Citation Nr: 1527409	
Decision Date: 06/26/15    Archive Date: 07/07/15

DOCKET NO.  11-28 848A	)	DATE
	)
	)

On appeal from the
Department of Veterans Affairs Regional Office in Philadelphia, Pennsylvania


THE ISSUE

Entitlement to a waiver of recovery of an overpayment on service-connected compensation benefits in the amount of $37,239.50.  

(The issues of a higher initial rating for migraine headaches and an increased rating for cervical spine degenerative disc disease with radiculopathy are addressed in a separate decision.)


REPRESENTATION

Appellant represented by:	Disabled American Veterans


ATTORNEY FOR THE BOARD

T. Susco, Associate Counsel


INTRODUCTION

The Veteran, who is the appellant in this case, served on active duty from June 1974 to July 1977.  

This matter comes before the Board of Veterans' Appeals (Board) on appeal from an April 2011 decision of the Committee on Waivers and Compromises (COWAC) located at the Department of Veterans Affairs (VA) Regional Office (RO) in Philadelphia, Pennsylvania.    

In evaluating this case, the Board has not only reviewed the physical claims file, but has also reviewed the file on the "Veterans Benefits Management System" and on the "Virtual VA" system to ensure a complete assessment of the evidence.
 

FINDINGS OF FACT

1.  The creation of an overpayment prior to October 31, 2005, was solely the fault of the Veteran.  

2.  The creation of an overpayment prior to October 31, 2005, was not the result of fraud, misrepresentation, or bad faith.  

3.  Repayment of that portion of an overpayment created prior to October 31, 2005, would not result in undue financial hardship to the Veteran, and would not defeat the purpose of VA disability compensation.  

4.  A waiver of repayment of that portion of an overpayment created prior to October 31, 2005, would result in unjust enrichment by the Veteran. 

5.  Recovery of that portion of an overpayment created prior to October 31, 2005, would not violate the principles of equity and good conscience. The creation of an overpayment on or after October 31, 2005, was due materially to the administrative fault of VA.  

6.  The creation of an overpayment on or after October 31, 2005, was due materially to the administrative fault of VA.  


CONCLUSIONS OF LAW

1.  An overpayment of VA compensation benefits prior to October 31, 2005, was validly created.  38 U.S.C.A. §§ 1114(a), 5315 (West 2014); 38 C.F.R. § 3.665 (2014).  

2.  The creation of the overpayment prior to October 31, 2005, did not involve fraud, misrepresentation, or bad faith on the part of the Veteran.  38 U.S.C.A. § 5302(c) (West 2014); 38 C.F.R. §§ 1.963(a), 1.965(a) (2014).  

3.  The criteria for a waiver of that portion of the overpayment created prior to October 31, 2005, are not met.  38 U.S.C.A. § 5302 (West 2014); 38 C.F.R. §§ 1.963, 1.965 (2014).  

4.  Resolving reasonable doubt in the Veteran's favor, an overpayment of VA compensation benefits on or after October 31, 2005, was not validly created.  38 U.S.C.A. §§ 1114(a), 5315 (West 2014); 38 C.F.R. § 3.665 (2014).  


REASONS AND BASES FOR FINDINGS AND CONCLUSIONS

Duties to Notify and Assist

The Veterans Claims Assistance Act of 2000 (VCAA) describes VA's duties to notify and assist a claimant in substantiating a claim for VA benefits.  38 U.S.C.A. §§ 5100, 5102, 5103, 5103A, 5107, 5126; 38 C.F.R. §§ 3.102, 3.156(a), 3.159, 3.326(a).  However, in Barger v. Principi, 16 Vet. App. 132 (2002), the United States Court of Appeals for Veterans Claims (Court) held that the VCAA does not apply to waiver-of-overpayment claims, noting that the statute at issue in these cases is found in Chapter 53, Title 38, of the United States Code, and that the provisions of the VCAA apply to a different Chapter (i.e., Chapter 51).

