Citation Nr: 22013404 Decision Date: 03/09/22 Archive Date: 03/09/22 DOCKET NO. 16-33 191 DATE: March 9, 2022 ORDER Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) compensation benefits in the amount of $86,005.27, to include the validity of the debt, is denied. FINDINGS OF FACT 1. Based on the Veteran's reports regarding the severity of his disabilities, he was awarded special monthly compensation (SMC), specially adapted housing and automobile and adaptive equipment, and 100 percent disability rating for entitlement to bilateral lower extremity neuropathy. 2. The Veteran's statements regarding the severity of his disabilities were false. 3. The Veteran's repeated knowingly false representations regarding the severity of his disabilities resulted in an overpayment in the amount of $86,005.27. 4. The Veteran committed fraud in the creation of the debt. CONCLUSIONS OF LAW 1. The overpayment of VA compensation benefits in the amount of $86,005.27 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 $86,005.27 of the Veteran's VA benefits is precluded by a finding of fraud 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 FINDING AND CONCLUSION The Veteran served on active duty from November 1966 to August 1969. In January 2020, the Board remanded the claim for further development. Waiver of overpayment A Veteran has the right to dispute the existence and amount of the debt. 38 C.F.R. § 1.911(c). In determining whether a waiver of overpayment is appropriate, the inquiry is focused on three distinct questions. First, VA must determine if the overpayment at issue was validly created. See Schaper v. Derwinski, 1 Vet. App. 430, 434-35 (1991) (noting that before adjudicating a waiver application, the lawfulness of the overpayment must first be decided). The term "overpayment" refers only to those benefit payments made to a designated living payee or beneficiary in excess of the amount due or to which such payee or beneficiary is entitled. See 38 U.S.C. § 5302; 38 C.F.R. § 1.962. Second, if the debt is valid, VA must determine if fraud, misrepresentation, or bad faith played a role in its creation. If it did, waiver of the overpayment is automatically precluded, and further analysis is not warranted. See 38 U.S.C. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(b); see also Ridings v. Brown, 6 Vet. App. 544 (1994) (holding that the Board must independently address the matter of bad faith before addressing whether waiver would be appropriate). A finding of fraud in overpayment cases requires that the misrepresentation involved must be more than non-willful or mere inadvertence. 38 C.F.R. § 1.962(b). Fraud is specifically defined as an act committed when a person knowingly makes or causes to be made or conspires, combines, aids, or assists in, agrees to, arranges for, or in any way procures the making or presentation of a false or fraudulent affidavit, declaration, certificate, statement, voucher, or paper, concerning any claim for benefits under any of the laws administered by the VA, except laws relating to insurance benefits. 38 C.F.R. § 3.901(a). Bad faith generally describes an 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; see also Richards v. Brown, 9 Vet. App. 255 (1996). Analysis The Veteran seeks a waiver of indebtedness for an overpayment in the amount of $86,005.27. By way of background, in June 2003, the Veteran was awarded service connection for right and left lower extremity neuropathy. He was assigned 10 percent ratings for each extremity, effective January 22, 2001. In a February 2008 Statement in Support of Claim, the Veteran noted that he requested SMC due to aid and assistance (A&A). He stated that due to his service-connected eye disability, he was severely visually impaired, and the disability had restricted him significantly, i.e., he could no longer drive or see well enough to read, cook, watch TV, or wash clothes. Additionally, due to his service-connected bilateral lower extremity neuropathy, walking was extremely difficult, and this further restricted him. In April 2008, the Veteran stated that he was legally blind, and his legs were to the point where he was now using a VA-issued walker. He reported having trouble getting out and about and was essentially confined to his home. He reiterated that he could no longer drive a vehicle, and his poor eyesight restricted him from doing most if not all of the normal things he used to do. In June 2008, the Veteran was afforded an A&A VA examination. The Veteran denied driving and reported being driven to the examination by his brother-in-law. He stated that he required assistance when putting on his shoes and socks, cooking, and all of his instrumental activities of daily living outside of the home, as well as managing his medications due to his poor eyesight. The Veteran arrived at the examination in a wheelchair. He stated that he could not walk due to his diabetic neuropathy and his lower extremity as well as lower back conditions. He was given a walker; but, he was unable to use a walker at home. He carried a cane with him to get in and out of the wheelchair; however, he denies being able to ambulate greater than several feet before he needed to sit down in a chair or use a wheelchair. In July 2008, the Veteran was awarded 100 percent rating for his bilateral lower extremity neuropathy. He was also awarded SMC based on loss of use of lower extremities, $11,000.00 to go towards the purchase of an automobile or other conveyance, and specially adapted housing. In September 2008, the Veteran stated that he had lost the use of both lower extremities, and he was a danger to himself and in need of regular A&A. In September 2011, the Veteran was seen for a consultation for a left proximal tibia periprosthetic fracture. The Veteran stated that while working on the roof, he fell off a ladder. He attempted to brace his fall by holding on to