Citation Nr: 0003674 Decision Date: 02/11/00 Archive Date: 02/15/00 DOCKET NO. 94-11 194 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Muskogee, Oklahoma THE ISSUE Entitlement to waiver of recovery of an overpayment of Improved Disability Pension benefits in the calculated amount of $5,662.20. REPRESENTATION Appellant represented by: Richard E. Butner, Attorney ATTORNEY FOR THE BOARD John R. Pagano, Counsel INTRODUCTION The veteran had active military service from December 1942 to November 1945. This matter arises from various decisions rendered since May 1993 by the Department of Veterans Affairs (VA) Committee on Waivers and Compromises (COWC) at the Muskogee, Oklahoma, Regional Office (RO). In the aggregate, these waived recovery of all but $5,662.20 of the original overpayment of $38,547.75, holding that recovery of the former would not be against the principles of equity and good conscience. Following compliance with the procedural requirements set forth in 38 U.S.C.A. § 7105, the case was forwarded to the Board of Veterans' Appeals (Board) for appellate consideration. Following preliminary review, the Board remanded the case to the RO in March 1997 for additional action. That was accomplished to the extent possible, and the case was returned to the Board for further appellate consideration. FINDINGS OF FACT 1. The appellant first was awarded Improved Disability Pension benefits effective September 4, 1980. 2. On July 31, 1981, the veteran was married to his current spouse; on various Eligibility Verification Reports submitted by the veteran from the time of his marriage until 1990, the veteran reported that his spouse had no income from any source. 3. In late 1992, VA learned that the veteran's spouse had been receiving monthly income from the John Hancock Insurance Company, as well as from a local church. The veteran's income for pension purposes was recomputed retroactively, and his pension benefits were terminated, effective July 31, 1981. An overpayment of $38,547.75 was created as a result. 4. In response to a request for waiver of recovery of the then existing overpayment of Improved Disability Pension benefits, the COWC waived all but $5,662.20 of the then existing overpayment. 5. The repeated failure of the appellant to report his wife's monthly income from the John Hancock Insurance Company was the sole cause of the overpayment at issue. 6. The veteran had been informed by VA on numerous occasions that he must report any changes in his family's income. 7. The repeated failure of the appellant to report his wife's receipt of retirement income despite his knowledge of the reporting requirement demonstrates an intent on his part to seek an unfair advantage with knowledge of the likely consequences, and also resulted in a subsequent monetary loss to the Government. CONCLUSION OF LAW The creation of the overpayment of Improved Disability Pension benefits in the amount of $5,662.20 involved bad faith on the part of the appellant, and waiver of recovery of the overpayment is, therefore, precluded. 38 U.S.C.A. §§ 5107, 5302 (West 1991); 38 C.F.R. §§ 1.963, 1.965 (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSION The Board notes that the appellant has not questioned the validity of the indebtedness at issue; instead, his contentions go to the question of his relative degree of fault in the creation of the debt, and his inability to repay the debt. Because the appellant has not questioned the validity of the indebtedness, and because the Board is satisfied that the debt was properly created, that question need not be examined further. See Schaper v. Derwinski, 1 Vet. App. 430, 434 (1991). Also of note is that the RO considered the facts in this case, and concluded that the appellant had not demonstrated fraud, willful misrepresentation, or bad faith in the creation of the overpayment now at issue. Notwithstanding this, however, the Board must render an independent determination in this regard. See Ridings v. Brown, 6 Vet. App. 544, 546 (1994). To this extent, there shall be no recovery of payments or overpayments of any benefits under any laws administered by the Secretary [of Veterans Affairs] 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 bad faith in the creation of the overpayment. See 38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.963(a). Bad faith generally is an unfair or deceptive dealing by one who seeks to gain at another's expense; there need not be an actual fraudulent intent, but merely an intent to seek and unfair advantage with knowledge of the likely consequences, and a subsequent loss to the Government. See 38 C.F.R. § 1.965(b)(2). The threshold question, then, is whether bad faith on the part of the appellant led to the overpayment at issue. The appellant married his current spouse on July 31, 1981. He was notified by VA in May 1981, and subsequently, that he must promptly report all changes in his income. Although the veteran was quick to notify VA of his July 1981 marriage for the purpose of receiving additional benefits in the form of a dependency allowance for his spouse, he failed to indicate that she had any income. Moreover, the veteran continued to report no income for his wife annually on EVRs submitted by him for all the years from 1982 through 1989. It was not until an income verification match was conducted by VA and the Social Security Administration in 1989 that the veteran reported his wife's receipt of Social Security benefits; despite this, however, the veteran persisted in his failure to inform VA of the additional income that his wife received by way of retirement benefits. In view of the foregoing, the Board must conclude that the appellant underreported his family's income with the intent to gain an unfair advantage. Repeated notices by VA regarding the appellant's responsibilities in accurately reporting his family's income, coupled with the appellant's repeated failure to do so leads the Board to the conclusion that the appellant's actions were intentional. If so, they could be for no other purpose than to gain unfair advantage in his dealings with VA. He was successful in this respect as evidenced by the ensuing overpayment. Thus, the Board is compelled to find that the veteran was guilty of bad faith in the creation of the overpayment at issue. The Board's finding of bad faith precludes the granting of waiver of recovery of the overpayment of Improved Disability Pension benefits now at issue, 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). ORDER Waiver of recovery of the overpayment of Improved Disability Pension benefits in the amount of $5,662.20 is denied. JAMES A. FROST Acting Member, Board of Veterans' Appeals