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ISCR Case 16-01578.h1 — CASE

ISCR Case 16-01578.h1denied

Case Headnote

ISCR Case No. 16-01578.h1

deniedAug 16, 2017· Hon. Jennifer I. Goldstein· hearing

Summary

A 40-year-old government contractor was denied a security clearance under Guideline F, Financial Considerations, due to significant financial issues. The Statement of Reasons specifically cited the applicant's failure to file federal income tax returns for tax years 2011 through 2014, and state income tax returns for tax years 2010 through 2014.

Further disqualifying conditions included indebtedness to 22 creditors, totaling approximately $36,000. The judge determined that the applicant did not provide sufficient documentation to demonstrate resolution of any of these delinquencies or the outstanding tax returns.

While mitigating condition AG ¶ 20(b) was considered, it was not applied. Ultimately, the applicant's failure to resolve these financial concerns led to the denial, as they raised doubts about his reliability and trustworthiness.

Why the Applicant Was Denied

Applicant is indebted to 22 creditors totaling approximately $36,000.
Applicant failed to file Federal income tax returns for tax years 2011 through 2014 and state income tax returns for tax years 2010 through 2014.
Applicant did not provide documentation to show he resolved any of his delinquencies or delinquent tax returns.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Tax Returns

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond the Person's ControlApplicant's unemployment and divorce were circumstances beyond his control, but he did not act responsibly regarding his debts.

Key Rule Quoted

“"Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems."”
— ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016)

Procedural Posture

SOR issuedJun 29, 2016
Answer filedAug 26, 2016Applicant requested a decision on the written record.
Hearing held—No hearing; case decided on the written record.
Decision dateAug 16, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations
Impact of Failure to File Tax Returns on Security Clearance Eligibility
Consideration of Financial Circumstances Under Guideline F

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Standardized Decision Profile

SEAD-4 Guideline F · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found multiple financial concerns under Guideline F, including the applicant's significant indebtedness and failure to file tax returns for several years. Despite some claims of mitigation, the judge concluded that the applicant did not demonstrate sufficient evidence of responsible financial behavior, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file Federal income tax returns for tax years 2011 through 2014	Against Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.p	specific text not stated in this decision	For Applicant	Unspecified Financial	Unknown	—	—	—
1.q	failed to file state income tax returns for tax years 2010 through 2014	Against Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—

Descriptive standardized rendering of a decided public case (Guideline F). The verbatim source decision is shown in full below.

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

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ) ISCR Case No. 16-01578 ) Applicant for Security Clearance )

For Government: Philip J. Katauskas, Esquire, Department Counsel For Applicant: Pro se

August 16, 2017 ______________

STATEMENT OF CASE

______________

GOLDSTEIN, Jennifer I., Administrative Judge:

Applicant is indebted to 22 creditors in the approximate amount of $36,000. Additionally, he failed to file Federal income tax returns for tax years 2011 through 2014, and state income tax returns for tax years 2010 through 2014. He failed to produce documentation to show he resolved any of his delinquencies or delinquent tax returns. Based upon a review of the pleadings and exhibits, eligibility for access to classified information is denied.

On December 8, 2014, Applicant submitted a security clearance application (SF- 86). On June 29, 2016, the Department of Defense Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of Reasons (SOR), detailing security concerns under Guideline F, Financial Considerations. (Item 1.) The action was taken under Executive Order (EO) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; DoD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information. Applicant answered the SOR on August 26, 2016. (Item 3.) He requested that his case be decided by an administrative judge on the written record without a hearing. (Item 3.) On September 30, 2016, Department Counsel submitted the Government’s written case. A complete copy of the File of Relevant Material (FORM), containing seven Items, was mailed to Applicant on September 30, 2016, and received by him on October 14, 2016. The FORM notified Applicant that he had an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of his receipt of the FORM.

Applicant did not respond to the FORM within the 30 days allotted, which ended November 13, 2016. DOHA assigned the case to me on August 2, 2017. Items 1 through 7 are admitted into evidence.1

The SOR in this case was issued under the adjudicative guidelines that came into effect within the DoD on September 1, 2006. Security Executive Agent Directive (SEAD) 4, National Security Adjudicative Guidelines, implements new adjudicative guidelines, effective June 8, 2017. All security clearance decisions issued on or after June 8, 2017, are to be decided using the new National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), as implemented by SEAD 4. I considered the previous adjudicative guidelines, effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s security clearance eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG.

FINDINGS OF FACT

Applicant is 40 years old. He has worked for his current employer, a government contractor, since April 2012. On his SF-86, he listed that he was unemployed from September 2011 through April 2012. He was divorced from his ex-wife in February 2013. He married his second wife in May 2015. (Item 4; Item 5.)

Applicant was alleged to be indebted to 23 creditors in the approximate amount of $45,000. Additionally, he was alleged to have failed to file Federal income tax returns for tax years 2011 through 2014, and state income tax returns for tax years 2010 through 2014. Applicant admitted to the tax filing issues and debts identified in SOR ¶¶ 1.a, 1.b, and 1.dthrough 1.y. He denied the debt listed in SOR ¶ 1.c, claiming that the “debt has been paid off.” Applicant’s debts appear in credit reports dated December 23, 2014, and April 14, 2016. (Items 6 and 7.) Applicant attributes his debts to his divorce. (Item 4.)

Applicant failed to file Federal income tax returns for tax years 2011 through 2014, and state income tax returns for tax years 2010 through 2014. On Applicant’s SF- 86, he disclosed that he failed to file and pay his 2010 state income taxes. (Item 4.) He also indicated he was paying $400 per month to resolve this issue. He again claimed to be “in the process of making payments” on his state tax debt in his Answer. (Item 3.) He denied other instances of failing to file or pay his Federal, state, or other taxes as required by law on his SF-86 (Item 4), but later admitted both allegations concerning his unfiled Federal and state taxes in SOR ¶¶ 1.a and 1.bin his Answer. (Item 3.) No record evidence established that the delinquent returns have been filed. They are unresolved. (Item 4 at p. 29-30.)

