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ISCR Case 14-04159.a1 — CASE

ISCR Case 14-04159.a1denied

Case Headnote

ISCR Case No. 14-04159.a1

Aug 1, 2016· Hon. Michael Y. Ra'anan· appeal

Summary

A security clearance applicant, represented by counsel, was denied under Guideline F (Financial Considerations) due to significant unresolved tax issues. The applicant failed to file and pay federal and state income taxes for multiple years.

A key factor in the denial was the applicant's reliance on an unreliable spouse to manage tax documentation, which resulted in lost records. Despite possessing significant financial resources, the applicant did not demonstrate sufficient efforts to resolve these outstanding tax obligations.

The judge found that the applicant's reliance on the spouse and the lack of demonstrated resolution were critical. The appeal board subsequently affirmed the denial, concluding there was substantial evidence to support the judge's findings regarding the applicant's financial irresponsibility.

Conditions Referenced

Disqualifying

AG ¶ 20raisedFinancial Considerations

Key Rule Quoted

“A person who fails repeatedly to fulfill his or her legal obligations, such as filing and paying taxes when due, does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information.”
— ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015)

Procedural Posture

SOR issuedOct 17, 2014
Answer filed—
Hearing heldMay 23, 2016
Decision dateAug 1, 2016

Cite For

Failure to Fulfill Legal Obligations Under Guideline F
Reliance on an Unreliable Spouse for Financial Matters
Substantial Evidence Standard in Security Clearance Decisions

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 was filed by the applicant after the Administrative Judge denied his request for a security clearance based on financial considerations under Guideline F. The applicant argued that the Judge's findings were not supported by substantial evidence and that the decision was arbitrary and capricious. The Board affirmed the Judge's decision, finding no harmful error in the proceedings.

Appealed bythe applicant

Applicant representationAttorney

Judge belowArthur E. Marshall, Jr. — 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's findings were not based on substantial evidence.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant contended that the Judge's adverse decision was arbitrary, capricious, or contrary to law.

Why the Board ruled this way

The Board found that the Judge's findings were based on substantial evidence and that the Judge did not weigh the evidence in an arbitrary or capricious manner. The adverse decision was affirmed as it was consistent with national security interests.

Standard of review applied

Substantial-evidence reviewArbitrary-and-capricious reviewNo de-novo re-decisionNo new evidence on appeal

Appeal Board panel

Michael Y. Ra’anan — Chair
James E. Moody
James F. Duffy

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 has neither rebutted the presumption that the Judge considered all of the evidence in the record nor shown that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. Adverse decision affirmed. CASE NO: 14-04159.a1 DATE: 08/01/2016 DATE: August 1, 2016 In Re: ------------

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 14-04159

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Gregory F. Greiner, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On October 17, 2014, DoD 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 May 23, 2016, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Arthur E. Marshall, Jr., 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’s findings were based upon substantial record evidence and whether the Judge’s adverse decision was arbitrary, capricious or contrary to law. Consistent with the following, we affirm. The Judge’s Findings of Fact Applicant’s SOR allegations arose from his failure to file and pay Federal and state income taxes for a number of years. His tax problems originated with his having employed an accountant who was “too aggressive with regard to income tax deductions.” Decision at 2. The IRS questioned his tax returns, so Applicant changed accountants and paid estimated taxes. Applicant relied on his spouse to gather and deliver tax documentation to their new accountant, but the documents became lost and Applicant’s spouse did not keep copies. Applicant suspects that his spouse’s unreliability may result from health issues. From 2001 until 2011, Applicant did his taxes himself. He performed estimated tax filings, but he never completed final income tax returns. After becoming aware of a tax lien, Applicant hired a new accountant, who entered into settlement negotiations. Applicant’s total tax debt is about $465,000, although he believes that he will ultimately pay between $40,000 and $50,000. Applicant has sufficient resources to satisfy his ultimate tax debt. He earns a little over $200,000 a year and estimates the gross value of his assets as between $4 million and $5 million. The Judge’s Analysis The Judge stated that, despite representations to the contrary, there is little evidence that Applicant’s income tax filings would be completed by the end of 2015. He noted evidence that Applicant had tasked his spouse with managing the couple’s tax materials, despite knowing that she was less than reliable. He stated that Applicant’s arguments and positions regarding his negotiations with tax authorities are not clear and that it is difficult to tell if Applicant has a reasonable basis to dispute the amounts at issue. The Judge suggested that, given Applicant’s sizeable assets, the protracted nature of his tax negotiations may be due to his unwillingness to settle. In the whole-person analysis, the Judge cited to evidence of Applicant’s excellent professional credentials. However, the Judge found it “inexplicable” that Applicant would have trusted his spouse with important tax responsibilities, given his belief in her unreliability. Id. at 8. He also cited to evidence that Applicant did not preserve his records even after he assumed responsibility for handling the couple’s taxes. Though noting that Applicant had made some efforts to resolve his tax problems, the Judge concluded that, on the whole, the record did not support a conclusion that Applicant had mitigated the security concerns in his case.

DISCUSSION

Applicant challenges the Judge’s findings. After examining the record, we conclude that the Judge’s material findings are based upon substantial evidence or constitute reasonable inferences that could be drawn from the record. See, e.g., ISCR Case No. 12-03420 at 3 (App. Bd. Jul. 25, 2014). Applicant has not cited to any harmful error in the Judge’s findings. Moreover, Applicant has neither rebutted the presumption that the Judge considered all of the evidence in the record nor shown that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 14-05795 at 2-3 (App. Bd. Apr. 26, 2016). We conclude that the Judge examined the relevant data and articulated a satisfactory explanation for the decision. A person who fails repeatedly to fulfill his or her legal obligations, such as filing and paying taxes when due, does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). The 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 Decision is AFFIRMED. Signed: Michael Y. Ra’anan Michael Y. Ra’anan Administrative Judge Chairperson, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board Signed: James F. Duffy James F. Duffy Administrative Judge Member, Appeal Board