Veterans Affairs

Benjamin KrauseUntil Congress repeals 38 USC § 511, Department of Veterans Affairs will run roughshod over the rights of veterans and the ability of Congress to hold them accountable. But perhaps its time veterans refocus their angst against government contractors that help VA violate our rights?

With all the bad news in the press with VA violating veterans rights left and right and lying to Congress, I thought I would write about my ‘fix’ to give you something to chew on over the weekend.

Let me explain.

The statute, 38 USC § 511, severely restricts a veteran’s ability to sue VA officials for wrongdoing. It states that the Secretary (and de facto his minions), have final say over any benefits decision effecting a veteran, and that the decision cannot be reviewed by federal courts. But many “decisions” by the VA secretary affect veterans access to benefits, services and programs constituting a denial of one of the many established VA benefits. This list includes Servicemen’s and Veterans Group Life Insurance payouts.

Instead, veterans are stuck in the never ending VA grinder that attorney Chris Attig writes about on a regular basis. VA routinely argues that § 511 blocks jurisdiction for federal courts in most situations when benefit claims are at issue.

But VA is dead wrong – as usual.


As we now know, VA has often abused this authority by wrongfully withholding benefits in a way that is best described as “bad faith.” It is bad faith when VA takes a legally unjustifiable, meritless position in denying a veteran’s request for benefits.

There are many instances where VA lawyers and benefits adjudicators engage in what Henry Campbell Black called, “Predestined Interpretation”, while interpreting VA laws. Predestined Interpretation occurs when a an attorney interprets the law in a way that fits his or her own bias where a distortion results.

When a law is not clearly on point, an attorney needs to engage in “interpretation”. Existing laws require the lawyer doing the interpretation to act in good faith and apply the law in a way that is consistent with long-established rules of legal interpretation.

All Veterans Laws are “remedial” laws and must be liberally construed to effect justice in the remedy provided. Yet, VA lawyers distort this process by using narrow interpretations that have the effect of penalizing veterans by holding that veterans are not entitled based on the facts when they would be under the correct liberal interpretation.

To provide context, criminal laws are narrowly (or strictly) interpreted by the courts to ensure any person accused has adequate notice of the law prior to conviction. The point is to ensure no criminal is surprised by an unexpected, liberal, application of the law against some kind of prohibited behavior.

VA lawyers are often accused of interpreting the Veterans Law strictly, applying it against the veteran as if applying it to a criminal. Time and again, this perverted interpretation of the law by VA has been ruled by the Courts as illegal and unethical. But, VA lawyers and claims raters continue to misapply it against veterans.

In 2010, Chief Justice John Roberts made openly critical remarks during oral arguments at how often VA lawyers take “substantially unjustified” positions when fighting attorney fee awards in veterans appeal cases. At that time, it was discovered that VA lawyers did this in 70 percent of the appeals where veterans attorneys won awards for Equal Access to Justice Act (EAJA) attorney’s fees for wrongly denied veterans.

Bad faith insurance claims adjudication is an illegal practice for insurance companies in every state where the insurance company makes a decision that is unjustified based on the clear language of the policy and the facts as presented.

Yet, VA gets away with it since it is essentially the insurance company for the Department of Defense and generally considered outside the jurisdiction of most federal courts when taking bad faith positions under § 511 for certain benefits adjudications (disability, pension, Chapter 31, etc.).


On the benefits side, VA functions as an insurance company and even used to be named the Bureau of War Risk Insurance.

VA claims it hires insurance consultants to help it create new methods of doing business. In many instances, these new methods result in restrictive policies and extra hoops that serve as little more than roadblocks to benefits similar to those used by Allstate in the last decade.

Allstate got sued for “bad faith adjudication” of claims, and in 2007, it had to release slides created for it by an leading insurance industry consulting company called McKinsey & Co. Those slides created by McKinsey & Co instructed Allstate about its new profit model the firm referred to as the Delay, Deny, Defend model. The suit was not good for Allstate and the world became privy to its new and very profitable “Delay, Deny, Defend” scheme to improperly increase profits on the backs of policyholders.

