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ISCR Case 17-00584.a1 — CASE

ISCR Case 17-00584.a1denied

Case Headnote

ISCR Case No. 17-00584.a1

May 29, 2018· Hon. Michael Y. Ra'anan· appeal

Summary

A defense contractor with a master's degree was denied a security clearance under Guideline F (Financial Considerations) due to a prolonged failure to meet tax obligations. The applicant did not file federal and state income tax returns for nine years, specifically from 2007 to 2016.

The applicant's explanation of misunderstanding tax responsibilities was deemed not credible, as a tax preparer had previously informed him of his filing duties. Furthermore, the applicant failed to fully disclose the extent of these tax delinquencies on his 2011 Security Clearance Application, which negatively impacted his credibility.

The appeal board upheld the denial, citing the applicant's lack of candor and the absence of a demonstrated history of compliance with tax laws. The decision emphasized that the applicant's actions raised concerns under Disqualifying Condition F3.

Conditions Referenced

Disqualifying

F3raisedFailure to File or Pay Taxes as Required

Key Rule Quoted

“A person who fails repeatedly to fulfill his or her legal obligations, such as filing tax returns when due, does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information.”
— ISCR Case No. 15-06707 at 3 (App. Bd. Aug. 15, 2017)

Procedural Posture

SOR issuedJun 17, 2017
Answer filed—
Hearing heldMar 6, 2018
Decision dateMay 29, 2018

Cite For

Failure to File Income Tax Returns as a Disqualifying Condition Under Guideline F
Credibility Issues Arising From Non-disclosure of Tax Delinquencies
The Necessity of Demonstrating a Track Record of Compliance with Tax Laws for Security Clearance Eligibility

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's decision was arbitrary and capricious. The Board affirmed the Judge's decision, finding no harmful error in the proceedings.

Appealed bythe applicant

Applicant representationPro se (self-represented)

Judge belowBraden M. Murphy — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant argued 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 decision was supported by substantial evidence and that the Judge did not act arbitrarily or capriciously in weighing the evidence presented.

Standard of review applied

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

Appeal Board panel

Michael 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: The Judge made extensive findings about Applicant’s circumstances, including the things that he addresses in his appeal brief, and discussed them in the Analysis portion of the Decision. Applicant has not rebutted the presumption that the Judge considered all of the evidence in the record, nor has he shown that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. Adverse decision affirmed. CASENO: 17-00584.a1 DATE: 05/29/2018 DATE: May 29, 2018 In Re: --------------------------

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 17-00584

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Pro se The Department of Defense (DoD) declined to grant Applicant a security clearance. On June 17, 2017, 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 March 6, 2018, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Braden M. Murphy 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’s adverse decision was arbitrary, capricious, or contrary to law. Consistent with the following, we affirm. The Judge’s Findings of Fact Applicant holds bachelor’s and master’s degrees. He has worked for a Defense contractor since 1998 and has held a clearance since 2011. Applicant failed to file his Federal and state income tax returns for 2007 through 2016. He filed his returns by the close of the record. In addition, both the IRS and his state taxing authority garnished Applicant’s wages, although, by the end of 2017, Applicant owed no past due taxes either to the Federal Government or to his state. Applicant attributed his failures to his belief that he had three years in which to file his income tax returns, so long as he expected to receive a refund. He expressed a similar belief regarding his state taxes, although he was not able to cite to a state law or regulation to that effect. However, he also testified that he knew that he was supposed to file taxes on an annual basis and that a professional tax preparer had told him so. Moreover, despite his claimed belief that he had three years in which to file, Applicant filed his returns four years late for several years. When he completed his 2011 SCA, Applicant did not disclose the full extent of his tax filing delinquencies. He did disclose that he ran a business from 2003 until 2015. At the hearing, he admitted that he did not file his business tax returns on time for 2007 through 2015. Applicant has an annual salary of about $90,000, and his wife is employed. He stated that they are financially stable. Applicant owns eight rental properties worth about $600,000, with a mortgage debt of about $440,000. The Judge’s Analysis The Judge cited to Applicant’s many years of having failed to file timely income tax returns. Though noting his claimed belief that he had three years in which to file returns, the Judge observed that Applicant had been placed on notice of his filing obligations by his tax preparer and that he had actually filed a number of returns four years late. The Judge stated that Applicant was not fully candid when he completed his 2011 SCA, in that he did not disclose all of his tax delinquencies, which detracted from his credibility. Though acknowledging Applicant’s many years of service to the Defense industry and Applicant’s having actually filed his delinquent returns, the Judge concluded that he had not established a track record of compliance with tax laws sufficient to mitigate the concerns in his case.

DISCUSSION

Applicant cites to the provision of the U.S. tax code that establishes a three year statute of limitations for claiming a refund. He states that this was the basis for his erroneous belief that he could file his returns within three years. He cites to evidence that he does not owe tax obligations either to the IRS and to his state and that he has filed all of his returns. He argues that he did not intend to deceive when he failed to disclose all of his tax problems on his 2011 SCA. The Judge made extensive findings about Applicant’s circumstances, including the things that he addresses in his appeal brief, and discussed them in the Analysis portion of the Decision. Applicant has not rebutted the presumption that the Judge considered all of the evidence in the record, nor has he shown that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 17-00257 at 3 (App. Bd. Dec. 7, 2017). To the extent that Applicant is challenging the Judge’s credibility determination concerning the sincerity of his claimed belief about the statute of limitations, we note record evidence in which Applicant admitted that he had been informed that taxes are to be filed on an annual basis.1 We are required to give deference to a Judge’s credibility determinations, and Applicant’s brief has not provided us with a reason to withhold that deference. Directive ¶ E3.1.32.1. 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. A person who fails repeatedly to fulfill his or her legal obligations, such as filing tax returns 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. 15-06707 at 3 (App. Bd. Aug. 15, 2017). See Cafeteria and Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). In a security clearance adjudication, “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, Encl. 2, App. A ¶ 2(b): “Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.”

ORDER

The Decision is AFFIRMED. Signed: Michael Ra’anan Michael 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

FOOTNOTES

1 See, e.g., the following: “I did know the April time frame filing date, I knew that. Again, but I think because I did file past that . . . beyond that date, I was fully aware of--that I had not met the annual year date.” Tr. at 79.