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ISCR Case 15-06707.a1 — CASE

ISCR Case 15-06707.a1denied

Case Headnote

ISCR Case No. 15-06707.a1

Aug 15, 2017· Hon. Michael Y. Ra'anan· appeal

Summary

A defense contractor, holding a security clearance since 2006, was denied continued clearance due to concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The denial stemmed from significant financial mismanagement, specifically the applicant's reliance on bankruptcy to resolve debts and a failure to file federal and state tax returns from 2007 to 2012.

The judge determined that the applicant did not demonstrate a good-faith effort to manage financial obligations, citing the use of bankruptcy instead of timely debt payment and the multi-year non-compliance with tax filing requirements. These issues raised disqualifying conditions under both guidelines.

Ultimately, the appeal board affirmed the denial of the security clearance. The board emphasized the applicant's lack of good-faith efforts in managing debts and adhering to tax obligations, leading to the final decision to deny the clearance.

Conditions Referenced

Disqualifying

AG ¶ 20raisedFinancial Considerations
AG ¶ 15raisedPersonal Conduct

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 issuedMar 26, 2016
Answer filed—
Hearing heldMay 30, 2017
Decision dateAug 15, 2017

Cite For

Denial Based on Financial Mismanagement Under Guideline F
Failure to File Tax Returns as a Compliance Issue Under Guideline E
Reliance on Bankruptcy Not Sufficient to Mitigate Financial 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 involved an applicant seeking a security clearance who was denied due to financial considerations and personal conduct issues. The applicant argued that the Judge's decision was arbitrary and capricious. The Board affirmed the Judge's decision, finding no harmful error in the analysis of the applicant's financial situation and tax compliance.

Appealed bythe applicant

Applicant representationAttorney

Judge belowPhilip S. Howe — denied the clearance (split findings)

Decided ona hearing

Guidelines belowGuideline FGuideline E

What the Board reviewed

Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant contends that the Judge did not properly apply the mitigating conditions.

Why the Board ruled this way

The Board found no reason to disturb the Judge’s conclusion that Applicant had not satisfied the mitigating conditions, affirming the adverse decision based on the evidence presented.

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
William S. Fields

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; Guideline E DIGEST: We find no reason to disturb the Judge’s conclusion that Applicant had not satisfied the mitigating conditions. Among other things, relying upon an option such as bankruptcy is not the same as actually paying debts when due. Adverse decision affirmed. CASENO: 15-06707.a1 DATE: 08/15/2017 DATE: August 15, 2017 In Re: ----------------

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 15-06707

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Andre F. Regard, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On March 26, 2016, DoD issued a statement of reasons (SOR) advising Applicant of the basis for that decision–security concerns raised under Guideline F (Financial Considerations) and Guideline E (Personal Conduct) of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive). Applicant requested a hearing. On May 30, 2017, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Philip S. Howe 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. Consistent with the following, we affirm. The Judge’s Findings of Fact Applicant works for a Defense contractor. He has held a security clearance since 2006. He also works at a part-time job to earn extra money. Applicant’s wife had surgery in 2006, resulting in her inability to work. This decreased the family income. Applicant’s wife was required to repay the state $10,000 for an apparent unemployment compensation overpayment. This debt has been resolved. Applicant has spent funds for travel, equipment, etc., in support of his children’s athletic activities. In late 2003, Applicant filed for Chapter 13 bankruptcy protection, which was subsequently converted to Chapter 7. He was discharged in bankruptcy in early 2005. Applicant filed again for Chapter 13 bankruptcy in late 2016 and is making weekly payments of $111 to the bankruptcy trustee. He refers to this as his repayment plan. Applicant’s SOR lists a number of delinquent debts, for utility services, medical expenses, automobile loans, cable television, etc. Applicant demonstrated that he had resolved some of these debts, and others were included in the Chapter 13 bankruptcy plan. This plan also includes debts not listed in the SOR. In addition, Applicant’s SOR alleges that he failed to file his Federal and state income tax returns from 2007 to 2012. He owes the Federal Government over $20,000, and he began an installment plan in January 2013. He did not produce a copy of this exhibit. In addition, he owes his state about $600 for unpaid taxes, which he claims that he paid in 2015. Applicant believed that when he filed Federal returns his state returns were filed automatically. “He has now learned that he has to file tax returns with the IRS and his home state tax authorities separately.” Decision at 4. Applicant enrolled in a credit counseling program, but he discontinued it when he decided to file for bankruptcy. He received counseling as part of his bankruptcy proceeding. The Judge’s Analysis The Judge resolved some of Applicant’s debts in his favor, as he also did with one of the Guideline E allegations. However, he also entered adverse findings under both Guidelines. Regarding Applicant’s finances, the Judge concluded that the problems were not under control. He stated that Applicant did not demonstrate a good-faith effort to pay his debts, relying instead upon bankruptcy. He also cited to Applicant’s ongoing tax debt. Applicant’s failure to have filed his tax returns was cross alleged under Guideline E, for which the Judge found no mitigation.

DISCUSSION

Applicant contends that the Judge did not properly apply the mitigating conditions. He cites to each of the SOR debts, arguing that some had been paid and that others, including Applicant’s delinquent tax obligations, were covered by the Chapter 13 bankruptcy plan. He also states that Applicant has filed his tax returns. Some of the matters addressed in the Appeal Brief are from outside the record. We cannot consider new evidence on appeal. Directive ¶ E3.1.29. Applicant’s arguments are not enough to rebut the presumption that the Judge considered all of the evidence in the record. Neither are they enough 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. 13-00502 at 3 (App. Bd. Mar. 7, 2017). We find no reason to disturb the Judge’s conclusion that Applicant had not satisfied the mitigating conditions. Among other things, relying upon an option such as bankruptcy is not the same as actually paying debts when due. See ISCR Case No.12-01664 at 3 (App. Bd. Jan. 17, 2014). Moreover, failure to file tax returns and pay tax obligations suggests that an applicant has a problem with complying with well-established government rules and regulations. Voluntary compliance with such rules and regulations is essential for protecting classified information. See, e.g., ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 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, 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 Ra’anan Michael Ra’anan Administrative Judge Chairperson, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board Signed: William S. Fields William S. Fields Administrative Judge Member, Appeal Board