5 On Your Side Investigation: How the VA failed to protect hundreds of disabled veterans' finances

STOW, Ohio - Our exclusive 5 On Your Side Investigation has uncovered serious concerns about a U.S. Department of Veteran Affairs program meant to protect disabled veterans.

When a disabled veteran can no longer manage their affairs, the VA appoints a fiduciary to oversee the veteran’s benefits, pay their bills on time, and balance their budget.

Our investigation found, since 2012, the VA has barred 752 fiduciaries after finding they misused disabled veterans benefits, including a Northeast Ohio prosecutor.

Stow prosecutor barred by the VA

Munroe Falls resident Nicole Welsh, 43, is currently an assistant prosecutor in the City of Stow.

A VA spokesperson told us Welsh is currently banned from serving as a fiduciary.

A VA memo obtained by 5 On Your Side Investigators found Welsh misused and mismanaged one of her beneficiary’s benefits.

The VA memo orders Welsh to reimburse the veteran $6,306.80.

The reimbursement amount includes $5,166.32 in fiduciary fees Welsh received during the “period in which a late fee, overdraft fee, or transfer of funds was noted”; $220.48 in late fees, and $220 for overdraft fees.

The memo orders Welsh to repay $700 in “transferred funds” she put into her “personal account.”

In three separate e-mails over a two-week period, 5 On Your Side investigators requested an interview with Welsh. She declined to take part in a scheduled on-camera interview.

We then met up with her on her way to work at Stow Municipal Court last week.

She vehemently denied transferring the veteran’s money into her personal account, but declined to answer any other questions.

5 On Your Side Investigators asked the VA if Welsh reimbursed the veteran, but it failed to provide an answer by our deadline.

The VA spokesperson did tell us Welsh managed the finances of between 10 and 20 veterans and said an investigation into Welsh’s actions is ongoing.

Broken Trust

“I trusted the VA to take care of their veterans. But this situation, it has made our life . . .  hell,” said “Lin.”

“Lin” is the veteran whose benefits were misused and mismanaged by Welsh, according to the VA memo.

She spoke with 5 On Your Side Investigators after we agreed to conceal her identity.

“Lin” told us Welsh’s actions have left her in “financial ruins” and caused her enormous stress.

“I have so many collection notices I can't even keep up with (it,)” she said.

“I get phone calls; letters; notes on my door; people driving by,” she said.

“It made my condition a whole lot worse,” she said.

“Lin” joined the Air Force in 1986 to “make a difference,” but the former Senior Airman soon began suffering debilitating depression.

In 2004, the VA determined she was unable to manage her finances and needed a fiduciary.

According to VA records, Nicole Welsh was appointed her fiduciary in 2009.

At first, “Lin” did not worry about the increasing number of calls she was getting from debt collectors or the growing number of collection notices in her mailbox.

But last year, after the calls and mail grew out of control, she finally contacted the VA for help.

After finding misuse, the VA appointed a new fiduciary for “Lin.”

“I feel horribly betrayed,” she said.

“I feel a great disservice has been done to me and my family,” she said.

A daughter’s distress

Our investigation uncovered another veteran who said he had problems with Welsh.

“It's like we were the gold mine,” said Univester Sanders.

The Akron resident told 5 On Your Side Investigators Welsh failed to pay his bills on time.

The former Marine suffers from schizophrenia. He said his medication makes it difficult for him to remember and discuss specifics about his financial problems.

However, his daughter, Makita, was able to provide details to 5 On Your Side Investigators.

“I very knew something wasn't right,” she said.

“Bills weren't being paid. Our electric almost got cut off once. Our water too,” she said.

She said collection notices routinely arrived in the mail.

She also told us Welsh refused to pay for her family’s basic needs, like clothing.

“My dad's a good person,” she said.

“He shows love to anybody that's around. And respect. So for her to do that, that just shows she's a heartless person and she thinks of herself,” she said.

A mother’s fight

Cheryl Lynch founded American Veterans with Brain Injuries after her son, Christopher, was injured during a training exercise while serving overseas.

Her non-profit provides peer support for disabled vets.

Lynch said the VA appoints fiduciaries to take responsibility for many of the veterans that work with her organization.

She told us many veterans she assists have serious complaints about the people appointed to manage their finances.

VA OIG audit uncovers investigative delays

An audit released by the VA Office of Inspector General released in August 2015 found the Veterans Benefits Administration fails to investigate allegations of misuse in a timely manner.

During calendar year 2013, the audit found 48% of required misuse actions associated with managing 122 beneficiaries “were not performed timely or according to policy.”

Even more troubling, after misuse was confirmed, the audit found the VBA often failed to quickly complete required actions, like reissuing the misused funds. 

For example, the audit said two fiduciaries who misused beneficiary funds were allowed to continue managing 48 other fiduciaries.

A VA spokesperson said fiduciaries who receive a fee make up just 8 percent of the fiduciaries who serve 198,193 beneficiaries.

The vast majority of VA fiduciaries are veterans’ family members.

During FY 2015, the VA says it receive more than 1800 allegations of misuse.

It found misuse in 390 cases. Each case of misuse is then referred to the VA’s Office of Inspector General.

If the VA OIG determines the misuse involved criminal acts, they refer the case to local or federal  prosecutors.

The VA spokesperson said misuse is rare and occurs in just 1/10th of 1 percent of cases.

Limited oversight

“Certainly, they could do things differently,” said Jessica Berg, Dean of the Case Western Reserve University School of Law, about the VA fiduciary program.

Berg’s biography lists her as a “renowned health law expert.”

She told us she has conducted extensive research into public health policy.

Berg told us the U.S. government rarely prioritizes oversight.

“We don't provide minute by minute oversight of what someone is doing,” she said.

“It really takes something happening and somebody else noticing and complaining and then an investigation,” she said.

“I think fraud occurs in a variety of circumstances and certainly this is one in which we've seen fraud occur before,” she said.

“It is an unfortunate side effect of creating these kinds of systems,” she said.

Berg said fraud and mismanagement can be reduced by putting limits on the number of beneficiaries.

A VA spokesperson told us there is currently no limit.

“Just think how hard it is to keep track of everything (with your own bills),” she said.

“We need to think very carefully about what we're asking people to do,” said Berg.

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