                     UNITED STATES COURT OF APPEALS
                          FOR THE FIFTH CIRCUIT


                                No. 00-30080


                              HOWARD MAKOFSKY

                                                      Plaintiff-Appellant,

                                      v.

                           KENNETH S. APFEL
             Commissioner, Social Security Administration

                                                        Defendant-Appellee,


         Appeal from the United States District Court for the
                     Eastern District of Louisiana
                            (99-CV-1720-LLM)

                              January 23, 2001


Before GOODWIN1, GARWOOD and JONES, Circuit Judges.


EDITH H. JONES, Circuit Judge:2

             Appellant Howard Makofsky received an overpayment of

Social Security benefits and seeks to waive reimbursement to the

Social Security Administration (SSA).          An administrative law judge

(ALJ) held that Makofsky failed to show that he was “without fault”

under 42 U.S.C. § 404(b), and refused to waive the overpayment.


     1
             Circuit Judge of the Ninth Circuit, sitting by designation.
     2
            Pursuant to 5TH CIR. R. 47.5, the court has determined that this
opinion should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
Makofsky appeals. Concluding that there is not sufficient evidence

to sustain the ALJ’s conclusion, we reverse and remand.

            Makofsky began receiving retirement benefits from the SSA

in 1989.     At that time, he signed a preprinted application that

stated, “[m]y reporting responsibilities have been explained to me

and   I    have   also   received   a       printed   explanation   of   those

responsibilities.” Makofsky testified that the SSA office was very

busy on the day he applied for benefits, and that SSA personnel

spoke to him only briefly.     He did not recall receiving any oral or

written instructions to notify the SSA if he went to prison.               He

understood from SSA Form 1099 tax documents that he could earn only

limited income while receiving benefits and that he was obliged to

notify SSA of changes in address.

            Makofsky was in prison between February 1995 and April

1996 for writing bad checks, a felony.            Under 42 U.S.C. § 402(x),

he was not entitled to receive social security benefits during this

period.     Makofsky testified that he never knew this, and he

therefore did not notify the SSA of his confinement.            He continued

to receive benefits in a post office box, his sole mailing address

since at least 1982.         Makofsky’s former spouse had power of

attorney over his affairs, and she received and cashed his benefits

for him.    She paid his bills and rent during his confinement, and

sent cash to him.



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          In May 1996, the SSA notified Makofsky that he had

received an overpayment and asked him to repay $ 14,136.      Makofsky

asked the SSA to waive the overpayment.    The SSA refused to do so,

but it reduced the debt to $13,196.

          The ALJ held a hearing at which only Makofsky testified.

In his decision, the ALJ briefly described Makofsky’s testimony and

ruled:

     Although [Makofsky] asserts that he did not know that he
     had the duty to inform the Administration if he were
     incarcerated, he did know that he had to report a change
     of address, other sources of income, and other
     circumstances. . . .

     I conclude claimant knew or should have known that he had
     to inform the Administration when he became incarcerated
     due to conviction of a felony in February 1995. He was
     aware of other reporting procedures which are explained
     concurrently with the one requiring that he report any
     incarcerations due to felony convictions.

Record at 10 (citations omitted).    The ALJ concluded that Makofsky

was at fault, and refused to waive the overpayment.

          This decision cited no SSA instructions that would have

notified Makofsky to report incarceration.      It made no explicit

findings about Makofsky’s credibility.    It also did not explicitly

consider Makofsky’s physical, mental, educational, or linguistic

limitations.

          The district court affirmed, finding that substantial

evidence supported the ALJ’s decision.    Makofsky appeals.




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                        STANDARD OF REVIEW

          We may review only two issues: 1) whether substantial

evidence supports the decision, and 2) whether the ALJ correctly

applied the law.    See Paul v. Shalala, 29 F.3d 208, 210 (5th

Cir.1994). Substantial evidence is “more than a mere scintilla and

less than a preponderance.     It is such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion.”

Id. (citing Muse v. Sullivan, 925 F.2d 785, 589 (5th Cir.1991).

                             DISCUSSION

          Makofsky contends that substantial evidence does not

support the determination that he was at fault.   He argues that the

SSA never told him to report incarceration, and that he never knew

he had to.    He also argues that the ALJ did not impugn his

credibility, and thus the ALJ should have credited his testimony.

          Section 404(b), “No recovery from persons without fault,”

states

     In any case in which more than the correct amount of
     payment has been made, there shall be no adjustment of
     payments to, or recovery by the United States from, any
     person who is without fault if such adjustment or
     recovery would defeat the purpose of this subchapter or
     would be against equity and good conscience.

42 U.S.C. § 404(b).     Thus, Makofsky cannot benefit from this

section unless he was without fault.      Makofsky has the burden of

proof on this issue.   See Bray v. Bowen, 854 F.2d 685, 687 (5th

Cir.1988) (holding that the evidence supported a finding of fault).

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          SSA regulation § 404.507, “Fault,” states:

     What constitutes fault on the part of the overpaid
     individual . . . depends upon whether the facts show that
     the incorrect payment to the individual . . . resulted
     from: . . .

     (b) Failure to furnish information which he knew or
     should have known to be material.

20 C.F.R. § 404.507.   Our inquiry therefore is whether there is

substantial evidence that Makofsky knew or should have known that

his imprisonment was material to his eligibility.

          If the SSA told Makofsky to report imprisonment, he

certainly would be at fault.         In Bray, the SSA informed the

claimant of her obligation to report marriage at the time she filed

and through periodic check “stuffers.”      This court, refusing to

waive an overpayment, concluded that she was at fault for not

reporting her change in marital status.    See Bray, 854 F.2d at 687.

