I 

108TH CONGRESS 

2D SESSION H. R. 4032

To amend title 38, United States Code, to provide additional safeguards 

for Department of Veterans Affairs benefit recipients who have fiduciaries for receipt and management of benefit payments, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 25, 2004

Mrs. DAVIS of California (for herself, Mr. MICHAUD, Mr. EVANS, Mr. FILNER, 

Ms. CORRINE BROWN of Florida, Mr. RODRIGUEZ, Ms. HOOLEY of Oregon, Mr. STRICKLAND, Mr. GRIJALVA, Mr. FRANK of Massachusetts, 

Mr. BISHOP of Georgia, Mr. HOLDEN, Mr. BRADY of Pennsylvania, Mrs. 

NAPOLITANO, and Mr. CHANDLER) introduced the following bill; which 

was referred to the Committee on Veterans’ Affairs 

A BILL

To amend title 38, United States Code, to provide additional 

safeguards for Department of Veterans Affairs benefit 

recipients who have fiduciaries for receipt and management of benefit payments, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Veterans Fiduciary 

5 Act of 2004’’. 
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1 SEC. 2. DEFINITION OF FIDUCIARY. 

2 (a) IN GENERAL.—(1) Chapter 55 of title 38, United 

3 States Code, is amended by adding at the end the fol4 lowing new section: 

5 ‘‘§ 5506. Definition of ‘fiduciary’

6 ‘‘For purposes of this chapter and chapter 61 of this 

7 title, the term ‘fiduciary’ means—

8 ‘‘(1) a person who is a guardian, curator, con9 servator, committee, or person legally vested with 

10 the responsibility or care of a claimant (or a claim11 ant’s estate) or of a beneficiary (or a beneficiary’s 

12 estate); or 

13 ‘‘(2) any other person having been appointed in 

14 a representative capacity to receive money paid 

15 under any of the laws administered by the Secretary 

16 for the use and benefit of a minor, incompetent, or 

17 other beneficiary.’’. 

18 (2) The table of sections at the beginning of such 

19 chapter is amended by adding at the end the following 

20 new item:

‘‘5506. Definition of ‘fiduciary’.’’.

21 (b) CONFORMING AMENDMENTS TO SECTION

22 5502.—Section 5502 of such title is amended— 

23 (1) in subsection (a)—

24 (A) in paragraph (1), by striking ‘‘other 

25 person’’ and inserting ‘‘other fiduciary’’; and 
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1 (B) in the second sentence of paragraph 

2 (2), by inserting ‘‘for benefits under this title’’ 

3 after ‘‘in connection with rendering fiduciary 

4 services’’; 

5 (2) in subsection (b), by striking ‘‘guardian, cu6 rator, conservator, or other person’’ each place it ap7 pears and inserting ‘‘fiduciary’’; and 

8 (3) in subsection (d), by striking ‘‘guardian, cu9 rator, or conservator’’ and inserting ‘‘fiduciary’’. 

10 (c) CONFORMING AMENDMENT TO SECTION 6101.—

11 Section 6101(a) of such title is amended by striking 

12 ‘‘guardian, curator,’’ and all that follows through ‘‘bene13 ficiary,’’ and inserting ‘‘fiduciary (as defined in section 

14 5506 of this title) for the benefit of a minor, incompetent, 

15 or other beneficiary under laws administered by the Sec16 retary,’’. 

17 SEC. 3. INVESTIGATION AND QUALIFICATION OF FIDU18 CIARIES. 

19 (a) IN GENERAL.—Chapter 55 of title 38, United 

20 States Code, as amended by section 2, is further amended 

21 by adding at the end the following new section: 

22 ‘‘§ 5507. Investigation and qualification of fiduciaries 

23 ‘‘(a) Any certification of a person for payment of ben24 efits of a beneficiary to that person as such beneficiary’s 
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1 fiduciary under section 5502 of this title shall be made 

2 on the basis of— 

3 ‘‘(1) an investigation by the Secretary of the 

4 fitness of that person to serve as fiduciary for that 

5 beneficiary, such investigation—

6 ‘‘(A) to be conducted in advance of such 

7 certification; and 

8 ‘‘(B) to the extent practicable, to include a 

9 face-to-face interview with such person; 

10 ‘‘(2) adequate evidence that certification of that 

11 person as fiduciary for that beneficiary is in the in12 terest of such beneficiary (as determined by the Sec13 retary under regulations); and 

14 ‘‘(3) the furnishing of any bond that may be re15 quired by the Secretary. 

