Citation Nr: 0007909 Decision Date: 03/23/00 Archive Date: 03/28/00 DOCKET NO. 95-39 701 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Buffalo, New York THE ISSUE Entitlement to a waiver of recovery of an overpayment of Department of Veterans Affairs (VA) improved death pension benefits in the amount of $5,052. REPRESENTATION Appellant represented by: The American Legion ATTORNEY FOR THE BOARD J. Connolly Jevtich, Counsel INTRODUCTION The veteran had active service from October 1943 to April 1946. He died in April 1990. The appellant is his surviving spouse. This matter came before the Board of Veterans' Appeals (Board) on appeal from a November 1994 decision of the Committee on Waivers and Compromises (Committee) of the Regional Office (RO) of the VA in Buffalo, New York. In July 1998, the Board remanded this case to the RO for further development, which was accomplished. The Board notes that the original overpayment of $5,878 has been reduced to $5,052. FINDING OF FACT The overpayment of VA improved death pension benefits was not due to the appellant's fraud, misrepresentation or bad faith. CONCLUSION OF LAW Waiver of recovery of the overpayment of improved death pension benefits is not precluded by fraud, misrepresentation, or bad faith on the appellant's part. 38 U.S.C.A. §§ 5107(b), 5302(c) (West 1991); 38 C.F.R. §§ 1.962(b), 1.965(b) (1999). REASONS AND BASES FOR FINDING AND CONCLUSION The Board finds the appellant's claim to be well-grounded within the meaning of 38 U.S.C.A. § 5107 (West 1991). That is, the Board finds that she has presented a plausible claim. The Board is also satisfied that all relevant facts have been properly developed and that no further assistance to the appellant is required to comply with the duty to assist mandated by 38 U.S.C.A. § 5107 (West 1991). Historically, in April 1990, the veteran died. Thereafter, in May 1990, the appellant submitted a claim for VA death benefits. She was subsequently awarded VA improved death pension benefits. In an August 1990 letter, she was advised of the award and was provided a VA Form 21-8767 which informed her that it was her responsibility to promptly notify the VA of any changes in her income or net worth and that, when reporting income, she was to report the total amount and source of all income received. In a December 1990 letter, the appellant was reminded that if she received benefits from the Social Security Administration (SSA), she should promptly notify the VA of such. In July 1991, an Eligibility Verification Report (EVR) was received from the appellant in which she reported that her sole source of income was from interest and dividends. She indicated that she had over $13,000 in Certificates of Deposit (CDs), but that these CDs were not accessible to her as they were being held as collateral for the mortgage of her home. She indicated that the balance on the mortgage was over $11,000. The appellant also reported significant medical expenses. In August 1991, the appellant was again provided a VA Form 21-8767 and was notified of her responsibility to promptly notify the VA of any changes in her income or net worth and that, when reporting income, she was to report the total amount and source of all income received. In January 1992, the appellant was informed that the amount of her VA improved death pension benefits had been increased due to her unreimbursed medical expenses. In June 1992, an EVR was received for the period of June 1, 1991 to May 31, 1992. In that EVR, the appellant indicated that she was not in receipt of SSA benefits. She reported that her sole source of income was from interest and dividends. She indicated that she had over $10,000 in CDs, but that these CDs were not accessible to her as they were being held as collateral for the mortgage of her home. The appellant also reported significant medical expenses. The appellant emphatically maintains that right after she sent her EVR, she mailed to the VA notification that she was beginning to receive SSA benefits. This information is not of record. In August and September 1993, the appellant was notified that she needed to submit an EVR for the period of June 1, 1992 to May 31, 1993. Thereafter, no EVR was forthcoming for that period. The appellant maintains that in the interim, she was diagnosed with cancer and underwent multiple surgical procedures, hence her progressively increasing medical costs. She asserts that her failure to submit the EVR in question was completely inadvertent as she was involved in her medical problems. She asserted that she lived with her son from June 1, 1992 to May 31, 1993 because she was so ill. In May 1994, an EVR was finally received for the periods of June 1, 1992 to May 31, 1993, and June 1, 1993 to May 31, 1994. In that EVR, the appellant indicated that she in receipt of SSA benefits. She reported that her other source of income was from interest and dividends. She indicated that she had over $9,000 in CDs, but that these CDs were not accessible to her as they were being held as collateral for the mortgage of her home. The appellant also reported increased and significant medical expenses. Also, in May 1994, the appellant submitted a copy of a VA Form 21-4138 in which she informed the VA that she would begin receiving SSA benefits in July 1992 as well as a copy of the SSA letter. The VA Form 21-4138 was dated in June 1992, but there is no VA date stamp prior to May 1994. In October 1994, the appellant was advised that her VA improved death pension benefits had been terminated effective August 1, 1992, based on the fact that her income consisting of SSA income as well as unearned income was excessive for VA improved death pension