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ISCR Case 16-01936.h1 — CASE

ISCR Case 16-01936.h1denied

Case Headnote

ISCR Case No. 16-01936.h1

deniedOct 12, 2017· Hon. Robert E. Coacher· hearing

Summary

A 45-year-old naturalized U.S. citizen, originally from South Korea, was denied a security clearance due to concerns under Guideline B (Foreign Influence) and Guideline F (Financial Considerations). The applicant failed to file federal income tax returns for 2011-2013 and had unresolved debts, including a $1,200 judgment from 2009 and a $185 collection account.

Additionally, the applicant maintained significant financial ties to South Korea. His wife, parents, parents-in-law, two sisters-in-law, and two brothers-in-law are all citizens and residents of South Korea. The applicant and his wife also hold several bank accounts, stock, and insurance policies in South Korea.

The judge determined that these financial and foreign ties created a heightened risk of foreign exploitation. Insufficient mitigating evidence was presented to overcome these concerns, leading to the denial of the security clearance.

Why the Applicant Was Denied

Applicant failed to file federal income tax returns for tax years 2011-2013.
Applicant has unresolved debts, including a judgment and a collection account.
Applicant has significant financial interests in South Korea, raising concerns of foreign influence.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(b)raisedUnwillingness to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Income Tax Returns
AG ¶ 7(a)raisedContact with Foreign Family Members
AG ¶ 7(b)raisedConnections to a Foreign Government
AG ¶ 7(e)raisedShared Living Quarters with Foreign Nationals
AG ¶ 7(f)raisedSubstantial Financial Interests in a Foreign Country

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedSep 12, 2016
Answer filedOct 18, 2016Applicant elected to proceed without a hearing.
Hearing held—Case decided on the written record.
Decision dateOct 12, 2017

Cite For

Failure to Mitigate Financial Obligations Under Guideline F
Heightened Risk of Foreign Influence Due to Family Ties Under Guideline B
Significant Financial Interests in a Foreign Country as a Disqualifying Condition

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 B (Foreign Influence) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found against the applicant on all allegations under Guideline B, citing significant foreign influence concerns due to the applicant's family ties and financial interests in South Korea. The applicant's connections to South Korea, including his wife and parents, along with substantial financial holdings there, raised risks of foreign exploitation and potential conflicts of interest, leading to the denial of his security clearance.

Country conditions:the decision took administrative notice of official facts about the foreign country (the Government’s country submission).

U.S. ties the decision noted: Naturalized U.S. Citizen · U.S. Children

¶	Allegation	Finding	Relationship	Country	Response	Disqualifying (¶7)	Mitigating applied (¶8)	Mitigation
2.a	The SOR also alleged his wife, parents, parents-in-law, two sisters-in-law and two brothers-in-law are citizens and residents of South Korea; and that he and his wife maintain several bank accounts, own stock, and insurance policies in South Korea (SOR ¶¶ 2.a-2.e).	Against Applicant	Parent in Foreign Country Immediate Family	South Korea HEIGHTENED RISK	Admitted	(a) contact with a foreign family member/associate/friend creating a heightened risk of exploitation (b) connections creating a potential conflict of interest (e) shared living quarters creating a heightened risk (f) substantial foreign business, financial, or property interests	—	—
2.b	The SOR also alleged his wife, parents, parents-in-law, two sisters-in-law and two brothers-in-law are citizens and residents of South Korea; and that he and his wife maintain several bank accounts, own stock, and insurance policies in South Korea (SOR ¶¶ 2.a-2.e).	Against Applicant	Sibling in Foreign Country Immediate Family	South Korea HEIGHTENED RISK	Admitted	(a) contact with a foreign family member/associate/friend creating a heightened risk of exploitation (b) connections creating a potential conflict of interest (e) shared living quarters creating a heightened risk (f) substantial foreign business, financial, or property interests	—	—
2.c	The SOR also alleged his wife, parents, parents-in-law, two sisters-in-law and two brothers-in-law are citizens and residents of South Korea; and that he and his wife maintain several bank accounts, own stock, and insurance policies in South Korea (SOR ¶¶ 2.a-2.e).	Against Applicant	In Law in Foreign Country Immediate Family	South Korea HEIGHTENED RISK	Admitted	(a) contact with a foreign family member/associate/friend creating a heightened risk of exploitation (b) connections creating a potential conflict of interest (e) shared living quarters creating a heightened risk (f) substantial foreign business, financial, or property interests	—	—
2.d	specific text not stated in this decision	Against Applicant	Unspecified Foreign Relationship Other	—	Unknown	—	—	—
2.e	The SOR also alleged his wife, parents, parents-in-law, two sisters-in-law and two brothers-in-law are citizens and residents of South Korea; and that he and his wife maintain several bank accounts, own stock, and insurance policies in South Korea (SOR ¶¶ 2.a-2.e).	Against Applicant	Foreign Bank Account or Investment Financial or Property Interest	South Korea HEIGHTENED RISK	Admitted	(a) contact with a foreign family member/associate/friend creating a heightened risk of exploitation (b) connections creating a potential conflict of interest (e) shared living quarters creating a heightened risk (f) substantial foreign business, financial, or property interests	—	—

