Citation Nr: 0006800 Decision Date: 03/14/00 Archive Date: 03/17/00 DOCKET NO. 98-00 898 ) DATE ) ) On appeal from the Department of Veterans Affairs Regional Office in Montgomery, Alabama THE ISSUE Entitlement to waiver of recovery of an overpayment of Department of Veterans Affairs improved death pension benefits in the amount of $17,338.00. REPRESENTATION Appellant represented by: Department of Veterans Affairs, Alabama ATTORNEY FOR THE BOARD J. T. Hutcheson, Counsel INTRODUCTION The appellant had active service from December 1959 to September 1983. In April 1996, the Montgomery, Alabama, Regional Office (RO) proposed to terminate payment of the appellant's Department of Veterans Affairs (VA) improved death pension benefits based upon her receipt of unreported earned and interest income. In June 1996, the RO retroactively effectuated the proposed termination as of February 1, 1993. In June 1996, the appellant was informed in writing of an overpayment of VA improved death pension benefits in the amount of $17,338.00 and her waiver rights. This matter came before the Board of Veterans' Appeals (Board) on appeal from a January 1997 decision of the RO's Committee on Waivers and Compromises (Committee) which concluded that there was bad faith on the appellant's part in the creation of the overpayment of VA improved death pension benefits in the amount of $17,338.00 and denied waiver of recovery of the overpayment. In September 1998, the Board remanded the appellant's claim to the RO for additional action. The appellant has been represented throughout this appeal by the Alabama Department of Veterans Affairs. FINDINGS OF FACT 1. The RO has obtained all relevant evidence necessary for an equitable disposition of the appellant's appeal. 2. The appellant was overpaid VA improved pension benefits in the amount of $17,338.00 due to her failure to promptly inform the VA of her countable income. 3. The appellant's failure to report that she was employed constitutes bad faith. CONCLUSIONS OF LAW 1. The overpayment of VA improved death pension benefits in the amount of $17,338.00 was not due to error solely on the part of the VA and was otherwise properly created. 38 U.S.C.A. § 5107(a) (West 1991); 38 C.F.R. § 3.660(a) (1999). 2. The appellant's bad faith precludes waiver of recover of an overpayment of VA improved death pension benefits in the amount of $17,338.00. 38 U.S.C.A. § 5302 (West 1991 & Supp. 1999); 38 C.F.R.§§ 1.963(a), 1.965(b)(2) (1999). REASONS AND BASES FOR FINDINGS AND CONCLUSIONS I. Creation of the Debt Generally, an individual in receipt of VA improved death pension benefits must notify the VA of all circumstances which will affect her entitlement to receive death pension benefits or the rate of those benefits. Such notice must be furnished when the recipient acquires knowledge that her income has changed. 38 C.F.R. § 3.660(a)(1) (1999). In her January 1993 claim for VA improved death pension benefits, the appellant advanced that she stopped working on December 20, 1992 following the veteran's death and had no income. In a November 1993 written statement, the appellant asserted that she was "unemployed and [did] not have any type of income." In December 1993, the RO informed the appellant that she had been awarded VA improved death pension benefits based upon its determination that she had no income. The written notice informed the appellant of her duty to promptly inform the VA of any changes in her income and that her failure to do so could result in the creation of an overpayment in her account. In April 1996, the RO informed the appellant that it had received information establishing that she was in receipt of previously unreported income in the amount of $5,704.00. Based upon her reported income, the RO proposed to terminate payment of the appellant's VA improved death pension benefits. In June 1996, the RO retroactively terminated the appellant's VA improved death pension benefits as of February 1, 1993. In an April 1997 written statement, the appellant acknowledged that she had failed to inform the VA of her earned income. The appellant has not contested the amount of the overpayment. In light of this fact and given the appellant's acknowledgment that she failed to inform the VA of her receipt of earned income, the Board finds that the overpayment of VA improved pension benefits in the amount of $17,338.00 was solely the consequence of the appellant's own action and thus properly created. II. Waiver of Recovery Recovery of an overpayment of VA improved death pension benefits may be waived if recovery of the indebtedness from the payee who received the benefit would be against equity and good conscience. 38 U.S.C.A. § 5302 (West 1991 & Supp. 1999); 38 C.F.R. § 1.963(a) (1999). The equity and good conscience standard means arriving at a fair decision between the obligor and the Government. In making this decision, consideration is to be given to factors such as: the fault of the debtor; a balancing of the fault of the debtor against any fault of the VA; whether collection would deprive the debtor of basic necessities; whether recovery would nullify the objective for which the benefits were intended; whether a failure to make restitution would result in unfair gain to the debtor; and whether reliance on the benefits would result in relinquishment of a valuable right or incurrence of a legal obligation. 