UN IT ED ST AT ES CO UR T O F A PP EA LS FO R V ET ER AN S C LA IMS

N O
. 03-1929
D AMI AN REYES , A P P EL LA NT ,

V
. R. J A M ES N I CHOL S ON , S ECR ETA RY OF V ETER A N S A FF AI RS , A PP ELL EE
.
On Ap pe al f rom the Bo ard

of Ve ter an s' Ap pe als
(Argued April 25, 2007 Decided July 20, 2007 )

Richard R. James, of

Gl enAl len , V A, fo r th e ap pe llant. Brent A. Bowker, wi th who m Tim S. McClain, Ge ne ral Co un sel ; R. Ra nd all Ca mp be ll , As sis tant G en era l C ouns el; Ri ch ar d Ma yer ick, Deputy Assistant Gener al Counsel, and Ba rb ara J

. Finsness, Ap pe llate A tto rne y, all of W ash ing ton , D .C ., fo r th e ap pe lle e. Before HAGEL , MOORMAN , and LANCE , Ju dges. MOORMAN, Judge : T h e a p p e ll an t, D a m ianR e y e s , th ro u g hc o un s e l, s e e k s r e v ie wo f an October 2, 2003, decis ion of the Board of Veterans' Appeals (Board) that de ni edh is r equests for
wa ive r of pe ns ion ov erp aym ents i n th e am ounts of $1 ,8 02 .1 8 and

$1 7, 07 6 upon finding b ad fa ith
on his part i n th e cr eat ion

of the de bt. Re co rd ( R. ) at 9. Th is a

pp eal is tim ely a nd the Court has jurisdi ction to review the Board decision pur suant to 38 U

. S. C

. §§ 7252(a) and 7266(a ). For the

reasons set forth bel ow, the Court wil l affirm, in part, and vacate, i n part, the Boar d's October 2003 decision as to the matters appea led a nd remand for further adjudi cation consi stent with t his decisi on.

I. FACTS Mr. R ey es ser

ve d in the U .S

. Ar

my fr om Apri l 1 94 4 to Fe bru ary

1 94 6. R. at 1 3. In

Mar ch 1991, he submitted an applica tion for VA disabi li ty compensation and pension, which t he VA regional office (RO) granted in April 1993. R. at 16, 21. His notice of award informed him of the2

following : Your rate of VA pension depends on tot al " fami ly " income which includes your inc om e an d th at o f anyde pendents. W e m us t ad jus t yo ur p aym ents whe ne ve r th is income changes. You m

ust notify us imm ediatel y if inc ome is receive d from any so ur ce ot he r t ha n t ha t s ho wn ab ov e. Yo u mus t a ls o r ep or t a ny ch an ge s i n t he in co me sh own a bo ve . Y our f

ail ure t o pro m

ptl y te ll V A a

bo ut i nc om e ch an ge s m aycre ate an overpayment which will have t o be repaid. R. at 2 3. He wa s no tif

ied o f t his req uir em ent in

sev era l ot

he r le tte rs f

rom the RO , d ate d f

rom Ju ly 1993 to February 1999. Se e R. at 42-43, 49, 55, 86, 179, 181, 203, 218, 229-30. In September 1995, the RO notified M r. Reyes that his pe nsion pa yments had been reduced, ef fe cti ve fr om

De cem be r 1, 19 94 , b eca

us e h e f ail ed to r ep ort his w if e' s an d s on ' s re cei pt o f S oc ial Se curity b en ef

its . R . at 58 , 6 0. In N ov em be r 19 95 , M r. R ey es request ed a w aiv er o f t

his
ov erp aym ent, a sse rti ng that he wa s un aw are o f the de bt and that th e re du cti on

in h is p en sio n w ou ld cause an undue, financi al hardshi p on him and his fam ily. R. at 80. In December 1995, his pension was reduced agai n, based on notificat ion that he had received pe nsion fund payments. R. at 84, 95. He then fi le d a Not ice of Disagreement (NOD), in which he reques ted an incr ease in his pension benefits b eca

us e of h is so n' s un em

plo ym ent and

lo ss of in co m e. R. at 8 8. In Fe bru ary 1996, VA ag ain adju ste d his pen sio n aw ard , ef fe cti ve fr om

Fe bru ary 19 93 , f or f ail ure to r ep ort

wa ge s. R. at 98

. In M arc h 19 96 , he re qu est ed w aiv er of

th is $9 45 o ve rpaym ent, and ask ed VAto c on sid er h is p e rs o n a l m e d ic a l e xp e n s e s an d c urr e n t p h y s ic a l c o n d it io n , a s w e ll a s p o s s ib le e n ti tl em en t to improved pension with aid and at tendance or hous ebound benefits. R. at 105. On Ap ril 1 0, 1 99 6, th e VAC om m itt ee on W aiv ers an d C om

pro m ise s (C om

m itt ee) de nie d Mr. Reyes's reque st for waiver of $945, after concl uding that t he debt was crea ted in bad faith. R. at 109-10. On April 26, 1996, VA reduced his pension effective February 1995, and terminated the pe ns ion aw ard ef fe cti ve fr om

Jan uary 1 , 1 99 6, du e to ex ces siv e inc om e fo r pen sio n. R. at 148 . T his created a total overpayment of $1,802.18. Id. Mr. Reyes requested a w aiver of this ove rpayment and in a September 1996 St atement of the Case (SOC), the RO affirmed its denial of waiver in t he
am ount of

