Veterans Benefits Scam

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Department of Veterans Affairs
News Release

January 5, 2001

VA Warns Veterans about Scam to Purchase Benefits

Washington, D.C. — Acting Secretary of Veterans Affairs (VA) Hershel W.
Gober warned veterans about a financial scam that offers lump-sum
payments in exchange for monthly VA disability checks or pensions.

“These schemes seem to target the most desperate of our veterans,” said
Gober.  “No financial expert on this planet would encourage anyone to accept
30 cents today if they could get a dollar tomorrow.  Doing this to veterans

Federal law outlaws the direct sale of VA benefits.  VA is also prohibited
paying pensions and disability compensation to anyone other than a veteran,
a family member or a lawful guardian.

The latest schemes, however, attempt to avoid the long-standing federal
prohibition by representing these transactions as loans.  Companies
persuade veterans to give up their disability and pension checks for a
specific period ­ up to eight years ­ in exchange for a lump-sum cash
payment typically worth 30 ­ 40 percent over that same period.  In some
cases, the veteran must also take out a life insurance policy naming the
company as beneficiary.

In the case of a veteran with a disability rated at 50 percent, it could
receiving a one-time payment of about $20,000, then forfeiting a $609
monthly payment that in the course of eight years would bring in nearly

“VA lawyers are still studying the fine print in these schemes to determine
whether or not they are legal,” Gober said.  “Even if they’re legal, they’re
despicable, because they take money away from people in the direst financial

VA pensions go to wartime veterans incapable of self-support for reasons
unrelated to their military service.   VA disability compensation is paid to
veterans with lingering health problems related to their time in uniform.

"When the way comes to an end, then change - having changed, you pass
through"  'I Ching'