       NOTE: This disposition is nonprecedential.


  United States Court of Appeals
      for the Federal Circuit
                ______________________

           SAMUEL VONZELL GORDON,
                   Petitioner

                           v.

    OFFICE OF PERSONNEL MANAGEMENT,
                  Respondent
            ______________________

                      2017-1165
                ______________________

   Petition for review of the Merit Systems Protection
Board in No. CH-0845-16-0204-I-1.
                ______________________

                Decided: May 25, 2017
                ______________________

   SAMUEL VONZELL GORDON, South Holland, IL, pro se.

    JOSEPH ALAN PIXLEY, Commercial Litigation Branch,
Civil Division, United States Department of Justice,
Washington, DC, for respondent. Also represented by
JOYCE R. BRANDA, ROBERT E. KIRSCHMAN, JR., PATRICIA M.
MCCARTHY.
                ______________________

 Before NEWMAN, O’MALLEY, and REYNA, Circuit Judges.
2                                            GORDON   v. OPM



O’MALLEY, Circuit Judge.
    Petitioner Samuel Gordon appeals the final order of
the Merits Systems Protection Board (“the Board”) affirm-
ing a decision of the Office of Personnel Management
(“OPM”). See Gordon v. Office of Pers. Mgmt. (Board
Order), 123 M.S.P.R. 574 (2016). The Board concluded
that Gordon failed to prove that the recovery of his over-
paid benefits from the Federal Employee Retirement
System (“FERS”) would be against equity and good con-
science. For the reasons set forth below, we reverse.
                     I. BACKGROUND
    Gordon filed a FERS application for immediate re-
tirement and disability retirement benefits in February
2009. OPM notified Gordon in an April 3, 2009, letter
that it had approved his application for disability retire-
ment. OPM authorized monthly interim FERS benefits in
the amount of approximately 80 percent of his estimated
FERS benefits until OPM finished processing his applica-
tion.
    OPM also directed Gordon to apply for Social Security
disability benefits and to notify OPM if the Social Security
Administration awarded him monthly benefits. OPM
explained that Gordon’s FERS benefits would be offset by
any Social Security disability benefits he received. OPM
then stated:
    Because the FERS disability benefit must be re-
    duced by 100 percent of any Social Security bene-
    fit payable for 12 months, Social Security checks
    should not be negotiated until the FERS benefit
    has been reduced. The Social Security checks will
    be needed to pay OPM for the reduction which
    should have been made in the FERS annuity.
Gordon v. Office of Pers. Mgmt. (AJ Decision), No. CH-
0845-16-0204-I-1, 2016 MSPB LEXIS 2622, at *3
(M.S.P.B. May 2, 2016).
GORDON   v. OPM                                            3



    Over a three-year period, Gordon received monthly in-
terim payments at three separate rates: (1) $1,118.28
from March 2, 2009, to March 30, 2009; (2) $1,118.00 from
April 1, 2009, to November 30, 2011; and (3) $1,147.00
from December 1, 2011, to January 30, 2012. OPM calcu-
lated these monthly interim payments based on an as-
sumed payable disability benefit with no reduction for
benefits from the Social Security Administration.
    Shortly after OPM authorized the monthly interim
payments, the Social Security Administration informed
Gordon that it had approved his request for benefits,
effective April 1, 2009. Gordon thereafter received month-
ly Social Security payments of $1,984.00. Despite OPM’s
letter instructing him not to negotiate the Social Security
checks, Gordon negotiated the checks and began receiving
both the Social Security and interim FERS payments.
    Before OPM finalized its review of Gordon’s applica-
tion, it determined in August 2011 that Gordon was not
eligible for a FERS disability annuity on his last day of
pay, January 30, 2009, because he did not have at least 18
months of creditable civilian service as of that date. OPM
concluded that he had 17 months and 27 days of credita-
ble civilian service, leaving him three days short of the 18-
month requirement for receiving a FERS disability annui-
ty. Rather than denying Gordon disability retirement
entirely, OPM credited his service beyond his last day of
pay to February 4, 2009, so that he would meet the mini-
mum service requirement.
    Around this time, OPM also informed Gordon that his
gross monthly annuity was not sufficient, as of January 1,
2011, to cover all of the voluntarily-elected health and life
insurance benefits he received. OPM sent Gordon a new
election form for his health benefits and life insurance,
but he failed to return the election form. OPM then
directed Gordon to pay his Federal Employee Health
Benefits premiums.
4                                          GORDON   v. OPM