$ 1, 80 2. 18 , af

ter c on clu din g, a s the R O ori gin all y ha d, th at the d eb t w as created in bad fa ithbe cau se o f M r. R ey es' s f ail ure to t im ely

rep ort all so urc es o f, an d c hang es in, inco m e. R. at 15 0. In O cto be r 19 96 , h e f ile d an a pp eal wi th t

he Bo ard , in

wh ich he als o asse rte d e nti tle m ent to VA disability c ompensation for various injur ies and disor ders. R. a t 152. In January 1998, the3

Bo ard rem an de d M r. R ey es' s ap pe al to the R O, in str uc tin g the R O to req

ue st fr om M r. Re ye s a l ist of all personal medical expenses from 1993 forward, and to adjudicate hi s claim as to the amount
an d p rop rie ty o f t

he cre ati on

of eac h e lem ent of

the ov erpaym ent. R . at 19 0. Th e B oard, af ter de ter m ini ng that th e cl aim s w ere no t in ex tri cab ly i nte rtw ine d w ith h is o ve rpaym ent is su e, als o ref err ed cla im s f or s erv ice co nn ect ion

fo r po st- tra

um ati c st res s disorder , a bac k d iso rde r, t hro at disorder, malaria , dysentery, a s tomach disorder , and residual s of exposure to cold weat her, to the RO for "appropriate a ction." R. at 188. In Apr il 19 98 , t he RO r eque st edthe inf ormat io n fr om the ap pe ll an t o rd er edby th e B oa rd 's Jan uary 1 99 8 re m an d. R

. at 19 3. In a rep ort of co nta ct, a V A r ep res entat ive no ted that Mr . R ey es "indicat ed he cannot re mem ber expenses for the time f rame requested be cause he is s uffering from

m ult ipl e m ed ica l pr ob lem s, but he did not have anyexp en ses beca us e he re cei ve s alm os t all o f h is medical care and medications from the DVA [D epartment of Vet er an s Affairs] Medical Cent er." R. at 195. In July 200 0, M r. Re ye s no tif ied th e RO th at he and

h is wi fe w ere n o lon ge r m arr ied

. He req ue ste d VArein state hi s pen sio n as a si ng le ve ter an . R. at 233 . In Janu ary

20 01 , th e R O s ent Mr

. Re ye s a n oti ce, inf

orm inghim

that V A w as t erm inatin g h is p en sio n be ne fi ts e ff ect ive fr om

Fe bru ary 1, 1 9 9 7 , u n t i l he re sp on de d t o VA 's S ep te mber20 00 re qu es t f orin for mat io n r eg ar di ng hi s w if e's inc om e f rom that ti m e unti l th e d ate of the ir d ivo rce . R . at 23 8-3 9 (n oting that h is s po us e h ad reported r eceipt of $5,200 in inc ome in 1997, which was not reported to VA a t t hat t ime). The RO
sent an oth er n oti ce i n Mar ch2 00 1, n oti ng th at it ha d re cei ve d in fo rm ati on that hi s f orm er w if e h ad received a dditional income in the amount of $6,996 in 1999 that was not reported to V A. R. at 243- 44 . In Mar ch20 01, Mr. Reyes p aid the ov erp aym ent of

$4 ,8 33 res ult ingfr om

the unrep ort ed income from

February 1997 to Ja nuary 1998. R. at 257. Bas edo n Mr

. Re ye s's wife' s 1999 unreported i ncome, VAnotified Mr. Reyes in August 2001 that an additional overpayment, in the amount of $20,156, had been created. R. at 255. On August 21, 2001, Mr. Reyes request ed a waiver of the ov erpayment in the amount of $2 0, 15 6. R. at 2 57 . H e n ote d th at V A h ad ins tru cte d h im , s inc e h is M arch 2001 paym ent, n ot t o send any funds because his overpayments had been pai d in full. R. at 257. In Februa ry 2002, the Committee denied his r equest for waiver, findi ng that the overpayment was created in bad f aith. The Committee stated:4 Th e ev ide nc e o f r eco rd s ho ws that yo u h av e b een rep eat ed ly a dv ised

that yo ur p en sio n w as b ase d o n y our to tal fa m ilyinc om e. De sp ite the VA's no tic es t o accurate ly and promptly report yourtotal family i nc ome, you failed to repor t your wife was worki ng for years 1998 and 1999. A review of your claim file shows ov erp aym ents in the past , c au sed byyo ur f

ail ure to i nf

orm the VAof

yo ur t ota l fam ilyinc om e. In s pit e o f y our pr ev iou s o ve rpaym ents y ou co ntinued

to s ub m it eligibi lity ver ification r eport s (E VR s) which indic ated your spouse was not in rece ipt of income. Y our failure t o report yourspouse's income allowedy ou t o rec eive be ne fi ts y ou

we re n ot e nti tle d to rec eiv e. Your failure to r eport your t otal family income and continued ac ceptance of VApe ns ion

ba sed on the int entio na l om iss ion

of th at in co m e sho ws an intent to see k an unfair advantage . You had knowledge t hat fail ure t o promptly reportreceiptof income would create an overpa yment. . . . This constitutes bad faith. R. at 270. Mr. Reyes filed an NOD as to thi s decision, a sserti ng that he was not a ware of the in de btedne ss, as he was in t he process of divorc ing his wife and was not aware of the income she
rec eiv ed durin g th at t im e. R. at 2 74 . T he Com m itt ee is su ed

a Stat em ent of

the Ca se, af

fi rm ingits decision t o deny waiver of the overpayment. R. at 285. Mr. Reyes filed his appeal with the Board. R. at 288. In the deci sion on appeal, t he Board affirmed the Com mittee's decision to deny waiverof the $1 ,8 02 .1 8 ov erp aym ent, an d red uc ed the ov erp aym ent in

the am ount o f $ 20 ,1 56 to $ 17 ,0 76 , a ft er concluding tha t $3,080 of the overpayment was not properl y created be cause Mr. Reyes's pension be ne fi ts f or a sin gle v ete ran

