TN 3 (09-16)

PR 06705.011 Florida

A. PR 16-173 Withholding Social Security Benefit Payments to Recover an Overpayment from a NH Convicted of Fraud

Date: August 8, 2016

1. Syllabus

When a court convicts a number holder of fraud in causing an overpayment, SSA is required to withhold the number holder’s full monthly benefits until SSA has recovered the overpayment. The agency’s authority to recover the overpayment (re: fraud) by full withholding of benefits exists, notwithstanding an order by the criminal court for the number holder to pay restitution.

2. Opinion

QUESTION

You asked for guidance regarding a “Judgment in a Criminal Case” issued by the United States District Court for the Middle District of Florida. Specifically, you asked whether this judgment, in which the court ordered the number holder to begin making payments of 10% of his net monthly income affects Social Security Administration (SSA) policy, as explained in SSA’s Program Operations Manual System (POMS) GN 02201.055, of full withholding of a number holder’s benefits to collect an overpayment where the number holder has been convicted of fraud.

OPINION

SSA’s statutory obligation to recover an overpayment is independent of the district court’s authority to order the number holder to make restitution. When a court convicts a number holder of fraud in causing an overpayment, SSA is required to withhold the number holder’s full monthly benefits until SSA has recovered the overpayment, notwithstanding an order by the criminal court for the number holder to pay restitution. The district court’s fraud conviction supports SSA’s conclusion that the number holder’s improper actions caused the overpayment and justifies SSA’s full withholding. Thus, the district court’s judgment and decision to order number holder to make restitution payments of 10% of his net monthly income does not affect SSA’s statutory obligation to recover the overpayment and authority to withhold the number holder’s full monthly benefit.

BACKGROUND

On June XX, 2015, a grand jury indicted R~, the number holder (NH), for having knowingly received $58,833.00 in benefits under Title II of the Social Security Act (Act) to which he was not entitled. On November XX, 2015, NH filed an intent to plead guilty to one count of Theft of Government Funds under 18 U.S.C. § 641, which the district court accepted by order dated December XX, 2015. By judgment issued March XX, 2016, the court placed NH on probation for five years and ordered him to pay $58,833.00 in restitution to SSA. The judgment provides that NH’s restitution shall be made payable to the court clerk for distribution to SSA’s Debt Management Section as the payee.

The court ordered NH to pay an assessment of $100.00 and to begin making restitution payments of 10% of his net monthly income to SSA until NH or SSA notifies the court that there has been a material change in NH’s ability to pay. Further, the judgment states that NH “shall forfeit to the United States those assets previously identified in the Order of Forfeiture, that are subject to forfeiture as follows: Forfeiture Money Judgment in the amount of $58,833.00.”

The information provided states that NH’s attorney and his probation officer have asked SSA to collect NH’s overpayment at the reduced rate ordered by the court because the NH has no other income.

DISCUSSION

Under section 204(a) of the Act, the Commissioner must recover any overpayment made to a Title II beneficiary. See Act § 204(a)(1). The Act states, “With respect to payment to a person of more than the correct amount, the Commissioner of Social Security shall decrease any payment under this title to which such overpaid person is entitled . . .” Act § 204(a)(1)(A) (emphasis added). Congress also expressly delegated to the Commissioner the authority to promulgate regulations regarding the means by which SSA must recover overpayments. See Act § 204(a)(1) (stating “recovery shall be made, under regulations prescribed by the Commissioner of Social Security, . . . .”). Thus, Congress entrusted the Commissioner, rather than the courts, with the primary responsibility for interpreting the Act’s overpayment provisions.

The Commissioner’s regulations specify that when SSA finds it has overpaid a Title II beneficiary, SSA will make adjustments against monthly benefits and lump sums. See 20 C.F.R. § 404.502 (2016). In particular:

If the individual to whom an overpayment was made is at the time of a determination of such overpayment entitled to a monthly benefit or a lump sum under title II of the Act, or at any time thereafter becomes so entitled, no benefit for any month and no lump sum is payable to such individual . . . until an amount equal to the amount of the overpayment has been withheld or refunded.