Nevertheless, the Board has reviewed the case for purposes of ascertaining that the Veteran has had a fair opportunity to present arguments and evidence in support of his request for a waiver of overpayment.  The Board concludes from this review that the requirements for the fair development of the claim have been met.  Prior to reducing benefits, VA is required to comply with pertinent VA regulations concerning due process.  Specifically, claimants are entitled to notice of any decision made by VA affecting the payment of benefits.  Such notice should clearly set forth the decision made, any applicable effective date, the reasons for the decision, the right to a hearing on any issue involved in the claim, the right to representation, and the right to initiate an appeal of the decision.  See 38 C.F.R. 
§ 3.103(b) (2014).  If the reduction is based solely on factual and unambiguous information or statements as to income, net worth, or dependency or marital status that the beneficiary provided to VA in writing or orally, with knowledge or notice that such information would be used to calculate benefit amounts, in lieu of advanced notice and opportunity for a hearing, VA will send written notice to the beneficiary at the same time it takes adverse action.  38 C.F.R. §§ 3.103(b)(3)(i), 3.105(h) (2014). 

In this case, the Veteran's benefits were reduced based on the receipt of notice to VA that the Veteran had been incarcerated as of February 12, 2004.  The RO notified the Veteran of the proposed reduction in benefits in February 2010 and benefits were reduced in August 2010.  Also in August 2010, the Veteran was informed that he had an overpayment debt in the amount of $37,239.50.  In January 2011, the Veteran submitted a timely request for a waiver of the overpayment.  In April 2011, the COWAC informed the Veteran that a waiver of the debt in the amount of $37,239.50 was denied.  The COWAC issued a Statement of the Case in October 2011, and the Veteran perfected the appeal in November 2011.  The Board finds that additional notice and development are not necessary to address the Veteran's appeal.  Accordingly, the Board finds that VA has met all due process requirements for reducing the Veteran's benefit, and the Board may now address the merits of the Veteran's appeal.

Waiver of Recovery of an Overpayment, Including Questions of Creation of the Debt and Bad Faith - Laws and Regulations

An overpayment is created when VA determines that a beneficiary or payee has received monetary benefits to which he or she is not entitled.  See 38 U.S.C.A. § 5302; 38 C.F.R. § 1.962.  The law provides that if any person to whom VA compensation is being paid is imprisoned as the result of conviction of a felony or misdemeanor, such compensation payments will be discontinued effective on the 61st day of imprisonment following conviction.  38 C.F.R. § 3.665. 

A claimant has the right to dispute the existence and amount of the debt.  38 U.S.C.A. § 501 (West 2014); 38 C.F.R. § 1.911(c) (2014).  Any indebtedness of a veteran can be waived only when the following factors are determined to exist: 
(1) there is no indication of fraud, misrepresentation, or bad faith on the part of the person or persons having an interest in obtaining the waiver (5302(c); 38 C.F.R. §§ 1.963(a), 1.965(b)); and, (2) collection of such indebtedness would be against equity and good conscience.  38 U.S.C.A. § 5302(c); 38 C.F.R. § 1.963(a).  Thus, a finding of fraud, misrepresentation, or bad faith precludes a grant of a waiver of recovery of the overpayment.  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); see also VAOPGCPREC 6-98 (interpreting that, where the validity of the debt is challenged, that issue must be developed before the issue of waiver of the debt can be considered).  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.

A discontinuance of an award will be made effective the date of last payment on an erroneous award based solely on administrative error or error in judgment.  See 38 U.S.C.A. § 5112(b)(10); 38 C.F.R. § 3.500(b)(2).  A reduction or discontinuance of benefits based on an erroneous award will be made when it is determined that: (1) the beneficiary was not guilty of an act of commission or omission which, in whole or in part, caused the erroneous award of benefits and had no knowledge thereof; and (2) the VA either: (a) committed an administrative error, including an error of fact (e.g., the VA mistakes or overlooks the facts of record or makes a purely clerical error), or (b) committed an error of judgment (e.g., the VA fails to properly interpret, understand and follow existing Department instructions or regulatory or statutory requirements).  VAOPGCPREC 2-90 (1990); see also 
38 U.S.C.A. § 5112(b); 38 C.F.R. § 3.500(b)(1); Jordan v. Brown, 10 Vet. App. 171 (1997).

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.A. 
§ 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). 

In order to establish actual fraud, it must be determined that there was willful misrepresentation of a material fact, or the willful failure to disclose a material fact, with the intent of obtaining or retaining eligibility for VA benefits.  It must be shown that the willful intent to either misrepresent or fail to disclose was done with the debtor's knowledge that such misrepresentation or failure would result in the erroneous award or erroneous retention of VA benefits.  Essentially, there must be a finding that the person willfully failed to disclose a material fact or willfully misrepresented a material fact, and there must be a finding that the debtor had knowledge that such misrepresentation or failure would result in an erroneous award or erroneous retention of VA benefits.  38 C.F.R. § 1.962(b).