16 ‘‘(b) As part of any investigation of any person under 

17 subsection (a), the Secretary shall request information 

18 concerning whether that person has been convicted of any 

19 offense under Federal or State law which resulted in im20 prisonment for more than one year. If that person has 

21 been convicted of such an offense, the Secretary may cer22 tify the person as a fiduciary only if the Secretary makes 

23 a specific finding that the person has been rehabilitated 

24 and is the most appropriate person to act as fiduciary for 

25 the beneficiary concerned under the circumstances. 
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1 ‘‘(c)(1) In the case of a proposed fiduciary described 

2 in paragraph (2), the Secretary, in conducting an inves3 tigation under subsection (a)(1), may carry out such in4 vestigation on an expedited basis that may include waiver 

5 of any specific requirement relating to such investigation, 

6 including the otherwise applicable provisions of subpara7 graphs (A) and (B) of such subsection. Any such inves8 tigation carried out on such an expedited basis shall be 

9 carried out under regulations prescribed for purposes of 

10 this section. 

11 ‘‘(2) Paragraph (1) applies with respect to a proposed 

12 fiduciary who is—

13 ‘‘(A) the parent (natural, adopted, or step14 parent) of a beneficiary who is a minor; 

15 ‘‘(B) the spouse or parent of an incompetent 

16 beneficiary; or 

17 ‘‘(C) a person who has been appointed a fidu18 ciary of the beneficiary by a court of competent ju19 risdiction.’’. 

20 (b) CLERICAL AMENDMENT.—The table of sections 

21 at the beginning of such chapter is amended by adding 

22 after the item added by the amendment made by section 

23 2(a)(2) the following new item:

‘‘5507. Investigation and qualification of fiduciaries.’’.
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1 SEC. 4. MISUSE OF BENEFITS BY FIDUCIARIES. 

2 (a) PROTECTION OF VETERANS BENEFITS WHEN

3 ADMINISTERED BY FIDUCIARIES.—(1) Chapter 61 of title 

4 38, United States Code, is amended by adding at the end 

5 the following new sections: 

6 ‘‘§ 6106. Misuse of benefits by fiduciaries 

7 ‘‘(a) FEE FORFEITURE IN CASE OF BENEFIT MIS8 USE BY FIDUCIARIES.—A fiduciary may not collect a fee 

9 from a beneficiary for any month with respect to which 

10 the Secretary or a court of competent jurisdiction has de11 termined that fiduciary misused all or part of the individ12 ual’s benefit, and any amount so collected by the fiduciary 

13 as a fee for such month shall be treated as a misused part 

14 of the individual’s benefit. 

15 ‘‘(b) LIABILITY OF FIDUCIARIES FOR MISUSED BEN16 EFITS.—(1) If the Secretary or a court of competent juris17 diction determines that a fiduciary that is not a Federal, 

18 State, or local government agency has misused all or part 

19 of a beneficiary’s benefit that was paid to such fiduciary, 

20 the fiduciary shall be liable for the amount misused, and 

21 such amount (to the extent not repaid by the fiduciary) 

22 shall be treated as an erroneous payment of benefits under 

23 this title to the fiduciary for purposes of laws pertaining 

24 to the recovery of overpayments. The amount of such over25 payment shall constitute a liability of such fiduciary to the 

26 United States and may be recovered in the same manner 
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1 as any other debt due the United States. Subject to para2 graph (2), upon recovering all or any part of such amount, 

3 the Secretary shall pay an amount equal to the recovered 

4 amount to such beneficiary or such beneficiary’s alter5 native fiduciary. 

6 ‘‘(2) The total of the amounts paid to a beneficiary 

7 (or a beneficiary’s alternative fiduciary) under paragraph 

8 (1) and under section 6107 of this title may not exceed 

9 the total benefit amount misused by the fiduciary with re10 spect to that beneficiary. 

