ISCR Case No. 19-01117

______________ ______________ DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) --- ) ISCR Case No. 19-01117 ) Applicant for Security Clearance ) Appearances For Government: Benjamin R. Dorsey, Esquire, Department Counsel For Applicant: Pro se 12/12/2019

GALES, Robert Robinson, Administrative Judge: Applicant failed to mitigate the security concerns regarding financial considerations. Eligibility for a security clearance is denied. Statement of the Case On December 6, 2017, Applicant applied for a security clearance and submitted a Questionnaire for National Security Positions (SF 86). On May 31, 2019, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) to him, under Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended and modified; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended and modified (Directive); and Directive 4 of the Security Executive Agent (SEAD 4), National Security Adjudicative Guidelines (AG) (December 10, 2016), for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position, effective June 8, 2017. The SOR alleged security concerns under Guideline F (Financial Considerations) and detailed reasons why the DOD adjudicators were unable to find that it is clearly

consistent with the national interest to grant or continue a security clearance for Applicant. The SOR recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked.

In two sworn statements, dated August 15, 2019, and September 27, 2019, Applicant responded to the SOR, and he elected to have his case decided on the written record in lieu of a hearing. (Item 2) A complete copy of the Government’s file of relevant material (FORM) was mailed to Applicant by the Defense Office of Hearings and Appeals (DOHA) on October 10, 2019, and he was afforded an opportunity after receipt of the FORM to file objections and submit material in refutation, extenuation, or mitigation. In addition to the FORM, Applicant was furnished a copy of the Directive as well as the Adjudicative Guidelines applicable to his case. Applicant received the FORM on October 21, 2019. His response was due on November 20, 2019. Applicant chose not to respond to the FORM, for as of December 10, 2019, no response had been received. The case was assigned to me on December 10, 2019.

In his initial Answer to the SOR, Applicant failed to admit or deny any of the SOR allegations. Instead, he addressed the allegations generally and offered comments regarding the issues raised in the SOR. In his Supplemental Answer, Applicant admitted, with substantial comments, all of the factual allegations pertaining to financial considerations (SOR ¶¶ 1.a. through 1.n.). Applicant’s admissions are incorporated herein as findings of fact. After a complete and thorough review of the evidence in the record, and upon due consideration of same, I make the following additional findings of fact:

Applicant is a 51-year-old employee of a defense contractor. He has been serving as a system administrator with his current employer since August 2017. Other than attending a vocational or technical school for several months in late 2008, for which he did not receive a diploma, Applicant’s educational background was not reported. He enlisted in the Inactive Naval Reserve in March 1986, and served until he was honorably discharged in May 1991. He has never held a security clearance. Applicant was married in 1998 and divorced in 2017. He remarried in 2018. He has no children.

Financial Considerations

General source information pertaining to the financial accounts discussed below can be found in the following exhibits: Item 3 (SF 86, dated December 6, 2017); Item 5 (Combined Experian, TransUnion, and Equifax Credit Report, dated January 6, 2018); Item 4 (Enhanced Subject Interview, dated October 19, 2018); Item 6 (Equifax Credit Report, dated March 14, 2019); Item 2 (Applicant’s Initial Answer to SOR, dated August 15, 2019); and Item 2 (Applicant’s Supplemental Answer, dated September 27, 2019). Applicant attributed his financial problems to a variety of factors commencing in 2008: he reportedly underwent four back surgeries, at least one arm surgery, and three operations on his jaw as a result of a service-related injury while training in 1986; his