20 C.F.R. § 404.502(a)(1). SSA may adjust the amount withheld if SSA determines withholding the full amount each month would defeat the purpose of Title II, i.e., deprive the person of income required for ordinary and necessary living expenses. See 20 C.F.R. § 404.502(c)(1). However, such an adjustment “will not be available if the overpayment was caused by the individual’s intentional false statement or representation, or willful concealment of, or deliberate failure to furnish, material information.” 20 C.F.R. § 404.502(c)(2).[1]

SSA has also established policies and procedures regarding the recovery of an overpayment from an individual convicted of fraud. See Program Operations Manual System (POMS) GN 02201.055. Specifically, when an overpaid person is convicted of fraud, any benefit payments that become due after the conviction are to be withheld “at the full monthly benefit payment until the overpayment is recovered.” POMS GN 02201.055C.6.[2] In other words, SSA cannot waive overpayments when an overpaid person is convicted of fraud because the fraud conviction precludes a finding of “without fault.” POMS GN 02201.055C.1. Further, SSA cannot withhold more than the overpayment amount from benefits payable to an individual, but may retain any restitution the individual pays, so long as the amount does not exceed the total amount of restitution ordered by the court. See POMS GN 02201.055B. Regardless of the amount of restitution ordered by the court, the overpaid person is liable for the full amount of the overpayment. See id. Accordingly, SSA is required to withhold full benefits to collect an overpayment in cases involving fraud convictions, and a court’s restitution order does not affect SSA’s authority to collect the overpayment and to withhold 100% of the monthly benefit payment.

Here, the district court ordered the NH to pay $58,833.00 in restitution to SSA. Because the court convicted him of fraud in connection with causing that overpayment, SSA must pursue the full amount of the overpayment, including withholding 100% of the NH’s benefit payments until he has paid the overpayment in full. See Act § 204(a)(1)(A); 20 C.F.R. § 404.502(a)(1); POMS GN 02201.055.

The court’s judgment did not and could not release SSA from its statutory obligation to recover the overpayment made to NH, and did not undermine the Commissioner’s authority to do so. See, e.g. Tanker, 2015 WL 5023024, at *2-3; Skrine, 2015 WL 3932422, at *2-3; United States v. Nelson, No. 03-80712, 2013 WL 3381436, at *2 (E.D. Mich. July 8, 2013); Brown, 2012 WL 75105, at *3-4; Theede, 2010 WL 653422, at *1-2.[3]

CONCLUSION

For the foregoing reasons, we recommend that SSA immediately begin withholding 100% of NH’s benefit payments until NH has repaid the overpayment in full.

Sincerely,

Mary Ann Sloan

Regional Chief Counsel

By: Jennifer L. Patel

Assistant Regional Counsel

B. PR 13-009 Potential Formal Claim for Overpayment Recovery from a Closed Estate, the Estate’s Legal Representative or the Distributee(s) of the Estate - Florida

DATE: October 22, 2012

1. SYLLABUS

SSA cannot file a formal claim to recover the overpayment because the estate is closed. SSA also cannot recover the balance of the overpayment from the legal representative of the estate because SSA did not notify him of NH’s overpayment before the estate closed. However, SSA could potentially recover the overpayment balance from the distributee(s) of the estate.

2. OPINION

QUESTION

Based on the information provided, we understand you are requesting advice on filing a formal claim against the estate of a number holder who died owing an overpayment to the Social Security Administration (SSA). The information provided also raises questions of whether the agency can recover the overpayment from the estates legal representative or distributee(s).

OPINION

SSA cannot file a formal claim to recover the overpayment because the estate is closed. SSA also cannot recover the balance of the overpayment from the legal representative of the estate because SSA did not notify him of NH’s overpayment before the estate closed. However, SSA could potentially recover the overpayment balance from the distributee(s) of the estate.

BACKGROUND

Based on the information provided, we understand the facts to be as follows. K~, the number holder (NH), died in Florida on March XX, 2010, with an overpayment balance of $7,427, caused by an incorrect computation of her old-age insurance benefits. According to documentation received from the clerk of Citrus County Court, I~, Florida, NH’s estate had assets totaling $43,200 in value and the estate closed on June XX, 2010.