11 ‘‘(c) MISUSE OF BENEFITS DEFINED.—For purposes 

12 of this chapter, misuse of benefits by a fiduciary occurs 

13 in any case in which the fiduciary receives payment, under 

14 any of laws administered by the Secretary, for the use and 

15 benefit of a beneficiary and converts such payment, or any 

16 part thereof, to a use other than for the use and benefit 

17 of such beneficiary or that beneficiary’s dependents. Re18 tention by a fiduciary of an amount of a benefit payment 

19 as a fiduciary fee or commission, or as attorney’s fees (in20 cluding expenses) and court costs, if authorized by the 

21 Secretary or a court of competent jurisdiction, shall be 

22 considered to be for the use or benefit of such beneficiary. 

23 ‘‘(d) REGULATIONS.—The Secretary may prescribe 

24 by regulation the meaning of the term ‘use and benefit’ 

25 for purposes of this section. 
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1 ‘‘(e) FINALITY OF DETERMINATIONS.—A determina2 tion by the Secretary that a fiduciary has misused benefits 

3 shall be considered to be a decision of the Secretary under 

4 section 511(a) of this title. 

5 ‘‘§ 6107. Reissuance of benefits 

6 ‘‘(a) NEGLIGENT FAILURE BY SECRETARY.—(1) In 

7 any case in which the negligent failure of the Secretary 

8 to investigate or monitor a fiduciary results in misuse of 

9 benefits by the fiduciary, the Secretary shall pay to the 

10 beneficiary or the beneficiary’s alternate fiduciary an 

11 amount equal to the amount of benefits that were so mis12 used. 

13 ‘‘(2) There shall be considered to have been a neg14 ligent failure by the Secretary to investigate and monitor 

15 a fiduciary in the following cases: 

16 ‘‘(A) A case in which the Secretary failed to 

17 timely review a fiduciary’s accounting. 

18 ‘‘(B) A case in which the Secretary was notified 

19 of allegations of misuse, but failed to act in a timely 

20 manner to terminate the fiduciary. 

21 ‘‘(C) In any other case in which actual neg22 ligence is shown. 

23 ‘‘(b) REISSUANCE OF MISUSED BENEFITS.—(1) In 

24 any case in which a fiduciary described in paragraph (2) 

25 misuses all or part of an individual’s benefit paid to such 
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1 fiduciary, the Secretary shall pay to the beneficiary or the 

2 beneficiary’s alternative fiduciary an amount equal to the 

3 amount of such benefit so misused. 

4 ‘‘(2) Paragraph (1) applies to a fiduciary that—

5 ‘‘(A) is not an individual; or 

6 ‘‘(B) is an individual who, for any month dur7 ing a period when misuse occurs, serves 15 or more 

8 individuals who are beneficiaries under this title. 

9 ‘‘(c) RECOUPMENT OF AMOUNTS REISSUED.—In any 

10 case in which the Secretary reissues a benefit payment (in 

11 whole or in part) under subsection (a) or (b), the Sec12 retary shall make a good faith effort to obtain recoupment 

13 from the fiduciary to whom the payment was originally 

14 made.’’. 

15 (b) CLERICAL AMENDMENT.—The table of sections 

16 at the beginning of such chapter is amended by adding 

17 at the end the following new items:

‘‘6106. Misuse of benefits by fiduciaries. 

‘‘6107. Reissuance of benefits.’’.

18 SEC. 5. ADDITIONAL PROTECTIONS FOR BENEFICIARIES 

19 WITH FIDUCIARIES. 

20 (a) ONSITE REVIEWS AND REQUIRED ACCOUNT21 INGS.—(1) Chapter 55 of title 38, United States Code, 

22 as amended by section 3, is further amended by adding 

23 at the end the following new sections: 
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1 ‘‘§ 5508. Periodic onsite reviews of institutional fidu2 ciaries 

3 ‘‘(a) INSPECTIONS REQUIRED.—In addition to such 

4 other reviews of fiduciaries as the Secretary may otherwise 

5 conduct, the Secretary shall provide for the periodic onsite 

6 review of any person or agency located in the United 

7 States that receives the benefits payable under laws ad8 ministered by the Secretary to another individual pursuant 

9 to the appointment of such person or agency as a fiduciary 

10 under section 5502 of this title in any case in which—

11 ‘‘(1) the fiduciary is a person who serves in that 

12 capacity with respect to 15 or more such individuals; 

13 ‘‘(2) the fiduciary is a certified community14 based nonprofit social service agency; or 

15 ‘‘(3) the fiduciary is an agency (other than an 

16 agency described in paragraph (2)) that serves in 

17 that capacity with respect to 50 or more such indi18 viduals. 

