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ISCR Case 16-02263.h1 — CASE

ISCR Case 16-02263.h1granted

Case Headnote

ISCR Case No. 16-02263.h1

grantedAug 8, 2017· Hon. Robert J. Tuidar· hearing

Summary

A 42-year-old claims customer service advocate was granted a public trust position despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons alleged that the applicant failed to file federal and state income taxes for tax years 2012 through 2014. This raised a disqualifying condition under Adjudicative Guideline Paragraph 19(f).

However, the applicant successfully demonstrated mitigating conditions, specifically Adjudicative Guideline Paragraph 20(g). She proved that her failure to file was not due to willful neglect but rather a result of identity theft and financial hardship. In 2016, she filed all outstanding taxes for 2012 through 2014 and subsequently received refunds for each year.

The judge found that the applicant had resolved the financial concerns by demonstrating compliance with tax authorities and a commitment to timely filing in the future. Consequently, eligibility for the public trust position was granted.

Why the Applicant Prevailed

The applicant filed her 2012 through 2014 taxes in 2016 and received refunds for all three years.
The applicant's failure to file was due to identity theft and financial hardship, not willful neglect.
The applicant demonstrated compliance with tax authorities and a commitment to timely filing in the future.

Conditions Referenced

Disqualifying

AG ¶ 19(f)raisedFailure to File Annual Federal Income Tax Returns

Mitigating

AG ¶ 20(g)appliedMade Arrangements with the Appropriate Tax Authority to File or Pay the Amount Owed

Key Rule Quoted

“The ultimate determination must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept.”

Procedural Posture

SOR issuedAug 15, 2016
Answer filedAug 31, 2016Requested decision without a hearing.
Hearing held—No hearing; decision based on written submissions.
Decision dateAug 8, 2017

Cite For

Mitigation of Financial Concerns Under Guideline F Due to Identity Theft
Consideration of the Whole-person Concept in Security Clearance Decisions
The Importance of Compliance with Tax Obligations in Security Clearance Evaluations

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: granted

The judge found that the applicant failed to file her federal and state income taxes for the years 2012 through 2014, which raised financial concerns under Guideline F. However, the applicant demonstrated that she made arrangements with the tax authority to file her returns and was in compliance, leading to a ruling in her favor.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file her Federal and state taxes for tax years 2012 through 2014.	For Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	(g) arrangements made with the tax authority; in compliance	Documented Debt Paid in Full

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: ) ) ) ADP Case No. 16-02263 ) Applicant for Security Clearance )

For Government: David F. Hayes, Esq., Department Counsel For Applicant: Pro se

08/08/2017 ___________

STATEMENT OF CASE

___________

TUIDER, Robert, Administrative Judge:

This case involves trustworthiness concerns raised by Guideline F (financial considerations). Eligibility for a public trust position is granted.

Statement of the Case

On June 22, 2015, Applicant completed and signed a Questionnaire for National Security Positions (SF-86). On August 15, 2016, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) to Applicant under Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry, February 20, 1960; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (Directive), January 2, 1992; and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information, which became effective on September 1, 2006 (Sept. 1, 2006 AGs).

The SOR detailed reasons why the DOD CAF did not find under the Directive that it is clearly consistent with the interests of national security to grant or continue a public trust position for her, and recommended referral to an administrative judge to determine whether a public trust position should be granted, continued, denied, or revoked. Specifically, the SOR set forth security concerns arising under the financial considerations guideline. On August 31, 2016, Applicant provided a response to the SOR, and she requested a decision without a hearing. (Item 1) On September 30, 2016, Department Counsel completed the File of Relevant Material (FORM). On October 14, 2016, Applicant received the FORM. Subsequently, Applicant responded to the FORM.1 On July 3, 2017, the case was assigned to me. The case file consists of three exhibits and a FORM response. (Items 1-3; FORM response) Applicant did not object to any of the Government exhibits.

While this case was pending a decision, the Director of National Intelligence (DNI) issued Security Executive Agent Directive 4, establishing in Appendix A the National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AGs), which he made applicable to all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position. The new AGs supersede the September 1, 2006 AGs and are effective “for all covered individuals” on or after June 8, 2017. Accordingly, I have evaluated Applicant’s public trust position eligibility under the new AGs.2

Findings of Fact3

Applicant admitted to the sole allegation of failing to file her 2012 through 2014 Federal and state income taxes. Her admissions are accepted as findings of fact. Additional findings of fact follow.