38 C.F.R. § 1.965(a) (1999). The provisions of 38 U.S.C.A. § 5302(c) (West 1991 & Supp. 1999) provide that: The recovery of any payment or collection of any indebtedness (or any interest thereon) may not be waived under this section if, in the Secretary's opinion, there exists in connection with the claim for such waiver an indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining a waiver of such recovery or the collection of such indebtedness (or any interest thereon). Any indication of bad faith will preclude waiver of recovery of an overpayment. "Bad faith" denotes 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(b)(2) (1999). In her November 1993 written statement, the appellant reported that she was unemployed and had no income. A December 1996 written statement from a United States Army Legal Assistance attorney notes that the appellant had suffered from severe depression following the veteran's death and had not worked since March 1996. A March 1997 psychiatric treatment record from Fox Army Community Hospital notes that the appellant had been diagnosed with a dysthymic disorder and uncomplicated bereavement. The treating Army psychologist opined that the appellant experienced "a severe disruption of her cognitive functioning" and "significant difficulty with the appropriate management of her affairs." It did not surprise the reviewing psychologist to learn that the appellant had "some serious financial problems." In an April 1997 written statement, the appellant asserted that: I drank for a while after [the veteran] killed himself, but I stopped. I was having a lot of trouble managing my affairs. ... After [the veteran] died, I got help and advice to pay some of my bills from Mr. Kelly at the ACS office on the Arsenal. ... I took a job at a pet store. I love animals. It was minimum wage work, but it got me out of the house and I did not have to think about my problems. The VA started to send me money after [the veteran] died. It started out at a little more than $300 a month, which I used to pay my utility bills. It rose to $460 or 480 later on. I relied on this money, but it was not enough to live on. ... I ignored a lot of important things, like paying my bills and opening my mail. ... I realize now that I needed to keep the VA informed of my financial earnings. ... But I want the VA to know that I've had lots of trouble taking care of my own affairs. I'm still having trouble concentrating. ... I never meant to do anything wrong. I never "willfully intended" to neglect my duties. I'm having a hard time being willful about anything. I'm still not thinking very clearly. I really thought the money was mine. But I never intended to get more than I was supposed to get. An April 1997 written statement from a United States Army Legal Assistance attorney conveys that the appellant did not "dispute that she had failed to keep the VA informed and submit timely and accurate disclosures." The attorney advanced that the appellant's failure was a consequence of her psychiatric disability and her associated inability to comprehend her responsibility. He stated that the appellant had no intention to defraud the Government or willful intent to "circumvent her lawful VA obligations." In her December 1997 substantive appeal, the appellant reiterated that she failed to inform the VA of her earned income as she "was not capable of knowing what she was supposed to do" as a consequence of her severe psychological problems; did not understand her obligations; and was incapable of defrauding the VA. The Board has reviewed the probative evidence including the appellant's statements on appeal. The Board finds that there was bad faith on the appellant's part with an intent to retain her eligibility for death pension. Although she was informed in writing that the amount of her VA improved death pension benefits was dependent upon an accurate assessment of her annual income and instructed to promptly report the receipt of all income from whatever source derived to the VA, she did not report that she was employed. The appellant advances that her psychiatric disability prevented her from fully comprehending and complying with her obligation to timely report her income. However, the Board finds that such an assertion is belied by her statements on appeal to the effect that she was able to secure and follow employment; to comprehend the need to pay her bills; and to seek assistance in meeting her other financial obligations. It is important to note that the RO terminated the award as of February 1993. Previously, she had been informed of the consequences of a failure to act. In response, in November 1993, she reported that she was unemployed. She also requested waiver, blamed VA for its mistake and reported that she had no way of refunding it. Although some examiners have questioned her legal competence and the ability to inform intent, it is abundantly clear that she knew how to exercise her rights and inform VA of appropriate misinformation. We again note that she has not challenged the cut off date of February 1993. Therefore, her assertion that she was not working in November 1993 is an affirmative action taken demonstrating unfair or deceptive dealing when seeking to gain at VA's expense. The Board is presented with more than negligence in the failure to report income. The affirmative statements entered by her in November 1993 were deceptive and constituted bad faith. The opinions of examiners are refuted by her own sworn statement dated in November 1993. Although the examiners appear to explain away a failure to report income, the examiners do not establish an inability to distinguish between right and wrong or establish that she was incapable of making false statements. Her bad faith rests upon knowingly supplying incorrect information rather than negligence in a failure to report. Therefore, the Board concludes that the appellant's actions constitute bad faith which precludes a waiver of recovery of the overpayment. 38 U.S.C.A. § 5302(c) (West 1991 & Supp. 1999); 38 C.F.R. § 1.965(b)(2) (1999). Accordingly, a waiver of recovery of an overpayment of VA improved death pension benefits in the amount of $17,338.00 is denied. ORDER Waiver of recovery of the overpayment of VA improved pension benefits in the amount of $17,388.00 is denied. H. N. SCHWARTZ Member, Board of Veterans' Appeals