purposes. This action resulted in the creation of an overpayment of $5,878. The appellant requested a waiver of the recovery of this debt. In addition, she submitted an extensive report of unreimbursed medical expenses. Based on this report of unreimbursed medical expenses, the appellant's income level was reduced and her VA improved death pension benefits were restored from June 1, 1992 until August 1, 1992 when they were reduced; to December 1, 1992, when they were reduced again; and thereafter until June 1, 1993, when they were terminated due to excessive income. This reduced the overpayment to $5,052. The appellant's request for waiver was denied by the Committee in November 1994, based on a finding of bad faith. The Committee determined that the appellant had committed bad faith in failing to timely notify the VA of her receipt of SSA income and in her failure to submit an EVR for the period of June 1, 1992 to May 31, 1993 until May 1994. The Board notes that VA law precludes waiver of recovery of an overpayment or waiver of collection of any indebtedness where any one of the following elements is found to exist: (1) fraud, (2) misrepresentation, or, (3) bad faith. 38 U.S.C.A. § 5302(c) (West 1991); 38 C.F.R. § 1.965(b) (1999). For fraud, consideration must be given to the definition of fraud delineated in the VA Office of General Counsel Opinion VAOPGC 4-85 (September 16, 1985). In that opinion, the General Counsel (GC) held that the term "fraud," as used in 38 U.S.C. § 5302(c) and 38 C.F.R. §§ 1.963(a) and 1.965(b), may be interpreted to mean an intentional misrepresentation of fact, or the intentional failure to disclose pertinent facts, for the purpose of obtaining or retaining VA benefits, with knowledge that the misrepresentation of facts or the failure to disclose facts may result in an erroneous award of benefits or the retention of such benefits. The Board notes that the GC's opinion includes the following elements in determining if fraud was established: (1) knowledge of facts upon which payments are based; (2) knowledge of change in circumstances; (3) knowledge that change in circumstances removes eligibility for some or all of the benefits being paid; (4) failure to advise the agency of change in circumstances with the actual intention of receiving or obtaining the payments ; and (5) actual receipt or retention of payments or increased payments as a consequence of the intentional failure to disclose. With regard to 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) (1999). "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) (1999). 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. The phrase "bad faith" is also defined in the Veterans Benefits Administration (VBA) CIRCULAR 20-90-5, dated February 12, 1990, as a willful intention on the part of the claimant to seek an unfair advantage or to neglect or refuse to fulfill some duty or contractual obligation." However, a recent decision of the Court has invalidated the use of the above-cited italicized phrase as an appropriate basis for a bad faith determination. See Richards v. Brown, 9 Vet. App. 255 (1996). In Richards, 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. Thus, the Court held that the use of the phrase neglect or refuse to fulfill some duty or contractual obligation found in the circular was inconsistent with the regulation and cannot be an appropriate basis for a bad faith determination. The Board notes that while there is no record of the appellant's receipt of SSA benefits effective from July 1992 until May 1994 and no EVR for the period of June 1, 1992 to May 31, 1993 until May 1994, the Board is unable to conclude that the high standards of fraud, misrepresentation or bad faith are met in this case. The record contains numerous correspondence from the appellant in which she asserts that she did not fail to notify the VA of her SSA income and inadvertently failed to submit an EVR for the period of June 1, 1992 to May 31, 1993. She maintains, as noted, that she did mail the proper notification to the VA of the award of SSA benefits before she actually received any of those benefits. In addition, she asserts that she was diagnosed with cancer and underwent multiple surgeries during the period in question and was forced to live with her son during that period due to her illness. With regard to the elements of fraud, the Board notes that the appellant essentially asserts that the fourth element, failure to advise the agency of change in circumstances with the actual intention of receiving or obtaining the payments, is not met in this case because she did notify the VA in advance of her receipt of SSA benefits and because her failure to submit an EVR was merely inadvertent due to her medical problems at the time. Based on a review of her correspondence and the nature thereof, the Board believes finds that while it is unclear whether or not the appellant sent the notification of her SSA benefits to the VA in a prompt manner, she was under much stress during this period of time due to her serious illness, the surgeries thereto, and her relocation to her son's home. Likewise, her failure to submit an EVR was due to the same personal stressors. While this does not excuse her for failing to again notify the VA of her receipt of SSA or for failing to submit the EVR, it does show that she lacked fraudulent intent. With regard to misrepresentation, the Board does not find that the appellant's actions were willful due to the fact that she believed that she submitted the necessary information and due to the fact that her ill health precluded her from submitting her EVR in a timely fashion. Likewise, there was no bad faith as