    OPM completed its review of Gordon’s application in
January 2012, almost three years after approving his
application for benefits. OPM calculated that the actual
value of Gordon’s annuity before he began receiving Social
Security benefits in April 2009 was $1,599.00 per month.
After accounting for the $1,984.00 per month that Gordon
began receiving from his Social Security benefits in April
2009, however, OPM concluded that Gordon was entitled
only to an earned rate annuity of $326.00 per month.
Because Gordon had received $1,118.00 per month for
almost three years while only being entitled to $326.00
per month, OPM calculated that it had overpaid Gordon
by $25,012.90. OPM also calculated overpayments of
$5,191.39 for Gordon’s voluntary elections for Federal
Employee Health Benefits premiums and $2,923.13 for
Federal Employees’ Group Life Insurance premiums.
OPM therefore determined that Gordon needed to repay
$33,127.42 because of OPM’s overpayment from April 1,
2009, to January 30, 2012. OPM developed a repayment
plan that would have required Gordon to pay more than
250 monthly installments of $127.96.
    Gordon requested reconsideration and submitted a
Financial Resources Questionnaire in February 2012. In
August 2014, OPM notified Gordon that it was reviewing
his request for reconsideration and requested updated
financial information. Gordon declined to submit an
updated Financial Resources Questionnaire, but contin-
ued to claim that he was entitled to a waiver of the over-
payment amount because of his disability, financial
situation, and inability to receive financial assistance
from the Veterans Administration and state and local
organizations because of the overpayment.
    OPM issued its decision on December 28, 2015, three
years and ten months after Gordon requested reconsider-
ation. OPM gave no reason for its delay, merely stating,
“[w]e apologize for the delay in responding to your re-
quest.” Resp’t’s App. 55. In its reconsideration decision,
GORDON   v. OPM                                         5



OPM affirmed the calculated overpayment amount. OPM
also concluded that Gordon was not entitled to waiver of
the overpayment. OPM concluded, “[a]fter a careful
review of the evidence of record,” that Gordon was not at
fault in causing or contributing to the overpayment, but
OPM found that recovery was not against equity and good
conscience. Resp’t’s App. 57. OPM did find, however,
that Gordon had shown collection at the scheduled rate
would cause financial hardship, so OPM lowered the
monthly payments to 662 installments of $50.00 and a
final installment of $27.42.
    Gordon appealed OPM’s decision to the Board. Gor-
don did not challenge OPM’s calculation of the overpay-
ment, and the Administrative Judge (“AJ”), upon review
of the record, found that OPM’s calculations were correct.
The AJ then found that Gordon failed to meet his burden
to show that recovery of the overpayment would be
against equity and good conscience. The AJ found that
Gordon failed to show financial hardship because he
declined to submit an updated Financial Resources Ques-
tionnaire despite multiple requests from OPM and en-
couragement to do so from the AJ. According to the AJ,
Gordon’s reliance on his 2012 submission did not provide
sufficient evidence to compare his current monthly income
with his claimed expenses. Gordon therefore failed to
prove by substantial evidence that collection of the over-
payment at $50.00 per month would be a financial hard-
ship.
     The AJ then considered whether Gordon had shown
he had relinquished a valuable right or changed positions
for the worse due to the overpayment. The AJ found that
Gordon did not establish a claim for detrimental reliance
because he received his letter from the Social Security
Administration regarding his entitlement to Social Secu-
rity benefits only one month after receiving notification
from OPM that his FERS disability benefits would be
reduced based on his receipt of Social Security benefits.
6                                            GORDON   v. OPM



The AJ also noted that OPM advised Gordon not to nego-
tiate the Social Security benefits until it finalized his
disability annuity. According to the AJ, Gordon’s failure
to heed this warning was an intervening circumstance
causing his failure to receive state, local, and Veterans
Administration aid because he likely could have qualified
for the aid had he not negotiated the Social Security
benefits. The AJ therefore found that Gordon had not
proven that recovery of the overpayment would be against
equity and good conscience based on a relinquishment of a
valuable right or a change in position for the worse.
    The AJ turned finally to whether Gordon proved his
entitlement to waiver of the overpayment based on un-
conscionability. The AJ acknowledged that OPM “was not
a model of expediency in notifying the appellant of the
overpayment,” but found that the delay of about three
years to finalize his annuity was not “so ‘monstrously
harsh’ that recovery of the overpayment would be uncon-
scionable.” AJ Decision, 2016 MSPB LEXIS 2622, at *22.
The AJ also found that Gordon had not demonstrated
unique personal circumstances based on his disability
because he had not submitted medical evidence support-
ing the assertion and the AJ found him to be “intelligent,
articulate, and in full command of his cognitive capabili-
ties in pursuing this appeal.” Id. And the AJ found that
OPM had not acted with gross negligence in its handling
of Gordon’s annuity.
     Gordon petitioned the Board for review of the AJ’s ini-
tial decision, but the Board denied the petition and af-
firmed the AJ’s initial decision. The Board did not state
that the initial decision was adopted subject to modifica-
tions by the Board. See, e.g., Howard v. Dep’t of Transp.,
117 M.S.P.R. 610, 610 (2012) (adopting the AJ’s decision
as the Board’s final decision “[e]xcept as modified by th[e]
Final Order”). Instead, the Board indicated that the AJ’s
initial decision “is now the Board’s final decision.” Board
Order, 123 M.S.P.R. at 574.
GORDON   v. OPM                                            7



