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ISCR Case 18-01088 — CASE

ISCR Case 18-01088denied

Case Headnote

ISCR Case No. 18-01088

deniedDec 21, 2018· Hon. Carol G. Ricciardello· hearing

Summary

A 34-year-old military veteran was denied a security clearance under Guideline F, Financial Considerations, primarily due to his failure to file and pay his 2012 federal income tax return. This issue was specifically cited in the Statement of Reasons as Allegation 1.a.

The applicant had been aware of this outstanding tax obligation since 2015. However, during the clearance process, he did not provide sufficient evidence to demonstrate that he had either filed the delinquent tax return or made arrangements to pay the outstanding amount. This lack of action raised disqualifying conditions under Adjudicative Guideline Paragraph 19(g).

Ultimately, the judge concluded that the applicant's failure to address a known financial obligation over several years did not demonstrate the reliability and trustworthiness necessary for access to classified information, resulting in the denial of his security clearance.

Why the Applicant Was Denied

Applicant failed to file and pay his 2012 federal income tax return, raising concerns under Guideline F.
Applicant was aware of the tax issue since 2015 but did not take sufficient action to resolve it.
The applicant did not provide evidence of filing his tax return or making payment arrangements.

Conditions Referenced

Disqualifying

AG ¶ 19(g)appliedFailure to File or Fraudulently Filing Annual Federal, State, or Local Income Tax Returns or Failure to Pay Annual Federal, State, or Local Income Tax as Required.

Key Rule Quoted

“Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems.”
— ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016)

Procedural Posture

SOR issuedApr 30, 2018
Answer filedMay 29, 2018Applicant elected to have his case decided on the written record.
Hearing held—Decision made based on written record.
Decision dateDec 21, 2018

Cite For

Failure to File Tax Returns as a Disqualifying Condition Under Guideline F
Insufficient Evidence to Mitigate Financial Concerns
Importance of Compliance with Government Rules 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.

Standardized Decision Profile

SEAD-4 Guideline F · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The applicant failed to file and pay his 2012 federal income tax return, resulting in a tax debt of $6,000. The judge ruled against the applicant, finding insufficient evidence to demonstrate responsible action towards resolving the tax issue, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant failed to file and pay his 2012 federal income tax return. $6,000	Against Applicant	Tax Filing Failure	Admitted	—	—	—

Descriptive standardized rendering of a decided public case (Guideline F). The verbatim source decision is shown in full below.

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

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 18-01088 ) Applicant for Security Clearance ) Appearances For Government: Allison Marie, Esq., Department Counsel For Applicant: Pro se ______________

STATEMENT OF CASE

______________ RICCIARDELLO, Carol G., Administrative Judge: Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Eligibility for access to classified information is denied. Statement of the Case On April 9, 2015, Applicant completed an electronic Questionnaire for Investigation Processing (e-QIP). On April 30, 2018, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued to Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations. The action was taken under Executive Order (EO) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the DOD on June 8, 2017. Applicant answered the SOR on May 29, 2018, and elected to have his case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s file of relevant material (FORM), and Applicant received it on June 25, 12/21/2018

2018. The Government’s evidence is identified as Items 1 through 6. Applicant was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. He did not provide a response, objections, or submit documents. Items 1 through 6 are admitted without objection. The case was assigned to me on November 19, 2018.

FINDINGS OF FACT

Applicant admitted the sole SOR allegation. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact.