s ho uld h av e be enre ins tat ed

f oll ow ingh is d ivo rce in July 20 00 . R . at 2. Th e B o a r dc o n c l u d e d t ha t d es pi te Mr . Re ye s's as se rt io ns th athe wa s n otaw ar e o f hi s w if e's act ivi tie s an d ear

ne d inc om e d

uri ng that pe rio d b eca

us e th eywe re i n th e p roc ess of sep aratin g, in his eli gib ili ty v eri fi cat ion rep ort s f or t hat ti m e p eri od , h e n ote d th at h e w as m arr ied , li vin g w ithhis sp ou se and

that hi s sp ou se h ad

no t w orke d d

uri ng the pre vio us ye ar and that no inc om e w as
expe cte d f

or h er i n th e cu

rre nt y ear ; thus , b ase d o n h is a sse rti on s in the se r ep ort s, the de bt w as pro pe rlycre ate d. The Board a lso de ter m ine d th at t

he ov erp aym ent in

the am ount o f $ 1, 80 2. 18 wa s properly cr eated becaus e of Mr. Reyes's failure to accurate ly report all source s of income, including Social Securi ty benefit payments. R. at 4. Th e ap pe llant m ak es f

ive ass ert ion s o f e rro r on ap pe al. First, he av ers that th e re gu lat ory de fi nit ion of ba d f aith, at 3 8 C. F. R. § 1 .9 65 (b) (2) (2 00 3), c on fe rs un fe tte red dis cre tio n u

po n V A t o de nywa ive rs whe ne ve r it so ch oo ses , c ontrary t o th e le gis lat ive int ent of 38 U.S.C . § 53 02 (c)

.5

Second, he assert s that the Board failed to comply with Ste ga ll v. Wes t , 11 Vet .Ap p. 2 68 , 271 (19 98 ), by n o t e n s uri n g th e a d ju d ic a ti o no f

th e c la im s f

o r s e rv ic e c o nn e c ti o np re v io u s ly re f e rr ed to the RO by the Board in its January 1998 decision. Third, he argues t hat the Board di d not provide an adequa te s tatement of reasons and bases for its decision bec ause it fail ed to consider38 C.F.R. §§ 1.93 1(a ),( b) ( 20 03 ); 1 .9 41 (b) (20 03 ); 1 .94 2(a ) (2 00 3), pro vis ion s th at a llo w f or s us pe nsion, termination, or compromise of debt. Next, the appellantmain ta in s th at pursuantto 38 C.F.R. § 1. 91 3 (2 00 3), VAsh ou ld h av e co nd uc ted a p ers on al i nte rvi ew . F ina lly , h e av ers that th e C ourt should reconsi der its de cis io n in Barger v. Principi , 16 Vet.App. 132 (2002), and apply t he req uir em en ts o f 3 8 U .S .C. § 5103( a) a nd 38 C. F. R. § 3 .1 59 to w aiv er c lai m s. Ap pe llant' s B rie f (App. Br.) at 14.

II. AN AL YS IS

A. 38 U. S. C. § 5 30 2: S tat uto ry B ars to W aiv er o f O ve rpaym ents Pursu ant to 3 8 U. S. C. § 5 30 2(a ) " [t ]h ere s ha ll be n o rec ov ery o f paym ents o r ov erp aym ents (or any inter est

the reo n) o f anybe ne fi ts und er anyof the law s ad

m ini ste red

bythe Se cre tar

y whenever the S ec re ta ry dete rmines that recovery would be against e quity and good consci ence." Although this pr ovision, at fir st blush, appea rs to setno limit on when a waive r of debt or
ov erp aym ent m ay

be per m itt ed , su chrequ est s fo r wa ive r are co ns tra ine d b y three sp eci fi ed statut ory bars set fort h in 38 U.S.C. § 5302(c). That provisi on absolutel y precludes t he Secretar y from granti ng a w aiv er, "if

, in th e S ecr etary' s o pin ion , th ere ex ist s in co nn ect ion

wi th t he cla im fo r su ch
wa ive r an ind

ica tio n o f frau d, mi

sre pr ese nta tio n o r b ad

fai th on t he p ar t of t he person or per sons having an inte rest in ob ta in in g a waiver of such recove ry or the col lection of such i ndebtedness." 38 U .S .C . § 53 02 (c) (em

ph asi s ad de d); see al

so Farle ss v. Derwinski, 2 Vet.App. 555, 556 (holding that "[ b] ef

ore the Bo ard

m ayde ter

m ine wh eth er ' eq

uit y and go od consc ien ce' af

fo rds wa ive r, ho we ve r, i t m

us t det erm ine whe the r 't

he re ex ist s . . . anind icatio n o f f rau d, m isr ep res entat ion

or b ad faith.' . . . If such is found, the Board cannotwaive the indebt edness by inquiry into 'equity and good
co ns cie nc e' cri ter ia" ). Thus , at iss ue in th is cas e is the S ecr etary' s int erp ret ati on o f a statut e, and

his im ple m en tin g re gulation, that cr eat e an ab so lut e b ar t o anyco ns ide rat ion of eq uit ab le r eli ef regarding wai ver of any debt owed to VA. The Court will now examine, therefore, the le gislati ve history of the st atute, as wel l as the Secr etary's regulat ory im plementation, to discern whether the6

Secretary's interpreta tion of "bad faith" i s permissible. See Chevron , U. S. A. , Inc