     Despite the Board indicating that the AJ’s initial de-
cision had become the Board’s final decision, the Board
provided additional reasoning regarding its conclusion
that Gordon had not provided any basis for granting his
petition for review. The Board based its reasoning on its
conclusion that the Set-Aside Rule applied to this case.
Because Gordon received OPM’s letter discussing the
effect of Social Security benefits on his FERS benefits, the
Board found that he was “aware of the set-aside require-
ment and should have anticipated that he was receiving
an overpayment that he eventually would need to repay.”
Board Order, 123 M.S.P.R. at 574. The Board also agreed
with the AJ’s findings that Gordon had not proven by
substantial evidence that: (1) he did not receive state and
Veterans Administration benefits because of the over-
payment, and (2) he would be financially burdened by
repaying the overpayment.
    Gordon appeals from the Board’s final decision. We
have jurisdiction over this appeal under 28 U.S.C.
§ 1295(a)(9).
                      II. DISCUSSION
     The scope of our review in an appeal from a decision
of the Board is limited. We must affirm the Board’s
decision unless it is “(1) arbitrary, capricious, an abuse of
discretion, or otherwise not in accordance with law;
(2) obtained without procedures required by law, rule, or
regulation having been followed; or (3) unsupported by
substantial evidence.” 5 U.S.C. § 7703(c); see also Fields
v. Dep’t of Justice, 452 F.3d 1297, 1301 (Fed. Cir. 2006).
Substantial evidence is “such relevant evidence as a
reasonable mind might accept as adequate to support” the
Board’s conclusion. Consol. Edison Co. v. Nat’l Labor
Relations Bd., 305 U.S. 197, 229 (1938).
   Gordon argues that the Board erred in failing to
waive the collection of the overpayment he received.
When the recipient of an overpayment argues that the
8                                            GORDON   v. OPM



overpayment amount should be waived, OPM has the
burden of establishing by a preponderance of the evidence
that an overpayment occurred. 5 C.F.R. § 845.307(a).
The recipient then must establish by substantial evidence
that he is eligible for a waiver of the overpayment. Id.
§ 845.307(b).
    As an initial matter, Gordon argues that OPM’s over-
payment calculations are incorrect because they do not
account for his service with the Transportation Security
Administration. In support, Gordon provides documenta-
tion that appears to show he worked as a Transportation
Security Officer at O’Hare International Airport. But the
AJ explained that Gordon “has not come forward with any
evidence or argument that challenged OPM’s calculations.
Rather, the appellant’s argument centers on waiver.” AJ
Decision, 2016 MPSB LEXIS 2622, at *12. In an apparent
attempt to excuse his failure to address OPM’s alleged
miscalculation, Gordon states that the documentation he
cites is new evidence that previously was not available to
him. But his own documentation shows that he had the
information during his appeal and even sent it to OPM in
2011. Because Gordon failed to challenge OPM’s calcula-
tions before the AJ and he did not produce new evidence,
we find that he waived his argument that OPM miscalcu-
lated his annuity and overpayment. See Gant v. United
States, 417 F.3d 1328, 1332 (Fed. Cir. 2005).
    Gordon next argues that he is entitled to waiver of the
overpayment. OPM’s collection of FERS overpayments is
subject to 5 U.S.C. § 8346(b), which provides in pertinent
part, “[r]ecovery of payments under this subchapter
[including FERS annuity benefits] may not be made from
an individual when, in the judgment of the Office of
Personnel Management, the individual is without fault
and recovery would be against equity and good con-
science.” 5 U.S.C. § 8346(b); see also 5 U.S.C. § 8470(b); 5
C.F.R. § 845.301. Recovery is against equity and good
conscience if any of the following three conditions are met:
GORDON   v. OPM                                          9



