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ISCR Case 05-14853.a1 — CASE

ISCR Case 05-14853.a1denied

Case Headnote

ISCR Case No. 05-14853.a1

Sep 24, 2007· Hon. Michael Y. Ra'anan· appeal

Summary

A 68-year-old applicant was denied a security clearance under Guideline F, Financial Considerations, due to significant tax indebtedness. The applicant owed approximately $1,105,000 in taxes and had made only minimal payments toward this debt.

The judge determined that these financial problems were not isolated incidents, raising concerns about the applicant's potential vulnerability to pressure or coercion. Disqualifying conditions under Adjudicative Guideline (AG) ¶ 20 were raised.

Despite the applicant's claims of integrity and character, and the application of mitigating conditions under AG ¶ 21, these were deemed insufficient to resolve the security concerns. The applicant ultimately failed to mitigate the issues, leading to the denial of the security clearance.

Conditions Referenced

Disqualifying

AG ¶ 20raisedFinancial Considerations

Mitigating

AG ¶ 21rejectedFinancial ConsiderationsThe judge concluded that the applicant's tax debt was recent and not isolated.

Key Rule Quoted

“"[T]here is a strong presumption against granting a security clearance."”
— Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991)

Procedural Posture

SOR issuedJun 14, 2006
Answer filed—
Hearing heldMar 30, 2007
Decision dateSep 24, 2007

Cite For

Significant Tax Indebtedness as a Disqualifying Condition Under Guideline F
Insufficient Mitigating Circumstances Related to Financial Issues
The Presumption Against Granting Security Clearances in Financial Cases

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 was filed by the applicant after the Administrative Judge denied his request for a security clearance based on financial considerations under Guideline F. The applicant argued that the Judge erred in failing to mitigate the security concerns and that the whole person analysis was arbitrary and capricious. The Board affirmed the Judge's decision, finding no harmful error.

Appealed bythe applicant

Applicant representationAttorney

Judge belowEdward W. Loughran — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Mitigation wrongly applied / not applied — raised by the applicantRejected
The Judge erred in failing to mitigate the Guideline F security concerns raised in the SOR.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
The Judge’s whole person analysis is arbitrary, capricious, and contrary to law.

Why the Board ruled this way

The Judge’s adverse conclusion bears a rational relationship to his unchallenged findings of fact regarding the extent of Applicant’s tax indebtedness and minimal payments thereon. The Board found no error in the Judge's analysis of the mitigating conditions and whole person factors.

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 Y. Ra’anan — Chair
William S. Fields
James E. Moody

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’s adverse conclusion bear a rational relationship to his unchallenged findings of fact regarding the extent of Applicant’s tax indebtedness and minimal payments thereon. Adverse decision affirmed. CASENO: 05-14853.a1 DATE: 09/24/2007 DATE: September 24, 2007 In Re: ----------- Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 05-14853

