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ISCR Case 16-01878.h1 — CASE

ISCR Case 16-01878.h1denied

Case Headnote

ISCR Case No. 16-01878.h1

deniedJun 2, 2017· Hon. Roger C. Wesley· hearing

Summary

A 61-year-old electronics technician was denied a security clearance under Guideline F, Financial Considerations, due to unresolved financial issues. The Statement of Reasons cited two primary allegations: an outstanding debt to the IRS of $18,336 for delinquent taxes spanning tax years 2007-2009, 2011, and 2013, and a tax lien entered in February 2011 for $7,832. These issues raised Disqualifying Conditions 19(a) and 19(c).

While Mitigating Conditions 20(b) and 20(d) were considered, they were not sufficient to overcome the security concerns. The denial was based on the applicant's history of delinquent federal taxes and the unresolved tax lien.

The applicant failed to provide verifiable evidence of timely tax filings and payments, and her limited payment history under an IRS installment agreement did not demonstrate sufficient financial stability. Consequently, the applicant's security clearance was denied.

Why the Applicant Was Denied

The applicant has a history of delinquent federal taxes totaling $18,336 and a tax lien of $7,832, which remain unresolved.
The applicant failed to provide verifiable evidence of timely tax filings and payments, raising concerns about her financial responsibility.
The applicant's limited payment history under the IRS installment agreement does not demonstrate sufficient financial stability.

Conditions Referenced

Disqualifying

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

Mitigating

MC ¶ 20(b)appliedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlThe applicant's husband's heart attack and subsequent disability were considered.
MC ¶ 20(d)rejectedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve DebtsThe applicant's payment history was insufficient to demonstrate a good-faith effort.

Key Rule Quoted

“The ultimate determination of an applicant's eligibility for a security clearance depends, in large part, on the relevance and materiality of that evidence.”
— United States v. Gaudin, 515 U.S. 506, 509-511 (1995)

Procedural Posture

SOR issuedSep 15, 2016
Answer filedOct 26, 2016Applicant requested a hearing.
Hearing heldMar 8, 2017
Decision dateMay 12, 2017Decision issued after record was supplemented.

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations Under Guideline F
Importance of Verifiable Evidence of Financial Stability in Security Clearance Cases
Consideration of Personal Circumstances in Financial Mitigation 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 that the applicant had significant financial concerns due to delinquent federal taxes totaling $18,336 and a tax lien of $7,832. Despite the applicant's claims of a payment plan with the IRS, the judge determined that the applicant did not provide sufficient evidence to mitigate the financial issues, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant is indebted to the IRS for delinquent taxes of $18,336 for tax years 2007-2009, 2011, and 2013. $18,336	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Applicant is indebted to the IRS for a tax lien entered in February 2011 for $7,832. $7,832	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

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. 16-01878 ) ) Applicant for Security Clearance )

For Government: Andrew Henderson, Esq., Department Counsel For Applicant: Pro se 06/02/2017 _____________

STATEMENT OF CASE

______________

WESLEY, Roger C., Administrative Judge:

Based upon a review of the pleadings, exhibits, and testimony, I conclude that Applicant did not mitigate the security concerns regarding her financial considerations. Eligibility for access to classified information is denied.

On September 15, 2016, Department of Defense (DoD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) detailing reasons why DoD adjudicators could not make the affirmative determination of eligibility for a security clearance, and recommended referral to an administrative judge to determine whether a security clearance should be granted, continued, denied, or revoked. The action was taken under Executive Order (Exec. Or.) 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 (AGs) implemented by DoD on September 1, 2006. Applicant responded to the SOR on October 26, 2016, and requested a hearing. The case was assigned to me on December 21, 2016, and was scheduled for hearing on March 8, 2017. At the hearing, the Government's case consisted of five exhibits (GEs 1- 5). Applicant relied on one witness (herself) and three exhibits (AE A-C). The transcript (Tr.) was received on March 20, 2017.

Procedural Issues

Before the close of the hearing, Applicant requested the record be kept open to permit her the opportunity to supplement the record with documentation of her payments under the installment agreement she made with the Internal Revenue Service (IRS) in 2015. For good cause shown, Applicant was granted 21 days to supplement the record, Department Counsel was afforded two days to respond. Within the time permitted by the extension, Applicant did not supplement the record. In response to my inquiries, she provided updated summaries and transcripts of her IRS installment payments and account balances covering tax years 2007-2009, 2011, and 2013. Applicant’s submissions were received on May 12, 2017, and admitted without objection as AE D.