[The matter is outlined in book, From Good Hands to Boxing Gloves.]

Note that the call to action is alarmingly similar to VA’s attributed motto from veterans, “Delay, Deny, Hope that I die.”

According to the case documents, Allstate simply wanted to increase profits. And the “Delay, Deny, Defend” model allowed Allstate to retain money that should have been paid out for a much longer period of time. A company could then invest the funds into relatively safe capital markets accounts to earn interest on the improperly retained payouts.

Further, Allstate would fight those claimants in court in an attempt to reduce the payout for bigger claims where it was cheaper to fight in court than to cut the check. It would also lowball policyholders by providing settlement checks for lower amounts than were warranted. Sound familiar?

In the end, this was essentially a scheme cooked up by McKinsey & Co for its client to increase profits, and the scheme worked great for Allstate but was bad for the policyholders.


In 2009, VA hired the same insurance consulting company, McKinsey & Co, to help it refine its disability benefits adjudication processes including creating disability calculators, disability benefits questionnaires (DBQs), and part of the VBMS system. You may have seen these systems and “fixes” touted by none other than Undersecretary Allison Hickey before Congress as the fabled silver bullet fix for the disability backlog for the last few years.

It does not take a rocket scientist to see at least a coincidental link between VA hiring McKinsey in 2009 and the explosion in the backlog since that point. The VBMS computer program has been a huge failure to this point. Pretty much, every electronic “fix” has failed to provide the results promised by top VA executives.

Since VA does not have to pay interest on the funds it withholds from veterans but instead can invest the money in capital markets, VA can earn a perverse return on the money by screwing veterans or dragging out the process. The longer the process takes for a payout, the more interest VA can earn on the money wrongfully withheld through arbitrary denials.


For example, if VA withholds a disability rating of 100% for a veteran for one year, it will payout the veteran at the rate for the previous year under the argument that the Sovereign does not pay interest – since there is no interest, the government also takes the position that they do not need to adjust the payout for cost of living increases to compensation for inflation.

Here is what this looks like when comparing just one year for a veteran who receives an award in 2013 but the claim should have been awarded in 2012 (veteran with spouse and one child). We will assume some rater somewhere made an arbitrary mistake about the law that they should have known to not do through proper training that caused a one year delay due to a DRO hearing decision:

  • 2012 – 100% payout = $36,444
  • 2013 – 100% payout = $37,608

By delaying one year, VA holds the funds, pays the veteran at last year’s dollars, saves $1,164 on COLA increase, and the agency can even earn another $1,822 in interest by investing in capital markets with a conservative rate of return on investment of 5%.

All in with this example, VA just “earned” almost $3,000 by making a mistake [sic]. Here, VA saved 8% by making an error that withheld money from a veteran for one year. That veteran did not have the benefit of possessing the money and making investments or payouts as he or she saw fit and are penalized. We can call this a disability tax.

Does this seem like a sick and twisted scheme to you?

In my opinion, VA should be required to pay at today’s COLA / disability rate amounts to avoid creating this perverse incentive to make mistakes that is exactly the same as what insurance companies have been caught doing in bad faith.

Check out our newest example from Prudential getting caught doing exactly that.


In 2001, Prudential embarked on a similar scheme to increase profits on the backs of veterans and their families with relation to SGLI and life insurance payments.

For a little background, VA pays Prudential to manage these benefits programs for veterans. In fact, VA does this with a lot of companies. So much so that many Americans would be shocked at how little VA actually does do regarding benefits adjudication. Prudential is required by VA statute to pay out the benefit when a veteran dies. In exchange, VA pays Prudential for the service and also pays the firm for lost profits by working for VA rather than on the private market (this makes little sense to me).

The payments would likely be substantial enough for most firms, but Prudential decided to fraudulently withhold funds and/or arbitrarily pay out funds. The company was able to earn a rate of return on investment that created even greater profits for company shareholders – both directly from VA and also from fraudulently withholding policyholder payouts. In response, veterans’ families sued both Prudential and VA.

