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.

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

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.

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

SECTION 1. SHORT TITLE.

This Act may be cited as the `Veterans Fiduciary Act of 2004'.

SEC. 2. DEFINITION OF FIDUCIARY.

(a) In General- (1) Chapter 55 of title 38, United States Code, is amended by adding at the end the following new section:

`Sec. 5506. Definition of `fiduciary'

`For purposes of this chapter and chapter 61 of this title, the term `fiduciary' means--

`(1) a person who is a guardian, curator, conservator, committee, or person legally vested with the responsibility or care of a claimant (or a claimant's estate) or of a beneficiary (or a beneficiary's estate); or

`(2) any other person having been appointed in a representative capacity to receive money paid under any of the laws administered by the Secretary for the use and benefit of a minor, incompetent, or other beneficiary.'.

(2) The table of sections at the beginning of such chapter is amended by adding at the end the following new item:

`5506. Definition of `fiduciary'.'.

(b) Conforming Amendments to Section 5502- Section 5502 of such title is amended--

(1) in subsection (a)--

(A) in paragraph (1), by striking `other person' and inserting `other fiduciary'; and

(B) in the second sentence of paragraph (2), by inserting `for benefits under this title' after `in connection with rendering fiduciary services';

(2) in subsection (b), by striking `guardian, curator, conservator, or other person' each place it appears and inserting `fiduciary'; and

(3) in subsection (d), by striking `guardian, curator, or conservator' and inserting `fiduciary'.

(c) Conforming Amendment to Section 6101- Section 6101(a) of such title is amended by striking `guardian, curator,' and all that follows through `beneficiary,' and inserting `fiduciary (as defined in section 5506 of this title) for the benefit of a minor, incompetent, or other beneficiary under laws administered by the Secretary,'.

SEC. 3. INVESTIGATION AND QUALIFICATION OF FIDUCIARIES.

(a) In General- Chapter 55 of title 38, United States Code, as amended by section 2, is further amended by adding at the end the following new section:

`Sec. 5507. Investigation and qualification of fiduciaries

`(a) Any certification of a person for payment of benefits of a beneficiary to that person as such beneficiary's fiduciary under section 5502 of this title shall be made on the basis of--

`(1) an investigation by the Secretary of the fitness of that person to serve as fiduciary for that beneficiary, such investigation--

`(A) to be conducted in advance of such certification; and

`(B) to the extent practicable, to include a face-to-face interview with such person;

`(2) adequate evidence that certification of that person as fiduciary for that beneficiary is in the interest of such beneficiary (as determined by the Secretary under regulations); and

`(3) the furnishing of any bond that may be required by the Secretary.

`(b) As part of any investigation of any person under subsection (a), the Secretary shall request information concerning whether that person has been convicted of any offense under Federal or State law which resulted in imprisonment for more than one year. If that person has been convicted of such an offense, the Secretary may certify the person as a fiduciary only if the Secretary makes a specific finding that the person has been rehabilitated and is the most appropriate person to act as fiduciary for the beneficiary concerned under the circumstances.

`(c)(1) In the case of a proposed fiduciary described in paragraph (2), the Secretary, in conducting an investigation under subsection (a)(1), may carry out such investigation on an expedited basis that may include waiver of any specific requirement relating to such investigation, including the otherwise applicable provisions of subparagraphs (A) and (B) of such subsection. Any such investigation carried out on such an expedited basis shall be carried out under regulations prescribed for purposes of this section.

`(2) Paragraph (1) applies with respect to a proposed fiduciary who is--

`(A) the parent (natural, adopted, or stepparent) of a beneficiary who is a minor;

`(B) the spouse or parent of an incompetent beneficiary; or

`(C) a person who has been appointed a fiduciary of the beneficiary by a court of competent jurisdiction.'.

(b) Clerical Amendment- The table of sections at the beginning of such chapter is amended by adding after the item added by the amendment made by section 2(a)(2) the following new item:

`5507. Investigation and qualification of fiduciaries.'.