   (a) It would cause financial hardship to the person
   from whom it is sought;
   (b) The recipient of the overpayment can show
   (regardless of his or her financial circumstances)
   that due to the notice that such payment would be
   made or because of the incorrect payment he or
   she either has relinquished a valuable right or has
   changed positions for the worse; or
   (c) Recovery would be unconscionable under the
   circumstances.
5 C.F.R. § 845.303.
    The AJ found, and the Board did not dispute, that
Gordon was “without fault” in this case, but the AJ denied
Gordon’s request for a waiver based on her equity and
good conscience analysis. Gordon argues that recovery in
this case would be against equity and good conscience
because he meets each of the three conditions. After
reviewing each of the conditions, we conclude the AJ erred
in finding that Gordon had not shown recovery would be
against equity and good conscience because recovery of
the overpayment under these circumstances would be
unconscionable due to OPM’s lengthy delays and the
impact it had on Gordon’s benefits.
                        A. Fault
     Although the AJ and the Board both found that Gor-
don was without fault, we briefly address the fault in-
quiry because of its impact on the reasoning used to
support the finding by the AJ and the Board that Gordon
failed to prove recovery would be against equity and good
conscience. As we explained in Boyd v. Office of Personnel
Management, 851 F.3d 1309 (Fed. Cir. 2017), the relevant
regulations state that a recipient of an overpayment is
“without fault if he/she performed no act of commission or
omission which resulted in the overpayment.” 5 C.F.R.
§ 831.1402. One of the pertinent considerations when
10                                           GORDON   v. OPM



considering a finding of fault is whether the recipient of
an overpayment “accepted a payment which he/she knew
or should have known to be erroneous.”                 Id.
§ 831.1402(a)(3).
    OPM’s published policy guidelines interpreting its
regulations further reiterate and explain the fault in-
quiry. OPM’s guidelines state that “an individual is not
without fault if,” inter alia, “he/she accepted a payment
which he/she knew to be erroneous[,] or . . . he/she accept-
ed a payment which he/she should have known to be
erroneous.” Ret. & Ins. Grp., U.S. Office of Pers. Mgmt.,
Policy Guidelines on the Disposition of Overpayments
under the Civil Service Retirement System and Federal
Employees’ [sic] Retirement System (“Policy Guidelines”),
§ I.B.3(c)–(d) (1995). But the guidelines contain an excep-
tion under which anyone, even an individual who knows
that he is receiving an erroneous overpayment, can auto-
matically be found without fault:
     Prompt Notification Exception. Individuals who
     accept a payment in excess of the amount to which
     they are entitled will automatically be found
     without fault, regardless of whether they knew or
     should have known that the payment was errone-
     ous, if they promptly contact OPM and question
     the correctness of the payment. In general, an in-
     dividual must contact OPM within 60 days of the
     receipt of the overpayment—i.e., a onetime
     prompt notification requirement. (Note: This rule
     provides an exception to the general rules cited
     above (I.B.3) by allowing certain persons who
     knowingly accept overpayments to be found with-
     out fault if they demonstrate good faith by
     promptly bringing the overpayments to OPM's at-
     tention. However, the fact that they suspected or
     knew that they had received an overpayment—as
     evidenced by their contacting of OPM—will have a
GORDON   v. OPM                                            11



    bearing on equity and good conscience determina-
    tions. See the Set-Aside Rule, guideline I.C.4.)
Policy Guidelines § I.B.6.
    The Set-Aside Rule, which is referenced by the
Prompt Notification Exception, applies to the equity and
good conscience inquiry. Boyd, 851 F.3d at 1313–15.
Although the Set-Aside Rule does not affect the fault
analysis, the outcome of the fault analysis determines the
applicability of the Set-Aside Rule. See Policy Guidelines
§§ I.B.6, I.C.4, I.E.7. The Set-Aside Rule states:
    Individuals who are aware that they are receiving
    overpayments are obligated by the principles of
    equity and good conscience to set aside the
    amount overpaid pending recoupment by OPM.
    Thus, an individual who accepted a payment
    which he/she suspected or knew to be erroneous
    but who is found without fault under the Prompt
    Notification Exception (I.B.6) is obliged to set the
    overpaid money aside pending recovery by
    OPM. . . . Unless there are exceptional circum-
    stances, recovery by OPM in these cases is not
    against equity and good conscience. (Note: Excep-
    tional circumstances would involve extremely
    egregious errors or delays by OPM—e.g., a failure
    to issue a written decision within 4 years of a
    debtor’s request for waiver. [See I.F.1 and I.F.3.]
    Financial hardship is not an exceptional circum-
    stance.)
Policy Guidelines § I.C.4 (italicized emphasis added). As
explained by the guideline, the Set-Aside Rule applies to
any individual who accepted a payment that he “suspect-
ed or knew to be erroneous” but was nevertheless found
without fault due to the Prompt Notification Exception.
Id.
12                                            GORDON   v. OPM