the gutter; however, he fell. In January 2013, VA noted that the Veteran was afforded a VA examination in November 2012. During the examination, the Veteran stated that in September 2011, he was helping his son roof a house. The Veteran was on a ladder, the ladder gave way, and he fell. The VA examiner opined that the objective finding regarding peripheral neuropathy were not consistent with the Veteran's objective report. Additionally, on January 7, 2013, the Office of Inspector General (OIG), Criminal Investigations Division, prepared a comprehensive report of investigation and noted that it received information that the Veteran had exaggerated his disabilities to VA in order to receive greater compensation benefits. Based on this information, in February 2013, VA proposed to discontinue entitlement to a 100 percent evaluation based on loss of use of the lower extremities, entitlement to SMC based on loss of use of the lower extremities, entitlement to specially adapted housing and automobile and adaptive equipment. In June 2013, VA discontinued the above referenced benefits effective August 3, 2008. The discontinuance resulted in a $86,005.27 debt. In February 2013, the Veteran submitted a statement. He stated that he had concerns and issues regarding the proposal to reduce both legs to 40 percent, take away the loss of use determination, and recoup monthly benefit. The Veteran stated that he did not initiate a request for a finding of "loss of use." VA initiated loss of use itself. He did not misrepresent the extent of his abilities in order to get a higher rating. The Veteran stated that he is not medically qualified to determine his status, and VA made all decisions. Additionally, when asked what he could and could not do, he answered truthfully. He also stated that he did in fact take a variety of pain suppressors, and that he had "good" days and "bad" days, and that was the nature of his disabilities. He stated that he made no effort to commit fraud or misrepresent himself to VA. He noted that it was true that he was able to, at times, "assist" at the local tire shop, but that was a very minor thing. He reported going for coffee in the mornings, and it was social in nature. Any "work" he did was minimal, and generally more a matter of him being in the way. He was not an active tire changer by any stretch of the imagination. Likewise, he fell off the second rung of a ladder in an attempt to see what had been done while his son was roofing his house; he was not doing any of the work himself, and the opinions and comments to the contrary were simply not true. He reiterated that he did not initiate the determination by VAMC and VARO regarding his bilateral neuropathy condition and loss of use determination. It was done as part of his VA care, and when asked for abilities, he responded truthfully. When tested for feeling, the test results were accurate. When asked about his ability to walk or stand, he told the truth. He stated on days when he felt better or attempted "normal" activities, it seemed obvious that he should not have made the attempts, certainly with the knowledge that he had "an angry neighbor out for blood, willing to snap photographs and hire a private investigator." In his August 2013 VA 646 Statement of Accredited Representative in Appeal, the Veteran stated while termination of his benefits might be appropriate under 38 CFR 3.105(a) or (e), there is no evidence of fraud to warrant retroactive termination. The Veteran argued that his bilateral lower extremity impairment waxed and waned in severity. The level of impairment depended on the amount of pain he was experiencing and to the degree to which he was relying on painkillers. The Veteran's representative noted that during his hearing, the Veteran's Polk County Veterans Service Officer (CVSO) testified that he had frequently seen the Veteran so impaired that he was able to ambulate only with the use of a wheelchair. The representative stated that loss of use does not necessarily imply an inability to ambulate without recourse to a wheelchair, and under the applicable VA regulation, impairment equal to that of a person who suffered amputation corrected by suitable prosthesis is sufficient to show loss of use. Additionally, "it is commonly known that bilateral lower extremity prostheses enable a person, not just to walk, but also to run competitively." In addition, the Veteran, after the grant of SMC but prior to the initiation of the fraud inquiry, demonstrated and reported lesser impairment on various VA outpatient visits and exams. The representative stated that this certainly calls into question any intent to commit a fraud. Additionally, VA pointed out that the Veteran's lower extremity impairment may be due more to a non-service-connected back condition than to his service-connected diabetes. The representative stated that even if this was the case, a veteran is scarcely responsible for identifying the disability causing his impairment. More importantly, no medical evidence has been obtained to demonstrate that the Veteran's allegations of waxing and waning impairment (which is very possibly more likely in lumbosacral disc disease than in diabetic neuropathy) were medically unsupportable. In November 2015, the Veteran submitted a timely waiver request. However, in a January 2016 decision, the Committee on Waivers and Compromises (COWC) denied the Veteran's waiver request based on the finding of fraud in the creation of the debt. In an August 2018 Plea Agreement and Sentencing Stipulations, the Veteran pled guilty to fraudulent acceptance of payments. The United States District Court, District of Minnesota (Court) noted that in 2008, the Veteran submitted a statement in support of his claim that, in addition to his other disabilities, he could no longer see well enough to do certain tasks, including driving. He also claimed he could no longer