BNUMBER:  B-270349
DATE:  December 17, 1996
TITLE:  Chief Hospital Corpsman, William R. Brown, USN
(Ret.)--Waiver Request

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Matter of:Chief Hospital Corpsman, William R. Brown, USN 
(Ret.)--Waiver Request

File:     B-270349

Date:December 17, 1996

DIGEST

A Navy member was separated due to physical disability and was paid 
severance pay.  The Board for Correction of Naval Records later 
corrected his record to show that he had been placed on the Temporary 
Disability Retired List rather than separated.  The Department of 
Veterans Affairs (VA) awarded the member VA compensation, but has 
withheld payment setting off such amounts against the separation pay 
under 10 U.S.C.  sec.  1212, which requires repayment of the amount of 
disability severance pay if the member becomes entitled to VA 
compensation for the same disability.  The correction board's action 
entitled the member to retired pay but also rendered the disability 
severance pay payment erroneous and subject to collection, but also 
subject to consideration for waiver.  Considering the purpose of the 
correction board action and to prevent the inequity of placing him in 
debt in the new status, the net amount of the member's debt, after 
deduction for retroactive retired pay entitlements, is waived pursuant 
to 10 U.S.C.  sec.  2774.  Whether VA compensation payments also may be 
begun is a matter within VA's jurisdiction to decide.    

DECISION

This is in response to the request of Chief Hospital Corpsman,William 
R. Brown, USN (Retired), for waiver of a debt for repayment of 
disability severance pay which arose when the Board for Correction of 
Naval Records (Board) corrected his records to state that he was 
retired from the United States Navy rather than separated due to a 
physical disability.  His waiver request is granted for the net amount 
of his debt.

BACKGROUND

On July 17, 1992, Chief Brown was medically discharged with a 20 
percent disability rating and thereupon received $45,525.60 in 
disability severance pay.  Subsequently, he applied to the Board for 
Correction of his record to indicate that he was retired rather than 
discharged.  The Board corrected his record to show that his name was 
placed on the Temporary Disability Retired List as of July 18, 1992, 
with a disability rating of 30 percent.  As of that date, Chief Brown 
became entitled to retired pay to be paid by the Defense Finance and 
Accounting Service (DFAS).  Apparently concurrently, the Department of 
Veterans Affairs (VA) found him eligible for monthly disability 
compensation which he was entitled to receive upon filing a waiver 
with DFAS for an equivalent amount of retired pay.[1]  However, since 
his record had been corrected to show that he had been retired rather 
than separated as of July 18, 1992, he also became indebted to the 
United States for the amount of disability severance pay he had 
received.  To compute his net indebtedness, DFAS set off Chief Brown's 
retired pay entitlements for constructive time on the Temporary 
Disability Retired List from his disability severance pay to reach a 
net debt of $20,475.24.  

Both VA and DFAS have been withholding the entire monthly amount 
payable to Chief Brown in order to satisfy the debt, and he has 
requested waiver.  DFAS denied Chief Brown's request on the grounds 
that when he requested the record correction, he was aware that he 
would be required to repay the disability severance pay and that 
therefore collection would not be against equity and good conscience.  
He has appealed, arguing that he was not aware that his entire monthly 
entitlement would be withheld until the severance pay was collected.

ANALYSIS

Under 10 U.S.C.  sec.  1212, a member with less than 20 years of service 
who is separated with a disability under 10 U.S.C.  sec.  1203 may be 
entitled to disability severance pay.  However, the disability 
severance pay must be deducted from any other compensation due under a 
law administered by VA to which he becomes entitled based on the same 
disability.  10 U.S.C.  sec.  1212(c).  See also 41 Comp. Gen. 597 (1962).  

Under 10 U.S.C.  sec.  1552, the Secretary of a military department, acting 
through a civilian board, may correct a military record if he 
considers it necessary to correct an error or remove an injustice.  
Proper correction of a record under this statute is final and 
conclusive on all officers of the United States.  10 U.S.C.  sec.  
1552(a)(4).  

Under 10 U.S.C.  sec.  2774, the Comptroller General may waive in whole or 
in part a claim of the United States against a person arising out of 
an "erroneous payment" of pay or allowances to or on behalf of a 
member or former member of the uniformed services, the collection of 
which would be against equity and good conscience and not in the best 
interest of the United States.[2]  Waiver is not appropriate if there 
is any indication of fraud, misrepresentation, fault, or lack of good 
faith on the part of the member.