. v. Natural Res. De f. Co un cil

, In c. , 467 U.S. 837, 842 (1984) (holding that where a statute has a pl ain meaning, the Court shall gi ve effect to that meaning; however, where st atute is sile nt as to the matter at issue, t he Ag en cy ' s attem

pt at f ill ingth e ga

p lef t b y the s tat

ute s ho uld

be af fo rde d d ef

ere nc e); see also NLRB v. United Food & Com mercial Work ers Union , 4 84 U. S. 11 2, 12 3 (1 98 7) ( ho ldi ng that if a st atute is s ile nt a s to the m att er at is su e, Ag en cy ' s attem pt at f ill ingthe ga

p "w ill ge ne ral ly b e su sta ine d a s lon g a s it ref lec ts a pe rm iss ibl e co ns tru cti on

of the statut e") ; cf. Smith (Ellis) v. Nicholson , 451 F.3d 13 44 , 1 35 0 (F ed . C ir. 20 06 ) ( holding that wh ere VAm ere ly r ep lac es s tat uto ry am big uit y w ith regulator y ambiguity, VA' s interpr etation of it s own regulati on " be co mes ' of controlling wei ght
un les s it is p lai nly err on eo us or i nc on sis tent w iththe reg ulatio n' " (i nte rna l ci tat ion s o m itt ed )). 1. Sta tutor

y L angu age a nd

Le gis lat iveHi

sto ry In 1 98 9, Congress amended section 5302(c) , to replac e the then- existing s tandard barring waiver if there was "an i ndication of fraud, material fault , or lack of good faith," wit h the curre nt stand ard barri ng wa ive r if

the re i s "an in dic ati on

of fr au d, m isr ep res entat ion or b ad fa ith [. ]" Se e Pub. L. 101-237, § 311(2)(B), 103 Stat. 2062, 2076 (Dec. 18, 1989). In re gard to thi s change from "la ck of go od fa ith " to "ba d f

aith," a lth ou ghfo cu sin g m ain ly o n c oll ect ion of ho m e-l oan d eb ts, Re pre sentat ive Mo ntg om ery , o n b eh alf of the U. S. Ho us e o f R ep res entative s Committee on Veterans Af fa ir s , re p o rt e d

th at t h e p rov isi on

"w ou ld, ef

fe cti ve up on

en actm ent, ( 1) g en era llym ak e m an dator y the granti ng of waivers of hom e-loan d eb ts i f collec tion of the debt would be a gainst equi ty and good conscience; and (2) prohi bit waiver i n case s invol ving 'fraud, misrepres entation, or bad fait h.' Th e C om m itt ees int en d th at a

bo rro we r' s ab an do nm ent of a mo rtg ag e des pit e h av ingthe fi nanc ial abilit y to make the m ortgage payments be consi dered 'bad faith' in connection with t he defaultand th at'misr ep re se nt at io n' in cl ud e on ly a mate ri al misr ep re se nt at io n. " Vet er an s' H ea lt h Ca re Pr og ra ms Am endments of 1989, 135 C ONG
. REC . H9095, H9115 (daily ed. Nov. 20, 1989) (sta tement of Rep. Mo ntg om ery ). F urt

he r, i n re po rti ng be fo re t he U. S. Ho us e o f R ep res entat ive s o n th e p rop os ed change, Represent ative Mont gomery stated: It h as a lw ay s been the C on gre ss' inte nt t o a ff ord wa ive r re lie f whe n e qu ita ble considerat ions warrantit. . . . Although the l aw permits waiver whenever colle ction of the ind eb ted

ne ss w ou ld v iol ate eq

uit y a nd go od con sci en ce, the D ep artm ent re lie s he av ilyon

tw o a dd iti onal c rit eri a – ba lan cin g o f f

au lt and the ve ter an ' s ab ili ty t o repay. The comm ittee disagr ees with the D epartment's undue emphasis on these two7

criter ia. By disagree ing, theco mm ittee d oes n ot i mp ly t

ha t it co nd on es f ra ud , w as te, or gross neglect on the veteran's part. Th e co mm itt ee b eli ev es t hat if the ve ter anis not at fault i n creati ng an indebtednes s due t o improper action or l ack of action by the De partm ent, r eli ef

sh ou ld b e g ranted

to t he ve ter anin s uc h c ase s. Veterans' Hom e Loan Mortgage I ndemnity Act of 1989, 135 C ONG
. REC . H2289, H2291 (daily ed. June 6, 19 89 ) (s tat em ent of Re p. Mo ntg om ery ). Specifically, i n regard to ba d faith, Senator Crans ton report ed: The comprom ise agree ment includes a provisi on to modify section 3102 of title 38 to m ak e suc h de bt w aiv ers mand ato ry, rath er th andisc ret ion ary , if the ve ter anm eet s the ' eq uit y and go od co ns cie nc e' tes t. C urr ent law p rohibi ts w aiv ers in c ase s involving 'fraud, misrepresentat ion, material fault, orlack of good faith' in obtaining the waiver; the comprom ise agree ment would m odify this lis t to incl ude only 'fraud, m isr ep res entat ion , o r ba d f aith. ' Th e co mm itt ees de let ed ' m ate ria l f

au lt' because it is subsumed within the other t erms and us ed theter m ' ba d fa ith ' to req uire a hig he r sta nd ar d o f cu lpa bil ityin o rd

er to d en y a wa ive r. Veterans' Benefits Amendm ents of 1989, 135 C ONG
. REC . S16443-01, S16460 (daily ed. Nov. 20, 19 89 ) (s tat em ent of

