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ISCR Case 09-07916.a1 — CASE

ISCR Case 09-07916.a1denied

Case Headnote

ISCR Case No. 09-07916.a1

May 9, 2011· Hon. Michael Y. Ra'anan· appeal

Summary

A security clearance was denied for a business owner under Guideline F (Financial Considerations) due to significant ongoing tax debts totaling approximately $120,000. The appeal board affirmed this denial, concluding that the applicant had not sufficiently mitigated the financial concerns, as the debts were neither remote in time nor demonstrated to be beyond his control.

The board found that the applicant failed to show a good-faith effort to resolve these debts. This lack of effort was evidenced by IRS garnishments, which indicated a reactive rather than proactive approach to his financial obligations.

Ultimately, the substantial and unaddressed nature of these debts raised doubts about the applicant's reliability and trustworthiness, leading to the denial of his security clearance.

Conditions Referenced

Disqualifying

AG ¶ 19raisedFinancial Considerations

Key Rule Quoted

“Whether or not a debt is collectable is not the focus of a security clearance adjudication.”
— ISCR Case No. 07-16841 at 4 (App. Bd. Dec. 19, 2008)

Procedural Posture

SOR issuedMay 17, 2010
Answer filed—
Hearing heldFeb 17, 2011
Decision dateMay 9, 2011

Cite For

Affirmation of Adverse Decisions Based on Ongoing Financial Issues Under Guideline F
Importance of Demonstrating Mitigation of Financial Concerns
Reliability and Trustworthiness Considerations in Security Clearance Adjudications

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 a denial of a security clearance based on financial considerations under Guideline F. The Applicant argued that the Judge erred in assessing the evidence and applying mitigating conditions. The Board affirmed the Judge's decision, finding no harmful error in the conclusions reached regarding the Applicant's financial situation.

Appealed bythe applicant

Applicant representationAttorney

Judge belowClaude R. Heiny — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Judge mis-weighed or ignored evidence — raised by the applicantRejected
Applicant argued that the Judge erred in concluding that the evidence raised Guideline F security concerns.
Mitigation wrongly applied / not applied — raised by the applicantRejected
Applicant contended that the Judge erred in his application of the mitigating conditions.
Whole-person analysis — raised by the applicantRejected
Applicant claimed that the Judge's whole-person analysis was erroneous.

Why the Board ruled this way

The Board found that the Judge's conclusions regarding the Applicant's ongoing tax debts and their implications for security clearance were supported by substantial evidence and articulated a rational connection between the facts and the decision made.

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: Whether or not a debt is collectable is not the focus of a security clearance adjudication. Applicant failed to meet his burden of persuasion as to mitigation. Adverse decision affirmed. CASE NO: 09-07916.a1 DATE: 05/09/2011 DATE: May 9, 2011 In Re: ----------------

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 09-07916

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Robert W. Wilson, Esq. The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security clearance. On May 17, 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 February 17, 2011, after the hearing, Administrative Judge Claude R. Heiny denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raised the following issues on appeal: whether the Judge erred in concluding that the evidence raised Guideline F security concerns; whether the Judge erred in his application of the

FOOTNOTES

1 Applicant Exhibit C includes a copy of the Form 656, Offer in Compromise, dated July 20, 2009. In Section III of this form, Applicant checked two blocks. One asserted “I have insufficient assets and income to pay the full amount.” The other asserted “I owe this amount and have sufficient assets to pay the full amount, but due to my exceptional circumstances, requiring full payment would cause an economic hardship or would be unfair and inequitable.” Section VII asserted that Applicant “will borrow the funds from friends” to pay his offered $20,000 settlement.

2 Directive, Enclosure 2 ¶ 20(a): “the behavior happened so long ago . . . and does not cast doubt on the individual’s current reliability, trustworthiness, or good judgment[.]”

3 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[.]”

4 Directive, Enclosure 2 ¶ 20(d): “the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts[.]”

5 Directive, Enclosure 2 ¶ 20(c): “the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control[.]” mitigating conditions; and whether the Judge’s whole-person analysis was erroneous. Consistent with the following, we affirm the decision of the Judge. The Judge made the following pertinent findings of fact: Applicant is president and CEO of a company employing between five and seven people. Applicant’s SOR lists three delinquent debts to the Internal Revenue Service. Applicant owes the IRS approximately $120,000 in back taxes, interest, and penalties. In 2000, Applicant started his own business. He loaned the business $80,000 as startup money. This money was withdrawn from his 401(k) account. Applicant attributed much of the tax debt to his accountant’s having designated the funds as a withdrawal, and therefore taxable, rather than as a loan to his business. Applicant made monthly payments to the IRS. In addition, the IRS started monthly garnishments of Applicant’s Social Security payments. Applicant has employed accountants and an attorney to work on his tax debts. He has submitted an offer in compromise to the IRS, offering to pay $20,000 in full satisfaction of his debts. In the offer he stated that he would borrow the money from friends to make his payments.1 Although Applicant’s accountant expects resolution of the issue in late 2010, there is no further information on this matter contained in the record. In the Analysis portion of the Decision, the Judge concluded that Applicant’s tax debts were not remote in time, since they were ongoing, and, in any event, they cast doubt on Applicant’s reliability, trustworthiness, and good judgment.2 He further concluded that the debts did not result from circumstances outside Applicant’s control3 and that the IRS garnishment action did not constitute a good-faith effort by Applicant to pay his debt.4 Moreover, Applicant had not received financial counseling.5 Considering the evidence as a whole, the Judge concluded that Applicant had failed to meet his burden of persuasion as to mitigation. Applicant asserts that the Internal Revenue Service has failed to be responsive to Applicant’s offers to compromise. He cites the testimony of an accountant. However, the accountant testified that Applicant had no incentive to push the IRS because the debts were “going away.” Tr. at 49. It is well-established that whether or not a debt is collectable is not the focus of a security clearance adjudication. See, e.g., ISCR Case No. 07-16841 at 4 (App. Bd. Dec. 19, 2008). Viewed in the context of the record as a whole, the Judge’s conclusion that Applicant’s ongoing tax debts raised Guideline F security concerns is sustainable. See, e.g., ISCR Case No. 07- 05434 at 2-3 (App. Bd. Feb. 24, 2009). 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,’” both as to the mitigating conditions and the whole-person factors. 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