Appeal from a judgment of the United States District Court for the Eastern District of New York, Eugene H. Nickerson, Judge, affirming the Secretary's reopening of a disability determination because of "fraud or similar fault."
Oakes, Kearse, and Cardamone, Circuit Judges. Kearse, Circuit Judge, dissenting.
The issue in this case is whether the Secretary of Health and Human Services properly reopened a determination of disability. Dominick Barone began receiving disability insurance benefits in 1980 for a disability that began in 1978. In 1985, the Secretary reopened Barone's disability determination and changed the onset of disability to 1980. This meant, of course, that Barone had been overpaid in the interim. Barone was not "without fault" in causing the overpayment and would therefore be obliged to refund the excess benefits if his case has been properly reopened by the Secretary. However, we conclude that there was not substantial evidence of "fraud or similar fault" to justify reopening the determination of Barone's disability. Therefore, we reverse the judgment of the United States District Court for the Eastern District of New York, Eugene H. Nickerson, Judge, upholding the Secretary.
Dominick Barone is sixty-one years old. He has worked as a cabinet maker most of his adult life. He received disability benefits for several years following the amputation of his left big toe in the mid-1960s. In January 1979 it became necessary to amputate his right big toe. Then, on October 19, 1979, Barone applied to the Social Security Administration (SSA) for disability benefits. He stated on his application form that the amputation of his right big toe was the impairment that prevented him from working. The application form requested information about recent employment and earnings. In response, Barone stated that he had worked for G. P. Cabinet Co. (a firm that also appears in our record as Furniture Intrigue, Inc.) from September 1978 to October 1979, and that his earnings in 1979 amounted at that time to "approx. [ 4000.00." Barone submitted a Work Activity Report and a Disability Report with his application. The information that he provided in those reports differed from that given on the application form. According to the Work Activity Report, he worked at G. P. Cabinet from February 5 to March 6, 1979, and from September 10 to October 18, 1979, and was paid $320 per week. On his Disability Report, Barone wrote: "I was out of work from 12/20/78 to 2/5/79. I was out of work from 3/6/79 to 9/10/79. I stopped work completely as of 10/19/79. When I did work, I sometimes worked only a few hours." Finally, it should be mentioned that the employer's records, obtained by the SSA in 1983, showed that Barone worked from February to May and from September to October 1979. The records also say that by October 1, 1979, Barone had earned $4,206--only $206 more than the estimate of earnings to date that he gave the SSA on October 19.
The SSA decided on March 18, 1980, that Barone became disabled on December 20, 1978, and that he was entitled to benefits from that date. Meanwhile, Barone continued to work after submitting his application for disability benefits, but for a different employer, Custom Craft Designs Ltd. That firm reported to the SSA in 1983 that Barone worked for the firm from November 1979 to August 1980, earning a total of $7,400. According to Barone, he called the Social Security district office to tell them about his work for Custom Craft. He says that he then went to the office to "fill out some affidavits" about this work. There is no documentary evidence in the record to corroborate this testimony. A vocational report prepared in February 1980 by a Social Security employee after a telephone conversation with Barone did not mention Barone's work for Custom Craft.
In 1983, the SSA sought more information about Barone's employment after the onset of his disability. It obtained the reports from the employers mentioned above, and it requested further information from Barone. In response, Barone reported that he had worked for G. P. Cabinet Co. from February 1978 to June 1979, forty hours per week at $8.50 per hour, and for Custom Craft Designs from August 1979 to September 1980, forty hours per week at $8.00 per hour.
The information about Barone's work activity led the SSA in 1985 to revise its determination of his disability. It found the onset of disability to be September 1, 1980, rather than December 20, 1978, and consequently decided that he had been overpaid $9,172.30. Barone disputed this decision; represented by counsel, he obtained a hearing before an administrative law judge to consider his case de novo. The ALJ decided on January 29, 1986, that Barone had not been disabled from December 20, 1978, to August 31, 1980. He held that the initial determination of disability was properly reopened and revised "because of fraud or, as in this case, similar fault." The ALJ concluded that the SSA's recovery should not be waived because Barone was not "without fault" in causing the overpayment.
The Appeals Council rejected Barone's request to review the ALJ's decision. Barone sought judicial review of the SSA's action by filing an action against the Secretary in the district court, pursuant to 42 U.S.C. § 405(g) (1982). Judge Nickerson granted the Secretary's motion to affirm on the administrative record, provided that the Secretary recalculate the amount claimed as an overpayment. Barone then filed this appeal.
The Secretary may reopen a decision "for any reason" within one year of the initial determination, 20 C.F.R. § 404.988(a) (1988), and for "good cause" within four years, id. at § 404.988(b). There is no time limit for reopening a decision if it was obtained by "fraud or similar fault." Id. at § 404.988(c)(1). It is this latter provision of the regulation that governs this case, since the Secretary reopened Barone's case in 1985, more than four years after the initial determination in 1980.
When a determination is reopened, the Secretary may decide that there has been an overpayment. The Secretary is authorized to recover overpayments. See 42 U.S.C. § 404(a)(1982); 20 C.F.R. § 404.502(1988). However, the Secretary must waive recovery of any overpayment if the individual was "without fault" and recovery would defeat the purposes of the Social Security Act or be against equity and good conscience. 42 U.S.C. § 404(b); 20 C.F.R. § 404.506.
The use of the word "fault" in these two regulations invites confusion, for the word means different things in different contexts. "Fault" in the context of an overpayment waiver depends upon ...