Of Applicant’s 23 delinquent debts, Applicant claimed in his Answer that SOR ¶¶ 1.c, 1.p, and 1.y “ha[ve] been paid off.” (Item 3.) He noted, “Upon looking closely you will see some of these debts are duplicates,” without any further explanation. (Item 3.) Applicant’s credit report dated April 14, 2016, reflects the debt in ¶ 1.cas a charged-off auto account with a balance of $9,578, and It appears to remain delinquent. (Item 7.) However, SOR ¶¶ 1.pand 1.y, which are owed to the same creditor in the amounts of $8,127 and $11,532 respectively, are reflected on Applicant’s December 23, 2014 credit report with the same account number, and as such is a duplicated entry on the SOR. This debt is listed as an open collection account with a balance of $11,532. It is unresolved. (Item 6.) Applicant admitted, and the credit reports establish that the rest of his delinquent debts (SOR ¶¶ 1.dthrough 1.o, and 1.qthrough 1.x) remain unresolved.

Applicant submitted no evidence of financial counseling, or of budget estimates from which to analyze his current financial situation. No character references were submitted to describe Applicant’s judgment, trustworthiness, integrity, or reliability. I was unable to evaluate his credibility, demeanor, or character in person since he elected to have his case decided without a hearing.

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are useful in evaluating an applicant’s eligibility for access to classified information.

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, administrative judges apply the guidelines in conjunction with the factors listed in AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(a), the entire process is a conscientious scrutiny of a number of variables known as the whole-person concept. The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision.

The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical and based on the evidence contained in the record. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture.

Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15, states an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance decision.”

A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to protect or safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information.

Section 7 of Executive Order 10865 provides that adverse decisions shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information).

ANALYSIS

Guideline F, Financial Considerations

The security concerns relating to the guideline for financial considerations are set out in AG ¶ 18, which reads in pertinent part:

Failure to live within one's means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual's reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds.

AG ¶ 19 describes three conditions that could raise security concerns and may be disqualifying in this case:

(a) inability to satisfy debts;

(f) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required.

Applicant is indebted on 22 delinquent accounts (as SOR ¶¶ 1.pand 1.yare the same debt) in an amount exceeding $36,000. He has documented no action to resolve these delinquencies. Further, he failed to file Federal income tax returns for tax years 2011 through 2014, and state income tax returns for tax years 2010 through 2014. The facts establish prima facie support for the foregoing disqualifying conditions, and shift the burden to Applicant to mitigate those concerns.

The guideline includes conditions in AG ¶ 20 that could mitigate the security concerns arising from Applicant’s alleged financial difficulties:

(a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual's current reliability, trustworthiness, or good judgment;

(b) the conditions that resulted in the financial problem were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances;

(d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and

(g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements. The evidence does not establish mitigation under AG ¶ 20(a). Applicant’s SOR- alleged financial problems have been ongoing since 2010, are unresolved, and continue to date.

The evidence establishes partial mitigation under AG ¶ 20(b). Applicant’s unemployment from September 2011 through April 2012 and his divorce from his ex- wife in February 2013, were circumstances beyond his control. However, he did not provide evidence that he acted responsibly under the circumstances with respect to his debt or his obligations to file Federal and state income tax returns annually, which would be necessary for full mitigation under this condition. He has been fully employed since April 2012, yet he has not documented steps taken to resolve his SOR-listed delinquencies. Moreover, he continued to fail to file his Federal and state income tax returns through at least 2014. Mitigation under AG ¶ 20(b) is not fully applicable.

Applicant has not established a history of responsible action with respect to his delinquent debts or filing his Federal and state income tax returns. There is no discernable evidence of a good-faith effort to repay those debts in the record. The evidence does not establish mitigation under AG ¶ 20(d).

Applicant indicated that he had an arrangement with his state taxation authority to repay his outstand tax debt. However, he failed to present documentation of any such arrangement. Further, he mentioned no such arrangements with the Federal tax authority to file or pay the amount owed. As a general rule, "[f]ailure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information." (ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016).) The evidence does not establish mitigation under AG ¶ 20(g).

WHOLE PERSON CONCEPT

Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(d):

(1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence. According to AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the applicable guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all pertinent facts and circumstances surrounding this case. Applicant is a mature individual who is accountable for the decisions and choices that led to his financial difficulties. He failed to demonstrate a basis for finding current good judgment, or permanent behavioral change, concerning his continuing pattern of financial irresponsibility. His ongoing delinquent debts establish continuing potential for pressure, coercion, or duress.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For these reasons, I conclude that he did not meet his burden to mitigate the security concerns arising from his financial considerations.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by ¶ E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a through1.o: Against Applicant For Applicant2 Subparagraph 1.p: Subparagraphs 1.qthrough1.y: Against Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied.

Jennifer Goldstein Administrative Judge

FOOTNOTES

1 Item 5 is an unauthenticated report of personal subject interviews conducted June 4, 11, and 16, 2015; November 19, 2015; and January 6, 2016. Because Applicant did not respond to the FORM or affirmatively waive any objection to Item 5, I will consider only those facts in Item 5 that are not adverse to Applicant unless they are also contained in other evidence or included in the admissions in his answer to the SOR. 2 This allegation is found for Appellant to avoid having the debt, which is duplicated in the proper amount in SOR ¶ 1.y, count twice.