Summary of Pleadings

Under Guideline F, Applicant allegedly is indebted to the IRS for (a) delinquent taxes of $18,336 for tax years 2007-2009, 2011, and 2013, and (b) for a tax lien entered in February 2011 for $7,832. Allegedly, Applicant’s delinquent federal taxes remain unpaid.

In her response to the SOR, Applicant admitted each of the obligations with explanations. She claimed to have a payment plan in place with the IRS and is making all of her monthly tax payments on time.

FINDINGS OF FACT

Applicant is a 61-year-old electronics technician for a defense contractor who seeks a security clearance. The allegations covered in the SOR and admitted by Applicant are incorporated and adopted as relevant and material findings. Additional findings follow.

Background

Applicant married in September 1973 and divorced in January 1976. (GE 1) She remarried in February 1981, separated initially in 2004, reconciled for a month before separating again the same year. (GE 1; Tr. 26-27, 32-33) Applicant and her husband reconciled again in 2008, a short time before her husband suffered a heart attack that placed him on permanent disability. (Tr. 24, 32-33) She has one adult child and one stepchild from her first marriage. (GE 1)

Applicant attended college classes between January 2004 and May 2006; she earned no degree or diploma. (GE 1) She reported no military service. Applicant has worked for her current employer as an electronics technician since July 2011. (GEs 1-2) Contemporaneously with her full-time employment with her current employer, she has worked on a part-time basis with a non-DOD employer in an engineering support position. (GEs 1-2) Between January 2005 and January 2013, she was self-employed as a home inspector representative. (GE 1)

Applicant’s finances

Following her separation from her current husband, Applicant ceased filing her federal tax returns on a timely basis. (Tr. 27-28) For tax years 2004, 2007-2009, 2011, and 2013 she obtained automatic extensions but failed to file her returns within the times required by law. At some undetermined date, she filed all of her back federal returns together without a valid extension. (Tr. 27-28)

IRS transcripts covering tax years 2004, 2007-2009, 2011, and 2013 reveal no late filings of her federal tax returns or penalties assessed for late filing of tax returns for the years in question. (AE D) Each of the transcripts for the covered years recited tax “information from the return or as adjusted,” without any taxpayer filing confirmations or dates of filing. (AE D) Applicant’s acknowledged late filings for certain of the tax years in issue cannot be verified from the documented evidence in the record.

Because Applicant did not list or disclose her multiple failures to timely file her federal tax returns for the years in issue in the Electronic Questionnaires for Investigations Processing (e-QIP) she completed in February 2015, or in the interview she later submitted to with an investigator from the Office of Personnel Management (OPM) in June 2015, filing dates could not be readily checked and verified by the Government. (GEs 1-2) Not until she was asked about her filing of her federal tax returns for the years in issue (i.e., 2007-2009, 2011, and 2013) at hearing did Applicant disclose her multiple failures to timely file them. Without more information about when and how she filed her federal tax returns for the covered years, filing confirmations and filing dates cannot be verified.

Between 2004 and 2013, Applicant accumulated delinquent federal tax debts with the IRS for tax years 2004, 2007-2009, 2011, and 2013. (GEs 1-5 and AEs B-D)) These reported delinquent taxes totaled $18,336 according to recent credit reports. Besides these reported delinquent federal taxes, Applicant incurred an IRS tax lien in February 2011 in the amount of $7,832 (years covered not specified).

In June 2015, Applicant entered into an installment agreement that covered tax years 2004, 2007-2009, 2011, and 2013. (AEs C-D) Under the terms of her agreement she was required to make monthly payments of $80, beginning in September 2015. (AE C; Tr. 30-31) Beginning in August 2017, her monthly tax payments are scheduled to increase to $347 a month. (Tr. 22) Applicant’s payment records document her regular payments (varying between $50 and $80 a month) made between September 2015 and February 2017, and totaling $1,780 to date. (AE C-D) Whether she can handle the increased monthly payments with her income resources from her employment and her husband’s disability income is unclear.

IRS transcripts confirm that Applicant currently owes no more back taxes for the 2004 tax year. (AEs C-D) Still, the transcripts reflect that the aggregate balance of taxes owed for the remaining tax years covered by Applicant’s installment agreement for tax years 2007-2009, 2011, and 2013 has increased to a reported $20,939. More federal taxes could be owed for previous years covered by the federal tax lien entered against Applicant in 2011.