Se n. Cr an sto n) ( em

ph asi s ad de d). Th e intent of

Congress, as we ll a s th e p lai n lang ua ge of the statut e, is n ot c lear as to what precisel y was meant by "bad faith." Rather, it is only cle ar that i n requiri ng an affirmative showing of ba d f ait h, Co ng res s inten de d to m an date a "hi gh er s tan dard o f c ulp ab ili ty t o d eny w aiv er. " Id. No stand ard s w ere pro vid ed , o the r th an the aband onm ent of the paym ent of

a m ort ga ge sec ure d through the VA home loan program when one is financially abl e to continue such payments, for de ter m ini ng wh at a cti on s co uld co ns tit ute "ba d f

aith. " T hu s, the ter

m "ba d f aith" i s su ff

ici ently vague to all ow VA to exercise its 38 U.S.C . § 501 rulemaking authorit y and "fill the gaps" left by the statute. See Chevron, U.S.A., Inc., 46 7 U .S . at 84 2-4 3; see also NLRB , 4 84 U. S. at 1 23 ; seeals o B LACK ' S L A W D I CT I ONAR Y 134 (7th ed. 1999) ( defining "bad faith" as "dishones ty of belief or purpose" and r ecogni zing that " '[a] complete catalogue of types of bad faith i s impossible but the following types are among those which have been recognized i n judicial decisions: evasion of the sp iri t o f the b arg ain , la ck

of dil ige nc e an d s lac kin g o ff , w ill fu l re nd eri ng of

im pe rf ect pe rf orm an ce, ab us e o f a p owe r t o s pe ci fy t erms, a ndint er fer en ce wit h o r f ai lu re to co op er at e i n t he ot he r p ar ty 's performance'" (internal ci tations omitted) ).
2. Regulatory Int erpretati on8

Fo llo wi ng the statut ory

am en dm ent, t

he Se cre tar

y am en de d 3 8 C .F .R . § 1. 96 5(b )(2) , providing thi s definition: Bad faith. This term generall y describes unfairo r dec eptive deal ing by one who seeks to gai n thereby atanother's expense. Thus, a debtor's conduct in conne ction wi th a de bt aris ingfr om

parti cip ati on

in a VAb en ef

its /se rvi ces p rog ram

e xh ibi ts b ad fa ithif su chco nd

uc t, a ltho ug h n ot u

nd ert ak enwi th a ctu al f

rau du lent intent, i s un de rtake n w ithintent to seek an unf air advanta ge , w ithkn ow led ge of the lik ely co ns eq ue nc es, an d re su lts in a

los s to the go ve rnm ent. 38 C. F. R. § 1 .9 65 (b) (2) (19 93 ); seeals o 57 Fed. Reg. 15,046 (Apr. 24, 1992) (noting thatPub. L. No . 1 01 -23 7 "r em ov ed

m ate ria l f

au lt and lac k o f g oo d f

aith a s ab so lut e b ars to w aiv er and rep lac ed the m wi th b ad fa ith . A s a r esu lt, w e m

us t n owre vis e the three re gu lat ion s to c om ply wi th t he se n ew req uir em en ts" ). Th e Se cre tar y, in p rom

ulg ati ng thi s re gu lat ory

de fi nit ion , p rov ide d n o g uid an ce a s to how this definit ion should be appl ied. Se e 57 Fed. Reg. 15,046. In the notice of final rul emaking, VA recognized the Court 's decision in Fa rless, su pra , which n ot eda n inconsist ency between the authorizi ng st at utory provis ion, 38 U.S.C. § 5302, and the implem enting regul ation, 38 C.F.R. § 1 .9 65 (b) (2) , in

that th e re gu lat ion

fa ile d to in clu de the st atutor y lan gu ag e "in dic ati on

of" pri or t o "fraud, misrepresentat ion or bad faith." 58 Fed. Reg. 3840 (Jan. 12, 1993)

. The only change to t he propo se d re gu lat ion in the final rule was to i nclude this introduct ory language. Furt hermore, the Secretary appears not t o have provided further guidance in hi s adjudicat ion manual regarding how this provi sion should be appl ied. Th e ap pe llant a sse rts that th is r eg ulator y inter pre tat ion of "ba d f aith, " as ap pli ed , is too bro ad and essenti ally all ows VA "unfettered discr etion . . . to deny a s many waivers as it wishes, t hereby thw art ing the leg isl ati ve int ent." Ap pe llant' s R ep ly B rie f at 11. Th e Co urt

doe s no t ag ree . T he m ere fact "that t he applicat ion of the VA regulations as a pract ica l matter may benefit one class of veterans more than anot her, or not bene fit one cl ass of veterans at a ll, is notgrounds for finding the VA ' s inter

pre tat ion unrea so na

ble ." Na t'l

Or g. of V ete ra ns ' A dv oc ate

s v. S ec' y o f V ete ra ns Af fai rs, 47 6 F .3 d 8 72 , 8 77 (F ed . C ir. 20 07 ). R ath er, the Court c on clu de s th at the Se cre tar y' s re gu lat ory interpr et at io n as set forth in § 1.965( b)(2), which r equires an a ffirm ative showing t hat (1) t he appellant 's conduct was undert aken wit h an intent t o seek an unfair advant age, (2) with knowle dge of the likely consequences, and (3) thatres ulted in a loss t o the government, is consis tent with t he9

int en t of Co ng res s in

req uir inga h igh er d eg ree of cu lpa bil ityto bar w aiv er, an d is no t "p lai nly
err on eo us ." Sm ith (Elli

s) , 451 F.3d at 1350.

