Federal officials warned World War II veterans last week to look out for phony reports -- the "dividend hoax" rumor that has circulated periodically for decades -- that they are entitled to GI insurance refunds.

Thousands of needless applications for the non-existent refunds have been piling up in the Veterans Administration's Philadelphia office, causing headaches for workers trying to handle the agency's real paperwork.

Rep. Matthew J. Rinaldo,(R-N.J.) and Veterans Administration officials said the rumor has cropped up repeatedly in different parts of the country despite attempts to squelch it.

The story, Rinaldo said, claims that more than a half-million World War II veterans are entitled to a life insurance refund of $72 to $312. Some veterans even have received phony applications to send to a "Capt. V.R. Prosser" at the VA center in Philadelphia, where the agency's insurance programs are managed.

Not only are there no such dividends, there is no Capt. V.R. Prosser, said Paul Koons, chief of management for the VA's insurance program.

"This is a recurring problem," Koons said. "We refer to it as the dividend hoax. In the last couple of months, it's been acting up again.