          Where the SSA does not expressly warn claimants, however,

federal appeals courts have not assumed that claimants know what is

material to their eligibility.   In Peeler v. Heckler, a prisoner

was already receiving SSA benefits when § 402(x) took effect in

1980. See Peeler v. Heckler, 781 F.2d 649 (8th Cir.1986).    The SSA

knew that the claimant was in prison, but it did not suspend his

benefits until a year after the new law took effect.      The Eighth

Circuit stated that “[b]eneficiaries are not presumed to know of

each new arcanum of social-security law.    They are not presumed to


                                 5
have acted with fault when, in the absence of changed personal

circumstances, they accept a benefit payment in the amount which

they have been accustomed to receiving each month.”                   Id. at 653-54

(citations omitted). The court found that substantial evidence did

not support the ALJ’s determination of fault under § 404(b).

              In another circuit decision, claimants argued that they

did not know they had to report a savings account to the SSA.                     See

Romero v. Harris, 675 F.2d 1100, 1101-02 (10th Cir.1982). Funds in

the savings account were initially below the SSA’s resource limit

but later exceeded it.          The claimants testified that the SSA never

told them to report savings accounts.                 See id. at 1102.       Although

the ALJ found them at fault and refused to waive the overpayments

under § 404(b), the Tenth Circuit reversed for lack of evidence in

the record to support a finding of fault.                See id. at 1104.       While

Peeler and Romero are not exactly like this case, they show that

Makofsky is not at fault unless he had some reason to know that he

was ineligible for benefits.

              Here, termination of benefits under § 402(x) is not so

obvious that Makofsky should have been aware of it on his own.

Some    might   find      it   intuitive       that   prisoners     cannot   receive

benefits, but the rule has not always been this straightforward.

The    rule   did   not    even   exist    before     1980,   and    prisoners    who

committed misdemeanors could receive benefits until 1994.                         See


                                           6
Historical and Statutory Notes, 42 U.S.C. § 402 (West 2000).                We

believe § 402(x) is beyond the scope of an ordinary applicant’s

knowledge.

            Makofsky    signed    a   form    stating    that   he   received

instructions on his reporting duties.          There is no evidence in the

record, however, of the substance of these instructions or even of

standard SSA instructions to applicants.          Granted, Makofsky bears

the burden of proof.         Makofsky testified, however, that the SSA

never told him to report imprisonment.             Nothing in the record

contradicts this.

            The ALJ’s decision was based in part on Makofsky’s

consciousness of income limits and his duty to report address

changes.     This is not substantial evidence that Makofsky knew or

should have     known   to   report   his    imprisonment.      Awareness   of

fundamental    reporting     responsibilities     does   not    automatically

translate into awareness of fairly obscure statutory provisions.

Makofsky did not change his address, so his failure to report his

imprisonment does not create an inference that he was concealing

anything.

            Perhaps the ALJ simply disbelieved Makofsky, but if so

the ALJ should have stated this.          “Where, as here, credibility is

a critical factor in determining whether the claimant was without

fault, the ALJ must have stated explicitly whether he believed the



                                      7
witness’s testimony.”           Valente v. Secretary of Health & Human

Servs., 733 F.2d 1037, 1045 (2nd Cir.1984) (reversing a finding of

fault   in   part    on   the    ALJ’s   failure   to   make   a   finding   on

credibility); see also Albalos v. Sullivan, 907 F.2d 871, 873-74

(9th Cir.1990) (requiring more than merely an implicit finding that

claimant was not credible in a § 404(b) fault case).               The Eleventh

Circuit has reversed a finding of fault because the ALJ did not

clearly explain whether its ruling was based on the scope of

claimant’s evidence or his credibility.            See Viehman v. Schweiker,

679 F.2d 223, 229 (11th Cir.1982).           It also demanded that “the fact

finder articulate any reasons for questioning [the claimant’s]

credibility.”       We agree with these circuits and hold that where a

witness’s testimony is central to a § 404(b) fault inquiry, the ALJ

should include a credibility finding in his decision.

             In sum, substantial evidence does not support the ALJ’s

findings.     There is no record evidence that in 1989, the SSA

regularly informed applicants that they must report incarceration.

Moreover, since Makofsky’s testimony excused his fault, there is no

substantial evidence for a contrary finding without some proof, or

explicit, explained finding, that Makofsky lacked credibility.

             We recognize that an unpublished decision from the Eighth

Circuit refused to find a claimant without fault on somewhat

analogous facts.       In Kiefer v. Apfel, 2000 U.S. App. LEXIS 23332


                                         8
(8th Cir.2000), the claimant indicated on his application that he

had received reporting instructions, and later received benefits

while in prison.   He sought to waive the overpayment, arguing that

he was without fault because he relied on an allegedly ambiguous

letter from the SSA.   The court rejected his claim and found that

substantial evidence supported the ALJ’s decision.

           Kiefer is factually distinguishable for a couple of

reasons.   First, the claimant was not arguing that he had never

received instructions to report confinement.   On the contrary, he

wanted to contest the denial of benefits pending confinement.

Second, the court found unpersuasive his reliance on an ambiguous

and self-contradictory letter from SSA. This case, by contrast, is

only about what the SSA told Makofsky (nothing explicit about the

consequence of incarceration) and what he knew or should have

known.

           Notwithstanding our conclusion that Makofsky was without

fault, he is not necessarily entitled to a waiver of repayment.

Under § 404(b), he must still show that recovery would defeat the

purpose of Title II benefits or would be against equity and good

conscience.   Remand is required to consider this question, which

under the statute includes assessment of the claimant’s physical,

mental, educational or linguistic limitations.   Id.




                                 9
          For the reasons stated above, we REVERSE because Makofsky

was without fault and REMAND for further proceedings.




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