19 ‘‘(b) CERTIFIED COMMUNITY-BASED NONPROFIT SO20 CIAL SERVICE AGENCY DEFINED.—For purposes of this 

21 section, the term ‘certified community-based nonprofit so22 cial service agency’ means a community-based nonprofit 

23 social service agency that is in compliance with require24 ments, under regulations which shall be prescribed by the 

25 Secretary, for annual certification to the Secretary that 

26 it is bonded in accordance with requirements specified by
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1 the Secretary and that it is licensed in each State in which 

2 it serves as a fiduciary (if licensing is available in such 

3 State) in accordance with requirements specified by the 

4 Secretary. Any such annual certification shall include a 

5 copy of any independent audit on such agency which may 

6 have been performed since the previous certification. 

7 ‘‘(c) BIENNIAL REPORT.—(1) Within 120 days after 

8 the end of each even-numbered fiscal year, the Secretary 

9 shall submit to the Committees on Veterans’ Affairs of 

10 the Senate and House of Representatives a report on the 

11 results of periodic onsite reviews conducted during the two 

12 preceding fiscal years pursuant to subsection (a) and of 

13 any other reviews of fiduciaries conducted during those fis14 cal years in connection with benefits under this title (such 

15 as summaries of findings of reports of the Office of the 

16 Inspector General) that the Secretary determines to be 

17 pertinent for purposes of this subsection. 

18 ‘‘(2) Each report under paragraph (1) shall describe 

19 in detail all problems identified in such reviews and any 

20 corrective action taken or planned to be taken to correct 

21 such problems, and shall include the following: 

22 ‘‘(A) The number of such reviews. 

23 ‘‘(B) The results of such reviews. 

24 ‘‘(C) The number of cases in which the fidu25 ciary was changed and why. 
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1 ‘‘(D) The number of cases involving the exercise 

2 of expedited, targeted oversight of the fiduciary by 

3 the Secretary conducted upon receipt of an allega4 tion of misuse of benefits, failure to pay a vendor, 

5 or a similar irregularity. 

6 ‘‘(E) The number of cases discovered in which 

7 there was a misuse of benefits. 

8 ‘‘(F) How any such case of misuse of benefits 

9 was addressed by the Secretary. 

10 ‘‘(G) The final disposition of such cases of mis11 use of benefits, including any civil or criminal pen12 alties imposed. 

13 ‘‘(H) Such other information as the Secretary 

14 considers appropriate. 

15 ‘‘§ 5509. Authority to redirect delivery of benefit pay16 ments when a fiduciary fails to provide 

17 required accounting 

18 ‘‘(a) REQUIRED REPORTS AND ACCOUNTINGS.—The 

19 Secretary may require a fiduciary to file a report or ac20 counting pursuant to regulations prescribed by the Sec21 retary. 

22 ‘‘(b) ACTIONS UPON FAILURE TO FILE.—In any 

23 case in which a fiduciary fails to submit a report or ac24 counting required by the Secretary under subsection (a), 

25 the Secretary may, after furnishing notice to such fidu-
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1 ciary and the beneficiary entitled to such payment of bene2 fits, require that such fiduciary appear in person at a re3 gional office of the Department serving the area in which 

4 the beneficiary resides in order to receive such pay5 ments.’’. 

6 (2) The table of sections at the beginning of such 

7 chapter is amended by adding after the item added by the 

8 amendment made by section 3(b) the following new items:

‘‘5508. Periodic onsite reviews of institutional fiduciaries. 

‘‘5509. Authority to redirect delivery of benefit payments when a fiduciary fails 

to provide required accounting.’’.

