CASE · Clearance Adjudication Search EngineCASE

Loading case…

ISCR Case 14-04435.a1 — CASE

ISCR Case 14-04435.a1denied

Case Headnote

ISCR Case No. 14-04435.a1

Mar 13, 2017· Hon. Michael Y. Ra'anan· appeal

Summary

A security clearance was denied to an applicant working in the banking and mortgage industry, primarily under Guideline F (Financial Considerations). The denial stemmed from a history of delinquent debts, specifically credit card obligations and a failure to file tax returns. These issues raised concerns about the applicant's judgment and reliability.

Despite a reported increase in income, the applicant did not sufficiently resolve these financial problems. The appeal board upheld the denial, concluding that the applicant had not adequately mitigated the financial concerns.

The decision cited disqualifying conditions related to a history of not meeting financial obligations and an inability to satisfy debts. While mitigating conditions concerning the financial problems not being recent or isolated were considered, they were ultimately insufficient to overcome the security concerns.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(b)raisedA History of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(e)appliedThe Individual Has a Reasonable Basis to Dispute the Legitimacy of the Past-due DebtThe applicant had a reasonable basis for disputing some debts, but this did not mitigate the concerns regarding the credit card debts.

Key Rule Quoted

“The Directive presumes a nexus between proved or admitted conduct under any of the Guidelines and an applicant’s eligibility for a clearance.”

Procedural Posture

SOR issuedFeb 26, 2015
Answer filed—
Hearing heldNov 22, 2016
Decision dateMar 13, 2017

Cite For

History of Delinquent Debts Under Guideline F
Failure to File Tax Returns as a Security Concern
Nexus Between Financial Issues and Judgment/reliability Concerns

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 made errors in her findings and analysis. The Appeal Board affirmed the decision, finding that any errors were harmless and that the Judge's conclusions were supported by substantial evidence.

Appealed bythe applicant

Applicant representationAttorney

Judge belowElizabeth M. Matchinski — 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 erred in finding that SOR ¶¶ 1.f and 1.g were duplicative of the two credit card debts.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
The Judge's whole-person analysis ran contrary to the weight of the record evidence.
Erroneous finding of fact — raised by the applicantRejected
The Judge's findings of fact contained errors.

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 Judge's findings were supported by substantial evidence, and any errors found were deemed harmless as they did not affect the overall 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 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: Any error in the Judge’s findings of fact was harmless. The Directive presumes a nexus between proved or admitted conduct under any of the Guidelines and an applicant’s eligibility for a clearance. Debts that remained unpaid over a course of years can properly be characterized as a history of delinquent debt. Conduct not alleged in an SOR can be considered for limited purposes, such as evaluating an applicant’s case for mitigation and performing a whole-person analysis Adverse decision affirmed. CASE NO: 14-04435.a1 DATE: 03/13/2017 DATE: March 13, 2017 In Re: ---------------- Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 14-04435

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Donna Price, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On February 26, 2015, DoD 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 November 22, 2016, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Elizabeth M. Matchinski 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’s findings of fact contained errors; whether the evidence raised Guideline F security concerns; and whether the Judge’s whole-person analysis ran contrary to the weight of the record evidence. Consistent with the following, we affirm. The Judge’s Findings of Fact Applicant worked in the banking and mortgage industry after college. He co-founded a business, of which he is the chairman and chief executive officer (CEO). Applicant divorced his second wife in 2015. He has a child from a first marriage and another from his second. During the course of their marriage, Applicant and his second wife purchased two houses. Because of Applicant’s wife’s contributions to the family income, they had no trouble meeting their financial obligations, including mortgage payments, for several years. However, in about 2008, Applicant’s wife developed a drinking problem as well as mental health difficulties. In addition, Applicant’s business began to struggle. His overall household income declined significantly, and he experienced financial problems. For example, in 2011 he was late on the mortgage payments for both of his homes. Applicant and his wife separated, embarking upon a protracted divorce proceeding, during which his wife neglected her share of the marital debts. Applicant’s problems were magnified by his difficulty in meeting required payments for a guardian ad litem appointed during the course of child custody litigation. In 2013, however, Applicant’s income from his company improved. For example, in 2013 his salary was nearly $308,000 and two years later it was over $270,000. Applicant’s SOR lists several delinquent debts. The Judge found that he was not responsible for two of them. She also found that the debts alleged in SOR ¶¶ 1.cand 1.dwere duplicated by two others alleged at 1.gand 1.fand that he had paid the remaining debt, nearly $700 for cable services. In addition to the debts alleged in the SOR, the record showed that Applicant had failed to file state and Federal income tax returns for several years. He filed his state income tax returns late for 2007 and 2008 and filed late Federal returns for 2004 through 2012.1 He still owed over $8,000 to the IRS for tax year 2008 but promised to resolve it “within the next 30 to 45 days.” Decision at 5. The two SOR debts that the Judge found to be unresolved were credit cards alleged at 1.c ($15,000) and 1.d ($8,100). An attorney advised Applicant not to pay these debts until the creditors and the amounts were verified. As of mid-2016, 1.cwas not listed on Applicant’s credit report but there is no evidence that it had been paid. 1.dwas the subject of a judgment against Applicant, though he intended to file a motion to vacate it. Applicant’s attorney has concluded that the creditors are charging usurious interest rates for these two debts. In 2015, Applicant offered to settle 1.cand 1.dfor $1,350 and $1,540 respectively but without success. Numerous business associates, friends, and colleagues attest to Applicant’s drive, work ethic, and integrity. He is lauded for his effort to provide a stable home for his daughter despite the difficult personal circumstances attending his second marriage and subsequent divorce. He enjoys an excellent reputation for integrity, and his character references recommend him for a clearance. The Judge’s Analysis As stated above, the Judge found that Applicant was not responsible for two of the SOR debts and that two debts were duplicative of others. She concluded that the remaining three–the two credit cards and the cable services debt–raised security concerns under Guideline F, thereby imposing on Applicant the burden of persuasion as to mitigation.2 The Judge concluded that Applicant’s having paid the cable debt was sufficient to mitigate any concern arising from it. However, she concluded that Applicant had failed to mitigate concerns arising from the two credit cards. She stated that Applicant had been on notice since at least 2015 that these debts were of concern but that he had shown inordinate delay in addressing them, which raises questions about his judgment. Though noting circumstances outside his control that affected his financial problems–his marital difficulties, a downturn in his business, etc.–the Judge concluded that he had not shown responsible action regarding the credit cards. She cited to his significant increase in annual income, which should have enabled him to resolve these remaining debts. She stated that his settlement offers were entitled to little weight, given that they were for relatively small portions of the amounts owed. Though she concluded that 1.fand 1.gdid not raise concerns insofar as they were duplicates of the credit card debts, she also concluded that mitigating condition 20(e)3 applied to them, in that Applicant had a reasonable basis for dispute. In the whole-person analysis, the Judge noted Applicant’s numerous character references and his excellent reputation “for always doing the right thing.” Decision at 14. She found this reputation to be hard to reconcile with Applicant’s difficulty in managing his finances. She stated that, given his business acumen and experience in the banking industry, he should have known that delinquent debts can be transferred to other creditors and that higher balances can result through the accrual of interest. She found that Applicant’s problem with the two debts that she resolved against him was due, at least in part, to his own inattention. She also stated that Applicant showed similar inattention to his obligation to file income tax returns for several years, resulting in delinquent obligations to state and Federal revenue authorities.

DISCUSSION

Applicant argues that the Judge erred in finding that SOR ¶¶ 1.fand 1.gwere duplicative of the two credit card debts that she resolved against him. Though acknowledging that the evidence presented at the hearing about these debts was in many respects confusing, he argues that 1.fand 1.gwere not credit card expenditures but, rather, unrelated revolving lines of credit. We have considered Applicant’s argument in light of the record as a whole. The Judge’s challenged finding is sustainable on this record. However, even if the Judge erred in this finding, we fail to see how it worked to Applicant’s detriment. The Judge did not attribute security concerns to 1.fand 1.g, and she made no reference to them in her analysis, except to opine that they fell within mitigating condition 20(e). Moreover, she entered favorable formal findings for these two debts. Accordingly, the Judge’s adverse decision did not rely on the debts alleged in 1.fand 1.gto any extent. Even if the Judge erred in finding them to be duplicative of the credit cards, the error did not contribute to the overall adverse decision and, therefore, was harmless. See, e.g., ISCR Case No. 14-03601 at 3 (App. Bd. Jul. 1, 2015). The material findings upon which the Judge based her decision were supported by “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all the contrary evidence in the same record.” Directive ¶ E3.1.32.1. See ISCR Case No. 14-04226 at 3 (App. Bd. Aug. 18, 2015). Applicant contends that the two credit card debts do not constitute a history of failing to pay debt. We construe this as an argument that the Judge’s findings do not support her conclusion that Applicant’s financial problems raise security concerns. The Directive presumes a nexus between admitted or proved facts under any of the Guidelines and an applicant’s eligibility for a clearance. See, e.g., ISCR Case No. 14-06653 at 3 (App. Bd. Nov. 18, 2016). A single debt can be sufficient to raise Guideline F security concerns. See, e.g., ISCR Case No. 14-05366 at 3 (App. Bd. Feb. 5, 2016). In the case before us, the debts at issue are contained in Applicant’s credit reports (see GE 4 at 11, cited in n.3., for example), and Applicant testified about them as well. He stated that he probably used the card alleged in 1.dfor the purchase of household goods (Tr. at 143), and he acknowledged owing both debts.4 The Judge found that these credit card debts, alongside the cable bill, had been delinquent for several years. The Judge’s findings about the credit cards and the cable bill support her conclusion that Applicant had been unable or unwilling to address his debts. They also support her conclusion that he has a history of failing to pay debt, in that debts that have remained unpaid over a course of years can properly be characterized as a history. See, e.g., ISCR Case No. 15-02477 at 3 (App. Bd. Nov. 23, 2016) (Debts unresolved in the years since the applicant’s previous clearance investigation can reasonably be characterized as a history). Applicant’s arguments on appeal are not sufficient to rebut the presumption of nexus between Applicant’s financial problems and concerns that he is deficient in the judgment and reliability required for access to classified information. Applicant contends that his character evidence was overwhelming but that the Judge improperly discounted it in light of evidence such as his delinquent tax returns, among other things. As stated above, the SOR did not allege Applicant’s tax problems. Department Counsel moved to amend the SOR to include an allegation that Applicant failed to file his state and Federal tax returns, but the Judge denied the motion. Decision at 2-3. However, the Judge noted that conduct not alleged in an SOR can be considered for certain limited purposes, such as evaluating an applicant’s case for mitigation and performing a whole-person analysis, citing to, inter alia, ISCR Case No. 09- 07219 at 5 (App. Bd. Sep. 27, 2012). Decision at 5, n.4. The Judge’s reliance on the cited case was proper, and she limited her discussion of the tax delinquencies to the whole-person analysis of the decision. We find no error in the Judge’s treatment of Applicant’s failure to have filed tax returns. Applicant’s appeal brief, viewed as a whole, consists in large measure of a disagreement with the Judge’s weighing of the evidence, which is not enough to show that the Judge did so in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 15-02326 at 5 (App. Bd. Oct. 14, 2016). 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, 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 Ra’anan Michael 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

FOOTNOTES

1 Compare the Judge’s findings with Applicant’s testimony that the last time he filed both state and Federal tax returns was 1998 and that he finally got caught up on his delinquent filings in 2013. Tr. at 162, 168, and 170.

2 The Judge found two disqualifying conditions raised by Applicant’s circumstances: Directive, Enclosure 2 ¶ 19(a) (“inability or unwillingness to satisfy debts”) and (b) (“a history of not meeting financial obligations”). Applicant’s burden of persuasion is set forth in Directive ¶ E3.1.15.

3 Directive, Enclosure 2 ¶ 20(e): “the individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue[.]”

4 Department Counsel questioned Applicant about 1.c: “And similar to the debt at [1.d] . . . that is a debt that you owed and that went delinquent during the time frame when you were having financial difficulties? [Applicant]: yes.” Tr. at 146.