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

Standardized Decision Profile

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

Posture: Decision on RecordDecided: denied

The judge found that the applicant failed to mitigate financial concerns under Guideline F, which included failing to file federal income tax returns for 2011-2013, an unpaid judgment of $1,200, and a collection account of $185. As a result, the applicant's eligibility for a security clearance was denied.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file his federal income tax returns for tax years 2011-2013	Against Applicant	Tax Filing Failure	Admitted	(a) inability to satisfy debts (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	is delinquent on paying a judgment of $1,200, entered in 2009 $1,200	Against Applicant	Judgment Against Applicant	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—
1.c	is indebted on a collection account in the amount of $185 $185	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—

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. 16-01936 ) Applicant for Security Clearance )

For Government: Daniel F. Crowley, Esq., Department Counsel For Applicant: Pro se

10/12/2017 ______________

STATEMENT OF CASE

______________

COACHER, Robert E., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, financial considerations, and Guideline B, foreign influence. Applicant’s eligibility for a security clearance is denied.

Statement of the Case

On September 12, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guidelines F and B. DOD CAF acted under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG), effective within the Department of Defense on September 1, 2006.1

Applicant answered the SOR on October 18, 2016, and elected to have his case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s File of Relevant Material (FORM) on November 15, 2016. The evidence included in the FORM is identified as Items 3-7 (Items 1 and 2 include pleadings and transmittal information, and Item 8 is a request for administrative notice on South Korea). The FORM was mailed to Applicant, who received it on November 28, 2016. Applicant was given an opportunity to file objections and submit material in refutation, extenuation, or mitigation. Applicant did not file objections and did not submit any evidence. Items 3-7 are admitted into evidence without objection. The case was assigned to me on October 1, 2017.

PROCEDURAL RULINGS

Department Counsel submitted a formal request that I take administrative notice of certain facts relating to South Korea. Applicant did not object and the request was approved. The request and the attached documents were not admitted into evidence but were included in the record as Item 8. The facts administratively noticed are set out in the Findings of Fact, below.

FINDINGS OF FACT

In Applicant’s answer to the SOR, he admitted SOR allegations ¶¶ 1.a, 1.b, 2.a – 2.c, and 2.e. He denied the allegations in SOR ¶¶ 1.cand 2.d. The admissions are incorporated into the findings of fact. After a thorough and careful review of the pleadings and exhibits submitted, I make the following additional findings of fact.

The SOR alleged Applicant failed to file his tax year 2011-2013 federal income tax returns; that he is delinquent on paying a judgment of $1,200, entered in 2009; and he is indebted on a collection account in the amount of $185 (SOR ¶¶ 1.a – 1.c). The SOR also alleged his wife, parents, parents-in-law, two sisters-in-law and two brothers- in-law are citizens and residents of South Korea; and that he and his wife maintain several bank accounts, own stock, and insurance policies in South Korea (SOR ¶¶ 2.a- 2.e).

Applicant is 45 years old. He was born in South Korea in 1972. He relocated to the United States with his family in 1986. He became a naturalized U.S. citizen in 1991. Presumably, he attended high school and college in the United States, but the record is silent as to that information. He began working for a series of defense contractors in 2002 to the present as an IT specialist or engineer. He has continuously lived in South Korea since at least 2002. The record contains no evidence that Applicant has property or other assets in the United States.2 He married a South Korean national in 2004. He has two children who are U.S. citizens, but both were born in South Korea.3

Foreign Influence

Applicant’s wife is a South Korean citizen and currently resides there as well. Applicant and his wife share the same residence. She is a retired customer service representative. She has no ties to the South Korean government. Applicant claims his wife intends to seek U.S. citizenship when they return to the United States.4

Applicant’s mother and father are citizens and residents of South Korea. His mother is 76 years old and is a retired school teacher. His father is 78 years old. He is retired from self-employment. Applicant has daily contact with his parents, both in person and telephonic. Neither parent has ties to the South Korean government.5

Applicant’s mother-in-law and father-in-law are citizens and residents of South Korea. His mother-in-law is 76 years old and is a homemaker. His father-in-law is 77 years old. He is retired from a government position. Applicant has monthly contact with his in-laws, both in person and telephonic. His father-in-law used to work for the South Korean government as a customer service associate. His mother-in-law has no ties to the South Korean government.6