9 (b) CIVIL MONETARY PENALTIES; JUDICIAL ORDERS

10 OF RESTITUTION.—(1) Chapter 61 of title 38, United 

11 States Code, as amended by section 4(a), is further 

12 amended by adding at the end the following new sections: 

13 ‘‘§ 6108. Civil monetary penalties 

14 ‘‘(a) PENALTY FOR CONVERSION.—Any person (in15 cluding an organization, agency, or other entity) who, hav16 ing received, while acting in the capacity of a fiduciary 

17 pursuant to section 5502 of this title, a payment under 

18 a law administered by the Secretary for the use and ben19 efit of another individual, converts such payment, or any 

20 part thereof, to a use that such person knows or should 

21 know is other than for the use and benefit of such other 

22 individual shall be subject to, in addition to any other pen23 alty that may be prescribed by law, a civil monetary pen24 alty of not more than $5,000 for each such conversion. 
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1 ‘‘(b) PENALTY IN LIEU OF DAMAGES.—Any person 

2 who makes a conversion of a payment described in sub3 section (a) and is subject to a civil monetary penalty under 

4 that subsection by reason of such conversion shall also be 

5 subject to an assessment, in lieu of damages sustained by 

6 the United States resulting from the conversion, of not 

7 more than twice the amount of any payments so converted. 

8 ‘‘(c) COSTS OF RECOVERY.—From amounts collected 

9 under this section, the amount necessary to recoup the De10 partment’s costs of such collection shall be credited to ap11 plicable appropriations, to remain available until ex12 pended. 

13 ‘‘§ 6109. Authority for judicial orders of restitution 

14 ‘‘(a) Any Federal court, when sentencing a defendant 

15 convicted of an offense involving the misuse of benefits 

16 under this title, may order, in addition to or in lieu of 

17 any other penalty authorized by law, that the defendant 

18 make restitution to the Department. 

19 ‘‘(b) Sections 3612, 3663, and 3664 of title 18 shall 

20 apply with respect to the issuance and enforcement of or21 ders of restitution under subsection (a). In so applying 

22 those sections, the Department shall be considered the vic23 tim. 
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1 ‘‘(c) If the court does not order restitution, or orders 

2 only partial restitution, under subsection (a), the court 

3 shall state on the record the reasons therefor. 

4 ‘‘(d)(1) Except as provided in paragraph (2), 

5 amounts received or recovered by the Secretary pursuant 

6 to an order of restitution under subsection (a), to the ex7 tent and in the amounts provided in advance in appropria8 tions Acts, shall be available to defray expenses incurred 

9 in the supervision and investigation of fiduciaries under 

10 this title. 

11 ‘‘(2) Paragraph (1) shall not apply with respect to 

12 amounts received in connection with misuse by a fiduciary 

13 of funds paid as benefits under laws administered by the 

14 Secretary. Such amounts shall be paid to the individual 

15 whose benefits were misused unless the Secretary has pre16 viously reissued the misused benefits, in which case the 

17 amounts shall be treated in the same manner as overpay18 ments recouped by the Secretary and shall be deposited 

19 to the credit of the applicable revolving fund, trust fund, 

20 or appropriation.’’. 

21 (2) The table of sections at the beginning of such 

22 chapter is amended by adding after the item added by the 

23 amendment made by section 4(b) the following new items:

‘‘6108. Civil monetary penalties. 

‘‘6109. Authority for judicial orders of restitution.’’.
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1 SEC. 6. EFFECTIVE DATES. 

2 (a) IN GENERAL.— Except as otherwise provided, 

3 this Act and the amendments made by this Act shall take 

4 effect on the first day of the seventh month beginning 

5 after the date of the enactment of this Act. 

6 (b) SPECIAL RULES.—Sections 6106 and 6107 of 

7 title 38, United States Code, as added by section 4(a), 

8 shall apply with respect to any determinations by the Sec9 retary of Veterans Affairs made after the date of the en10 actment of this Act of misuse of funds by a fiduciary. 

11 SEC. 7. REPORT TO CONGRESS. 

12 The Secretary of Veterans Affairs shall prepare a re13 port evaluating whether the existing procedures and re14 views for the qualification (including disqualification) of 

15 fiduciaries are sufficient to enable the Secretary to protect 

16 benefits from being misused by fiduciaries. The Secretary 

17 shall submit the report to the Committee on Veterans’ Af18 fairs of the Senate and House of Representatives no later 

19 than 270 days after the date of the enactment of this Act. 

20 The Secretary shall include in such report any rec21 ommendations that the Secretary considers appropriate.

Æ