In a letter dated February 22, 2011, the Mid-Atlantic Payment Service Center (payment center) informed R~, the attorney for NH’s estate, of NH’s overpayment balance and requested that he refund the $7,427 overpayment balance from the proceeds of the estate. The letter also informed R~ of the provisions of 31 U.S.C. § 3713, which provide for the potential of personal liability of any legal representative of an estate who pays other debts from the proceeds of the estate without first satisfying a debt owed to the United States. The payment center also sent a letter the same day to the Citrus County Clerk of Court informing the court of the existence of the debt, but expressly noting SSA did not intend the letter to be a claim. R~ did not respond to the SSA’s letter.

DISCUSSION

The Social Security Act (Act) generally requires the Commissioner to recover Title II benefits when SSA overpays a person. See Act § 204(a)(1)(A); 20 C.F.R. § 404.501(a) (2012). [4] An “overpayment” includes any payment in excess of the amount to which the person was entitled for any period. See 20 C.F.R. § 404.501(a); Program Operations Manual System (POMS) GN 02201.001.A. Under the Act, the Commissioner can recoup overpayments by several methods, including requiring the overpaid person’s estate to refund the overpayment or decreasing any payment under Title II payable to the overpaid person’s estate or to any other person on the basis of the wages and self-employment income that were the basis of the payments to the overpaid person. Act § 204(a)(1)(A); see 20 C.F.R. § 404.502(b). When an overpaid person is deceased, his or her estate, the legal representative of the estate, or the distributee(s) of the estate may be liable for repayment of the overpayment. See 20 C.F.R. § 404.502(b)(1), POMS GN 02205.001.B.2; POMS GN 02205.003.A; POMS GN 02215.050.A. [5]

The legal representative of a deceased person’s estate can be held liable for the deceased person’s overpayment if SSA has notified the legal representative of the overpayment and the legal representative disburses the assets of the estate before repaying the overpayment. See 31 U.S.C. § 3713(b); POMS GN 02215.050.A; POMS GN 02215.055.A; POMS GN 02215.070. When the deceased person’s estate is closed or will not be administered and the assets of a debtor’s estate have been distributed, SSA can hold the distributee(s) of the estate liable for the overpayment to the extent of the proceeds of the estate, or property attributable to such proceeds, which are in the distributee’s possession when SSA notifies the distributee(s) of the overpayment. See POMS GN 02205.001.B.2; POMS GN 02205.003.A; POMS GN 02215.050.A; POMS GN 02215.070.A; Social Security Ruling (SSR) 86-2. The distributee(s) of the estate of the overpaid person, if properly notified, are liable for the overpayment even if SSA did not notify the estate of the deceased person’s overpayment until after the estate was probated, closed, and the assets were distributed. See SSR 86-2.

In NH’s case, SSA did not notify the legal representative of NH’s estate about NH’s overpayment until after the estate had closed and SSA has not made a claim to date. Florida has a “non-claim” statute that generally prohibits any liability of a deceased person’s estate, the legal representative of the estate, or the distributee(s) of the estate for any claim or cause of action that is made more than two years after the death of the person. See Fla. Stat. Ann § 733.710(1) (West 2012). An administrator or legal representative of an estate, who receives notice of a deceased person’s overpayment and, nevertheless, disburses estate funds for other debts and closes the estate without repaying the overpayment can be held personally liable for the amount due, up to the extent of the estate. See 31 U.S.C. § 3713(b); POMS GN 02215.070.A. However, the administrator’s or legal representative’s liability attaches only if that person has knowledge of the debt owed by the estate to the United States or notice of facts that would lead a reasonably prudent person to inquire as to the existence of the debt owed before making the challenged distribution. See U.S. v. Coppola, 85 F.3d 1015, 1020 (2nd Cir. 1996). Because of the non-claim statute, the closure of the estate and SSA’s failure to notify the estate’s legal representative of the overpayment prior to the closure of the estate, SSA cannot file a formal claim to seek recovery of the overpayment from NH’s estate or the legal representative of NH’s estate. However, SSA could attempt to recover the overpayment from the distributee(s) of NH’s estate because State non-claim statutes do not bar claims of the United States. See SSR 86-2; U.S. v. Summerlin, 310 U.S. 414, 416-18 (1940); U.S. v. Snyder 207 F. Supp. 189, 191 (D.C. Pa. 1962).