    In this case, there is no indication that the Prompt
Notification Exception applies to Gordon. OPM’s recon-
sideration decision, issued on December 28, 2015, merely
states, “[a]fter a careful review of the evidence of record,
we find that [Gordon is] not at fault in causing or contrib-
uting to the overpayment.” Resp’t’s App. 57. OPM’s
decision makes no reference to the Prompt Notification
Exception. The decisions of the AJ and the Board also
give no indication that the Prompt Notification Exception
applies in this case, and we see no indication in the record
that Gordon notified OPM within sixty days of the receipt
of an overpayment, as required by Policy Guidelines
§ I.B.6. We therefore conclude that the Prompt Notifica-
tion Exception does not apply to Gordon.
    Because the Prompt Notification Exception does not
apply, the decisions of OPM, the AJ, and the Board find-
ing Gordon “without fault” must be based on the underly-
ing conclusions that Gordon (1) did not know his payment
was erroneous, and (2) could not have reasonably been
expected to know his payment was erroneous. 1 If either
of these conclusions were not true, then Gordon would not
be without fault under the Policy Guidelines because the
Prompt Notification Exception, which “provides an excep-
tion to the general rules cited above (I.B.3) by allowing
certain persons who knowingly accept overpayments to be
found without fault . . . ,” Policy Guidelines § I.B.6, does
not apply in this case. See Policy Guidelines § I.B.3(c)–(d).
                  B. Financial Hardship
    Gordon argues that he has burdensome financial obli-
gations caused by his disability and now by the overpay-



     1   A parenthetical note at the end of Policy Guide-
lines § I.B.3 states, “[t]he phrase ‘should have known’ can
be interpreted as ‘could have reasonably been expected to
know.’”
GORDON   v. OPM                                           13



ment. Gordon asserts that his financial obligations
became so great that he was forced to return to work
against the advice of his doctor. 2 To demonstrate his
financial obligations, Gordon filed a Financial Resources
Questionnaire in February 2012. OPM requested that
Gordon submit an updated questionnaire in 2014, but he
declined to file one. OPM again requested an updated
questionnaire while the case was before the AJ. The AJ
even encouraged Gordon to submit an updated question-
naire before his hearing and specifically informed him
that the AJ would find it difficult to find in his favor on
financial hardship grounds without an updated question-
naire. Gordon declined once again.
     To show financial hardship, an individual must show
that he needs substantially all of his “current income and
liquid assets to meet current ordinary and necessary
living expenses and liabilities.” 5 C.F.R. § 845.304. A
pertinent consideration in this determination is the
“individual’s financial ability to pay at the time collection
is scheduled to be made.” Id. § 845.304(a)(1) (emphasis
added). The AJ found that Gordon failed to meet his
burden to show financial hardship because he declined to
submit an updated questionnaire, which left the AJ
without sufficient evidence to compare Gordon’s then-
current monthly household income with his claimed
expenses. Because Gordon’s ability to pay at the time of
collection is a pertinent consideration in analyzing finan-



    2   Gordon appears to allege separately that he was
improperly terminated from his positions working for the
U.S. Postal Service on three separate occasions when he
tried to return to work. As the AJ explained to Gordon,
those claims are not relevant to this case. If he desires,
Gordon can pursue a claim against his former employers
by filing a separate action. See AJ Decision, 2016 MSPB
LEXIS 2622, at *7.
14                                            GORDON   v. OPM



cial hardship and there is substantial evidence to support
the AJ’s conclusion that Gordon failed to show his finan-
cial ability to pay at the time of the appeal, we find no
error in the AJ’s consideration of this issue.
         C. Relinquishment of a Valuable Right or
             Changed Position for the Worse
    Gordon argues that he lost valuable healthcare bene-
fits from the Veterans Administration, Medicare, and
Medicaid because of the overpayment. He also argues
that he lost nearly all of a $35,000 forgivable home loan
from the State of Illinois because the overpayment falsely
inflated his reportable income to the IRS.
    Waiver of an overpayment is justified under § I.E.3 of
OPM’s guidelines when the relinquishment of a valuable
right or change in position is:
     a) directly caused by the overpayment or notice
     that such payment would be made (i.e., loss or
     change would not have otherwise occurred);
     b) detrimental to the overpayment recipient;
     c) material (i.e., significant enough to warrant the
     waiver); and
     d) irrevocable (i.e., the forfeited right cannot be
     recovered, the change in position cannot be re-
     versed).
Policy Guidelines § I.E.3; see also King v. Office of Pers.
Mgmt., 730 F.3d 1342, 1349 (Fed. Cir. 2013). But the
Policy Guidelines explain that relinquishment of a valua-
ble right or change in position does not warrant a waiver
of an overpayment if the debtor knew or strongly suspect-
ed that the payment was erroneous:
     A debtor’s claim that an overpayment caused
     him/her to lose a valuable right or to change posi-
     tions for the worse should be rejected if there is
GORDON   v. OPM                                             15