annual income plummeted from over $70,000 down to less than $40,000, due to his disability; he was laid off in April 2017, and was unemployed until August 2017; although he had paid 75 percent of the family bills until his first wife completed her nursing training, once she did so, she refused to help him continue paying the bills and limited him to only one half of her salary; she refused to include him on her health insurance unless he paid for the extra costs of doing so; and he encountered a computer malfunction in 2016 and lost copies of his income tax returns for several years; and when he and his ex-wife separated, he lost items that he thought were in his filing cabinet. (Item 2 – Initial Answer) All of his comments and explanations are unverified and uncorroborated because Applicant failed to submit any documents to support his claims. When Applicant completed his December 2017 SF 86, he denied having any delinquent accounts, but he acknowledged having failed to file and or pay, or both, his federal and state income tax returns for several tax years. (Item 3, at 36-41) In October 2018, during his interview with an investigator from the U.S. Office of Personnel Management (OPM), Applicant discussed his unfiled, misplaced, or lost tax returns. It was only after he was confronted with additional delinquent accounts – primarily medical accounts – that he shared the facts associated with those accounts. SOR ¶¶ 1.a. and 1.b.: The SOR alleged five years of unfiled federal and state income tax returns. Applicant did not dispute his tax issues, but indicated that he had found tax returns for the tax years 2011, 2012, and 2013, but was not convinced that he had actually timely filed them. Those income tax returns could be copies of returns that had been filed, or copies of returns that he had intended to file. He indicated that he planned to re-submit the tax returns for those tax years, and that he would contact the Internal Revenue Service (IRS) to set up installment agreements to pay his income taxes for the tax years 2014 and 2015 because copies of those income tax returns could still not be located by him. He contended that he was now in a position to re-file his income tax returns and to pay any taxes owed. (Item 4, at 4) Applicant failed to submit any documents such as account transcripts from the IRS or the state revenue department to reflect that federal or state income tax returns for the tax years 2011 through 2015 had been filed; that installment agreements had been requested by him; or that any payments had been made. SOR ¶¶ 1.c. through 1.n.: The SOR also alleged 12 delinquent accounts, including one credit-card account and 11 medical accounts, totaling approximately $17,332. Four of the delinquent medical accounts have balances of less than $150 each. (Item 5, at 5, 10-11; Item 6, at 2; Item 2) Applicant claimed that he had taken on a personal loan and has been making close to $5,000 in payments and intends to continue to do so when he can. (Item 2; Item 4, at 4-5). He failed to submit any documentation, such as statements from his creditors agreeing to repayment plans, cancelled checks, copies of money orders, a bank register, or receipts, to support his contention that he has any agreements and that he has made any payments to the creditor(s). In the absence of such documentation, with the exception of the account alleged in SOR ¶ 1.h. for which the Government offered no evidence, and it appears to be erroneously alleged, I must conclude that the accounts, even those with minimal balances, have not been resolved, and they are not yet in the process of being resolved.

It is not known what Applicant’s current financial resources may be because he did not report his current net monthly income; monthly expenses; and any monthly remainder that might be available for discretionary spending or savings. There is no evidence of a budget. There is no evidence of financial counseling. In the absence of additional financial information, it remains difficult to determine if Applicant is currently in a better position financially than he had been.

The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.” (Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)) As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information. The President has authorized the Secretary of Defense or his designee to grant an applicant eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” (Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified.)

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the guidelines in SEAD 4. In addition to brief introductory explanations for each guideline, the guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information.

An administrative judge need not view the guidelines as inflexible, ironclad rules of law. Instead, acknowledging 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. 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 meaningful decision.

In the decision-making process, facts must be established by “substantial evidence.” “Substantial evidence [is] such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all contrary evidence in the record.” (ISCR Case No. 04-11463 at 2 (App. Bd. Aug. 4, 2006) (citing Directive ¶ E3.1.32.1)) “Substantial evidence” is “more than a scintilla but less than a preponderance.” (See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994))

The Government initially has the burden of producing evidence to establish a potentially disqualifying condition under the Directive, and has the burden of establishing controverted facts alleged in the SOR. Once the Government has produced substantial evidence of a disqualifying condition, under Directive ¶ E3.1.15, the applicant has the burden of persuasion to present evidence in refutation, explanation, extenuation or

mitigation, sufficient to overcome the doubts raised by the Government’s case. The burden of disproving a mitigating condition never shifts to the Government. (See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005))

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 as well. It is because of this special relationship that the Government must be able to repose a high degree of trust and confidence in those individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the 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. Furthermore, “security clearance determinations should err, if they must, on the side of denials.” (Egan, 484 U.S. at 531)

Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” (See Exec. Or. 10865 § 7) Thus, nothing in this decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination as to Applicant’s allegiance, loyalty, or patriotism. It is merely an indication the Applicant has or has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. 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.

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.

The guideline notes several conditions that could raise security concerns under AG ¶ 19:

(a) inability to satisfy debts; (b) unwillingness to satisfy debts regardless of the ability to do so;

(c) a history of not meeting financial obligations; and

(f) 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.