Pressed to identify the tax years covered by the federal tax lien filed in February 2011 for $7,832, Applicant could not identify the covered years. (GE 2; Tr. 34-37) With her increased monthly payments beginning in August 2017 under her installment agreement, Applicant could begin to see reductions in the running balance on her taxes owed for tax years 2007-2009, 2011, and 2013, but only if she is able to sustain her monthly payments currently and under the upwardly revised payment table scheduled to begin in August 2017. Amounts owing on other tax years covered by the federal tax lien entered against Applicant in February 2011 remain unidentified, but are likely covered by her installment agreement. Because Applicant did not provide any budget or evidence of financial counseling, her ability to sustain her IRS payments that are scheduled to increase substantially to $347 a month in August 2017 cannot be determined with any reasonable degree of accuracy.

Endorsements

Applicant is well regarded by her company president and facility security officer (FSO). He credited her with being an exemplary employee who consistently performs above and beyond the call of duty. (AE A) He characterized her as a team player with a strong work ethic. With his business experience, her manager considered himself a good judge of character. (AE A) He found Applicant to exhibit qualities of virtue, honesty, and respect.

P o l i c i e s

The AGs list guidelines to be used by administrative judges in the decision-making process covering security clearance cases. These guidelines take into account factors that could create a potential conflict of interest for the individual applicant, as well as considerations that could affect the individual’s reliability, trustworthiness, and ability to protect classified information. These guidelines include "[c]onditions that could raise a security concern and may be disqualifying” (disqualifying conditions), if any, and many of the "[c]onditions that could mitigate security concerns.”

These guidelines must be considered before deciding whether or not a security clearance should be granted, continued, or denied. The guidelines do not require administrative judges to place exclusive reliance on the enumerated disqualifying and mitigating conditions in the guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the context of the whole person in accordance with AG ¶ 2(c).

In addition to the relevant AGs, administrative judges must take into account the pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a) of the AGs, which are intended to assist the judges in reaching a fair and impartial commonsense decision based upon a careful consideration of the pertinent guidelines within the context of the whole person.

The adjudicative process is designed to examine a sufficient period of an applicant’s life to enable predictive judgments to be made about whether the applicant is an acceptable security risk. The following AG ¶ 2(a) factors are pertinent: (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 chances; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

Viewing the issues raised and evidence as a whole, the following individual guidelines are pertinent in this case:

Financial Considerations

The Concern: Failure or inability 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 information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Compulsive gambling is a concern as it may lead to financial crimes including espionage. Affluence that cannot be explained by known sources of income is also a security concern. It may indicate proceeds from financially profitable criminal acts. AG ¶ 18.

Burden of Proof

By virtue of the principles and policies framed by the AGs, a decision to grant or continue an applicant's security clearance may be made only upon a threshold finding that to do so is clearly consistent with the national interest. Because the Directive requires administrative judges to make a commonsense appraisal of the evidence accumulated in the record, the ultimate determination of an applicant's eligibility for a security clearance depends, in large part, on the relevance and materiality of that evidence. See United States, v. Gaudin, 515 U.S. 506, 509-511 (1995). As with all adversarial proceedings, the judge may draw only those inferences which have a reasonable and logical basis from the evidence of record. Conversely, the judge cannot draw factual inferences that are grounded on speculation or conjecture.

The Government's initial burden is twofold: (1) it must prove by substantial evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the facts proven have a material bearing to the applicant's eligibility to obtain or maintain a security clearance. The required materiality showing, however, does not require the Government to affirmatively demonstrate that the applicant has actually mishandled or abused classified information before it can deny or revoke a security clearance. Rather, the judge must consider and weigh the cognizable risks that an applicant may deliberately or inadvertently fail to safeguard classified information.

Once the Government meets its initial burden of proof of establishing admitted or controverted facts, the evidentiary burden shifts to the applicant for the purpose of establishing his or her security worthiness through evidence of refutation, extenuation, or mitigation. Based on the requirement of Exec. Or. 10865 that all security clearances be clearly consistent with the national interest, the applicant has the ultimate burden of demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations should err, if they must, on the side of denials.” See Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).

ANALYSIS

Security concerns are raised over Applicant’s history of incurring delinquent federal taxes for tax years 2007-2009, 2011, and 2013 and other federal taxes covered by a 2011 federal tax lien. To date, Applicant has produced documented payments of $1,780 towards the satisfaction of a current balance owing of $20,939 for the tax years covered by her installment agreement and nothing verifiable for the other years covered by the federal tax lien entered against Applicant in 2011.