    substantial proof that the debtor knew or strongly
    suspected that the payment in question was erro-
    neous: e.g., debtor inquired as to correctness of the
    payment. See I.C.4.
Policy Guidelines § I.E.7. This limitation on the relin-
quishment of a valuable right or change in position analy-
sis coincides with § I.C.4—the Set-Aside Rule—because a
debtor who is “aware,” or who “knew or strongly suspect-
ed” (in the language of § I.E.7), that he is receiving over-
payments cannot receive a waiver of the overpayment for
equity and good conscience “[u]nless there are exceptional
circumstances,” which do not include financial hardship.
Policy Guidelines § I.C.4. In other words, if a debtor was
“aware” or “knew or strongly suspected” that he received
an overpayment, then the Set-Aside Rule applies and the
equity and good conscience analysis hinges on whether
exceptional circumstances exist, not the separate factors
relating to the inquiries of financial hardship or relin-
quishment of a valuable right or change of position for the
worse. 3 See, e.g., Policy Guidelines §§ I.C.4, I.E.7; James
v. Office of Pers. Mgmt., 72 M.S.P.R. 211, 220 (1996)
(analyzing a debtor’s argument related to a change in
position for the worse due to a commitment to buy a new
house based on the exceptional circumstances standard,




    3   To be clear, we are not saying that a situation in-
volving loss of a valuable right or a change in position for
the worse cannot rise to the level of exceptional circum-
stances. Although the Set-Aside Rule specifies that
“[f]inancial hardship is not an exceptional circumstance,”
Policy Guidelines § I.C.4, it does not state that a loss of a
valuable right or a change in position for the worse cannot
create an exceptional circumstance. We do not offer any
further analysis on this issue because, as explained below,
the Set-Aside Rule does not apply in this case.
16                                            GORDON   v. OPM



not the factors relating to a change in position for the
worse, when the Set-Aside Rule applied).
     In her analysis, the AJ appears to have combined the
first prong of § I.E.3—direct causation—with the note in
§ I.E.7 to conclude that Gordon did not qualify for waiver
under this condition. The AJ found that Gordon could not
show detrimental reliance “when [he] was made aware
just one month prior to receiving social security that he
should set aside those payments until OPM finalized his
case.” AJ Decision, 2016 MSPB LEXIS 2622, at *18–19.
The AJ concluded that Gordon’s negotiation of his Social
Security benefits despite notice from OPM not to negoti-
ate the benefits “served as an intervening circumstance
precluding good-faith reliance to his detriment.” Id. at
*19. The AJ also found that there is “substantial proof in
the record that the appellant knew that his FERS annuity
payments were subject to reduction upon receipt of” a
Social Security benefits award. Id. (citing Policy Guide-
lines § I.E.7).
    The AJ’s analysis on this issue is not supported by
substantial evidence and is erroneous. First, to the extent
the AJ’s analysis relies specifically on the direct causation
element of § I.E.3, the AJ’s “intervening circumstance”
conclusion is not supported by substantial evidence and is
otherwise not in accordance with law. The Policy Guide-
lines explain that the direct causation element considers
whether the “loss or change would not have otherwise
occurred.” Policy Guidelines § I.E.3(a). The receipt of an
overpayment that disqualifies a person from the receipt of
benefits he otherwise would have received falls directly
within the criteria that the “loss or change would not have
otherwise occurred.” Id. The AJ’s attempt to skirt this
conclusion because Gordon negotiated his Social Security
benefits conflates this element with the fault determina-
tion, which had already been made in Gordon’s favor. As
noted, OPM concluded that Gordon was “without fault,”
so Gordon’s fault should not have come into play at that
GORDON   v. OPM                                          17



point. AJ Decision, 2016 MSPB LEXIS 2622, at *14. The
AJ’s reintroduction of fault during an analysis of
§ I.E.3(a) is contrary to law.
    To the extent the AJ relied on § I.E.7 because Gordon
allegedly knew that he was receiving an overpayment, the
AJ’s conclusion must be erroneous because it contradicts
the AJ’s previous conclusion that Gordon was without
fault. As discussed above, the record provides no evidence
that the Prompt Notification Exception applies to Gordon.
OPM, the AJ, and the Board also made no indication that
the Prompt Notification Exception applies in this case.
Because the Prompt Notification Exception does not
apply, Gordon must not have known or had a reasonable
expectation to know that his payments were erroneous;
otherwise, OPM, the AJ, and the Board could not have
found him without fault under Policy Guidelines
§ I.B.3(c)–(d). The AJ’s contradictory conclusions that
Gordon was without fault in this case, which required a
conclusion that he did not know or have a reasonable
expectation to know that the payments were erroneous,
but that he could not satisfy the detrimental reliance
criteria because he knew that the payments were errone-
ous cannot stand.
    The Board’s characterization of the AJ’s decision on
this issue as an application of the Set-Aside Rule, Board
Order, 123 M.S.P.R. at 574, fails for similar reasons. 4 The