SEC. 4. MISUSE OF BENEFITS BY FIDUCIARIES.

(a) Protection of Veterans Benefits When Administered by Fiduciaries- (1) Chapter 61 of title 38, United States Code, is amended by adding at the end the following new sections:

`Sec. 6106. Misuse of benefits by fiduciaries

`(a) FEE FORFEITURE IN CASE OF BENEFIT MISUSE BY FIDUCIARIES- A fiduciary may not collect a fee from a beneficiary for any month with respect to which the Secretary or a court of competent jurisdiction has determined that fiduciary misused all or part of the individual's benefit, and any amount so collected by the fiduciary as a fee for such month shall be treated as a misused part of the individual's benefit.

`(b) LIABILITY OF FIDUCIARIES FOR MISUSED BENEFITS- (1) If the Secretary or a court of competent jurisdiction determines that a fiduciary that is not a Federal, State, or local government agency has misused all or part of a beneficiary's benefit that was paid to such fiduciary, the fiduciary shall be liable for the amount misused, and such amount (to the extent not repaid by the fiduciary) shall be treated as an erroneous payment of benefits under this title to the fiduciary for purposes of laws pertaining to the recovery of overpayments. The amount of such overpayment shall constitute a liability of such fiduciary to the United States and may be recovered in the same manner as any other debt due the United States. Subject to paragraph (2), upon recovering all or any part of such amount, the Secretary shall pay an amount equal to the recovered amount to such beneficiary or such beneficiary's alternative fiduciary.

`(2) The total of the amounts paid to a beneficiary (or a beneficiary's alternative fiduciary) under paragraph (1) and under section 6107 of this title may not exceed the total benefit amount misused by the fiduciary with respect to that beneficiary.

`(c) MISUSE OF BENEFITS DEFINED- For purposes of this chapter, misuse of benefits by a fiduciary occurs in any case in which the fiduciary receives payment, under any of laws administered by the Secretary, for the use and benefit of a beneficiary and converts such payment, or any part thereof, to a use other than for the use and benefit of such beneficiary or that beneficiary's dependents. Retention by a fiduciary of an amount of a benefit payment as a fiduciary fee or commission, or as attorney's fees (including expenses) and court costs, if authorized by the Secretary or a court of competent jurisdiction, shall be considered to be for the use or benefit of such beneficiary.

`(d) REGULATIONS- The Secretary may prescribe by regulation the meaning of the term `use and benefit' for purposes of this section.

`(e) FINALITY OF DETERMINATIONS- A determination by the Secretary that a fiduciary has misused benefits shall be considered to be a decision of the Secretary under section 511(a) of this title.

`Sec. 6107. Reissuance of benefits

`(a) Negligent Failure by Secretary- (1) In any case in which the negligent failure of the Secretary to investigate or monitor a fiduciary results in misuse of benefits by the fiduciary, the Secretary shall pay to the beneficiary or the beneficiary's alternate fiduciary an amount equal to the amount of benefits that were so misused.

`(2) There shall be considered to have been a negligent failure by the Secretary to investigate and monitor a fiduciary in the following cases:

`(A) A case in which the Secretary failed to timely review a fiduciary's accounting.

`(B) A case in which the Secretary was notified of allegations of misuse, but failed to act in a timely manner to terminate the fiduciary.

`(C) In any other case in which actual negligence is shown.

`(b) REISSUANCE OF MISUSED BENEFITS- (1) In any case in which a fiduciary described in paragraph (2) misuses all or part of an individual's benefit paid to such fiduciary, the Secretary shall pay to the beneficiary or the beneficiary's alternative fiduciary an amount equal to the amount of such benefit so misused.

`(2) Paragraph (1) applies to a fiduciary that--

`(A) is not an individual; or

`(B) is an individual who, for any month during a period when misuse occurs, serves 15 or more individuals who are beneficiaries under this title.