While the taxes covered by the 2011 federal tax lien are likely covered by her installment agreement, this is by no means certain. Applicant’s incurred delinquent federal tax debts warrant the application of two of the disqualifying conditions (DC) of the AGs: DC ¶ 19(a), “inability or unwillingness to satisfy debts,” and DC ¶ 19(c), “a history of not meeting financial obligations.”

Holding a security clearance involves the exercise of important fiducial responsibilities, among which is the expectancy of consistent trust and candor. Financial stability in a person cleared to access classified information is required precisely to inspire trust and confidence in the holder of the clearance. While the principal concern of a clearance holder’s demonstrated financial difficulties is vulnerability to coercion and influence, judgment and trust concerns are also explicit in financial cases.

Applicant’s accumulation of delinquent federal tax debts, merit only partial application of MC ¶ 20(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, or a death, divorce or separation), and the individual acted responsibly under the circumstances.” While Applicant’s credible testimony of her husband’s heart attack and ensuing disability warrants some application of MC ¶ 20(b), she provided no probative evidence of financial hardships that would justify her failing to address her acknowledged federal tax liabilities in whole or in part before initiating the application process for a security clearance in February 2015.

To date, Applicant has made some inroads on meeting her federal tax payment obligations under the installment agreement she has with the IRS. But her payment track record is still very recent and modest in payments credited to the $20,939 balance that continues to accrue interest. And she still has not provided any verifiable explanations of tax liabilities owed or resolved for the tax years covered by the 2011 federal tax lien entered against her.

Because she has not developed a sufficient track record for repaying her federal taxes owed under her IRS installment agreement, or provided verifiable explanations of whether or not the taxes covered by the federal tax lien entered against her in 2011 are incorporated in her installment agreement, application of MC ¶ 20(d), “the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts,” is very limited as well. Prospects for her sustaining her scheduled payments under her installment agreement (both currently and under the revised repayment schedule beginning in August 2017) without a supporting budget and evidence of financial counseling are uncertain and difficult to gauge.

Applicant’s modest track record of repayment actions taken with her taxes owed for past years and covered by her 2015 installment agreement and 2011 tax lien (if not previously incorporated in her installment agreement) with the known resources available to her prevent her from meeting the Appeal Board’s requirements for demonstrating financial stability. ISCR Case No. 07-06482 (App. Bd. May 21 2008); see ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99- 0462 at 4 (App. Bd. May 25, 2000)); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999).

From a whole-person standpoint, Applicant’s limited attention devoted to addressing her federal tax returns and payment obligations before completing her e-QIP reflect poorly on her judgment and willingness to follow IRS rules and regulations. While her failure to timely file her federal tax returns until at least 2014 is not alleged in the SOR, her delinquent filings may be considered under the whole-person concept when evaluating her motives and overall whole-person judgment, trustworthiness, and reliability. See ISCR Case No. 12-04554 at 2, Note 1 (App. Bd. July 25 2004)

Timing of filing federal and state tax returns in DOHA proceedings is critical to an assessment of an applicant’s trustworthiness, reliability, and good judgment in following rules and guidelines necessary for those seeking access to classified information. See ISCR Case No. 14-06808 at 3 (App. Bd. Nov. 23, 2016); ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015)

The favorable impressions Applicant has forged with her manager are notable and worthy of considerable praise and encouragement. They are not enough at this time, however, to overcome security concerns associated with her history of failing to file her federal tax returns for the years in issue (i.e., 2007-2009, 2011, and 2013) or establish a stronger track record of paying her federal taxes as required by law. More time is needed for Applicant to demonstrate her reliability and trustworthiness in meeting IRS laws and regulations governing tax filings and payments of taxes owed.

Considering all of the circumstances surrounding Applicant’s tax filing and payment delinquencies, her actions to date in addressing her finances are insufficient to meet mitigation requirements imposed by the guideline governing his finances. Unfavorable conclusions are warranted with respect to the allegations covered by subparagraphs 1.a and 1.bof Guideline F.

FORMAL FINDINGS

In reviewing the allegations of the SOR and ensuing conclusions reached in the context of the findings of fact, conclusions, conditions, and the factors listed above, I make the following formal findings:

GUIDELINE F (FINANCIAL CONSIDERATIONS): AGAINST APPLICANT

Subparas. 1.a-1.b: Against Applicant

Conclusio n s

In light of all the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant or continue Applicant’s security clearance. Clearance is denied.

Roger C. Wesley Administrative Judge