Any recovery of NH’s overpayment from a distributee of his estate would be available only to the extent the distributee either has the proceeds of the estate or property attributable to such proceeds in his or her possession when SSA notifies him or her of the overpayment. See POMS GN 02205.001.B.2; POMS GN 02215.070.A. Furthermore, the liability of each distributee would proportionate to the share of the estate he or she received. See POMS GN 02215.070.A. We do not have any information about the distributee(s) of NH’s estate or whether SSA has notified the distributee(s) about liability for repayment of NH’s overpayment. If SSA decides to pursue recovery of NH’s overpayment from the distributee(s) of NH’s estate, SSA will need to properly notify the distributee(s) and determine whether the estate’s assets can be traced to the distributee(s). See POMS GN 02215.050.B, C; POMS GN 02215.070.B.

CONCLUSION

Based on the information provided, SSA cannot file a formal claim or seek recovery of NH’s overpayment from NH’s estate or the legal representative of NH’s estate. SSA could attempt to recover NH’s overpayment from the distributee(s) of NH’s estate. Such recovery would be limited to the extent the distributee(s) has proceeds of the estate or property attributable to such proceeds in his or her possession when SSA notifies him or her of the overpayment. Any such recovery would be proportionate to the amount the distributee received from the estate.

Very truly yours,

Mary Ann Sloan

Regional Chief Counsel

By Christopher Yarbrough
Assistant Regional Counsel

C. PR 04-223 In the Matter of the Estate of M~, a/k/a M~ , Case No. 02PR642, District Court, County of Arapahoe, State of Colorado

DATE: May 20, 2004

1. SYLLABUS

The opinion expands on the policy for recovery of an overpayment from an executor of an estate of a deceased debtor.

2. OPINION

Issue

Whether the Agency may recover an overpayment in the amount of $22,574.00 from V~, the personal representative of the estate of M~. [6]

DISCUSSION

Short Answer

V~ received notice of the overpayment prior to final distribution of the estate assets on April 21, 2004. Therefore, he is in violation of the Federal Priority Statute, 31 U.S.C. § 3713(b), and could be found personally responsible for repaying the overpayment. Referral of this matter to the Department of Justice (DOJ) for enforced collection, however, is premature because V~ did not receive proper notice of the overpayment. Specifically, the initial notice does not comport with Agency policy regarding overpayment notices, which includes informing the legal representative of the right to reconsideration and waiver of recovery, as well providing detailed information explaining the overpayment calculation. Because the December 14, 2004 notice (see Tab 3) is the only notice V has received regarding the overpayment, and this notice is deficient, we recommend the Great Lakes Program Service Center (GLPSC) reissue a notice that includes the requisite information noted in the Program Operations Manual System (POMS).

FACTS

According to information you have provided, at the time of her death, the decendent, M~, owed $22,574.00 to the Agency for an overpayment of benefits due to excess income. In a notice date December 14, 2003 (see Tab 3), the GLPSC informed C~ , the attorney for the estate, that "[b]ased on [V~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (id.) [7] The notice also informed C~ that according to Agency records, she was appointed as executor of the estate, and that pursuant to 31 U.S.C. § 3713, she would become personally liable for the overpayment if the estate's debt to the United States was not satisfied first and there were insufficient funds to pay all debts. The notice did not include, for example, "the monthly amount, if any, which should have been paid, . . . the months for which the different amount should have been paid, and the amount which was paid for those months." POMS § GN 02201.009B.1. (What Notice Includes). Nor did the notice mention the right to reconsideration of the overpayment determination or the right to request waiver of recovery. See id.

In a letter dated December 22, 2003 (see Tab 2), C~ informed the GLPSC that M~ died on June XX, 2002, and that V~ was appointed personal representative of the estate on July 18, 2002. C~ also noted that following V~'s appointment as personal representative, a "Notice to Creditors" was published three times in a local newspaper, beginning August XX, 2002, and ending August XX, 2002, and the "[the Agency] did not file a claim within this time period . . ." (id.) C~ noted further that "the personal representative of the Estate of M~ is denying the request by the Social Security Administration for repayment of $22,574.00," and that the estate would be closed 60 days from the date of her letter. Thus, despite the defective notice, V~, through the attorney for the estate, arguably requested reconsideration in December 2003, and the Agency has not responded to that request.