B. Ap pli cat ion

of § 1 .9 65 (b) Havin g c on clu de d th at the Se cre tar y' s inter pre tat ion of the statut ory

ter m "bad faith " is consistentwith the legi slative intent of Congres s and not plainl y erroneous, t he Court must now examine the applicat ion of that inte rpretat ion in this instance. See Butts v. Brown , 5 Vet.App. 532, 53 9-4 0 (1 99 3) ( ho ldi ng that the ap pro pri ate stan dard of revi ewfor

an is su e o f a

pp lic ati on

of lawto the parti cu lar

fa cts of a ca se i s the "arbit rary, cap ric iou s, ab us e o f d isc ret ion , o r ot he rw ise no t in
acc ord an ce w ithlaw " st an dard o f r ev iew ). I n lig ht of th e leg isl ati ve his tor

y o f 3 8 U .S .C . § 53 02 (c) , which places the burden of proof on the Secr etary to make an affirmative finding of "bad faith," we
co nc lud e th at the Se cre tar y' s application of

the statut ory

bar of ba d f aith in thi s in stanc e w as "arbit rary, capr icious, an abus e of discreti on, or otherwise notin accordanc e with law." 38 U.S.C. § 7 26 1(a )(3 )(A ); seeals o B utt s, 5 Vet. App. at 539-40. Th e B oard, in e ach

de cis ion , m

us t p rov ide a

written s tat em ent o f the re aso ns or b ase s f or i ts fi nd ing s an d c on clu sio ns o n all m ate ria l i ssu es of f act and law p res ented

on the rec ord ; ad eq

uate t o
en ab le a cla im ant to un derstan d th e p rec ise ba sis fo r th e B oard’ s d eci sio n, as w ell as t o f aci lit ate revi ew i n th is Court. Se e 38 U. S. C. § 7 10 4(d )(1 ); Allday v. Brown , 7 Ve t.A pp . 5 17 , 5 27 (19 95 ); Sim on v . D erw ins ki , 2 Ve t.A pp . 6 21 , 6 22 (19 92 ); Gi lbe rt v . D erw ins ki , 1 Ve t.A pp . 4 9, 57 (19 90 ). To comply with this require ment, the B oard m ust analyze the credibili ty and probative value of the evidence , accountfor the evidence t hat it finds t o be persuasi ve or unpersuas ive, and provide the reasons for it s reject ion of any material evidence favorable to the claimant. See Caluza v. Brown , 7 V et. Ap p. 49 8, 506 (199 5), aff ’d pe r cur iam , 78 F.3 d. 604 (Fed . Ci r. 19 96 ) (t ab le) ; Ga br iel so n v
. Brown , 7 Ve t.A

pp . 3 6, 39 -40 (19 94 ); Gi lbe rt, su pra . The clear i ntent of Congres s was to "make debt
wa ive rs m an dator

y, rathe r th andis cre tio nary, if the clai m ant m eet s th e ' eq uit y and go od co ns cie nc e' tes t"; an d, it wa s the equ all y cle ar intent of Con gre ss to requ ire "a hig he r stand ard of cu lpa bil ityin
or de r to d en y a waiver " by adopting t he "bad faith" t est. 135 C ONG
. REC . S 16 44 3-0 1, S1 64 60. Thus , it is the Se cre tar

y' s b urd ento pro ve ba d f aith, an d it

is the Bo ard ' s re sp on sib ili ty t o c learly articul ate its reasons or ba ses for finding that i t exists . To m ake such findings, when rai sed on the10

re co rd , t he Boa rdsh ou ldco ns id eran y e vi de nc e a ndr e l e v a n tfac to rs be ar in g o n t he cl ai mant 's kn ow led ge of

the ne ed to rep ort an d h is awaren ess of

inc om e su

bje ct t o re po rti ng . D uri ng ora l argument, the appellant 's counsel raised s everal suc h fact or s that could warrant comm ent by the Board, in this i nstance and i n general when consi dering the e xistence of bad faith i n requests for
wa ive rs. Th ese inc lud ed

the lev el o f t

he cla im ant' s ed

uc ati on , th e ex ist en ce o f anylan gu ag e b arr ier s, any assist an ce the cla imant m ay have had in completing the income-reporting forms, information
submi tt edto an y ot he r fe de ra l ag en cy requi ri ng inc ome- re po rt in g fr om the cl ai mantdu ri ng th e t ime pe rio d in qu est ion , and

any sta tem ents f

rom fr ien ds an d f

am ilym em

be rs r eg ard inghis or h er kn owl ed ge an d i nt en t i n a tt empt in g to compl y wi th the requi re ment s by rep or ti ng cha ng es in i nc ome over the year s. In this i nstance, the Board concluded tha t the appel lant act ed in bad faith be ca us e "he pe rsi ste ntl y f

ail ed to a ccurate ly r ep ort

his fam ilyinc om e. Hi s ac tio ns , whic h g av e ri se t o th is
ov erp aym ent, d em on str ate an int ent to see k unf air advanta ge wi th r eg ard

to VA p en sio n b en ef

its

. Further, h e h ad

be eninf orm ed of the lik ely

co ns eq ue nc es, an d h is i nte nti on al f ail ure to r ep ort inc om e re su lte d in

a lo ss t o th e g ov ernm ent in the am ount o f t

he overpa yme nt. " R . at 8. Thus , alt ho ug h th e B oard c on clu de d th at the ap pe llant h ad be en"i nf orm ed " of the ne ed to r ep ort ch an ge s in income, the Board failed to discuss the appellant 's knowledge of the need to reportincome and his aw are n e s s o f

th e in c o m e th a t h e f

a il e d to re p o rt

. S u c hd is c u s s io nis e s s e n ti a l t o anin f orm ed
rev iewbythe Co urt

of the Bo ard ' s find ing that th e ap pe llant' s f ail ure to r ep ort

inc om e w as an int en tional act . 3 8 C .F .R . § 1. 96 5(b )(2 ) (r eq uir ing a sh ow ingof

