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ISCR Case 09-07064.a1 — CASE

ISCR Case 09-07064.a1denied

Case Headnote

ISCR Case No. 09-07064.a1

Nov 18, 2011· Hon. Michael Y. Ra'anan· appeal

Summary

A defense contractor employee was denied a security clearance under Guideline F, Financial Considerations, due to significant unresolved tax debts. The applicant had an outstanding IRS tax lien of $128,000 and failed to pay withholding taxes for employees. These issues raised disqualifying conditions under AG ¶ 19(a) and AG ¶ 19(c).

Despite the applicant's last-minute efforts to address the tax lien, these actions were deemed insufficient to mitigate security concerns. The judge specifically noted the applicant's eight-year delay in attempting to resolve the tax debts, which undermined his reliability and trustworthiness.

While mitigating conditions AG ¶ 20(b) and AG ¶ 20(c) were considered, they did not overcome the severity of the financial issues and the prolonged inaction. Consequently, the security clearance request was denied.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedFinancial Considerations
AG ¶ 19(c)raisedFinancial Considerations

Mitigating

AG ¶ 20(b)rejectedFinancial ConsiderationsThe applicant's eight-year delay in addressing the tax deficiency was within his control.
AG ¶ 20(c)rejectedFinancial ConsiderationsThe applicant's repayment plan was not established as reliable.

Key Rule Quoted

“The general standard is that a clearance may be granted only when ‘clearly consistent with the interests of the national security.’”
— Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedMay 6, 2010
Answer filed—
Hearing heldAug 29, 2011
Decision dateNov 18, 2011

Cite For

Financial Responsibility as a Key Factor in Security Clearance Evaluations
Impact of Prolonged Inaction on Financial Obligations
Insufficient Mitigation of Security Concerns Due to Recent Efforts to Resolve Debts

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Appeal at a glance· Full written decision

Affirmed

The appeal involved an applicant who was denied a security clearance due to financial considerations under Guideline F. The applicant argued that the Judge misapplied mitigating conditions related to his tax debts. The Board affirmed the Judge's decision, finding that the applicant's delay in addressing his tax issues undermined his claims for mitigation.

Appealed bythe applicant

Applicant representationAttorney

Judge belowJames F. Duffy — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Mitigation wrongly applied / not applied — raised by the applicantRejected
The Judge failed properly to apply the Guideline F mitigating conditions.

Why the Board ruled this way

The Judge reasonably explained that the mitigating conditions could not be favorably applied due to the Applicant’s eight-year delay in resolving the debts and failure to make monthly payments. The decision is sustainable on the record.

Standard of review applied

Harmful-error gatekeeperSubstantial-evidence reviewArbitrary-and-capricious reviewProcedural complianceNo de-novo re-decisionNo new evidence on appealDeference to the judge’s credibility calls

Appeal Board panel

Michael Y. Ra’anan — Chair
William S. Fields
James E. Moody

Descriptive structured reading of this decided, public Appeal Board decision — what the case says, not a prediction or advice.

Full decision

The complete, official text — footnotes and signatures included — is in the original PDF.

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

APPEAL

SYNOPSIS

KEYWORD: Guideline F DIGEST: Applicant failed to pay withholding taxes for his employees. The Judge reasonably explained that he could not favorably apply mitigating conditions because of Applicant’s eight year delay in attempting to resolve the debts and failure to pay the monthly payments. Adverse decision affirmed. CASENO: 09-07064.a1 DATE: 11/18/2011 DATE: November 18, 2011 In Re: -----