Misrepresentation is defined as any manifestation by words or other conduct by one person to another that, under the circumstances, amounts to an assertion not in accordance with the facts.  Further, misrepresentation is an untrue statement of fact, and incorrect or false representation, and that which, if accepted, leads the mind to an apprehension of a condition other and different from that which exists.  Colloquially, it is understood to mean a statement made to deceive or mislead.  Black's Law Dictionary, 1001 (6th ed. 1990).  The misrepresentation must be more than non-willful or mere inadvertence.  38 C.F.R. § 1.962(b). 

Bad faith is defined as unfair or deceptive dealing by one who seeks to gain thereby at another's expense.  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).  The Court has held 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 and that a mere negligent failure to fulfill a duty or contractual obligation is not an appropriate basis for a bad faith determination.  Richards v. Brown, 9 Vet. App. 255 (1996).  

Finally, if VA determines that the debt is valid and that fraud, misrepresentation, and/or bad faith had no part in its creation, VA must then consider whether collection of the debt would be against the principles of equity and good conscience.  See 38 U.S.C.A. § 5302(b); 38 C.F.R. §§ 1.962, 1.963, 1.965.

The controlling legal criteria provide that the standard of "equity and good conscience" will be applied when the facts and circumstances in a particular case indicate the need for reasonableness and moderation in the exercise of the Government's rights.  38 C.F.R. § 1.965(a).  The decision reached should not be unduly favorable or adverse to either side.  The phrase equity and good conscience means arriving at a fair decision between the obligor and the U.S. Government. 

In making this determination, consideration will be given to the following elements, which are not intended to be all inclusive:  (1) Fault of debtor.  Where actions of the debtor contribute to the creation of the debt.  (2) Balancing of faults.  Weighing the fault of the debtor against the VA's fault.  (3) Undue hardship.  Whether collection would deprive the debtor or his or her family of basic necessities.  (4) Defeat the purpose.  Whether withholding of benefits or recovery would nullify the objective for which benefits were intended.  (5) Unjust enrichment.  Failure to make restitution would result in an unfair gain to the debtor.  (6) Changing position to one's detriment.  Reliance on VA benefits results in relinquishment of a valuable right or incurrence of a legal obligation.  38 U.S.C.A. § 5302(c); 38 C.F.R. 
§ 1.965(a).

It is the Board's responsibility to evaluate the entire record on appeal.  See 
38 U.S.C.A. § 7104(a).  When there is an approximate balance in the evidence regarding the merits of an issue material to the determination of the matter, the benefit of the doubt in resolving each such issue shall be given to the claimant.  
38 U.S.C.A. § 5107(b); 38 C.F.R. § 3.102.

Waiver of Recovery of an Overpayment - Analysis of the Validity of the Debt Created

In this case, a January 2010 Report of Contact indicates the Veteran began confinement at a correctional facility on February 12, 2004.  A February 2010 Report of Contact indicates that the Veteran was sentenced on April 27, 2005.  In short, the Veteran was convicted of a felony and incarcerated on April 27, 2005, though his confinement began on February 12, 2004.  The Veteran does not dispute these facts.  

On August 2, 2010, VA reduced the Veteran's disability compensation due to his incarceration to the 10 percent disability rating allowed under 38 C.F.R. § 3.665.  The rating reduction was effective June 26, 2005, the 61st day of the Veteran's incarceration.  The delay in the reduction of the Veteran's disability compensation resulted in an overpayment in the amount of $37,239.50.  The Veteran disagrees with the debt created, contending that he was unaware of the prohibition of receiving full disability compensation while incarcerated.  See February 2012 Statement.  The Veteran requested a waiver of the overpayment due to financial hardship and medical issues. 

Regarding the validity of the debt created, the central question concerns whether the debt created was solely the result of administrative error by the RO.  After a review of all the evidence of record, the Board finds that the Veteran reasonably put the RO on notice of his incarceration in correspondence received by the RO on October 31, 2005.  