act ua l "i nte nt t o s eek

anun fa ir advanta ge " to f

ind bad fai th) . Furth erm ore , th e o nly ev ide nc e th e B oard e va luated an d a pp are ntl y rel ied up on wa s p rov ide d b y th e ap pe llant' s own statem ents. In do ing so , th e B oard f ail ed to a dd res s fully his asser tions thathe was not aware of th e consequences of fail in g to t imely report, thathe believed he was e ntitle d to the fun ds, or t hat he was unaware of his wife's receiptof income f rom 1998 to 1999 due to thei r pending divor ce pro ce ed ings. Therefore, in r elying sole ly on the ap pe llant' s o wn

rep ort s to fi nd

that he act ed

in b ad fa ith , w ith out f

urt he r ad dre ssing the oth er relevantevidence, the Board failed to com ply with its duty to fully explain the basis for its deci sion that the e vid en ce was sufficient to find tha t the sta tutory barto equitabl e considera tion should be11

applied. Thus, re mand is re qu ir edfor the Board t o provide an adequa te stat ement of reasons or ba ses for its de c is io nto d e n yth e ap p e ll an t a w a iv e r b a s e d

o nth e c o n c lu s io nth a t h e a c te d in ba d fa ithin the creatio n of

the de bt. 38 U.S .C . § 7 10 4(d )(1 ). U po n re m an d, the Bo ard

sh ou ld c on sid er the fa cto rs n ote d a

bo ve th at we re rai sed

in t he fi rst ins tan ce b y th e ap pe llant' s co un sel durin g o ral argument. Se e Ma

gg itt v. Wes t , 2 02 F. 3d

13 70 (F ed . C ir. 20 00 ). C. Fa ilure t o C on sid er 3 8 C .F .R . § § 1 .9 31 (a) ,(b ); 1 .9 41 (b) ; 1. 94 2(a ) Th e ap pe llant a sse rts that th e B oard p rov ide d an in ad equate s tat em ent of rea so ns or b ase s because itfailed to disc uss 38 C.F.R. § 1.931(a), inability t o pay, §1.941(b), suspens ion of collecti on activit y, and § 1.942(a), te rmination of c ollecti on act ivity. Ini tiall y, the Court notes that pursua nt to 38 C.F.R. § 1.901 (2003), "[t]he standards s et forth in §§ 1.900 thr ough 1.954 shall appl y to VA handling of civil claims for m on ey a nd proper ty but the fail ure of the agency to c omply with any pro vis ion of th e stand ard s sh all n ot be ava ila ble as a de fe ns e f or anyde bto r." Th e S ecr etary a sse rts that t he se pro vis ion s are n ot rel ev ant t o the p res ent s itu ati on be cau se t ho se r eg ulatio ns "pe rta in t o housing and small business l oans . . . In addition, these provisions pertain to the collec tion of the de bt , no t wh et he r the deb t i s va li d orwhe th errec ov ery of the deb t may be wa iv ed ." S e c r e t a ry 's Brief at 16. As to the Secr etary's first ass ertion, t he Court finds no limitation i n the statutory or reg ulator y p rov isi on s th at r est

ric ts the ir a

pp lic ati on

to ca ses inv olv ingho us ing or s m all bu sin ess loan d eb t. R ath er, 38 C. F. R. § 1 .9 07 sp eci fi cal ly s tat es t hat "the ter

m s ' cla im s' an d ' de bt' are syno nym ou s an d inter ch an ge ab le. Th eyref er t o anyam ount o f m on eyor p rop erty whic h h as b een determine d by a n appropriat e official of the VA to be owed to the Unite d States by any per son, organizat ion or enti ty, except anot her federal age ncy." 38 C.F.R. § 1.907(a) (2003). However, the Court concludes t hat because the issue before the Board was whether the appella nt's debt was valid,
no t w he the r it

co uld be co lle cte d, co ns ide rat ion of the co lle cti on

provi sio ns bythe Bo ard

pri or t o a determination on the validit y of the debt would have been pr emature. Thus, the C ourt can find no error wit h the Board's failure to considerthese inappl icable r egulations

. Se e S ch afrath v. De rw ins ki , 1 V et. Ap p. 58 9, 59 3 (1 99 1) ( ho ldi ng that th e B oard i s re qu ire d to conside r al l ev ide nc e o f r eco rd and to consider , and discuss i n its deci sion, a ll "pot entiall y applicabl e" provisi ons of law and reg ulatio n); see also 38 U. S. C. § 7 10 4(a ); Charles v. Princi pi , 1 6 V et. Ap p. 37 0, 37 3 (2 00 2).12

D. Failure to Conduct a Personal Int erview Pursuantto 38 C.F.R. § 1.913 (2003) Pursuant to 38 C.F.R. § 1.9 13, VA"will, to t he extent feasi ble, underta ke personal i nterviews whenever request ed by debtors and in other cases having regard f or the am ounts involved and the pro xim ityo f ag en cyrep res entat ive s to the de bto rs. " 38 C. F. R. § 1 .9 13 (20 03 ); seeals o 69 Fed. Reg. 62188, 62195 (Oct. 25, 2004) (amending VA's debt collecti on regulations to com ply with the Debt Collection I mprovem ent Act of 1996, Pub. L. 104-134, 110 Stat . 1321, 1358, and in the proce ss of
am en din g th ese pro vis ion s, rem ov ing38 C. F.R. § 1.91 3 (2 00 3)) . A ga in, the Co urt no tes that pursu an t to 38 C.F .R . § 1. 90 1 (20 03 ), V A' s fa ilure to com ply with this prov isi on

is not avai lab le a s a "defense" for the de btor. Even assuming that thi s provisio n co ul d be a basis for re mand, the ap pe llant d oe s n ot a sse rt, no r do es t he rec ord indicate , th at at any ti m e d uri ng the co urs e o f h is ap pe al h e "r eq