Statements from [the] XX Bank, which are attached to the "Final Accounting-For Period From: July 24, 2002 To April 11, 2003" (see Tab 4) reflect that on December 31, 2002, the "customer," presumably, V~ , withdrew $145,000 from a Bank account in the name of "The Estate of M~." On March 26, 2004, approximately three months after he received notice of the overpayment through the attorney for the estate, V~, in his capacity as Trustee of the V~/M~’s Family Trust (the Trust), filed a "Receipt and Release" (see Tab 5), attesting that he had received cash in the amount of $146,362.98, and securities valued at $3,205.10 and $1,134.66 from himself as the personal representative of the estate. The "Receipt and Release" does not reflect the exact date V~ "contingently" distributed these assets to the Trust; however, as explained further below, the "final" distribution date, which in this case is April 21, 2004, is the relevant date for purpose of determining his liability for the overpayment under the Federal Priority Statute.

During a telephone conversation with C~ on April 19, 2002, she informed our office that V~ had distributed the assets to the Trust before he received notice of the overpayment from the Agency in December 2003. C~ also continued to assert that the Agency had missed the deadline to file a claim and had failed to prove the estate's liability for the overpayment. On April 21, 2004, C~ forwarded to our office a copy of the "Decree of Final Discharge" (see Tab 6) issued by the probate court, purportedly releasing and discharging V~ "from any and all liability arising in connection with the performance of [his] fiduciary's duties. . . ."

Legal Analysis

The Federal Priority Statute provides that, "A representative of a person or an estate . . . paying any part of a debt of the person or estate before paying a claim of the Government is liable to the extent of the payment for unpaid claims of the Government." 31 U.S.C. § 3713(b). "The statute is to be 'liberally construed so as to effect the public purpose of securing debts owed to the United States.'" United States v. Idaho Falls Assocs. Ltd. P'ship, 81 F. Supp.2d 1033, 3713 (D. Idaho 1999) (quoting United States v. Whitney, 654 F.2d 607, 609 (9th Cir. 1981) (citing Bramwell v. United States Fid. & Guar. Co., 269 U.S. 483 (1926)); see also United States v. Moore, 423 U.S. 77, 81-86 (1975).

"'The basic elements of § 3713(b) and of its predecessor statutes is that (1) a fiduciary (2) make a distribution which (3) leaves the estate with insufficient funds to pay (4) a debt owing the United States where (5) the fiduciary had knowledge or notice of the debt due to the United States at a time when the estate had sufficient assets with which to satisfy the debt owing to the United States.'" United States v. Bartlett, 186 F. Supp.2d 875 (C.D. Ill. 2002) (citations omitted).

V~, as the personal representative for the estate, is a fiduciary. He distributed the assets of the estate to the V~/M~’s Family Trust, leaving the estate with insufficient funds to pay the overpayment. While V~ contends he had already distributed the estate assets to the Trust before he received notice of the overpayment, "[t]he distribution by [V~] prior to the closure of the estate was not a final distribution pursuant to a final decree, but a contingent distribution." Ferri v. Bowen, No. C-85-505-SPM, 1986 WL 373, at *2 (E.D. Wash. July 16, 1986) (noting that "[i]t is 'distribution' which is controlling"). The date V~ made a final distribution of the estate assets is the determining factor in this case with respect to his personal liability under the Federal Recovery Statute. See id. Therefore, even if V~ did distribute the assets of the estate into the Trust before he received notice in December 2003, he received notice of the overpayment prior to the closure of the estate in April 2004 and is in violation of the Federal Priority Statute. See id.

V~, through the attorney for the estate, also continues to dispute the Agency's right to recover the overpayment from the estate assets on the basis that the Agency missed the deadline to file a claim. However, "[a]s it undisputed that state probate nonclaim statutes do not bar claims of the federal government, the status of the probate proceedings cannot be deemed controlling." Id. (citing United States v. Summerlin, 310 U.S. 414 (1940)).