On October 14, 2004, VA received correspondence from the Veteran indicating he had a new address.  The Board notes that the address provided by the Veteran corresponds to a psychiatric hospital affiliated with the Massachusetts Department of Corrections (DOC).  However, the Veteran did not indicate that he was incarcerated or otherwise confined by the Commonwealth.  Similarly, the Veteran submitted additional correspondences listing this new address; these correspondences were received by VA on November 5, 2004, November 15, 2004, March 17, 2005, and May 3, 2005.  In none of these correspondences did the Veteran indicate that he was incarcerated or otherwise confined by the Commonwealth.  

On October 31, 2005, VA received correspondence from the Veteran in which the Veteran wrote "I am currently being held at MCI Concord."  The Board notes that MCI Concord refers to the Massachusetts Correctional Institution located in Concord, Massachusetts.  This correspondence listed the address of the Concord correctional institution.  It appears that no action to inquire as to the Veteran's incarceration status was performed at that time.  

Beginning in January 2006, correspondence from the Veteran indicated that he again had a new address.  The Board notes that the address provided by the Veteran corresponds to the Bridgewater (Massachusetts) Correctional Complex, which includes the Old Colony Correctional Center and the Bridgewater State Hospital.  It appears that no action to inquire as to the Veteran's incarceration status was performed at that time.  

The record contains a September 2007 deferred rating by the Boston RO indicating that development in the Veteran's case was needed to determine if the Veteran was then-currently incarcerated.  In November 2007, the RO sent a letter to the Veteran, at the Bridgewater address, requesting whether the Veteran was currently incarcerated, and if so, whether he was incarcerated due to a felony conviction.  The Veteran did not respond to this letter.  It appears that no further inquiry regarding the Veteran's incarceration status was performed.  

In March 2009, the Board remanded two claims in the Veteran's case: entitlement to an initial rating in excess of 10 percent disabling for migraine headaches, and entitlement to an increased rating in excess of 40 percent disabling for cervical spine degenerative disc disease with right-sided radiculopathy.  In the March 2009 Remand, the Board noted that the Veteran was either incarcerated or confined to a mental hospital facility associated with the Massachusetts DOC.  Pursuant to the March 2009 Remand, the Nashville RO (assisting the Appeals Management Center) sent letters to both the Veteran and the Massachusetts DOC to further develop the Veteran's claims.  

In January and February 2010, the Boston RO confirmed the status of the Veteran's incarceration.  In a February 2010 correspondence, the RO proposed reduction of the Veteran's disability compensation in accordance with 38 C.F.R. § 3.665.  In August 2010, the RO took final action to reduce the Veteran's disability compensation, effective June 26, 2005, the 61st day of the Veteran's incarceration.  

Based on a careful review of the record, the Board finds that the Veteran informed VA of his incarceration in the October 31, 2005 correspondence.  It appears that the RO overlooked the Veteran's October 31, 2005 statement indicating that he was being held at a Commonwealth correctional facility.  While the Veteran was not forthcoming with details about his incarceration prior to October 31, 2005, his statement that he was "being held at MCI Concord" reasonably put VA on notice of the Veteran's incarceration.  While the RO attempted to confirm his incarceration status in November 2007, actual confirmation did not occur until the RO contacted the Commonwealth correctional facility directly in January and February 2010, more than four years after the Veteran reasonably put VA on notice of his incarceration.  This delay resulted in a significant portion of the overpayment to the Veteran, and is a direct administrative error as the RO overlooked the fact of record that the Veteran was being held by the Commonwealth of Massachusetts.  VAOGCPREC 2-90.  As such, the material fault in that portion of the debt created subsequent to October 31, 2005, lies with the RO.  See id.  

For these reasons, and resolving any reasonable doubt in favor of the Veteran, the Board finds that portion of the debt created subsequent to October 31, 2005, was not validly created in this case.  However, the Board finds that portion of the debt created prior to October 31, 2005, was validly created; therefore, the Board will proceed with the next step in the waiver analysis.  

Waiver of Recovery of an Overpayment - Analysis of Fraud, Misrepresentation, and Bad Faith

As discussed above, the Board finds that portion of the Veteran's debt created prior to October 31, 2005, to be validly created.  As the Board has found a portion of the debt valid, the Board must now determine if fraud, misrepresentation, or bad faith on the part of the Veteran played a role in the creation of that portion of the debt.  If such action is found, waiver of the overpayment is automatically precluded, and further analysis is not warranted.  See 38 U.S.C.A. § 5302(a); 38 C.F.R. 
§§ 1.963(a), 1.965(b); see also Ridings, 6 Vet. App. 544.