The SOR alleged five years of unfiled federal and state income tax returns as well as 12 delinquent accounts, including one credit-card account and 11 medical accounts, totaling approximately $17,332. One of the medical accounts was erroneously alleged. With respect to Applicant’s failure to timely file his federal and state income tax returns for the tax years 2011, 2012, 2013, 2014, and 2015, AG ¶ 19(f) has been established. With respect to his failure to satisfy his various delinquent debts, AG ¶¶ 19(a) and 19(c) have been established, but there is no evidence that Applicant has been unwilling to satisfy his debts regardless of an ability to do so, and AG ¶ 19(b) has not been established.

The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties under AG ¶ 20:

(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;

(d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; 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.

AG ¶ 20(b) minimally applies, but none of the other conditions apply. A debt that became delinquent several years ago is still considered recent because “an applicant’s ongoing, unpaid debts evidence a continuing course of conduct and, therefore, can be viewed as recent for purposes of the Guideline F mitigating conditions.” (ISCR Case No. 15-06532 at 3 (App. Bd. Feb. 16, 2017) (citing ISCR Case No. 15-01690 at 2 (App. Bd. Sept. 13, 2016)). The nature, frequency, and recency of Applicant’s continuing financial difficulties, and his failure to voluntarily and timely resolve his delinquent accounts for several years, make it rather easy to conclude that it was not infrequent and it is likely to remain unchanged, much like it has been for several years. Applicant has attempted to attribute his financial problems that commenced in 2008 to surgeries; a reduction of his annual income unemployment from April 2017 until August 2017; and his first wife’s refusal to reasonably contribute to the family expenses. His failure to timely file his federal and state income tax returns over a multi-year period was blamed on a computer malfunction in 2016. Applicant claims he has made efforts to resolve his accounts and re- file his income tax returns, but as noted above, he failed to submit any documentation to support his claims, and he failed to indicate when those reported efforts commenced.

An applicant who begins to resolve his financial problems only after being placed on notice that his or her security clearance is in jeopardy may be lacking in the judgment and self-discipline to follow rules and regulations over time or when there is no immediate threat to his or her own interests. (See, e.g., ISCR Case No. 17-01213 at 5 (App. Bd. Jun. 29, 2018); ISCR Case No. 17-00569 at 3-4 (App. Bd. Sept. 18, 2018). Applicant completed his SF 86 in December 2017; underwent his OPM interview in October 2018; and the SOR was issued in May 2019. Each step of the security clearance review process placed him on notice of the significance of the financial issues confronting him. With respect to his delinquent debts, according to Applicant, he borrowed some money and made small payments, but he offered no evidence to indicate if and when he did so. With respect to his unfiled federal and state income tax returns, there is no evidence that Applicant took any action to contact the IRS or the state department of revenue until years after those tax returns were required to be filed.

The DOHA Appeal Board has observed:

Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002). As we have noted in the past, a clearance adjudication is not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). By the same token, neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. Id. A person 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. Aug. 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).

ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). See ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016) (citing ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002)); ISCR Case No. 14-01894 at 4-5 (App. Bd. Aug. 18, 2015).

The Appeal Board clarified that even in instances where an applicant has purportedly corrected his or her federal tax problem, and the fact that the applicant is now motivated to prevent such problems in the future, does not preclude careful consideration of an applicant’s security worthiness in light of his or her longstanding prior behavior evidencing irresponsibility including a failure to timely file federal income tax returns. (See ISCR Case No. 15-01031 at 3 and note 3 (App. Bd. Jun. 15, 2016) (characterizing “no harm, no foul” approach to an Applicant’s course of conduct and employed an “all’s well that ends well” analysis as inadequate to support approval of access to classified information with focus on timing of filing of tax returns after receipt of the SOR).