In construing the predecessor statute to 31 U.S.C. § 3713(b),[ ] the courts have uniformly held a personal representative liable who, having actual notice of the debt due the Government, distributed the estate pursuant to a decree of distribution without first paying the debt due the Government even though the Government had not submitted a claim in the probate proceedings.

United States v. Boots, 675 F. Supp. 550, 551 (E.D. Mo. 1987) (citations omitted). V~ has "the burden of proving the statute does not apply" to him. F~, 1986 WL 373, *2 (citing United States v. Cole, 733 F.2d 651, 654 (9th Cir. 1984)).

V~ also continues to dispute the validity of the overpayment, and therefore, may contest whether the Agency actually had a "claim," i.e., whether the estate was indebted to the Agency within the meaning of the Federal Priority Statute before the assets were finally distributed . [8] "The terms of the . . . statute are to be construed liberally so as not to frustrate its purpose in securing sufficient revenue for the payments of public debts." United States v. Moriarty, 8 F.3d 329 (6th Cir. 1993) (holding that "although the United States may be precluded by the applicable statute of limitations from brining an action for money damages, it continues to have a 'right to payment' against the debtor in this case and thus may enforce that right in other ways") (citing Bramwell v. United States Fidelity & Guar. Co., 269 U.S. 482, 487 (1926); United States v. State Bank of N.C., 31 U.S. (6 Pet.) 29, 34, 8 L.Ed. 390 (1832)). Furthermore, "[i]n interpreting the term 'claim' under the federal priority statute, we look for guidance to the Bankruptcy Code." M~, 8 F.3d at 334 (citing United States v. Moore, 423 U.S. 77, 84 (1975)). "In the Bankruptcy Code, 'claim' is defined broadly as a 'right to payment, whether or not such right is reduced to judgment, . . . contingent, . . . [or] disputed. . . ." M~, 8 F.3d at 334 (emphasis in original) (citing 11 U.S. C. § 101(5)). Here, we believe the estate's debt arose on or about September 27, 2002, the date the Agency discovered and manually posted M~'s overpayment in its computer system. "Once a determination of overpayment is made, the overpaid amount is a debt owed to the United States Government." POMS GN 02201.001. [9] See Memorandum, Florida - Recovery of Overpayment Incurred Subsequent to Chapter 7 Bankruptcy, CC IV (Granger & Adams) to Assistant Regional Commissioner, Program Operations and Systems (May 5, 1993) (noting "[t]he debt to SSA is not created until [the beneficiary] reports the amount of her 1990 earnings or until as here, an investigation reveals that there were excess earnings for 1990).

Thus, we believe that V~ is in violation of the Federal Recovery Statute and, therefore, liable in his personal capacity as the representative of the estate for the $22,574 overpayment. However, we caution that DOJ may be reluctant to initiate a recovery action [10] against V~ in his capacity as personal representative if the Agency cannot demonstrate he received proper notice of the overpayment.

The December 2003 notice that V~ received through the attorney for the estate (see Tab 3) does not comport with Agency policy. POMS GS 02201.009 (Notification of Overpayment) requires that written notice be sent and requires that the notice include the "[o]verpayment amount and how and when it occurred (i.e., the overpaid amount, the monthly amount, if any, which should have been paid, why the different amount was due, the months for which the different amount should have been paid, and the amount which was paid for those months)." The December 2003 notice simply states the following: "Based on [M~] receiving a government pension, her Social Security benefits should have been reduced. Therefore[,] an overpayment of $22,574.00 resulted" (see Tab 3). Additionally, the notice must inform the claimant of the "[r]ight to reconsideration of the overpayment determination," as well as the "[r]ight to request waiver of recovery and the automatic scheduling of a personal conference if a request for waiver cannot be approved." Id. § GN 02201.009B.1. The December 2003 notice does not mention reconsideration or waiver.