ue ste d" s uc h a per so na l int erv iewas req uir ed by 3 8 C .F .R . § 1. 91 3 (2 00 3). Th e C ourt concludes, the refore, that r emand f or compliance with this provision i s not warrant ed. E. Ste ga ll Violation The appellantasserts that the Boar d failed to comply with Ste ga ll , su pra , i n ensur ing compliance with the 1998 Boar d' s re fe rra l of cla im s f or VA d isa

bil ity com pensation for devel opment and adjudicat ion by the RO. Pursuant to Ste ga ll , "a remand by this Court or t he Board imposes upon the Se cr et ary of Veterans Affairs a concomitant duty t o ensure compliance with t he terms of the remand. . . . [and] whe re . . . the remand orders of the Board or t his Court are not complied with, the Board its elf errs in fail ing to insur e compliance." 11 V et .Ap p. a t 272. In t his insta nce, the Board, in i ts 1 99 8 deci sion, referre d rather t han remanded the claims to the RO for adjudicat ion. Se e L ink v. Wes t , 12 Vet.App. 39, 47 (1998) (holdi ng that claims referred by the Board are not ri pe for review by the Court) . Thes e claims were not before the Boar d when it issued i ts decisi on on ap pe al. Thus , th e C ourt c anno t co nc lud e th at the Bo ard err ed in f ail ingto e ns ure co m

pli an ce w ith Ste ga ll, su pra , in regard t o the clai ms that were referred to t he RO in the 1998 Board decisi on.

F. 38 U. S. C. §5 10 3 (a ) The appellanturges the Courtto reco nsider it s decis ion in Ba rger, su pra , th at the no tic e provisions of 38 U.S.C. § 5103(a) do not a pp ly t o claims involving waiverof debt. Se e B ar ge r ,13

16 Vet.App. at 137-38 (finding no error with the notice provi ded to th e ap pe llant pur suant to the sp eci fi c st atutor

y n oti ce p rov isi on s re gardi ng wa ive r of de bt u nd er 3 8 U .S .C . § 53 02 (a) ). T he Co urt ha s co ns ist entlyhe ld th at th e no tic e p rov isi on s o f 3 8 U .S .C . § 51 03 (a) do no t ap ply to d eb t w aiv er cla im s, an d th

us , f ind s n o e rro r w iththe Bo ard ' s d eci sio n in thi s re gard. See Lueras v. Princi pi , 18 Vet.App. 435, 438 (2004) (" The langua ge in Ba rger clearl y and explici tly precl udes applica tion of the VC AA[V ete ran s Cl aim s As sis tan ce A ct of 200 0, Pub . L. No. 106 -47 5, 114 St at. 20 96 ] n oti ce provisions t o chapter 53 pr oceedings.")

. G. A rg umen ts Pr es en te d fo r t he Fi rs t T ime Th e ap pe llant r ais ed

on ap pe al, fo r th e f

irs t ti m e, sev era l arg um ents d uri ng the co urs e o f o ral arg um en t. Al tho ug h th e ap pe llant u rge s th at the se i ssu es are r ipe fo r re vie w b eca us e th eywe re f

irs t ad dre sse d b y th e S ecr etary i n h is b rie f, the Co urt do es n ot ag ree . If

the ap pe llant b eli ev ed

that su ch iss ue s w ere cri tic al t o th e p rop er r eso lut ion of thi s ap pe al, he sh ou ld h av e ad dre sse d th em tho rou gh ly in his repl y brief. It is not appropri ate, however, for an appel lant "'to rai se, for the first t ime, an issue for appellate review'" during the c ourse of oral ar gument. Carbino v. West, 168 F.3d 32, 34 (Fed. Cir. 1999) (quoti ng Amhil Enters. Ltd. v. W awa , Inc

. , 8 1 F .3 d 1 55 4, 15 63 (F ed . C ir. 19 96 )). Th e Feder al C irc uit

an d th is C ourt c on sis tentlyhave he ld t hat "[ a] n im

pro pe r or lat e pre sentat ion

of aniss ue or argument unde r th e co urt ' s ru les ne ed no t be co ns ide red

an d, in f act , ord inaril y s ho uld

no t be co ns ide red ." Carbino , 16 8 F. 3d at 34; seeTu bia no sa v. De rw ins ki , 3 Vet.App. 181, 184 (1992) (not ing that t he Secretary "should have deve loped and prese nted all of his arguments in his initi al pleadi ng") (emphasis in ori ginal). Furt hermore, "[a]dvancing different arguments at successive stages of the appellate process does not serve the inter ests of the part ies or the Co urt . S uc h a

pra cti ce h ind ers the de cis ion -m ak ing pro ces s an d ra ise s th e und esi rab le s pe cte r of pie cem eal lit igatio n. " Fu ge re v . D erw ins ki , 1 Vet.App. 103, 105 (1990).

III . C ON CL US ION Af ter co ns ide rat ion

of the ap pe llant' s an d th e S ecr etary' s b rie fs , o ral arg um ent as pre sented
o nAp ri l 2 5 , 2 0 0 7 , an d

a r e v ie wo f

th e r e c o rd

o na p p e a l, th e B o ard ' s O c to b e r 2 , 2 0 0 3 , d eci sio n is14

AF FI RM ED to t

he ex tent th e B oard c on clu de d that the noti ce pr ov isi on s of 38 U .S .C . § 51 03 we re not applicable. This de ci si on is VACATED to the exte nt that t he Board concluded t he appellant acted in bad fait h in the cre ation of the overpa yment, and REMAN DED fo r fur th er a djudicati on consistentwith this dec ision.