Only one of the three elements (fraud, misrepresentation, or bad faith) need be shown to preclude consideration of waiver of recovery of the indebtedness.  
38 U.S.C.A. § 5302(c).  In other words, any indication that a claimant committed fraud, misrepresentation of a material fact, or bad faith in connection with his receipt of VA benefits precludes the Board from granting a waiver of recovery of the overpayment.  This parallels the "clean hands" doctrine familiar in equity cases; only if a veteran is free from all taint of fraud in connection with his claim for benefits may waiver on account of "equity and good conscience" be considered.  See Farless v. Derwinski, 2 Vet. App. 555 (1992).

Based on a review of all the evidence of record, the Board finds no evidence of fraud, misrepresentation, or bad faith.  While the Veteran was not forthcoming with information surrounding his incarceration prior to October 31, 2005, the Board finds that the Veteran's actions did not rise to the level of fraud, misrepresentation, or bad faith.  

In a December 2012 statement, the Veteran contended that he was not aware that incarceration would result in a reduction of his disability compensation, or his duty to notify VA of his incarceration.  However, the Board finds the Veteran was notified of this duty.  In March 2002, the RO granted an increased disability rating for the Veteran's service-connected cervical spine degenerative disc disease with right-sided radiculopathy.  The RO notified the Veteran of this decision in correspondence dated March 20, 2002.  Attached to this correspondence was VA Form 21-8764, Disability Compensation Award Attachment, which provided additional information about disability compensation benefits.  Relevant to the Veteran's claim, VA Form 21-8764 specifies that disability compensation benefits will be reduced upon incarceration in a Federal, State, or local penal institution in excess of 60 days for conviction of a felony.  VA Form 21-8764 further specifies that the Veteran should notify VA immediately if there is a change in any condition that may affect his rights to continued payments, as failure to notify VA may result in an overpayment.  As such, the Board finds that the Veteran was put on notice with respect to his duty to inform VA of his incarceration by the Commonwealth of Massachusetts.  

As indicated above, the Veteran was confined by the Commonwealth of Massachusetts as of February 12, 2004.  Specifically, the Veteran was confined to a psychiatric hospital associated with the Massachusetts DOC.  The Veteran was then convicted of a felony and began his incarceration on April 27, 2005.  In correspondences from the Veteran received by VA on October 14, 2004, November 5, 2004, November 15, 2004, March 17, 2005, and May 3, 2005, the Veteran indicated that he had a new address.  In none of these correspondences, however, did he indicate that he was incarcerated or otherwise confined by the Commonwealth.  Likewise, in none of these correspondences did the Veteran indicate that this new address was affiliated with the Massachusetts DOC.  As discussed in detail above, the Veteran did not reasonably put VA on notice of his incarceration until October 31, 2005.  

Despite the Veteran's duty to inform VA of his incarceration, the Board finds his failure to do so does not rise to the level of fraud, misrepresentation, or bad faith, so as to prevent a waiver of overpayment.  Specifically, the Board finds that prior to October 31, 2005, the Veteran was negligent in the fulfillment of his duty to inform VA of his incarceration.  However, the Board finds no evidence of willful misrepresentation or an intent to deceive or defraud the government, particularly as the Veteran provided information of his incarceration as of October 31, 2005.  See 38 C.F.R. § 1.962(b). 

Waiver of Recovery of an Overpayment - Analysis of Equity and Good Conscience

As discussed above, the Board has found that portion of the Veteran's debt created prior to October 31, 2005, to be validly created.  Additionally, the Board has found the Veteran's actions prior to October 31, 2005, did not rise to the level of fraud, misrepresentation, or bad faith.  Therefore, the Board will next determine if a waiver of that portion of the debt created prior to October 31, 2005, is warranted on the basis of equity and good conscience under 38 U.S.C.A. § 5302(a); 38 C.F.R. §§ 1.963(a), 1.965(a).  For the reasons discussed below, the Board finds that repayment of that portion of the Veteran's debt created prior to October 31, 2005, would not violate principles of equity and good conscience, and a waiver as to that portion of the debt is not warranted.  

In assessing the principles of equity and good conscience, the Board is to consider the following elements:  fault of the debtor, balancing of faults between the debtor and VA, undue hardship upon the debtor, whether recovery would defeat the purpose of the benefits, unjust enrichment, and detrimental reliance.  38 U.S.C.A. 
§ 5302(c); 38 C.F.R. § 1.965(a).