the Board does not find that the appellant was intentionally being deceptive. Accordingly, the Board concludes that the record does not clearly establish that the appellant intentionally did not report her full income in a timely manner during the period in question. Likewise, due to her poor health, the Board finds that it is not clear that the appellant realized that she was being paid in excess of what she was owed or was being paid benefits which she was not owed. To establish willful intent on her part, the record would essentially have to show that the appellant intentionally failed to disclose her full income for the express purpose of receiving benefits that she knew she would not receive or would no longer receive in the event that she did reveal such information. The record in this case does not establish such an intent, and accordingly, the evidence is insufficient to establish the elements of fraud, misrepresentation or bad faith. As noted, the Board is not stating the appellant does not bear the burden of fault in accurately reporting the income in full as this was her responsibility; however, her actions do not rise to the high level of fraud, misrepresentation or bad faith when taken in the context of her credible contentions. Inasmuch as VA has not met its burden of proof to establish fraud, misrepresentation or bad faith, waiver of recovery of the overpayment of death pension benefits is not precluded as a matter of law. ORDER Waiver of recovery of the overpayment of improved death pension benefits is not precluded by a finding of fraud, misrepresentation or bad faith. REMAND Inasmuch as it has been determined that waiver of recovery of the debt is not precluded by fraud, the application of the standard of equity and good conscience must be considered. In Bernard v. Brown, 4 Vet. App. 384 (1993), the United States Court of Appeals for Veterans Claims (known as the United States Court of Veterans Appeals prior to March 1, 1999) (hereinafter, "the Court") held that when the Board addresses in its decision a question that has not been addressed by the RO, it must consider whether the claimant has been given adequate notice of the need to submit evidence or argument on that question and an opportunity to submit such evidence and argument, and to address that question at a hearing, and, if not, whether the claimant has been prejudiced thereby. The application of each of the elements of the standard of equity and good conscience was not addressed by the RO in this case, nor has VA fulfilled its duty to assist the appellant in the development of evidence pertaining to that inquiry. The Board finds that the appellant would be prejudiced by the Board's consideration of that issue, in the circumstances of this case. In order to properly consider the elements of the standard of equity and good conscience, the appellant should be provided an opportunity to submit evidence and argument in that regard to include the submission of a complete and current financial status report. In that regard, in her prior correspondence, the appellant indicated that while she has money in her CDs, it is inaccessible. However, her EVRs show that she has progressively less money in the CDs every year. It is unclear if the appellant is able to access her CDs as her mortgage becomes paid off. The RO should have the appellant clarify that information. The law requires full compliance with all orders in this remand. Stegall v. West, 11 Vet. App. 268 (1998). Although the instructions in this remand should be carried out in a logical chronological sequence, no instruction in this remand may be given a lower order of priority in terms of the necessity of carrying out the instructions completely. Accordingly, this matter is Remanded for the following action: 1. The appellant should be requested to submit a complete and current financial status report. She should clarify what access, if any, she has to her CDs as they have reduced in value on an annual basis. 2. The appellant and her representative should be provided an opportunity to submit argument and evidence with regard to the elements of the standard of equity and good conscience. 3. The RO should readjudicate the appellant's claim for entitlement to a waiver of the recovery of an overpayment of VA improved death pension benefits under the standard of equity and good conscience. If the action taken is adverse to the appellant, she should be furnished a supplemental statement of the case that contains a summary of the relevant evidence and a citation and discussion of the applicable laws and regulations. She should also be afforded the opportunity to respond to that supplemental statement of the case before the claim is returned to the Board. The appellant has the right to submit additional evidence and argument on the matter or matters the Board has remanded to the regional office. Kutscherousky v. West, 12 Vet. App. 369 (1999). This claim must be afforded expeditious treatment by the RO. The law requires that all claims that are remanded by the Board of Veterans' Appeals or by the United States Court of Appeals for Veterans Claims for additional development or other appropriate action must be handled in an expeditious manner. See The Veterans' Benefits Improvements Act of 1994, Pub. L. No. 103-446, § 302, 108 Stat. 4645, 4658 (1994), 38 U.S.C.A. § 5101 (West Supp. 1999) (Historical and Statutory Notes). In addition, VBA's Adjudication Procedure Manual, M21-1, Part IV, directs the ROs to provide expeditious handling of all cases that have been remanded by the Board and the Court. See M21-1, Part IV, paras. 8.44- 8.45 and 38.02-38.03. C.W. Symanski Member, Board of Veterans' Appeals