Applicant has two brothers-in-law (B1, B2) and two sisters-in-law (S1, S2) that are citizens and residents of South Korea.7 B1 is 54 years old. He is an engineer for an auto company. S1 is 51 years old. She is a homemaker. B2 is 49 years old. He works in marketing. S2 is 47 years old. She is a school administrator. Applicant has in-person contact with these four in-laws approximately six times a year. None have any affiliations with the South Korean government.8 Applicant and his wife have opened up numerous bank savings accounts, bought insurance, and purchased stock in South Korea. These transactions took place from 1994 to 2010. The bank savings balances approximate $49,000; insurance purchases approximate $50,000; stock purchase approximate $499. There is no record evidence indicating Applicant divested himself of any of these assets. There also is no evidence indicating Applicant’s asset holdings in the United States.9

South Korea

South Korea is one of seven counties most actively engaging in foreign economic collection and industrial espionage against the United States. South Korea has been an unauthorized recipient of dual-use technologies. Industrial espionage remains a high- profile concern relating to South Korea and South Korean companies.

The South Korean government has generally respected the human rights of its citizens. The South Korean National Security Law grants authorities the power to detain, arrest, and imprison persons believed to have committed acts to endanger the security of the state.10

Financial Considerations

Applicant admitted failing to file his federal income tax returns for tax years 2011- 2013. A credit report from June 2014, establishes the unpaid judgment and delinquent debt. In his May 2014 security clearance application, he stated the reason for his failure to file his tax returns was: for 2011 return—missing W-2 form and interest form due to change of company and change of address; for 2012—missing documents due to change of company and address; for 2013—seeking an extension. He also claimed he was working with a professional to address the problem. In his Answer, he admitted he still had not filed these returns and was “working to fix the issue.” In April 2016, Applicant supplied IRS account transcripts for his tax years 2011-2013, which showed that no return had been filed for any of those years. There is no other record evidence indicating those tax returns were filed. Applicant’s tax issue is unresolved.11

Applicant claimed that he “wired the final payment on 31 May,” to pay the judgment. He failed to produce documentation to support his assertion. Applicant denied the collection debt for $185, claiming he did not know the creditor. He failed to produce documentation supporting his dispute. His debts are not resolved.12

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used 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, these guidelines are applied in conjunction with the factors listed in 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 careful weighing 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.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel, and has the ultimate burden of persuasion to obtain a favorable security 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 that an applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information.

Section 7 of EO 10865 provides that 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 B, Foreign Influence

The security concern relating to the guideline for foreign influence is set out in AG ¶ 7:

Foreign contacts and interests, including, but not limited to, business, financial, and property interests, are a national security concern if they result in divided allegiance. They may also be a national security concern if they create circumstances in which the individual may be manipulated or induced to help a foreign person, group, organization, or government in a way inconsistent with U.S. interests or otherwise made vulnerable to pressure or coercion by any foreign interest. Assessment of foreign contacts and interests should consider the country in which the foreign contact or interest is located, including, but not limited to, considerations such as whether it is known to target U.S. citizens to obtain classified or sensitive information or is associated with a risk of terrorism.

The guideline notes several conditions that could raise security concerns under AG ¶ 7. Four are potentially applicable in this case:

(a) contact, regardless of method, with a foreign family member, business or professional associate, friend, or other person who is a citizen of or resident in a foreign country if that contact creates a heightened risk of foreign exploitation, inducement, manipulation, pressure, or coercion;

(b) connections to a foreign person, group, government, or country that create a potential conflict of interest between the individual's obligation to protect classified or sensitive information or technology and the individual's desire to help a foreign person, group, or country by providing that information or technology;

(e) shared living quarters with a person or persons, regardless of citizenship status, if that relationship creates a heightened risk of foreign inducement, manipulation, pressure, or coercion; and

(f) substantial business, financial, or property interests in a foreign country, or in any foreign owned or foreign-operated business that could subject the individual to a heightened risk of foreign influence or exploitation or personal conflict of interest.

Applicant’s wife, parents, and in-laws are all citizens and residents of South Korea. Applicant and his wife have substantial financial holdings in South Korea. South Korea is one of the world’s most aggressive nations in the collection of sensitive economic information. These factors create a heightened risk of foreign exploitation, inducement, manipulation, pressure, and coercion. The same situation also creates a potential conflict of interest for Applicant. AG ¶¶ 7(a), 7(b), 7(e), and 7(f) have been raised by the evidence.