Clearance decisions are aimed at evaluating an applicant’s judgment, reliability, and trustworthiness. They are not a debt-collection procedure. The guidelines do not require an applicant to establish resolution of every debt or issue alleged in the SOR. An applicant needs only to establish a plan to resolve financial problems and take significant actions to implement the plan. There is no requirement that an applicant immediately resolve issues or make payments on all delinquent debts simultaneously, nor is there a requirement that the debts or issues alleged in an SOR be resolved first. Rather, a reasonable plan and concomitant conduct may provide for the payment of such debts, or resolution of such issues, one at a time. Mere promises to pay debts in the future, without further confirmed action, are insufficient. It should be noted that the Appeal Board has indicated that promises to pay off delinquent debts in the future are not a substitute for a track record of paying debts in a timely manner and otherwise acting in a financially responsible manner. (ISCR Case No. 07-13041 at 4 (App. Bd. Sept. 19, 2008) (citing ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999)) In this instance, there is no evidence, supported by documentation, that Applicant took any good-faith corrective actions with respect to his delinquent debts before he was interviewed by the OPM investigator. There are some unverified comments by Applicant that he started to resolve some delinquent accounts, but he offered no documentation to support his contentions. His contentions regarding the status of some accounts, and his unverified comments claiming that he had taken certain actions, without documents, to support his claims, are insufficient to reflect good-faith actions. The Appeal Board has previously explained what constitutes a good-faith effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good-faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term “good-faith.” However, the Board has indicated that the concept of good-faith “requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.” Accordingly, an applicant must do more than merely show that he or she relied on a legally

available option (such as bankruptcy [or statute of limitations]) in order to claim the benefit of [the “good-faith” mitigating condition].

(internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. Jun. 4, 2001).

There is no evidence of financial counseling or a budget. In the absence of additional financial information, it remains difficult to determine if Applicant is currently in a better position financially than he had been. Applicant’s actions, or inaction, under the circumstances cast doubt on his current reliability, trustworthiness, and good judgment. See ISCR Case No. 09-08533 at 3-4 (App. Bd. Oct. 6, 2010).

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 SEAD 4, App. A, ¶ 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 SEAD 4, App. A, ¶ 2(c), the ultimate determination of whether to grant a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. Moreover, I have evaluated the various aspects of this case in light of the totality of the record evidence and have not merely performed a piecemeal analysis. See U.S. v. Bottone, 365 F.2d 389, 392 (2d Cir. 1966); see also ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006).

There is some evidence in favor of mitigating Applicant’s financial concerns. Applicant is a 51-year-old employee of a defense contractor. He has been serving as a system administrator with his current employer since August 2017. He attended a vocational or technical school for several months in late 2008, but he did not receive a diploma. He enlisted in the Inactive Naval Reserve in March 1986, and served until he was honorably discharged in May 1991.

The disqualifying evidence under the whole-person concept is simply more substantial. Applicant failed to timely file his federal and state income tax returns for the tax years 2011, 2012, 2013, 2014, and 2015. He failed to offer any evidence that he has done so, even after he received the SOR. He also had a number of delinquent accounts that were seemingly ignored by him, including accounts as small as under $150. Applicant

claimed that he had made payments to some of his creditors, or entered into repayment agreements with other creditors. However, because of his failure to submit documentation associated with his delinquent accounts, it is difficult to assess the true financial situation, for we have mostly Applicant’s unverified comments claiming that he had taken certain actions.

In ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008), the Appeal Board addressed a key element in the analysis in financial cases stating:

In evaluating Guideline F cases, the Board has previously noted that the concept of “meaningful track record” necessarily includes evidence of actual debt reduction through payment of debts. However, an applicant is not required, as a matter of law, to establish that he [or she] has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he [or she] has “. . . established a plan to resolve his [or her] financial problems and taken significant actions to implement that plan.” The Judge can reasonably consider the entirety of an applicant’s financial situation and his [or her] actions in evaluating the extent to which that applicant’s plan for the reduction of his outstanding indebtedness is credible and realistic. See Directive ¶ E2.2(a) (“Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.”) There is no requirement that a plan provide for payments on all outstanding debts simultaneously. Rather, a reasonable plan (and concomitant conduct) may provide for the payment of such debts one at a time. Likewise, there is no requirement that the first debts actually paid in furtherance of a reasonable debt plan be the ones listed in the SOR.

While Applicant contended that he took certain actions with respect to his delinquent debts, as well as his delinquent federal and state income tax returns, there is no documentary evidence to indicate that any of those accounts have been addressed or tax returns filed. Applicant’s current track record is poor at best. Overall, the evidence leaves me with substantial questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all of these reasons, I conclude Applicant has failed to mitigate the security concerns arising from his financial considerations. See SEAD 4, App. A, ¶¶ 2(d)(1) through AG 2(d)(9).

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

Subparagraphs 1.a. through 1.g.: Against Applicant

Subparagraph 1.h.:

For Applicant Subparagraphs 1.i. through 1.n.: Against Applicant

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

________________________ ROBERT ROBINSON GALES Administrative Judge