated it should have been used to lessen the original debt amount. The attorney noted disparities in the amounts indicated in the various audits and that there was sole VA error in this case with regard to the whole creation. The case was then referred to the finance division of the RO for a new audit, but it was not performed. A subsequent supplemental statement of the case referred to the validity of $32,000.00 debt and did not address a waiver of the debt. So, further audit action was requested. Thereafter, the RO clarified the creation. The RO noted that in June 2006, a partial waiver in the amount of $10,291.48 was granted. However, the RO was unable to determine how the partial grant of waiver in the amount of $10,291.48 was decided by the Debt Management Center. However, based on this waiver, it reduced the total amount of the debt to $32,000.00. An audit dated August 14, 2018 showed the full amount of $32,000.00 was repaid in full and cleared in March 2013. The RO indicated that the debt created was a valid debt in that the money was deposited into the Veteran’s joint bank account and was used to pay house payments, etc., and although the Veteran did not have access to these funds from jail, he benefitted from the money in not having delinquent payments on his house at the time. The Veteran’s spouse stated that she used the funds because she thought it was the apportionment amount but this was without any notification that an apportionment had been awarded therefore, she had no basis to assume this was valid monies to be used. The Veteran’s attorney has cited to the appeal of the Board’s 2010 decision to the Court noting, before the Court, the Veteran had argued that “the continued deposits into the joint account were due solely to administrative error on the Secretary’s part, and that the effective date of the reduction in payments is limited to the date of the last payment, pursuant to 38 U.S.C. § 5112(b)(1 0) (the effective date of reduction by reason of an erroneous award based solely on administrative error or error in judgment shall be the date of last payment’).” In response to the appeal, the Court held that “[t]he record on appeal and the law support (the Veteran’s) argument.” The Court explained “[i]n the striking absence of any finding by the Board or any evidence in the record on appeal that (the Veteran) improperly used the funds deposited into his account, (the Veteran’s) knowledge alone of funds available in a joint account does not constitute fault on his part. It was, after all, the Secretary who deposited the funds into the joint account even with knowledge that (the Veteran) was incarcerated.” The Court further explained that the Veteran’s spouse, not the Veteran himself, was using the benefits deposited into their joint account, and she was entitled to a significant portion of those benefits pursuant to 38 U.S.C. § 5307(a)(1). The Veteran’s attorney argues that there is no evidence which demonstrates that the Veteran accessed any money held in that joint account for the period in question, much less an amount beyond what he was entitled to by statute. Thus, he argues that VA must find that it was VA error, not the Veteran’s error, that there was an erroneous deposit of funds into the joint account, which resulted in the overpayment. The attorney indicated that they had attempted to obtain copies of the bank records for the joint account from October 2003 to November 2004. Unfortunately, the financial institution does not keep banking records for more than 7 years, and the records for the period in question (from October 2003 to November 2004) are not available. Nonetheless, they argue that the Veteran did not have control over the funds deposited into the joint account. The Board finds that this case involved sole VA error. See Erickson v. West, 13 Vet. App. 495, 499 (2000). Sole administrative error may be found to occur only in cases where the Appellant neither had knowledge of, nor should have been aware of, the erroneous award. Further, such error contemplates that neither the Appellant’s actions nor his failure to act contributed to the erroneous award. 38 U.S.C. § 5112 (b)(10); 38 C.F.R. § 3.500 (b)(2). In this case, the RO was promptly notified of the Veteran’s incarceration and in advance of the 61st day of the incarceration date. A claim for an apportionment was immediately made. The RO did not promptly act to reduce the Veteran’s benefits and the initial reduction utilized the wrong date about fourteen months later. The Board finds that the Veteran neither had knowledge of nor should have been aware of the erroneous award of benefits to his spouse. He had no control over the joint account and no attempt was made to direct the funds to the Veteran’s new address which had been furnished. Even assuming the Veteran was aware that the higher rate was being paid, there was a claim for apportionment being processed (which was eventually granted so a valid claim) and it is reasonable to find that both the Veteran and his spouse would believe that the funds being paid to the joint account were in accordance with an award even though they had not yet either received notice, particularly given the lag time in VA correspondence. As to the argument that although the Veteran did not have access to these funds from jail, he benefitted from the money in not having delinquent payments on his house at the time, that is assuming that the spouse was always using the funds to benefit the Veteran. The Board does not find that the Veteran should be held responsible for funds that he does not know of or have access to merely based on an assumption that they are being used by another party to benefit the Veteran. (Continued on the next page)   The Board finds that the error in this case was solely due to the RO’s failure to promptly act to reduce benefits and to continue to deposit them into a bank account to which the Veteran had no access. The Veteran did not know of nor should have been aware of nor did he contribute to cause this debt. Accordingly, the Board finds that under the circumstances of this case, there was no valid debt and the appeal as to that matter must be granted. Without a valid debt, the claim for a waiver of the recovery of the debt is moot and is dismissed. C. TRUEBA Veterans Law Judge Board of Veterans’ Appeals J. Connolly, Attorney for the Board Department of Veterans Affairs 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.