Applicant is a 42-year-old claims customer service advocate employed by a defense contractor since 1999.4 She seeks a public trust position in conjunction with her current employment. Applicant attended college briefly in 2005 and in 2010, but did not earn a degree. She has never married and has two minor daughters from two different fathers. Neither father is paying Applicant child support.

Financial Considerations

Applicant’s SOR consists of a sole allegation that she failed to file her Federal and state taxes for tax years 2012 through 2014. (SOR ¶ 1.a) This allegation is established through Applicant’s admissions; her June 22, 2015 SF-86; and her November 18, 2015 Office of Personnel Management Personal Subject Interview (OPM PSI). (Items 1 - 3) In her SOR answer, Applicant claimed that she misplaced her 2012 W-2 and by the time she received a replacement 2012 W-2, she decided to file her 2012 taxes with her 2013 taxes. However, because of financial hardship as a result of lost wages while on maternity leave, she was unable to file her 2012 or 2013 taxes. In March 2015, while preparing to file all of her back tax returns, she received notification from the IRS that her 2014 taxes had been filed, which she states never occurred. In June 2015, Applicant visited her local IRS office and filed an identity theft form. Applicant provided documentation that she filed her 2012 through 2014 taxes in 2016 receiving refunds for all three years from both the IRS and state tax authorities. (Item 3)

During Applicant’s November 18, 2015 OPM PSI, she stated that she had “heard on television or from someone, that if you did not owe any taxes, you had up until six years to file for that tax year.” She had been getting a tax refund each year so she decided not to file in 2012 and procrastinated until she encountered the identity theft problem with her taxes in 2014. (Item 3)

I note that Applicant’s annual gross income ranges from approximately $26,000 to $29,000. She lives on a tight budget and there is no evidence that she has any means other than her salary to support herself and her two minor children. (Item 3)

POLICIES

The Under Secretary of Defense’s Memorandum of November 19, 2004, treats ADP positions as sensitive positions, and it entitles applicants for ADP positions to the procedural protections in the Directive before any final unfavorable access determination may be made. The standard set out in the adjudicative guidelines assignment to sensitive duties is that the person’s loyalty, reliability, and trustworthiness are such that assigning the person to sensitive duties is clearly consistent with the interests of national security.

A person who seeks access to sensitive 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. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard sensitive information.

When evaluating an applicant’s suitability for a public trust position, the administrative judge must consider the disqualifying and mitigating conditions in the AG. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with an evaluation of the whole person. The administrative judge’s overarching adjudicative goal is a fair, impartial and commonsense decision. An administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable.

The protection of the national security is the paramount consideration. Under AG ¶ 2(b), “[a]ny doubt concerning personnel being considered for access to [sensitive] information will be resolved in favor of national security.” The Government must present substantial evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.14. Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government. See ISCR Case No. 02- 31154 at 5 (App. Bd. Sep. 22, 2005). An applicant has the ultimate burden of demonstrating that it is clearly consistent with national security to grant or continue eligibility for access to sensitive information.

ANALYSIS

Financial Considerations

AG ¶ 18 articulates the security concern for financial problems:

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. . . .

The Appeal Board explained the scope and rationale for the financial considerations security concern in ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012) (citation omitted) as follows:

This concern is broader than the possibility that an applicant might knowingly compromise classified information in order to raise money in satisfaction of his or her debts. Rather, it requires a Judge to examine the totality of an applicant’s financial history and circumstances. The Judge must consider pertinent evidence regarding the applicant’s self-control, judgment, and other qualities essential to protecting the national secrets as well as the vulnerabilities inherent in the circumstances. The Directive presumes a nexus between proven conduct under any of the Guidelines and an applicant’s security eligibility.

AG ¶ 19 includes one disqualifying conditions that could raise a security concern and may be disqualifying in this case: “(f) failure to file . . . annual Federal . . . income tax returns . . . as required.” The record establishes the disqualifying condition in AG ¶ 19(f) requiring additional inquiry about the possible applicability of mitigating conditions. Applicant did not timely file her federal income tax returns for tax years 2012 through 2014. A willful failure to timely make (means complete and file with the IRS) a federal income tax return is a misdemeanor-level federal criminal offense.5 For purposes of this decision, I am not weighing Applicant’s failure to timely file her federal income tax returns against her as a federal crime. She did not receive notice of a Guideline J or E security concern in the SOR.

