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ISCR Case 20-01753.a1 — CASE

ISCR Case 20-01753.a1denied

Case Headnote

ISCR Case No. 20-01753.a1

Sep 22, 2021· Hon. Michael Y. Ra'anan· appeal

Summary

A retired military service member in his sixties was denied a security clearance due to significant financial issues under Guideline F (Financial Considerations). The applicant owed approximately $102,000 in taxes and failed to file state income tax returns, admitting to six of seven allegations related to these financial problems.

While the applicant made some recent efforts to address the tax issues, these were deemed insufficient to mitigate security concerns. The judge specifically cited the applicant's financial irresponsibility and lack of timely action as significant factors in the decision.

Ultimately, the appeal board affirmed the adverse decision, concluding that the applicant's efforts did not adequately resolve the disqualifying conditions (AG ¶ 20(a), AG ¶ 20(c)), despite the application of mitigating condition AG ¶ 20(g).

Conditions Referenced

Disqualifying

AG ¶ 20(a)raisedFinancial Considerations
AG ¶ 20(c)raisedFinancial Considerations

Mitigating

AG ¶ 20(g)appliedFinancial ConsiderationsApplicant filed all of his late income tax returns and made payment arrangements with the IRS for the delinquent taxes.

Key Rule Quoted

“The timing of the resolution of financial problems is an important factor in evaluating an applicant’s case for mitigation because an applicant who begins to resolve financial problems only after being placed on notice that his clearance was in jeopardy may lack the judgment and self-discipline to follow rules and regulations over time or when there is no immediate threat to his own interests.”
— ISCR Case No. 15-06440 at 4 (App. Bd. Dec. 26, 2017)

Procedural Posture

SOR issuedOct 15, 2020
Answer filed—
Hearing heldJun 16, 2021
Decision dateSep 22, 2021

Cite For

Insufficient Mitigation of Financial Issues Under Guideline F
Importance of Timely Resolution of Financial Problems
Affirmation of Adverse Decisions Based on Financial Irresponsibility

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 an applicant who was denied a security clearance due to financial issues, specifically owing significant taxes to the IRS and failing to file state tax returns. The applicant argued that the Judge erred in findings of fact and in the decision-making process. The Board affirmed the Judge's decision, finding no harmful error that would change the outcome.

Appealed bythe applicant

Applicant representationAttorney

Judge belowJuan J. Rivera — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Judge mis-weighed or ignored evidence — raised by the applicantRejected
The Judge did not properly weigh the evidence regarding the conditions beyond his control that impacted his financial problems.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
The Judge's decision was arbitrary, capricious, or contrary to law.
Erroneous finding of fact — raised by the applicantError found, but harmless
The Judge erred in stating the amount owed to the IRS for tax year 2014.

Error found, but harmless. The Board agreed the judge made a mistake but affirmed anyway, because it did not change the outcome.

Why the Board ruled this way

The Board found that the Judge's findings were supported by substantial evidence and that the errors alleged by the Applicant were either harmless or did not warrant a reversal of the decision.

Standard of review applied

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

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 admitted six of the seven allegations. He admitted with clarifications that he owed the Internal Revenue Service (IRS) taxes totaling about $102,000 for 2014-2017 and he failed to file as required his state income tax returns for 2015-2018. Adverse Decision Affirmed. CASE NO: 20-01753.a1 DATE: 09/22/2021 DATE: September 22, 2021 ) In Re: ) ) -------------------- ) ISCR Case No. 20-01753 ) ) Applicant for Security Clearance ) )

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Lindsay Bierman, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On October 15, 2020, DoD issued a statement of reasons (SOR) advising Applicant of the basis for that