Applicant is 34 years old. He is a high school graduate. He served in the military from 2003 to 2012 and was honorably discharged in the paygrade E-5. He was married from 2006 to 2007. He has no children. He has been employed since December 2014.1

Applicant disclosed on his April 2015 e-QIP that he failed to file and pay his 2012 federal income tax return. He stated: “Recently discharge[d] from the military at the time [and] was unemployed and unable to pay the amount owed.”2 He estimated he owed $6,000. He further stated: “Requested reissuance of 2012 W-2 from DFAS3 as I am unable to access, once W-2 is received taxes will be filed and amount paid.”4

Applicant was interviewed by a government investigator in October 2017. He discussed his failure to file his 2012 federal tax return. He said that he had entered his information to an online tax program, but did not file and panicked when he found out he might owe $6,000 in taxes. He did not have the money to pay the total amount to the IRS. He said he subsequently lost his W-2. He attempted to obtain a new W-2. He contacted DFAS for a copy, but had not received a response. He said he failed to contact the IRS and make payment arrangements. He intended to contact DFAS again and request a copy of the W-2 and file his 2012 federal tax return. He anticipated this would be completed by April 2018.5

Applicant answered government interrogatories in March 2018. In them he stated: “I have requested a 2012 W-2 from DFAS to ensure that any taxes owed are paid[,] but have not received it yet. When I do[,] I will file and set a payment plan.”6

1 Item 4.

2 Item 4.

3 Defense Finance and Accounting Service (DFAS).

4 Item 4.

5 Item 5.

6 Item 6.

Applicant did not provide a response to the FORM or any evidence to show he has filed his 2012 federal income tax return or paid any amount owed.

POLICIES

When evaluating an applicant’s suitability for national security eligibility, the administrative judge must consider the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information.

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision.

The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable security decision.”

A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk that an applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information.

Section 7 of EO 10865 provides that decisions shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information).

ANALYSIS

Guideline F: Financial Considerations

The security concern relating to the guideline for financial considerations is set out in AG ¶ 18:

Failure to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage.

AG ¶ 19 provides conditions that could raise security concerns. The following is potentially applicable:

(g) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required.

Applicant failed to timely file his 2012 federal income tax return. There is sufficient evidence to support the application of the above disqualifying condition.

The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions under AG ¶ 20 are potentially applicable:

(a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual's current reliability, trustworthiness, or good judgment;

(b) the conditions that resulted in the financial problem were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances;

(c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control; and

(g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.

Applicant admitted he failed to timely file his federal income return for tax year 2012. He has been aware since completing his April 2015 e-QIP that his failure to file his tax return was an issue. He provided insufficient evidence to show he is responsibly addressing his tax issue. His tax issues are not resolved. AG ¶ 20(a) does not apply.

Applicant did not file his 2012 federal income tax return because he did not have the money to pay the amount he believed he owed. This does not constitute a condition beyond his control. He then lost his W-2. He has repeatedly said he was requesting a copy from DFAS, but had not received it. This may have initially been beyond his control, but Applicant has not presented sufficient evidence to show when he made the request, how many requests he made, his follow-up actions, and if he contacted the IRS to arrange a payment plan. Applicant has not acted responsibly. I find AG ¶ 20(b) and AG ¶ 20(g) do not apply.

It is unknown if Applicant sought financial counseling, and there are not clear indications at this time to conclude the problem is being resolved. AG ¶ 20(c) does not apply.

WHOLE PERSON CONCEPT

Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all the circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(d):

(1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(d) were addressed under that guideline, but some warrant additional comment.

Applicant is 34 years old. He failed to file his 2012 federal income tax return because he did not have the money at the time to pay what he thought he owed. In 2015, after completing his e-QIP he was on notice that this was a security concern. The DOHA Appeal Board has held that:

Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems. Voluntary compliance with these things is essential for protecting classified information. ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). Someone who fails repeatedly to fulfill his or her legal obligations 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. August 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). 7

Applicant has not provided evidence that the delinquent tax return is filed, and he has paid what is owed or has a payment plan with the IRS. Applicant has not met his burden of persuasion. The record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate the security concerns arising under Guideline F, financial considerations.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F:

AGAINST APPLICANT

Subparagraph 1.a:

Against Applicant

7 ISCR Case No. 12-10933 at 3 (App. Bd. June 29, 2016).

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the national security to grant Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge