CASE · Clearance Adjudication Search EngineCASE

Loading case…

ISCR Case 12-00608.a1 — CASE

ISCR Case 12-00608.a1denied

Case Headnote

ISCR Case No. 12-00608.a1

Apr 11, 2014· Hon. Michael Y. Ra'anan· appeal

Summary

A defense contractor with 17 years of overseas employment was denied a security clearance under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The primary issue was the applicant's failure to timely file federal tax returns from 2000 to 2010.

The applicant asserted a belief that no taxes were owed and claimed efforts to resolve the tax issues. However, the appeal board found these claims insufficient to mitigate the security concerns. Disqualifying conditions were raised under AG ¶ 20, while mitigating conditions under AG ¶ 21 were considered but ultimately not applied.

The denial was based on the applicant's failure to file federal tax returns for multiple years without sufficient justification. The board specifically cited the applicant's procrastination and lack of a timely filing history as significant factors in the decision to deny the security clearance.

Conditions Referenced

Disqualifying

AG ¶ 20raisedFailure to File Annual Federal, State, or Local Income Tax Returns as Required

Mitigating

AG ¶ 21rejectedThe Individual Has Made a Good Faith Effort to Repay Overdue Creditors or Otherwise Resolve DebtsThe applicant's efforts to resolve tax issues were deemed insufficient to mitigate security concerns.

Key Rule Quoted

“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)

Procedural Posture

SOR issuedJul 24, 2013
Answer filed—
Hearing heldJan 31, 2014
Decision dateApr 11, 2014

Cite For

Insufficient Justification for Failure to File Tax Returns Under Guideline F
Procrastination as a Significant Factor in Security Clearance Denial
The Importance of Timely Filing in Assessing an Applicant's Judgment and Reliability

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 a denial of a security clearance based on the applicant's failure to file tax returns for multiple years. The applicant argued that the decision was arbitrary and capricious. The Board affirmed the Administrative Judge's decision, finding it supported by substantial evidence and consistent with national security interests.

Appealed bythe applicant

Applicant representationAttorney

Judge belowWilford H. Ross — denied the clearance

Decided ona hearing

Guidelines belowGuideline EGuideline F

What the Board reviewed

Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant argued that the Judge's adverse decision was arbitrary, capricious, or contrary to law.

Why the Board ruled this way

The Board found that the Judge's decision was supported by substantial evidence and articulated a satisfactory explanation for the adverse ruling regarding the applicant's failure to file tax returns. The applicant's expectation of a tax refund was deemed insufficient to mitigate the security concerns raised.

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
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 E; Guideline F DIGEST: The expectation of a tax refund is not sufficient to mitigate security concerns arising from a failure to file tax returns. Adverse decision affirmed. CASENO: 12-00608.a1 DATE: 04/11/2014 DATE: April 11, 2014 In Re: ---- Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 12-00608

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Amy Broderick, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On July 24, 2013, DoD issued a statement of reasons (SOR) advising Applicant of the basis for that decision–security concerns raised under Guideline E (Personal Conduct) and Guideline F (Financial Considerations) of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive). Applicant requested a hearing. On January 31, 2014, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Wilford H. Ross denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raised the following issue on appeal: whether the Judge’s adverse decision was arbitrary, capricious, or contrary to law. The Judge’s favorable findings under Guideline E are not at issue in this appeal. Consistent with the following, we affirm. The Judge’s Findings of Fact Applicant has been employed by Defense contractors overseas for 17 years. He failed to file his Federal tax returns for tax years 2000 and 2002 through 2010 in a timely manner. He has explained this failure as a result of his belief that he did not owe taxes, due to the tax exclusion on foreign earned income. However, he has also admitted that the reason was his own procrastination. The IRS filed a levy against Applicant for back taxes, interest, and penalties in the amount of $789,746.07. The IRS recouped nearly that amount by attaching Applicant’s investment accounts and by garnishing his pay. Although Applicant has known of his problems since around 2007 and subsequently hired a tax preparer to help him, it was not until 2013 that he gave this person the information required for him to prepare and file the returns. Additionally, Applicant has been in a dispute with a state regarding a tax notice sent him in 2012. He has reached a resolution, requiring him to send the state a copy of his 2010 Federal tax return. As of the date of the hearing, he had not done so. Applicant enjoys an excellent reputation among his fellow workers for conscientiousness and honesty. His colleagues believe that he can be trusted with sensitive information. The Judge’s Analysis The Judge cleared Applicant under Guideline E. In deciding otherwise under Guideline F, the Judge stated that Applicant failed to file his taxes for “no good reason.” Decision at 7. He stated that, despite Applicant’s recent efforts to address his tax delinquencies, he does not have a track record of timely filing. He stated that, with virtually no history of timeliness, Applicant had failed to demonstrate that his procrastination was behind him. In the whole-person analysis, the Judge stated that the evidence did not establish permanent behavioral changes, given Applicant’s long history of failing to file his tax returns.

DISCUSSION

Applicant cites to his efforts to resolve his tax problems and to his evidence that he had honestly believed that he had not owed the IRS any money. He also argues that, because he expects to get a refund after all his returns are filed, he had a legitimate basis to dispute the debts at issue here. This last point, even if it is true, is not sufficient to mitigate concerns arising from a failure to discharge one’s legal obligation to file tax returns. See Directive, Enclosure 2 ¶ 19(g): “failure to file annual Federal, state, or local income tax returns as required . . .” The Judge made findings about Applicant’s efforts to resolve his tax problems, and he discussed them in the Analysis. Applicant has not rebutted the presumption that the Judge considered all of the evidence in the record. See, e.g., ISCR Case No. 11-13948 at 3 (App. Bd. Feb. 26, 2014). The Judge examined the relevant data and articulated a satisfactory explanation for the decision. Failure to discharge legal obligations, such as filing tax returns, can impugn an applicant’s judgment and reliability. See, e.g., ISCR Case No. 98-0810 at 4 (App. Bd. Jun. 8, 2000). 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, Enclosure 2 ¶ 2(b): “Any doubt concerning personnel being considered for access to classified information 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: William S. Fields William S. Fields Administrative Judge Member, Appeal Board Signed; James E. Moody James E. Moody Administrative Judge Member, Appeal Board