POMS GN 02215.055, which specifically pertains to estates administered by a legal representative, states that "[a] legal representative must be notified of how and when an overpayment was made and the estate's liability for repayment." Moreover, these procedures also require the Agency to inform the legal representative of "[t]he right to reconsideration and waiver" and "[t]reat any protest/appeal of the estate's liability for repayment . . . as a request for reconsideration of that issue." Id. GN 02215.055 B.1.a.& e. Again, the notice V~ received through the attorney for the estate in December 2003 does not meet these requirements. "If notification is deficient (e.g., notice is not sent, . . . content is inadequate), a new notice must be sent." Id. § GN 02201.009B.8. [11] Furthermore, as noted above, the Agency has not responded to V~'s request for reconsideration.

Thus, while the December 2003 notice was sufficient to alert V~ that the Agency has a claim against the estate, [12] this notice is insufficient for the purpose of establishing the estate's liability for the overpayment because it does not contain the requisite information.

CONCLUSION

For the reasons discussed above, we believe V~ could be found liable in his personal capacity under the Federal Priority Statute for the overpayment because he received sufficient notice of the Agency's claim prior to final distribution of the estate assets. [13] However, we do not believe DOJ will institute recovery action if the Agency cannot prove the fact and amount of the debt, which will require to Agency to show that it followed its internal policies with regards to notice of the overpayment. [14] Therefore, we recommend the Agency reissue a notice to V~ in his capacity as personal representative that contains the requisite information noted in the POMS.

Deana R. Ertl Lombardi
Regional Chief Counsel, Region VIII

By: Yvette G. Keesee
Assistant Regional Counsel


Footnotes:

[1]

The judgment shows that NH was convicted under 18 U.S.C. § 641. Although 18 U.S.C. § 641 does not specifically refer to fraud, several courts have considered criminal offenses under that statute to be fraudulent offenses. See, e.g., Tanker v. Comm’r of Soc. Sec., No. 1:15 CV 469, 2015 WL 5023024, at *1-2 (N.D. Ohio Aug. 24, 2015) (applying 20 C.F.R. § 404.502 and SSA policy to a conviction under 18 U.S.C. § 641); United States v. Skrine, No. 1:10-cr-444-WSD, 2015 WL 3932422, at *2-3 (N.D. Ga. June 25, 2015) (noting “conviction for theft of government property under 18 U.S.C. § 641 based on [defendant’s] fraudulently obtaining Social Security benefits”); Deramus v. United States, No. 2:14-cv-668-WHA, 2014 WL 6088232, at *1 (M.D. Ala. Nov. 13, 2014) (noting defendant challenged her “guilty plea convictions and sentence for theft of government money (by fraudulently obtaining income tax refunds), in violation of 18 U.S.C. § 641”); United States v. Brown, No. 09-116, 2012 WL 75105, at *1, *3 (W.D. Pa. Jan. 10, 2012) (noting defendant convicted of theft of government property ($100,005.41 in Social Security benefits) which “she fraudulently obtained, in violation of 18 U.S.C. § 641”); United States v. Menendez, No. 10-20079-CR, 2010 WL 2949429, at *1 (S.D. Fla. July 26, 2010) (noting defendant was indicted “on thirty-two counts of postal fraud, 18 U.S.C. § 641”); United States v. Theede, No. CR 03-0996-01 PHX-DGC, 2010 WL 653422, at *1 (D. Ariz. Feb. 19, 2010) (applying 20 C.F.R. § 404.502 to resolve restitution and Social Security benefit overpayment issues where defendant convicted of violating 18 U.S.C. § 641).

[2]

The POMS identifies two exceptions to the rule of withholding 100% of the monthly benefit: (1) if the debtor is deceased and the estate is less than the overpayment amount, recovery is limited to the amount of the estate; and (2) if a United States Attorney (or the Department of Justice) accepts a compromise settlement, SSA should accept the settlement as full payment of the debt. See POMS GN 02201.055C.6. The information provided indicates that neither exception applies here.

[3]

You also inquired as to whether 20 C.F.R. § 404.535 has any effect on the court’s restitution judgment in light of SSA’s policy of full withholding where there has been a fraud conviction. 20 C.F.R. § 404.535 addresses how much SSA will withhold from an individual’s Title VIII and Title XVI benefits to recover a Title II overpayment. Although the information provided indicates that there has been a Title II overpayment, there is no indication that NH is receiving Title VIII or Title XVI benefits. Thus, based on the information provided, 20 C.F.R. § 404.535 is inapplicable.