Conditions that could mitigate foreign influence security concerns are provided under AG ¶ 8:

(a) the nature of the relationships with foreign persons, the country in which these persons are located, or the positions or activities of those persons in that country are such that it is unlikely the individual will be placed in a position of having to choose between the interests of a foreign individual, group, organization, or government and the interests of the United States;

(b) there is no conflict of interest, either because the individual's sense of loyalty or obligation to the foreign person, or allegiance to the group, government, or country is so minimal, or the individual has such deep and longstanding relationships and loyalties in the United States, that the individual can be expected to resolve any conflict of interest in favor of the U.S. interest; and

(f) the value or routine nature of the foreign business, financial, or property interests is such that they are unlikely to result in a conflict and could not be used effectively to influence, manipulate, or pressure the individual.

Based upon the documented action of South Korea in attempting to gain sensitive economic information from U.S. sources, the evidence does not support that it is unlikely that Applicant could be placed in a position to choose between the interests of his family in South Korea and those of the United States. Although Applicant has some ties to the United States, his ties to South Korea appear stronger. He has not resided in the United States since 2002, and there is no evidence of U.S.-held assets, which is contrasted to his documented $100,000 worth of South Korean assets. He failed to file his federal tax returns for at least three years. It is difficult to determine based upon the evidence that he has a deep and longstanding relationship with the United States such that he would resolve all conflicts in favor of the United States. As stated above, the protection of the national security is the paramount consideration and any doubt must be resolved in favor of national security. I am unable to find any of the mitigating conditions to be fully applicable. Despite the presence of some mitigation, it is insufficient to overcome the significant security concerns that exist.

Guideline F, Financial Considerations

AG ¶ 18 expresses the security concern for financial considerations:

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. Affluence that cannot be explained by known sources of income is also a trustworthiness concern insofar as it may result from criminal activity, including espionage.

The guideline notes several conditions that could raise security concerns. I have considered all of them under AG ¶ 19 and the following potentially apply:

(a) inability to satisfy debts;

(b) unwillingness to satisfy debts regardless of the ability to do so;

(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 failed to file his federal income tax returns for years 2011-2013. He incurred a judgment in 2009 that remains unpaid. He failed to pay a collection debt. I find all the above disqualifying conditions are raised.

The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. I have considered all of the mitigating conditions under AG ¶ 20 and the following potentially apply:

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

(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; 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 record contains no documentation supporting Applicant’s assertion that he filed his 2011-2013 federal tax returns. He also failed to document his payoff of the judgment. There is also no documentary evidence supporting a dispute of the collection debt listed in SOR ¶ 1.c. None of the mitigating conditions are applicable.

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 the circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a):

(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.

Under 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 guidelines and the whole-person concept.

South Korea has an aggressive espionage program aimed at the United States. The nature of a nation’s government, its relationship with the United States, and its human rights record are relevant in assessing the likelihood that an applicant’s family members are vulnerable to government coercion. The risk of coercion, persuasion, or duress is significantly greater if the foreign country has an authoritarian government, a family member is associated with or dependent upon the government, or the country is known to conduct intelligence operations against the United States. There is no reason to question Applicant’s loyalty and devotion to this country. However, he has not overcome the vulnerability to pressure, coercion, exploitation, and duress created by his relatives living in South Korea.

Applicant failed to produce any evidence showing that he has taken appropriate action to deal with his financial issues. He has done nothing whatsoever to question his loyalty and devotion to this country. However, he has simply been unable to overcome the heavy burden of showing that he is not subject to influence by South Korea. His vulnerability to foreign pressure, coercion, exploitation, or duress remains a concern.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant has not mitigated the financial considerations or foreign influence security concerns.

FORMAL FINDINGS

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

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a – 1.c: Against Applicant

Paragraph 2, Guideline B: AGAINST APPLICANT

Subparagraphs 2.a – 2.e: 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.

_____________________________ Robert E. Coacher Administrative Judge

FOOTNOTES

1 I decided this case using the AG implemented by DOD on June 8, 2017. However, I also considered this case under the previous AG implemented on September 1, 2006, and my conclusions are the same using either set of AG. 2 Item 4 (credit report shows he once had a mortgage loan and a car loan, but both accounts are closed). 3 Items 3, 5. 4 Items 2, 5. 5 Items 2, 5. 6 Items 2, 5. 7 Applicant admitted in a September 17, 2014, background interview that he had two brothers-in-law and two sisters-in-law. He went on to describe biographical information for all four people. In his SOR Answer (Item 2), he claimed he only had one brother-in-law and one sister-in-law. There is no further explanation for this discrepancy in the record. I find that there are two brothers-in-law and two-sisters-in-law. Items 2, 5. 8 Items 2, 5. 9 Items 2, 5. 10 Item 8. 11 Items 2-4, 7. 12 Items 2, 4.