Witness Testimony of Katrina Eagle, Attorney, Law Office of Katrina J. Eagle, Esq.
Thank you for the opportunity to share my experiences and insight into the Fiduciary Program of the Department of Veterans Affairs (VA). I am a veterans law attorney in private practice; my clients are veterans and their family members whose claims for benefits and compensation have been denied by VA. I currently represent or am counsel to nine different veteran-beneficiaries who are challenging various aspects of the VA fiduciary process.
The watershed moment for purposes of this Congressional hearing was April 26, 2011, the day the U.S. Court of Appeals for Veterans Claims (“Veterans Court”) held that the appointment of a VA fiduciary is appealable to the Board of Veterans’ Appeals and to the Veterans Court thereafter. See Freeman v. Shinseki (24 Vet. App. 404). The Veterans Court’s holding was premised upon the basic legal tenet that any aspect of the VA’s “provision of benefits” is subject to judicial review. See 38 U.S.C. §§ 511(a), 5502. No longer are veterans’ fiduciary-related questions and disagreements discarded with a terse VA letter asserting that such issues are “within the sole discretion of the Secretary.”
But, until the Veterans Court allowed fiduciary issues to be challenged, the VA Fiduciary Program operated with completely unfettered authority, in “splendid isolation.” The result of this decades-long unaccountability is now coming to light as veteran-beneficiaries and their family members report their problems and demand answers.
Of course, VA leadership will tout the issuance of two VA fast letters and the re-organization of fiduciary personnel into six VA Fiduciary Hubs as proof that they are fixing the system and improving the program. Meanwhile, veterans continue to be unable to talk directly to their VA-appointed fiduciary, to receive additional funds on an emergent or timely basis, and unable to obtain basic account information regarding their VA funds. In short, despite claiming that veteran-beneficiaries’ best interests are central to VA’s efforts, the reality is quite the opposite. And veterans are suffering as a result.
For example, according to VA Pension and Fiduciary Service leadership, current VA policy is that any time a veteran is determined to be incompetent to manage his VA benefits, a fiduciary must be appointed. Always. This VA policy, however, directly conflicts with VA law, which states unambiguously that a fiduciary is not required in every case. In fact, the relevant VA statute lists the veteran-beneficiary as the first choice -- among several -- to whom VA can pay the veteran’s monthly benefits. The last choice is a VA-appointed paid fiduciary. According to 38 U.S.C. section 5502, “Where it appears to the Secretary that the interest of the beneficiary would be served thereby, payment of benefits under any law administered by the Secretary may be made directly to the beneficiary or to a relative or some other fiduciary for the use and benefit of the beneficiary.” May. Not must.
The VA then compounds its erroneous interpretation of VA law by appointing a paid fiduciary and re-routing the veteran’s VA monthly payments to an undisclosed bank account to which only the fiduciary has access and control -- all without the veteran’s consent, approval, or even knowledge (under the guise that he or she is incompetent). Yes, thanks to Freeman, the veteran can now challenge the appointment by filing a Notice of Disagreement. But, while the appeal is pending and until the issue is resolved, a stranger -- known only to VA -- has complete control of the veteran’s monthly benefits. Further, according to VA’s own statistics, it takes the Board of Veterans’ Appeals an average of 886 days to process an appeal. Thus, even under the best possible outcome, for at least 2.5 years, a veteran has absolutely no access to his or her own VA funds – and many more years if the appeal has to go to the Veterans Court or the Federal Circuit.
Sadly -- but not surprisingly -- VA has not tried to proactively resolve any of the veterans’ fiduciary-related complaints and concerns I have personally brought to their attention since April 2011. No one at the local VA Regional Office level, nor anyone at VA headquarters. Indeed, only one case has been settled satisfactorily, and that was primarily due to adverse media attention. Sadder still is that in all nine of these cases, VA fiduciary management has defended its staff and the VA-appointed fiduciary (who is paid a monthly commission from the veteran’s VA funds), regardless of the merits of the veterans’ complaints.
In fact, the adult daughter of an elderly, World War II veteran in Texas has been explicitly rejected as a possible fiduciary for her father because she dared to make legitimate complaints – still unanswered by VA -- regarding her father’s VA-appointed paid fiduciary’s accountings. Indeed, internal VA memos show that VA itself had concerns with the same fiduciary during the same period. The fiduciary remains in place; the daughter was disqualified from handling her father’s finances.
