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ISCR Case 20-00168 — CASE

ISCR Case 20-00168granted

Case Headnote

ISCR Case No. 20-00168

grantedJan 21, 2021· Hon. Edward W. Loughran· hearing

Summary

A 67-year-old defense contractor employee was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons alleged a failure to file state income tax returns for the tax years 2012 through 2015, raising a disqualifying condition related to financial irresponsibility.

However, the judge found that mitigating conditions applied. The applicant demonstrated a commitment to rectify past issues by filing all overdue state tax returns in August 2020. Additionally, he consistently filed federal tax returns on time and reported the tax issues on his SF 86 security questionnaire.

The applicant's honorable military service was also considered a positive factor. These actions collectively demonstrated subsequent compliance with tax obligations and a commitment to resolve financial issues, leading to the favorable decision to grant the security clearance.

Why the Applicant Prevailed

The applicant filed all overdue state tax returns in August 2020, demonstrating compliance with tax obligations.
He filed federal tax returns on time and reported tax issues on his SF 86.
The applicant's honorable military service was considered positively.

Conditions Referenced

Disqualifying

AG ¶ 19(f)raisedFailure 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.

Mitigating

AG ¶ 20(g)appliedThe Individual Has Made Arrangements with the Appropriate Tax Authority to File or Pay the Amount Owed and Is in Compliance with Those Arrangements.

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedApr 30, 2020
Answer filedMay 18, 2020Requested decision on the written record.
Hearing held—Decision made based on written record.
Decision dateJan 21, 2021

Cite For

Mitigation of Financial Concerns Under Guideline F
Importance of Timely Compliance with Tax Obligations
Consideration of Honorable Military Service 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.

Standardized Decision Profile

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

Posture: Decision on RecordDecided: granted

The judge found that the applicant failed to file state income tax returns for the years 2012 through 2015, but ultimately ruled in favor of the applicant after considering the circumstances surrounding the late filings. The applicant filed the delinquent returns in August 2020 and demonstrated a commitment to timely future compliance with tax obligations.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Failure to file state income tax returns for tax years 2012 through 2015.	For Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	(g) arrangements made with the tax authority; in compliance	Claimed Other

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. 20-00168 ) Applicant for Security Clearance ) Appearances For Government: Brittany White, Esq., Department Counsel For Applicant: Pro se 01/21/2021

STATEMENT OF CASE

LOUGHRAN, Edward W., Administrative Judge: Applicant mitigated the financial considerations security concerns. Eligibility for access to classified information is granted. Statement of the Case On April 30, 2020, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, financial considerations. Applicant responded to the SOR on May 18, 2020, and requested a decision on the written record in lieu of a hearing. The Government’s written case was submitted on July 20, 2020. A complete copy of the file of relevant material (FORM) was provided to Applicant, who was afforded an opportunity to file objections and submit material to refute, extenuate, or mitigate the security concerns. Applicant received the FORM on July 27, 2020. He responded with a letter that I have marked as Applicant’s Exhibit (AE) A. The case was assigned to me on December 1, 2020. On the same day, I reopened the record to permit Applicant the opportunity to submit additional documents. He submitted

documents I have marked as AE B through D. The Government exhibits included in the FORM and AE A through D are admitted in evidence without objection.

FINDINGS OF FACT

Applicant is a 67-year-old employee of a defense contractor. He has worked for his current employer since 1991. He served in the U.S. military from 1971 until he was honorably discharged in 1977. He is a high school graduate with some community college credits. He is married for the second time. He has two adult children. (Items 3, 4) Applicant filed his federal income tax returns when they were due, but he did not file his state income tax returns for tax years 2012 through 2015 when they were due. He asserted that he completed the 2012 state return, but forgot to file it. He then lost the return and corresponding tax documents. He did not file the 2013 through 2015 state tax returns because he had not filed the 2012 return. He filed his state tax returns for 2016 forward on a timely basis. (Items 2-4) Applicant reported his tax issues when he submitted his Questionnaire for National Security Positions (SF 86) in June 2017. He wrote that he was in the process of filing all the late returns. During his background interview in June 2018, he stated that he intended to contact the state tax office to inquire about filing the late returns. He wrote essentially the same thing in his May 2020 response to the SOR. (Items 2-4) Applicant filed his state income tax returns for tax years 2012 through 2015 in August 2020. His returns indicate that he should have been due a $45 refund for tax year 2012, a $145 refund for 2013, and a $134 refund for 2015. He owed $4 for 2014. He sent the state a $4 check, which cleared on August 18, 2020. (AE A-D)

POLICIES

This case is adjudicated 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), which became effective on June 8, 2017. When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be 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, administrative judges apply the guidelines 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.” Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion to obtain 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 the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information. Section 7 of EO 10865 provides that adverse 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 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.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following is potentially applicable in this case: (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. Applicant did not file his 2012 through 2015 state income tax returns when they were due. AG ¶ 19(f) is applicable. Conditions that could mitigate the financial considerations security concerns are provided under AG ¶ 20. The following is potentially applicable: (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’s promises to file the delinquent state income tax returns rang hollow until they were finally filed in August 2020. AG ¶ 20(g) is applicable, but that does not end the discussion. Applicant’s failure to file his tax returns when required raises questions about his judgment and willingness to abide by rules and regulations.

Nonetheless, I am satisfied that Applicant has learned a valuable lesson, and that all future returns will be filed on time. Several factors are in Applicant’s favor: he filed all his federal returns on time; he reported his tax issues on his SF 86; he filed his returns for 2016 forward on a timely basis; and he paid the small amount he owed the state. Security concerns about Applicant’s finances are mitigated.

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 relevant 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. I also considered Applicant’s honorable military service. Overall, the record evidence leaves me without questions or doubts about Applicant’s eligibility and suitability for a security clearance. I conclude Applicant mitigated the financial considerations security concerns.

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: For Applicant Subparagraphs 1.a: For Applicant

CONCLUSION

It is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted. Edward W. Loughran Administrative Judge