[Read about VA / Prudential vs Hamilton in Class Action here.]

In that suit, 38 USC § 511 did not serve as a bar against jurisdiction of the courts because § 511 specifically allows litigation on such insurance claims – and (more interestingly for us) the actions of the agency were outside of the statutory scope outlined by the language of the VA insurance laws. The lawsuit proceeded past motion for summary judgment and dismissal, Prudential was hammered with allegations of fraud, and the parties settled for multiples of millions of dollars this summer, according to reports.

Yey! Chalk one up for the good guys. Let’s keep this going.


My questions are:

  • Why does VA continue to lie about these fixes (VBMS, eBenefits, GI Bill system, Electronic Health Records, etc.) and why did VA officials merely parrot the lies from certain government contractors that these fixes would magically revolutionize agency benefits systems? The proof (or lack there of) is in the results we have seen.
  • Why is no one talking about government contractors and their influence on VA decisionmaking?

Since we cannot sue VA like all other Americans can sue other federal agencies, I wonder when we should start suing these government contractors and VA for any potential misdeeds they have a hand in outside the scope of many VA laws.

I think the time is now!

Read More:

Updated 8/8/2014 4:00 pm

Ron Nesler

Pulitzer grade reporting, this is a must read for all vets, Americans and other air breathing justice loving creatures.


Good article, but you need to dig a little deeper into the Nature of the Beast, The Administration Procedures Act, and just what the nature of the VA is.
The article seems to only deal with the issue of allowing attorney’s to practice before the VA.
I can’t think of any veteran, (with one exception) who I’ve talked to who get this point.
Until this issue is dealt with, we are AlWAYS to be dealing with issues.

Ron Nesler

After a careful RE-reading, I see no mention of attorneys practicing before the VA. Are we speaking of different articles?

What other issue is there ? It’s all about the VA being a employment agency for everyone with a license to practice. Change the system, and we won’t be having this conversation. Your 40 yrs behind on this question. What I can tell you is that a good part of the reason for the problem we are having with the VA IS the Legal System,and all it entails. Your not campaigning for any real insight or change. I’ve been in… Read more »
Well, I’m going on the record for now as saying that there is no fix, either incremental or some grand strategy WITHIN the limitations that we are presented with. I don’t believe that anyone of us dealing with the problems will be around long enough to maintain any institution knowledge of just what went before. All the issue’s that we are discussing have been dealt with by others for decades. Is anyone on this site or any other resurrecting those… Read more »
I am in the middle of doing just that I have filed a complaint against the Psychologist who officiated my C&P and who without any discussions with me about my situation has harmed me and set my therapy back by stating I never have had PTSD. I am on record with private therapist’s and 2 VA Psychiatrists and psychologists, currently in therapy, as being diagnosed with CHRONIC PTSD and chronic Depression due to my war experiences in Vietnam. The psychologist… Read more »
Denise Beckman
Interesting, if you have your C&P report and it stated some personality disorder, mine was borderline personality disorder ( usually diagnosed in your teens, um, lady you need to study up, you cannot make a “true diagnostic disorder unless it is obvious like schizophrenia!”) they ask certain questions, yet I tried to explain to her, do you know what Fibro Fog is? She did, then kept going. I was trying to tell her that I just went through a very… Read more »
Belinda Mays
Belinda Mays

Excellent article Ben, has me thinking about my husband’s disability claim even more than ever. Hopefully, the attorney I have contacted will handle our appeal. Thank you for all you do.