   4    The AJ did not cite the Set-Aside Rule in her deci-
sion. The AJ also did not analyze Gordon’s arguments
under the Set-Aside Rule, as shown by the AJ not analyz-
ing Gordon’s argument under the “exceptional circum-
stances” standard, which specifically disqualifies financial
hardship as an exceptional circumstance, Policy Guide-
lines § I.C.4. Instead, the AJ analyzed Gordon’s argu-
ments, including financial hardship, on the merits. See
AJ Decision, 2016 MSPB LEXIS 2622, at *19. The Board
18                                            GORDON   v. OPM



Set-Aside Rule explains that it applies to “[i]ndividuals
who are aware that they are receiving overpayments . . . .”
Policy Guidelines § I.C.4. It then specifies that it applies
to “an individual who accepted a payment which he/she
suspected or knew to be erroneous but who is found
without fault under the Prompt Notification Excep-
tion . . . .” Id. As addressed above, the Prompt Notifica-
tion Exception does not apply, and the conclusion by
OPM, the AJ, and the Board that Gordon was without
fault must be premised on findings that he did not know
and could not have reasonably been expected to know that
his payments were erroneous. See Policy Guidelines
§ I.B.3(c)–(d). The Board’s conclusion that the AJ “cor-
rectly found [that] the appellant [wa]s without fault,”
Board Order, 123 M.S.P.R. at 574, directly contradicts the
Board’s subsequent conclusion that Gordon was subject to
the Set-Aside Rule because he was aware that he was
receiving overpayments. See id. These contradictory
conclusions cannot both stand; given the conclusions of
OPM, the AJ, and the Board that Gordon was without




denied Gordon’s petition for review and adopted the AJ’s
initial decision as the Board’s final decision; the Board did
not state that the initial decision was adopted subject to
modifications by the Board, as it does in some instances.
See, e.g., Howard v. Dep’t of Transp., 117 M.S.P.R. 610,
610 (2012) (adopting the AJ’s decision as the Board’s final
decision “[e]xcept as modified by th[e] Final Order”).
Because the Board’s application of the Set-Aside Rule
suffers from the same internal inconsistency as the AJ’s
analysis of Gordon’s arguments, we do not address the
effect of the Board affirming the AJ’s decision as the final
decision without modification but then offering reasoning
that clearly departs from that given by the AJ.
GORDON   v. OPM                                          19



fault based on the facts of this case, the Set-Aside Rule
could not apply. 5
    Because the decisions of the AJ and the Board on this
issue contradict the premise underlying the previous
conclusions of the AJ and the Board that Gordon was
without fault, we conclude that the decisions are arbi-
trary, capricious, or otherwise not in accordance with law.
We would normally remand the matter to the Board for
reconsideration in light of the inconsistent factual find-
ings made and the inconsistent legal theories employed.
We need do that, however, because we conclude that the
recoupment of the overpayment in these circumstances is
otherwise unconscionable.




   5    On this issue, the Board also stated, “[t]here is no
evidence that [Gordon] made an effort to inform the VA or
the Illinois state authorities, who oversaw the benefits
that he sought, that the income that was reported by
OPM to the Internal Revenue Service was erroneous, i.e.,
falsely inflated by OPM’s failure to reduce [Gordon’s]
FERS benefit as of the date of his receiving Social Securi-
ty benefits.” Board Order, 123 M.S.P.R. at 574. Accord-
ing to the Board, Gordon would not be entitled to waiver
“[a]bsent proof of such effort and a showing that it failed
to persuade the VA and the state authorities to allow him
the benefits to which he would have been entitled at a
lower income level . . . .” Id. The government also refer-
ences this logic in its brief. Resp’t’s Br. 11–12. But
neither the Board nor the government cites any authority
for placing this additional burden on Gordon. We find no
support in the statute or regulations for the Board’s
requirement that an individual must show that he tried to
convince a state or local agency his income was falsely
inflated by overpayments before he can receive waiver of
an overpayment based on the loss of other benefits.
20                                           GORDON   v. OPM