Ordinarily, debts resulting from requirements to later collect 
payments which were proper when made are not considered "arising out 
of erroneous" payments so as to be subject to waiver consideration 
under 10 U.S.C.  sec.  2774.  See, e.g., Isaac L. Tillman, B-266193, Feb. 
23, 1996.  However, we have held differently where a record correction 
pursuant to 10 U.S.C.  sec.  1552 has retroactively rendered what was 
originally a proper payment, improper.  In this regard, in 56 Comp. 
Gen. 587 (1977), we dealt with the waiver request of officers who had 
received readjustment pay, which is similar to severance pay, when 
they were separated from the Army.  A correction board later 
determined that they had been improperly separated, and their records 
were corrected to state that they had remained on active duty.  We 
found that the record corrections retroactively restoring the officers 
to active duty rendered the readjustment pay payments erroneous and 
subject to consideration for waiver under 10 U.S.C.  sec.  2774.  We noted 
that since the purpose of record correction and payments resulting 
therefrom is to restore members as nearly as possible to the position 
they would have been in if an error had not been made, we viewed it 
appropriate to consider for waiver the net amount of debt which 
remained after all necessary set offs and adjustments had been made to 
their pay accounts so as to prevent their returning to active duty in 
debt.[3]  

Chief Brown's situation is analogous to that of the officers in 56 
Comp. Gen. at 587.  When he was separated from the Navy, he received 
disability severance pay, which became an erroneous payment when the 
Board corrected his record to indicate that he was placed on the 
Temporary Disability Retired List rather than separated.  While DFAS 
argues that waiver should be denied because Chief Brown was aware when 
his records were corrected that he would be required to repay his 
disability severance pay, at the time Chief Brown received disability 
severance pay, similar to the officers in 56 Comp. Gen. supra, when 
they received readjustment pay, he was not aware that he might have to 
repay it at some time in the future.  Therefore, in order to place him 
as nearly as possible in the position he would have been in if he had 
been placed on the Temporary Disability Retired List in 1992, and to 
prevent the inequity of placing him in debt as a result thereof, the 
net amount of his debt (which the service has determined to be 
$20,475.24) is hereby waived.

Concerning the effect this action may have on the withholding of Chief 
Brown's VA compensation, we recognize that VA has jurisdiction over 
such compensation, and thus this is a matter for VA to determine.[4]   

/s/Seymour Efros
for Robert P. Murphy
General Counsel
 
B-270349

December 17, 1996

The Honorable Dan Miller
Member, United States House
    of Representatives
1751 Mound Street, Suite A-2
Sarasota, FL  34236

Dear Mr. Miller:

This is in further response to your letter of September 27, 1996, 
regarding the waiver request of Chief Hospital Corpsman William R. 
Brown, USN (Retired).  Enclosed is a copy of our decision of today's 
date in which we grant Mr. Brown's request for waiver. 

As we explained in our decision, Mr. Brown received disability 
severence pay when he was separated from the Navy due to physical 
disability.  The Board for Correction of Naval Records later corrected 
his records to show that he had been placed on the Temporary 
Disability Retired List.  While the disability severance pay statute, 
10 U.S.C.  sec.  1212, requires repayment of the amount of disability 
severence pay if a member becomes entitled to compensation for the 
same disability under any law administered by the Department of 
Veterans Affairs, the correction board's action entitled Mr. Brown to 
retired pay, but it also rendered the disability severance pay payment 
erroneous and subject to consideration for waiver.  After deduction 
for retroactive retired pay entitlements, the net amount of Mr. 
Brown's debt is waived.

We trust this serves the purpose of your inquiry.

Sincerely yours,

/s/Seymour Efros
for Robert P. Murphy
General Counsel

Enclosure  

1. While the record does not specifically state that Chief Brown filed 
such a waiver, we assume that he did so, since the relevant statute 
requires the filing of such a waiver to receive veterans compensation.  
See 38 U.S.C.  sec.  5304-5305.

2. Effective December 18, 1996, the Comptroller General's waiver 
authority, as it relates to military pay and allowances, is 
transferred to the Director of the Office of Management and Budget 
with authority to delegate it to any other agency or agencies.  Pub. 
L. 104-316,  sec.  101 and 105, 110 Stat. 3826 (1996). 

3. See also 64 Comp. Gen. 15 (1984); and B-166683, May 21, 1969, where 
similar results were reached concerning civilian employees separated 
with severance pay who were later found to be retroactively entitled 
to retirement.  

4. We trust that VA will give due consideration to our determination 
of today.  Cf. Isaac L. Tillman, B-266193, Feb. 23, 1996.