walk and required a wheelchair. As a result of his statements, he was awarded a one-time lump sum payment for an automobile and adaptive equipment entitlement, in the amount of $46,350.00, and a one-time payment for a specially adapted housing entitlement, in the amount of $63,780.00. The Veteran also received additional benefits on a monthly basis of roughly $1,000.00 per month, totaling $39,655.27 for the relevant time period. However, the Court found his statements, i.e., that he was unable to see or walk such that he could not perform certain daily functions, were false. The Court noted that, at all relevant times, the Veteran was able to walk and perform various tasks without the assistance of a wheel chair or cane, including standing, squatting, working in his yard, walking, changing a tire, and performing home improvement projects on his home and his neighbors' homes. He could also see well enough to drive. As a result, he received $149,785.27 in benefits to which he was not entitled. In July 2021, VA obtained the Office of Inspector General Criminal Investigations Division, Comprehensive Report of Investigation Compensation Benefits Fraud. The OIG documents included, among other things, the Veteran's Circuit Court records. The records documented a 2007 fight between the Veteran and his neighbor. The Veteran stated that he was watering his trees on his property, when a person who he recognized as a cabin owner knocked him to the ground. The Veteran was able to get to his feet and grab his .22 rifle. Eventually, the authorities were called. Additionally, the Circuit Court records note February and May 2008 traffic offenses, i.e., citations for not wearing a seatbelt and another for speeding. The documents also included a July 2010 surveillance video that showed the Veteran working in his yard, walking, standing, and crouching for approximately 30 minutes straight without sitting down. It also contained the Veteran's neighbor's testimonies that document the Veteran's activities such as performing yard work, landscaping, shoreline weeding, shoveling dirt and manure from his truck into his gardens and flowerbeds, and various other maintenance jobs in and around the Veteran's house. The documents relevant to the criminal proceeding, which confirmed the above-mentioned facts, charges, and guilty plea, were also included within the OIG documents. Based on the evidence of record, the Board finds that the creation of the debt is valid. The Board notes that a determination of whether the veteran committed an act of fraud in this case is a legal question. The question at issue is whether the veteran knowingly made (or caused to be made or conspired, combined, aided, or assisted in, agreed to, arranged for, or in any way procured the making of) a false or fraudulent representation (affidavit, declaration, certificate, statement, voucher, or paper) concerning the severity of his disabilities. See 38 U.S.C. § 6103(a); 38 C.F.R. § 3.901. After a review of the evidence of record, the Board finds that the Veteran knowingly made and presented false statements to VA concerning the severity of his service-connected disabilities. The Board notes that prior to his 100 percent rating and his awards of SMC, the Veteran requested both a higher rating for his service-connected disabilities and also SMC. The Veteran stated that he was severely visually impaired, and the disability had restricted him significantly, i.e., he could no longer drive or see well enough to read, cook, watch TV, or wash clothes. Additionally, due to his service-connected bilateral lower extremity neuropathy, walking was extremely difficult, and this further restricted him as he was unable to ambulate greater than several feet before he needed to sit down in a chair or use a wheelchair. Based on the Veteran's assertion, he was awarded a 100 percent rating for his bilateral lower extremity disability and SMC. However, the evidence demonstrates that the Veteran was able to, among other things, perform strenuous activities such as shoveling, perform yard work, and he was able to drive. Additionally, based on the facts noted above, the Veteran pled guilty in the United States District Court, District of Minnesota to fraudulent acceptance of payments. Accordingly, the Board finds the creation of the overpayment was valid. Waiver There shall be no recovery of payments or overpayments of any benefits under any laws administered by the Secretary of VA when it is determined that recovery would be against equity and good conscience. 38 U.S.C.A. § 5302(a). However, before the principles of equity and good conscience may afford waiver to an obligor, it must be established that the obligor was not guilty of fraud, misrepresentation, or bad faith in the creation of the overpayment. See 38 U.S.C. § 5302(c); 38 C.F.R. § 1.963(a). As the analysis above demonstrates, the Veteran knowingly made and presented false statements to VA concerning his claims for entitlement to increase ratings for his bilateral lower extremity neuropathy and entitlement to SMC. Based on his false statements, VA awarded him 100 percent rating for his bilateral lower extremity neuropathy, SMC, and, specially adapted housing and automobile and adaptive equipment. As such, the Board finds that the Veteran committed fraud in obtaining these benefits. Therefore, waiver of recovery of the overpayment is precluded due to fraud. 38 U.S.C. §§ 5302(c), 6103; 38 C.F.R. §§ 1.962, 1.963, 1.965. The Board's finding of fraud precludes the granting of waiver of recovery of the overpayment, notwithstanding the provisions of 38 C.F.R. § 1.965(a) regarding the standard of equity and good conscience. See Farless v. Derwinski, 2 Vet. App. 555, 556-557 (1992). The appeal is denied. MICHAEL LANE Veterans Law Judge Board of Veterans' Appeals Attorney for the Board Moore, T. 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.