                  D. Unconscionability
     As the AJ recognized, the Board will waive recovery
based on unconscionability only under exceptional cir-
cumstances. AJ Decision, 2016 MSPB LEXIS 2622, at
*20. The Board considers “all relevant factors using a
‘totality-of-the-circumstances’ approach in order to deter-
mine whether recovery of an annuity overpayment is
unconscionable in a given case.” Aguon v. Office of Pers.
Mgmt., 42 M.S.P.R. 540, 550 (1989). Possible circum-
stances include, inter alia, an “exceptionally lengthy delay
by OPM in adjusting an annuity,” id., or a failure by OPM
to respond to a without-fault debtor’s request for recon-
sideration within four years of the debtor’s request, Policy
Guidelines § I.F.3. A delay of less than four years “does
not mean that a finding of inequitable recovery is abso-
lutely precluded”; instead, “it simply means that a delay
of less than [four] years will not automatically be pre-
sumed to render recovery inequitable.” Id. But granting
a waiver based on egregious errors or delays “requires a
determination that OPM’s handling of a case was so
offensive—so monstrously harsh and shocking to the
conscience—that one’s sense of equity forbids recovery.”
Id. § I.F.1.
    The AJ concluded that OPM’s three-year delay to fi-
nalize its calculations for Gordon’s benefits, although
inexplicable, was not “so ‘monstrously harsh’ that recov-
ery of the overpayment would be unconscionable . . . .” AJ
Decision, 2016 MSPB LEXIS 2622, at *22. The AJ also
found that Gordon had failed to demonstrate unique
personal circumstances and credited OPM for acting
equitably during the delay by extending Gordon’s last day
of pay by a few days to qualify him for benefits despite its
belief that he had not met the 18-month requirement. Id.
at *22–24.
    But the AJ did not address the delay between Gor-
don’s request for reconsideration and OPM’s reconsidera-
GORDON   v. OPM                                           21



tion decision. Gordon requested reconsideration of OPM’s
initial decision on February 10, 2012, but OPM did not
issue a decision until December 28, 2015. Resp’t’s App.
55. OPM provided no reason for its delay; instead, it
merely stated, “[w]e apologize for the delay in responding
to your request.” Id. Although this delay does not auto-
matically qualify as an exceptional circumstance under
Policy Guidelines § I.F.3, it only barely misses that mark
and remains an important consideration. See Aguon, 42
M.S.P.R. at 550.
    In considering the totality of the circumstances, we
also acknowledge Gordon’s failure to qualify for aid and
benefits from state agencies, local agencies, and the
Veterans Administration because of OPM’s delay in
finalizing its calculations. See AJ Decision, 2016 MSPB
LEXIS 2622, at *19. The AJ recognized that Gordon
likely would have qualified for these benefits without the
overpayments. Id. And the Board did not disagree with
that conclusion.
     Because of OPM’s lengthy delays on two separate oc-
casions, the effect the first delay had on Gordon’s inability
to qualify for benefits he likely would have received, and
the fact that the second delay fell only forty days short of
the presumptively impermissible four-year time frame, we
conclude that recovery of the overpayment is unconscion-
able. OPM would have required Gordon to forego nearly
$1,200.00 per month (comparing his $1,118.00 FERS
interim benefits with the $1,984.00 Social Security bene-
fits and $326.00 earned FERS annuity he was entitled to
receive)—a hefty percentage of his income—for almost
three years because OPM did not finalize its calculations
more quickly. 6 But OPM did not learn from its initial


    6   The AJ’s belief that Gordon’s circumstances are
far from unique because they “fit squarely with a great
deal of former federal employees who are overpaid on
22                                            GORDON   v. OPM



delay. Instead, OPM waited another three years and
almost eleven months to respond to Gordon’s request for
reconsideration. Although the delayed response to the
request for reconsideration does not qualify as automati-
cally inequitable under Policy Guidelines § I.F.3, it follows
a delay of almost three years to calculate Gordon’s annui-
ty. To be clear, we do not endorse a rule that merely adds
up multiple delays to conclude that the greater than four-
year presumptively unconscionable time period has
passed. We simply find that where, as here, there is a
wholly unexplained delay of three years and almost
eleven months, which followed an earlier three-year
delay, and the AJ found both that Gordon was without
fault and that Gordon was deprived of the opportunity to
pursue and receive other benefits he likely would have
received during those delays, the requirements of 5 U.S.C.
§ 8346(b) have been met, despite the other countervailing
considerations addressed by the AJ. Considering the
totality of the circumstances, we conclude that OPM’s
recovery of the $33,127.42 overpayment would be uncon-
scionable.
                     III. CONCLUSION
    For the foregoing reasons, we reverse the Board’s Fi-
nal Order adopting the AJ’s initial decision as the Board’s
final decision. The Board is directed to instruct OPM to
waive recovery of the $33,127.42 claimed as an overpay-
ment.




account of interim pay and corresponding social security
benefits,” AJ Decision, 2016 MSPB LEXIS 2622, at *23,
creates cause for concern regarding the statutory scheme
and OPM’s efficiency, especially in addressing disability
benefits for veterans such as Gordon. But we are tasked
with applying the law, not rewriting it.
GORDON   v. OPM              23



                  REVERSED
                    COSTS
   No costs.