Ben, You do have to agree that there is a downside as well to allowing the VA to be sued in federal court on the benefits side. While I think that the statute may need to be narrowed totaly repealing it would not be advisable. If Vets were freely allowed to sue in a federal court everytime the process did not go their way they would just file a suit and hope something sticks. While there are legit concerns it… Read more »
Lawrence Kelley III
Jim, your perceptions of repealing 38 USC 511 are not valid under current laws. Your perceptions of the BVA ruing in favor of veterans “pretty often” are also not valid. The CAVC remand to BVA statistics and the BVA’s failure to grant CUEs when evidence is also present show that the BVA is an incompetent, anti-veteran judicial entity. The annual BVA statistics and CAVC remand statistics tell the real story, not personal perceptions based on nothing more than your casual,… Read more »
I won a CUE in 2010 by demonstrating an indisputable act of plagiarism between the pre-enlistment physical and the 1979 rater’s usurping of exact phrases to reach a negative conclusion and thereby deny my claim. I got paid a portion of what I am owed because current raters failed to consider worsening of knee conditions over 33 years (2012 when they finally issued a check). Five long years have gone into trying to correct all of the rater’s errors, the… Read more »
I will say that the part of your story regarding Prudential and SGLI, and SGLI specifically, is a really raw sore spot for me. I received my 100% Svc. Connected Perm./Total in 2010. Even though I was provided with the paperwork/info on the SGLI and enrollment, I was delayed/dragged about and finally denied my SGLI sign-up (I never even was allowed to make a premium payment…no enrollment), because the UNDERWRITERS, AKA Prudential, stated one of my chronic health issues was… Read more »
William heino Sr.
William heino Sr.
No matter what claim a veteran may take, whether you agree or not, lets be guided by only the proper response that I received, when there may be an other opposite view. After all, veteran’s are involved, and wanting to make a change, taking a position and in doing so, perhaps making it better for all of us. We all could learn few words of wisdom from an American Legion field representative. Who I might add, did not want to… Read more »

American Legion ? You should try to keep better company:)

Your story is the main reason why I do not avail myself of the VA Health care system any longer. I used the Phial Va Hospital early 2000’s, and can honestly say that the care provide was first rate. All this of course is a factor of time, place and circumstance whether you get in and out of the system in one piece. Well, so far I can say that my experience with the VHA and VBA has been positive… Read more »

Does the VA and it’s subsidiary entities maintain a “separate set of books ” ? Something on the order of a Comprehensive
Annual Financial Report ? If they do, as I suspect, then they would be bound to report their investments as a reporting requirement, as do other entities, Corporate and Governmental.
The investment of these “quasi-pension fund” for the lack of a better word, are what drive the capital markets…

Danny Hoffman
Danny Hoffman

Fire Gigliotti
What he did inVisn 19
Years earlier
He is also responsible
For the 1 billion dollar
Denver replacement hospital.
Fire him now!

There is a way to make lasting changes in the VA, in “one fell swoop”: remove the incentive for the VA decision makers to do wrong. I have always been in the belief that this powerful incentive is MONEY. Like I told Ben a long time ago, follow the money and you can connect it to every corrupt event that ever occurred in the VA. Here are a few examples: 1. Hundreds of millions of dollars of bonuses implicated in… Read more »

steamwhistler: Your heart may be in the right place, but the new legislation has already circled the wagons on this issue. The bonus incentive is still in place, and any firing is subject to a review and appeal with in the process. They have already closed ranks, it’s the same old, same old. THE FIX IS IN. I maintain that you CANNOT fix the VA from within system.
I rest my case.


steamwhistler: send me an email at [email protected].
Your in the right pew, but the wrong Church.
You need to go down the RIGHT Rabbit Hole on all this.


Ben: Do you have any set up for “COMSEC” traffic that isn’t in the clear…


As for my service connected rating, that came after I filed a CUE and the DRO stated it wasn’t a mistake, yet couldn’t explain why the rater ignored medical evidence and did not ask for an independent consultation. You can read my story here:

I think, some think that there is little return or profit with providing Vocational Rehabilitation towards 50% and above disabled. So might always be best to remotely think that this low-balling maybe a blessing in disguise, as to why one would get something less than a 50% disability percentage rating. However, perception is perception, and it’s obviously not profitable to high ball a pay-out. On the flip of this; where there’s money, there tends to be more fraud or exploitation.… Read more »