[4]

. All references to the C.F.R., below, are to the 2012 version unless otherwise noted.

[5]

. As noted above, to the extent any other person is entitled to receive a lump sum or monthly benefits on the basis of NH’s earnings, the agency could recover the overpayment from such an individual. See Act § 204(a)(1)(A); 20 C.F.R. § 404.502(b)(3). However, we do not have any indication that anyone is entitled to such benefits on the basis of NH’s earnings. Therefore, barring the development of information that indicates such a person exists, the only avenue that may be available to the agency would be an attempt to recover from the estate’s distributee(s) as discussed below.

[6]

. On April 13, 2004, you submitted a "Notice of Hearing on Petition for Final Settlement and Distribution (Non-Appearance)" (see Tab 1), scheduled for April 20, 2004, to the Office of the General Counsel, Region V, in Chicago, Illinois, which referred the matter to our office because a Colorado State Court has jurisdiction over the probate proceedings. After consultation with the Colorado U.S. Attorney's Office, we did not send an attorney to the non-appearance hearing. We determined that since the assets had been "contingently" distributed, it was unlikely the court would delay the final settlement and distribution of the estate, and, if warranted, the Agency could refer this matter to the Department of Justice (DOJ) for a civil suit to recover the overpayment from V~ at the conclusion of the administrative proceedings.

[7]

. The GLPSC sent a similar notice to the probate court. (a)(1) A claim of the United States Government shall be paid first when-(b) the estate of a deceased debtor, in the custody of the executor or administrator, is not enough to pay all debts of the debtor.

[8]

. Sections (a) and (b) of 31 U.S.C. § 3713 provide, in part, as follows:

[9]

. In this context, we believe "determination" is synonymous with "discovered," as opposed to the term of art, "initial determination," which requires written notice. See POMS GN 02201.009 ("When the debt is discovered, the fact, amount and liability for repayment must be communicated as soon as possible. If the overpayment is discovered because of an oral communication (telephone call or interview), the liability for repayment is communicated during the first oral contact. Written notice is always sent.")

[10]

. POMS § GN 02215.170.A (Handling of Overpayment Claims for Referral to DOJ) notes that "[t]he ARC, POS is responsible for either reporting or not reporting an outstanding debt to the U.S. Department of Justice (DOJ) Central Intake Facility for possible civil suit." Referrals must be submitted to the Department of Justice on a "Certificate of Indebtedness" and a Claims Collection Litigation Report pursuant to the instructions set forth in the POMS. See id. § GN 02215.170B.4.

[11]

. "Whenever there is a delay of more than 1 year between the time overpayment occurs and the time a determination is made (i.e., notice sent), a complete explanation and evidence to support the delay must be provided by the PC when the debt claim is referred to DOJ." POMS§ GN 02215.150.B.2.

[12]

. "The knowledge requirement of ... 31 U.S.C. § 3713 may be satisfied by either actual knowledge of the liability or notice of such facts as would put a reasonably prudent person on inquiry as to the existence of the unpaid claim of the United States. To be chargeable with knowledge of such a debt, the executor must be in possession of such facts as to put him on inquiry." B~, 186 F. Supp. 2d at 886-87.

[13]

. This opinion does not address recovery actions that could be taken against the beneficiaries (distributes) of the trust. "When an overpaid person (e.g., beneficiary or representative payee) dies, the person's estate becomes liable. If the estate is closed, the distributees or legatees are liable to the extent of the proceeds of the estate (or property attributable to such proceeds) which are in his/her possession when notified of the overpayment." POMS 02205.001.B.2.

[14]

. To ensure that civil suit is not barred, the complaint must be filed within: a. Six years after the right of action accrues (i.e., within 6 years after the time an overpayment determination has been made); or

b. One year after a final decision has been rendered in an administrative proceeding (i.e., reconsideration, hearing, and/or review by the Appeals Council), whichever is later. POMS § GN 02215.159B.2.


To Link to this section - Use this URL:
http://policy.ssa.gov/poms.nsf/lnx/1506705011
PR 06705.011 - Florida - 09/14/2016
Batch run: 09/15/2016
Rev:09/14/2016