`(c) RECOUPMENT OF AMOUNTS REISSUED- In any case in which the Secretary reissues a benefit payment (in whole or in part) under subsection (a) or (b), the Secretary shall make a good faith effort to obtain recoupment from the fiduciary to whom the payment was originally made.'.

(b) CLERICAL AMENDMENT- The table of sections at the beginning of such chapter is amended by adding at the end the following new items:

`6106. Misuse of benefits by fiduciaries.

`6107. Reissuance of benefits.'.

SEC. 5. ADDITIONAL PROTECTIONS FOR BENEFICIARIES WITH FIDUCIARIES.

(a) Onsite Reviews and Required Accountings- (1) Chapter 55 of title 38, United States Code, as amended by section 3, is further amended by adding at the end the following new sections:

`Sec. 5508. Periodic onsite reviews of institutional fiduciaries

`(a) INSPECTIONS REQUIRED- In addition to such other reviews of fiduciaries as the Secretary may otherwise conduct, the Secretary shall provide for the periodic onsite review of any person or agency located in the United States that receives the benefits payable under laws administered by the Secretary to another individual pursuant to the appointment of such person or agency as a fiduciary under section 5502 of this title in any case in which--

`(1) the fiduciary is a person who serves in that capacity with respect to 15 or more such individuals;

`(2) the fiduciary is a certified community-based nonprofit social service agency; or

`(3) the fiduciary is an agency (other than an agency described in paragraph (2)) that serves in that capacity with respect to 50 or more such individuals.

`(b) CERTIFIED COMMUNITY-BASED NONPROFIT SOCIAL SERVICE AGENCY DEFINED- For purposes of this section, the term `certified community-based nonprofit social service agency' means a community-based nonprofit social service agency that is in compliance with requirements, under regulations which shall be prescribed by the Secretary, for annual certification to the Secretary that it is bonded in accordance with requirements specified by

the Secretary and that it is licensed in each State in which it serves as a fiduciary (if licensing is available in such State) in accordance with requirements specified by the Secretary. Any such annual certification shall include a copy of any independent audit on such agency which may have been performed since the previous certification.

`(c) BIENNIAL REPORT- (1) Within 120 days after the end of each even-numbered fiscal year, the Secretary shall submit to the Committees on Veterans' Affairs of the Senate and House of Representatives a report on the results of periodic onsite reviews conducted during the two preceding fiscal years pursuant to subsection (a) and of any other reviews of fiduciaries conducted during those fiscal years in connection with benefits under this title (such as summaries of findings of reports of the Office of the Inspector General) that the Secretary determines to be pertinent for purposes of this subsection.

`(2) Each report under paragraph (1) shall describe in detail all problems identified in such reviews and any corrective action taken or planned to be taken to correct such problems, and shall include the following:

`(A) The number of such reviews.

`(B) The results of such reviews.

`(C) The number of cases in which the fiduciary was changed and why.

`(D) The number of cases involving the exercise of expedited, targeted oversight of the fiduciary by the Secretary conducted upon receipt of an allegation of misuse of benefits, failure to pay a vendor, or a similar irregularity.

`(E) The number of cases discovered in which there was a misuse of benefits.

`(F) How any such case of misuse of benefits was addressed by the Secretary.

`(G) The final disposition of such cases of misuse of benefits, including any civil or criminal penalties imposed.

`(H) Such other information as the Secretary considers appropriate.

`Sec. 5509. Authority to redirect delivery of benefit payments when a fiduciary fails to provide required accounting

`(a) REQUIRED REPORTS AND ACCOUNTINGS- The Secretary may require a fiduciary to file a report or accounting pursuant to regulations prescribed by the Secretary.

`(b) ACTIONS UPON FAILURE TO FILE- In any case in which a fiduciary fails to submit a report or accounting required by the Secretary under subsection (a), the Secretary may, after furnishing notice to such fiduciary and the beneficiary entitled to such payment of benefits, require that such fiduciary appear in person at a regional office of the Department serving the area in which the beneficiary resides in order to receive such payments.'.