VA officials will assert that the role of VA-appointed fiduciaries is to manage the veteran’s VA funds, a seemingly simple and straight-forward duty. VA leadership will also claim that these paid fiduciaries act independently from the VA. But the reality is that the fiduciary is required to sign a contract that explicitly states that he or she will never release any funds to the veteran without VA’s pre-approval. VA-appointed individuals are “fiduciaries” in name only – they are actually micro-managed agents of VA. As a result, fiduciaries have refused to release my clients’ own funds to them for heart-ailment medication, travel expenses for a family funeral, mid-summer air conditioner repairs -- and then only did so under threat of court intervention.
Veterans are suffering as a result of other VA Fiduciary Program policies as well. Typically, as part of appointing a fiduciary, a VA Field Examiner visits the veteran’s home and demands to see all bills, expenditures, sources of income and revenue -- including income from Social Security disability, military retirement, and spousal income. A monthly budget is then created and strictly enforced. Curiously, VA field examiners instruct veterans to expend all other sources of income before VA funds. VA-appointed fiduciaries are then directed to “save” large percentages of the monthly VA benefits – supposedly for emergencies – but which are rarely approved by VA management for any use. As a result, beneficiaries are left to scrape by on barebones VA-determined “budgets” while accumulating tens of thousands of dollars in untouchable bank accounts. Families are often forced to provide monetary assistance to these veterans, depleting their savings while VA benefits are unused. VA has yet to explain why a 90-year-old veteran needs to “save” 20% or 30% of his monthly payments for “future needs” when he cannot afford prescribed medicines and already has over $100,000.00 in his name.
The manner in which VA fiduciary personnel treat family members who volunteer to be the veteran’s fiduciary is abhorrent and disturbing too. Adult children of World War II veterans have been depicted as trying to “free ride” off of their father’s VA benefits, as are spouses of Vietnam-era veterans. For example:
- After ten years of “excellent” account reports, a VA Field Examiner in Texas made a personal home visit and summarily removed the spouse-payee of one of my clients because of supposed accounting discrepancies. That very same day, he appointed a paid fiduciary and stopped the veteran’s direct-deposited monthly VA funds. The Waco Regional Office then waited another ten days before sending the veteran a letter informing him of their actions.
- In Indiana, a World War II veteran’s adult daughter, who serves as his caregiver, Court-appointed Guardian, and Power-of-Attorney, was removed for incorrect account reports and accused of mismanaging the veteran’s funds because she used them to take him to a world-renowned dementia-treatment center in Arizona. VA then appointed a bank to oversee his VA funds, which routinely pays his monthly bills late or not at all, creating additional late fees and threats of utility shut-offs.
- In Maine, VA awarded a World War II veteran service-connected benefits in January 2011, but determined he was incompetent to manage his VA funds. His daughter, already his Court-appointed Durable Financial Power-of-Attorney, volunteered to act as his fiduciary. But once she learned that VA representatives required documentation of all of her father’s financial affairs to establish a monthly budget, she refused the home visit and requested an explanation for why her father must be appointed a fiduciary in the first place. VA responded by appointing a total stranger to open an undisclosed bank account and oversee the veteran’s VA funds. The veteran has yet to enjoy any of his awarded VA benefits.
My first-hand experience with these fiduciary cases makes clear that reforms in the VA Fiduciary Program are desperately needed. One simple suggestion is for paid fiduciaries to provide monthly bank statements to their veteran-beneficiary. Even incompetent veterans have every right to know basic account information regarding their money. Monthly bank statements would also allow veterans or family members to voice timely concerns, and thereby possibly prevent years-long fraud from being committed, as recently discovered by VA, IRS, and DOJ investigators in Texas.
Another suggestion is for VA fiduciary personnel, from top management to local Regional Office staff, to reform their mindset regarding the approximately 112,000 veteran-beneficiaries in their program. Incompetency is not synonymous with idiocy. Yet, all too often these veterans and their family members are totally ignored or treated with sub-standard professional etiquette. VA must also stop viewing the veteran’s VA funds as if it still the agency’s, stop hoarding it under the guise of “saving” it for emergencies, and allow paid fiduciaries the independence to make decisions that are truly in the veteran’s best interests.
On behalf of the veterans who have suffered as a result of VA’s flawed and ill-managed Fiduciary Program, I applaud this Subcommittee for its investigation and call for reforms. While many other issues deserve your attention, please remain diligent in your demands for substantive and timely changes in this program. Especially in these financially difficult times, these veterans deserve more information about and better access to their well-earned VA benefits.