The Judge’s Findings of Fact

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 June 16, 2021, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Juan J. Rivera 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 erred in his findings of fact and whether the Judge’s decision was arbitrary, capricious, or contrary to law. Consistent with the following, we affirm. Applicant is in his sixties, is married, and has adult children. He honorably served in the military and retired with a service-connected disability. He has earned a bachelor’s degree and has previously held a security clearance. In responding to the SOR, Applicant admitted six of the seven allegations. He admitted with clarifications that he owed the Internal Revenue Service (IRS) taxes totaling about $102,000 for 2014-2017 and he failed to file as required his state income tax returns for 2015-2018. The Judge found against him on the allegations he admitted and in favor of him on the allegation he denied. In his 2018 security clearance application, Applicant disclosed that he was working with a tax specialist to prepare the delinquent Federal and state income tax returns for 2014-2017. He attributed the tax filing delinquencies to various reasons, including loss of income from rental properties, repair and management expenses for the rental properties, sale of a rental property at a loss, unemployment, a significant reduction in income at a new job, family members passing away, living apart from his wife, and his wife’s medical problems. In his January 2019 background interview, Applicant stated his goal was to have all of his delinquent tax returns filed by September 2019. Applicant’s IRS Transcripts reflect that he filed his 2013 tax return in October 2015, the IRS filed substitute tax returns for him for tax years 2014-2017 in 2019 and 2020, and he filed his 2018 tax return in December 2020. In July and October 2020, Applicant filed his Federal and state income tax returns for 2014-2017. Applicant’s 2019 and 2020 Federal and state tax returns were filed in March 2021 and May 2021, respectively. In September 2019, Applicant proposed to pay the IRS within five months about $76,600, the tax liability for 2014-2016. The IRS accepted the proposal but Applicant presented no documentary evidence of any payments. In January 2021, Applicant proposed to pay the IRS within four months about $126,900, the tax liability for 2014-2017. The IRS accepted this later proposal but Applicant presented no documentary evidence of any payments. Applicant has promised to file his future tax returns in a timely manner and to expeditiously pay any delinquent taxes. The Judge’s Analysis

The Judge acknowledged that Applicant may owe less taxes than those reflected on the substitute tax returns that the IRS filed for him because he may be entitled to exemptions, credits, and deductions that may not have been previously considered. Nevertheless, he still owes taxes for several years. Although Applicant experienced conditions beyond his control that contributed to his financial problems, he failed to establish he acted responsibly under that circumstances. Of note, he failed to make a good-faith effort to file his tax returns in a timely manner or to pay his delinquent income taxes. His recent actions to resolve his financial problems were not sufficient. Mitigating Condition 20(g) applies because Applicant filed all of his late income tax returns and made payment arrangements with the IRS for the delinquent taxes, but those efforts do not mitigate the security concerns. In this regard, his delay in filing the tax returns and his failure to document any payments under the payment arrangements are important factors to consider.

DISCUSSION

In his appeal brief, Applicant stated: Significantly, the Judge erred in some of his findings of fact. He wrote that [Applicant] owed $23,387 to the Internal Revenue Service (“IRS”) in the Tax Year (TY) 2014. The amount due for TY 2014 is actually $22,387—an amount that is $10,000 less that [sic] what was specified in the opinion. [Appeal Brief at 2.] In the decision, the Judge noted that the SOR alleged Applicant owed “$23,387 for TY 2014[.]” Applicant is correct that amount is inaccurate. The SOR alleged that Applicant owed $22,387 to the IRS for that year, which is an apparent typographical error of $1,000. We also note the Judge correctly found later in the decision that Applicant’s IRS Tax Transcript, dated May 31, 2021, reflected he owed $23,213 to the IRS for TY 2014, citing Applicant’s Exhibit (AE) W-2 as supporting evidence. Decision at 3. The Judge’s error regarding the amount alleged in the SOR was harmless because it did not likely affect the outcome of the case. See, e.g., ISCR Case No. 19-01220 at 3 (App. Bd. Jun. 1, 2020). In his brief, Applicant also contends “[t]he Directive places no time limit for a security clearance applicant to mitigate possible concerns that the government might have.” Appeal Brief at 8. This statement, although correct, does not take into account that an applicant’s handling of alleged financial problems is examined to determine whether he or she acted in a manner that demonstrates a lack of reliability, trustworthiness, or good judgment. As quoted by the Judge in his decision, the Appeal Board has previously stated, The timing of the resolution of financial problems is an important factor in evaluating an applicant’s case for mitigation because an applicant who begins to resolve financial problems only after being placed on notice that his clearance was in jeopardy may lack the judgment and self-discipline to follow rules and regulations

over time or when there is no immediate threat to his own interests. [Decision at 11, citing ISCR Case No. 15-06440 at 4 (App. Bd. Dec. 26, 2017).] We find no error in the Judge’s conclusion that Applicant’s recent efforts to resolve his financial problems “are too little, too late to fully mitigate security concerns.” Decision at 13. Applicant’s brief argues that the Judge did not consider all the relevant evidence and did not properly weigh the evidence. In making such arguments, he highlights, for example, the conditions beyond his control that have impacted his financial problems. None of his arguments are enough to rebut the presumption that the Judge considered all of the evidence in the record or sufficient to show that the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 19-01649 at 3 (App. Bd. Jan. 6, 2021). In his brief, Applicant requests “a probationary period be instituted.” Appeal Brief at 9. To the extent that he is requesting a conditional security clearance, we conclude that Applicant has not established that the granting of an exception under Appendix C of the Adjudicative Guidelines is merited. Applicant failed to establish the Judge committed any harmful error. The Judge examined the relevant evidence and articulated a satisfactory explanation for the decision. 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, 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 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