The Board finds that the Veteran was at fault in the creation of the indebtedness due to his incarceration and his failure to report to incarceration prior to October 31, 2005.  As indicated above, the Veteran was notified of a duty to report his incarceration in correspondence dated in March 2002, which provided the Veteran with information regarding the increased disability compensation in connection with the Veteran's service-connected cervical spine degenerative disc disease with right-sided radiculopathy.  

In balancing the relative faults, the Board finds that prior to October 31, 2005, the weight of the fault in the creation of the debt lies entirely with the Veteran.  Specifically, the Board finds VA was not at fault in creating the Veteran's indebtedness prior to October 31, 2005, as it was not until that date that VA was put on notice of the Veteran's incarceration.  

The Board next finds that repayment of that portion of the debt created prior to October 31, 2005, would not create an undue hardship upon the Veteran.  The Board also finds that repayment of that portion of the debt created prior to October 31, 2005, would not deprive the Veteran of the basic necessities of life.  The Veteran has been incarcerated or confined by the Commonwealth of Massachusetts since February 2004.  In September 2011, the Veteran completed a VA Form 5655, Financial Status Report.  On this form, the Veteran indicated that he was currently received no income from any source, and had no current assets.  Additionally, the Veteran indicated that he had no current debts or expenses, except he reported a weekly expense of $25.00 for food to control his blood sugar.  In a November 2011 statement, the Veteran clarified that he needed money to purchase saltines to prevent his blood sugar from "bottoming out."  

While the Board acknowledges that repayment of the debt in its entirety would result in a financial hardship upon the Veteran, the Board has found only that portion of the debt created prior to October 31, 2005, to be valid.  As VA took steps to recoup the entire debt beginning in August 2010, the Veteran has already repaid a significant portion of the debt.  Therefore, the Board finds that recoupment of the valid debt has likely already occurred, and there is no additional financial hardship upon the Veteran.  Alternatively, if recoupment of the valid debt has not occurred, the Board finds that continued repayment of the debt would not create an undue financial hardship, as an undue financial hardship has not been shown with the repayment that has already occurred.  

Likewise, the Board finds that repayment of that portion of the debt created prior to October 31, 2005, would result in unjust enrichment to the Veteran, and would not defeat the purpose of the benefits.  The Veteran has been incarcerated or confined by the Commonwealth of Massachusetts since February 2004.  As such, he is not entitled to disability compensation benefits.  See 38 C.F.R. § 3.665.  Disability compensation benefits are intended to compensate a claimant for average impairments in earning capacity in civil occupations resulting from service-connected disabilities.  38 U.S.C.A. § 1155; see also 38 C.F.R. § 4.1.  As the Veteran was incarcerated by the Commonwealth of Massachusetts, he, therefore, had no earning capacity.  Moreover, the Veteran has no significant living expenses due to his incarceration.  As such, the Board finds that repayment of that portion of the debt created prior to October 31, 2005, would result in unjust enrichment and would not defeat the purpose of paying the benefits.  Finally, the Board finds no evidence that the Veteran relinquished a valuable right or incurred any legal obligations resulting from reliance on VA benefits.  

Given the above, the Board finds that the Veteran failed to notify VA of his incarceration prior to October 31, 2005.  While the Board finds the Veteran negligent in his duty to notify VA, the weight of the evidence does not establish fraud, misrepresentation, or bad faith.  In balancing the factors discussed above, the Board finds that repayment of that portion of the debt created prior to October 31, 2005, would not violate the principles of equity and good conscience.  For these reasons, the Board finds that the criteria for waiver of recovery of that portion of the debt created prior to October 31, 2005, are not met.  38 C.F.R. §§ 1.963, 1.965.  However, the Board finds that the Veteran reasonably put VA on notice of his incarceration as of October 31, 2005, and the material fault of the creation of the overpayment after that date lies with VA.  For these reasons, and resolving all reasonable doubt in favor of the Veteran, the Board finds that portion of the debt created on or after October 31, 2005, to be invalid, and repayment of that portion should be waived.  


ORDER

A waiver of recovery of that portion of an overpayment of VA benefits created prior to October 31, 2005, is denied.  

A waiver of recovery of that portion of an overpayment of VA benefits created on or after October 31, 2005, is granted.  



____________________________________________
L. M. YASUI
Acting Veterans Law Judge, Board of Veterans' Appeals



Department of Veterans Affairs



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