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 09-07064

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Alan V. Edmunds, Esq. The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security clearance. On May 6, 2010, DOHA issued a statement of reasons (SOR) advising Applicant of the basis for that decision–security concerns raised under Guideline F (Financial Considerations) of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive). Applicant requested a hearing. On August 29, 2011, after the hearing, Administrative Judge James F. Duffy denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raised the following issue on appeal: whether the Judge failed properly to apply the Guideline F mitigating conditions. Consistent with the following, we affirm the Judge’s decision. The Judge made the following pertinent findings of fact: Applicant is an employee of a Defense contractor, for whom he has worked since April 2009. A high school graduate, he is divorced, with two minor children. From 1997 to 2002, Applicant and his brother operated a business. The business experienced a downturn in 2000, and customers delayed paying. Although their business declined, Applicant and his brother did not lay off employees. However, they failed to pay their employees’ payroll taxes. This resulted in a substantial tax deficiency. Since closure of this business, Applicant has started two others, which also failed. These business failures resulted in Applicant acquiring numerous delinquent debts, for such things as telephone services, a credit card, vehicle loans, etc. The Judge found in Applicant’s favor for all the SOR debts except for two: a state tax lien of $344 and an IRS tax lien of $128,000. The Judge ruled in Applicant’s favor on a separate IRS lien of $10,000. In addition, Applicant filed for Chapter 7 bankruptcy protection, but the court dismissed the petition. In 2010, he filed a second petition for Chapter 7 bankruptcy protection that resulted in discharge of his debts. Applicant incurred the $128,000 IRS lien in 2002. In April 2011, he offered the IRS a repayment plan, which the agency accepted the following June. Under that plan Applicant is to pay $200 a month until the debt is paid off. Applicant lives with his ex-spouse and shares expenses with her. The Judge noted his answer to DOHA interrogatories, dated December 2009, to the effect that he has a net monthly income remainder of $385. However, the Judge also cited Applicant’s 2010 bankruptcy petition, which showed a net monthly remainder of $20. Applicant enjoys an excellent reputation for the quality of his job performance and for his honesty, trustworthiness, and responsibility. In the Analysis, the Judge addressed the security significance of the state and IRS tax liens. Characterizing the state tax debt as “minor,” the Judge devoted his attention principally to the IRS debt. He acknowledged that Applicant’s financial situation was affected by events outside his control, his business failures, divorce, and unemployment. However, the Judge also concluded that Applicant’s decision not to pay withholding tax for his employees was a matter within his control. Moreover, the Judge stated that the record did not establish that Applicant will necessarily be able to make his payments under his agreement with the IRS. The Judge stated that Applicant’s eight-year delay in attempting to resolve this tax deficiency casts doubt on his current reliability, trustworthiness, and good judgment. These last-minute efforts fail to mitigate the security concerns that arise from the remaining federal tax lien. Given the doubtful nature of his current plan for resolving this tax lien and his lengthy period of inaction in addressing it, I cannot find that he acted “responsibly given his circumstances and develop[ed] a reasonable plan for repayment, accompanied by ‘concomitant conduct,’ that is, actions which evidence a serious intent to effectuate the plan.” Decision at 10.1 Applicant’s brief challenges the Judge’s application of the mitigating conditions to the state and IRS tax debts described above. As noted above, the Judge reasonably explained that the mitigating conditions could not be favorably applied to the delinquent tax debts cited in SOR paragraphs 1(b) and 1(c) for two reasons: Applicant’s failure to make monthly payments to reduce the debts and his eight year delay in attempting to resolve the tax debts. The Judge’s explanation is sustainable. The brief also challenges the Judge’s treatment of a tax debt alleged in SOR ¶ 1(d). However, the Judge resolved this debt in Applicant’s favor. The record supports a conclusion that the Judge examined the relevant data and articulated a satisfactory explanation for the decision, “including a ‘rational connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)(quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)). The Judge’s adverse decision is sustainable on this record. “The general standard is that a clearance may be granted only when ‘clearly consistent with the interests of the national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). See also Directive, Enclosure 2 ¶ 2(b): “Any doubt concerning personnel being considered for access to classified information will be resolved in favor of the national security.”

ORDER

The Judge’s adverse security clearance decision is AFFIRMED. Signed: Michael Y. Ra’anan Michael Y. Ra’anan Administrative Judge Chairperson, Appeal Board Signed: William S. Fields William S. Fields Administrative Judge Member, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board

FOOTNOTES

1 See Directive, Enclosure 2 ¶ 20(b): “the conditions that resulted in the financial problem were largely beyond the person’s control . . . and the individual acted responsibly under the circumstances[.]” The Judge quoted ISCR Case No. 09-08462 at 3 (App. Bd. May 31, 2011) in his discussion of responsible action.