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Eric A. Eisen, Esq. The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security clearance. On June 14, 2006, DOHA 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 30, 2007, after the hearing, Administrative Judge Edward W. Loughran denied Applicant’s request for a security clearance. Applicant filed a timely appeal pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raises the following issues on appeal: whether the Judge erred in failing to mitigate the Guideline F security concerns raised in the SOR; and whether the Judge’s whole person analysis is arbitrary, capricious, and contrary to law. Finding no error, we affirm. The Judge made the following pertinent findings of fact: Applicant, 68 years old at the close of the record, filed for Chapter 7 bankruptcy protection in 1982, and was released from his dischargeable debts the same year. Applicant subsequently invested in a company that contracts with the DoD, owning 51% of the stock. The company filed Chapter 11 bankruptcy due to having lost a bid for a contract. In the 1990s, Applicant’s company won a bid to manufacture items for the DoD but suffered a cash flow problem, resulting in the reopening of Chapter 11 bankruptcy protection. As a consequence of these financial problems, the company stopped paying its own federal taxes and the tax withholdings of its employees. As president and stockholder of the company, Applicant is personally liable to the IRS for approximately $1,105,000. Applicant’s company remains in Chapter 11 bankruptcy. Applicant lives frugally, his income consisting of a small salary from his company and social security payments. Applicant and his company are currently negotiating offers in compromise with the Internal Revenue Service (IRS). Applicant submitted evidence to the effect that he is a person of the highest character, integrity, and trustworthiness. Applicant has not challenged the Judge’s findings. Therefore, they are not at issue in this appeal. See ISCR Case 04-11369 at 2 (App. Bd. Mar. 16, 2007). A Judge is required to “examine the relevant data and articulate a satisfactory explanation for” the decision, “including a ‘rational connection between the facts found and the choices 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 general standard is that a clearance may be granted only when ‘clearly consistent with the interests of national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). The Appeal Board may reverse the Judge’s decision to grant, deny, or revoke a security clearance if it is arbitrary, capricious, or contrary to law. Directive ¶¶ E3.1.32.3 and E3.1.33.3. “[T]here is a strong presumption against granting a security clearance.” Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9 Cir. 1990), cert. denied, 499 U.S. 905 (1991). Once the government th presents evidence raising security concerns, the burden shifts to the applicant to establish any appropriate mitigating conditions. See Directive ¶ E3.1.15. “The application of disqualifying and mitigating conditions and whole person factors does not turn simply on a finding that one or more of them apply to the particular facts of a case. Rather, their application requires the exercise of sound discretion in light of the record evidence as a whole.” See ISCR Case No. 05-03635 at 3 (App. Bd. Dec. 20, 2006). While acknowledging the extent of his debt, Applicant contends that any security concerns associated with it are mitigated. For example, Applicant argues that the basis for the debt, business Directive ¶ E2.A6.1.3.3. Directive ¶ E2.A6.1.3.2. Directive ¶ E2.A6.1.3.1. The Judge also concluded that Applicant’s debt to the IRS was recent and that it was not isolated. This is consistent with the ongoing nature of a federal tax debt, which is not extinguished by bankruptcy. See ISCR Case No. 02-31406 at 2 (App. Bd. Jul. 25, 2006) (“In this case, the Administrative Judge found that Applicant had a history of not meeting financial obligations which extended over many years. He had only recently resolved many of his debts and at the time the case was submitted for decision still had significant outstanding debts. In light of the foregoing, the Judge could reasonably conclude that Applicant’s financial problems were recent, not isolated, and still ongoing.”) misfortune, was beyond his control, was isolated, and not recent. The gravamen of Applicant’s brief on appeal, however, is that he is a mature man of high integrity who will not act to the detriment of his country, even if tempted by promises to pay off his debt. Applicant cites to a number of Hearing Office cases which he believes are consistent with granting him a clearance. We have considered Applicant’s brief in light of the Judge’s decision and the record as a whole. While the Judge acknowledged the centrality of Applicant’s business downturn to his financial problems, he nevertheless concluded that Applicant’s tax debt is, to an extent, within his control. “Applicant’s company was obligated to withhold funds from the employees’ wages for their federal income tax. The company did not fulfill the further obligation to pay that money to the IRS. The company chose to utilize money owed to the U.S. Government in an attempt to save a floundering company. That is not a valid business decision.” Decision at 7. The Judge went on to observe that Applicant’s payments to the IRS “have been minimal compared with the amount of the debts.” Id. The Judge concluded that Applicant had failed to meet his burden of persuasion that the security concerns in his case had been mitigated. This conclusion bears a rational relation to the Judge’s unchallenged findings. Therefore, we conclude that the Judge’s treatment of the mitigating conditions is neither arbitrary, capricious, nor contrary to law. As far as the Judge’s whole person analysis is concerned, he gave explicit consideration to Applicant’s professional accomplishments and his “impeccable character evidence.” Id. He balanced that against the extent of Applicant’s tax debt, concluding that it “raises his potential for pressure, coercion, exploitation, or duress.” Id. We conclude that the Judge’s whole person analysis complies with the requirements of Directive ¶ E2.2.1, in that he considered the totality of Applicant’s conduct in reaching his decision. See ISCR Case No. 04-09959 at 6 (App. Bd. May 19, 2006). The Board gives due consideration to the Hearing Office cases which Applicant has submitted in his appeal brief. However, such decisions are binding neither on Hearing Office Judges or on the Board. See ISCR Case No. 03-26115 at 3 (App. Bd. Apr. 5, 2007).

ORDER

The Judge’s decision denying Applicant a security clearance is AFFIRMED. Signed: Michael Y. Ra’anan Michael Y. Ra’anan Administrative Judge Chairman, Appeal Board Signed: William S. Fields William S. Fields Administrative Judge Member, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board