(2) The table of sections at the beginning of such chapter is amended by adding after the item added by the 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.'.

(b) Civil Monetary Penalties; Judicial Orders of Restitution- (1) Chapter 61 of title 38, United States Code, as amended by section 4(a), is further amended by adding at the end the following new sections:

`Sec. 6108. Civil monetary penalties

`(a) PENALTY FOR CONVERSION- Any person (including an organization, agency, or other entity) who, having received, while acting in the capacity of a fiduciary pursuant to section 5502 of this title, a payment under a law administered by the Secretary for the use and benefit of another individual, converts such payment, or any part thereof, to a use that such person knows or should know is other than for the use and benefit of such other individual shall be subject to, in addition to any other penalty that may be prescribed by law, a civil monetary penalty of not more than $5,000 for each such conversion.

`(b) PENALTY IN LIEU OF DAMAGES- Any person who makes a conversion of a payment described in subsection (a) and is subject to a civil monetary penalty under that subsection by reason of such conversion shall also be subject to an assessment, in lieu of damages sustained by the United States resulting from the conversion, of not more than twice the amount of any payments so converted.

`(c) COSTS OF RECOVERY- From amounts collected under this section, the amount necessary to recoup the Department's costs of such collection shall be credited to applicable appropriations, to remain available until expended.

`Sec. 6109. Authority for judicial orders of restitution

`(a) Any Federal court, when sentencing a defendant convicted of an offense involving the misuse of benefits under this title, may order, in addition to or in lieu of any other penalty authorized by law, that the defendant make restitution to the Department.

`(b) Sections 3612, 3663, and 3664 of title 18 shall apply with respect to the issuance and enforcement of orders of restitution under subsection (a). In so applying those sections, the Department shall be considered the victim.

`(c) If the court does not order restitution, or orders only partial restitution, under subsection (a), the court shall state on the record the reasons therefor.

`(d)(1) Except as provided in paragraph (2), amounts received or recovered by the Secretary pursuant to an order of restitution under subsection (a), to the extent and in the amounts provided in advance in appropriations Acts, shall be available to defray expenses incurred in the supervision and investigation of fiduciaries under this title.

`(2) Paragraph (1) shall not apply with respect to amounts received in connection with misuse by a fiduciary of funds paid as benefits under laws administered by the Secretary. Such amounts shall be paid to the individual whose benefits were misused unless the Secretary has previously reissued the misused benefits, in which case the amounts shall be treated in the same manner as overpayments recouped by the Secretary and shall be deposited to the credit of the applicable revolving fund, trust fund, or appropriation.'.

(2) The table of sections at the beginning of such chapter is amended by adding after the item added by the amendment made by section 4(b) the following new items:

`6108. Civil monetary penalties.

`6109. Authority for judicial orders of restitution.'.

SEC. 6. EFFECTIVE DATES.

(a) In General- Except as otherwise provided, this Act and the amendments made by this Act shall take effect on the first day of the seventh month beginning after the date of the enactment of this Act.

(b) SPECIAL RULES- Sections 6106 and 6107 of title 38, United States Code, as added by section 4(a), shall apply with respect to any determinations by the Secretary of Veterans Affairs made after the date of the enactment of this Act of misuse of funds by a fiduciary.

SEC. 7. REPORT TO CONGRESS.

The Secretary of Veterans Affairs shall prepare a report evaluating whether the existing procedures and reviews for the qualification (including disqualification) of fiduciaries are sufficient to enable the Secretary to protect benefits from being misused by fiduciaries. The Secretary shall submit the report to the Committee on Veterans' Affairs of the Senate and House of Representatives no later than 270 days after the date of the enactment of this Act. The Secretary shall include in such report any recommendations that the Secretary considers appropriate.

END