One financial considerations mitigating condition under AG ¶ 20 is applicable: “(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.”

Applicant negligently failed to timely file his federal income tax return for tax years 2012 through 2014. She was due refunds for those three tax years. The DOHA Appeal Board has commented:

Failure 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. 01-05340 at 3 (App. Bd. Dec. 20, 2002). As we have noted in the past, a clearance adjudication is not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). By the same token, neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. Id. A person who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961).

ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016) (emphasis in original). See ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016) (citing ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002)); ISCR Case No. 14-01894 at 4-5 (App. Bd. Aug. 18, 2015). The Appeal Board clarified that even in instances where an “[a]pplicant has purportedly corrected [the applicant’s] federal tax problem, and the fact that [applicant] is now motivated to prevent such problems in the future, does not preclude careful consideration of [a]pplicant’s security worthiness in light of [applicant’s] longstanding prior behavior evidencing irresponsibility” including a failure to timely file federal income tax returns. See

United States, 51 F.2d 193 (7th Cir. 1931). ISCR Case No. 15-01031 at 3 and note 3 (App. Bd. June 15, 2016) (characterizing “no harm, no foul” approach to an Applicant’s course of conduct and employed an “all’s well that ends well” analysis as inadequate to support approval of access to classified information with focus on timing of filing of tax returns after receipt of the SOR).

In ISCR Case No. 15-01031 at 2 (App. Bd. June 15, 2016), the Appeal Board reversed the grant of a security clearance, and noted the following primary relevant disqualifying facts:

Applicant filed his 2011 Federal income tax return in December 2013 and received a $2,074 tax refund. He filed his 2012 Federal tax return in September 2014 and his 2013 Federal tax return in October 2015. He received Federal tax refunds of $3,664 for 2012 and $1,013 for 2013.

Notwithstanding the lack of any tax debt owed when the tax returns were filed in ISCR Case No. 15-01031 (App. Bd. June 15, 2016), the Appeal Board provided the following principal rationale for reversing the grant of a security clearance, “By failing to file his 2011, 2012, and 2013 Federal income tax returns in a timely manner, Applicant did not demonstrate the high degree of good judgment and reliability required of persons granted access to classified information.” ISCR Case No. 15-01031 at 4 (App. Bd. June 15, 2016) (citations omitted).

On June 8, 2017, the new AGs went into effect. In 2016, Applicant “made arrangements with the appropriate tax authority to file [her 2012 through 2014 Federal and state tax returns] . . . and is in compliance with those arrangements.” AG ¶ 20(f). There is sufficient assurance that her financial problems are resolved, are under control, and will not recur in the future. Under all the circumstances, financial considerations security concerns are mitigated.

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(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.

Under AG ¶ 2(c), “[t]he ultimate determination” of whether to grant a security clearance “must be an overall commonsense judgment based upon careful consideration” of the guidelines and the whole-person concept. My comments under Guideline F are incorporated in my whole-person analysis. Some of the factors in AG ¶ 2(d) were addressed under that guideline but some warrant additional comment.

Applicant is a 42-year-old claims customer service advocate employed by a defense contractor for the past 18 years. Her employer supports her for a public trust position. Despite Applicant’s modest income, she is making ends meet as a single mother with two minor children.

Applicant was late in the filing of her 2012 through 2014 federal and state income tax returns. Her ability to timely file those returns was caused in part by her identity being stolen and loss of income due to maternity leave. I agree with Applicant’s admission of negligence; however, it is important to note that she was entitled to Federal and state refunds for those three tax years. Applicant’s error in judgment is less serious because it was not motivated by a desire to withhold funds due to the IRS. I am confident that Applicant will endeavor to timely file and pay his taxes in the future.

I have carefully applied the law, as set forth in Egan, Exec. Or. 10865, the Directive, and the AGs, to the facts and circumstances in the context of the whole person. I conclude that financial consideration security concerns are mitigated. It is clearly consistent with the interests of national security to grant Applicant a public trust position.

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: FOR APPLICANT

Subparagraph 1.a: For Applicant

CONCLUSION

I conclude that is clearly consistent with national security to grant Applicant eligibility for a public trust position. Eligibility for a public trust position is granted.

_________________________ ROBERT TUIDER Administrative Judge

FOOTNOTES

1 Applicant’s FORM “response” consists of her mailing the FORM back and did not contain any new or relevant evidence.

2 The new AGs are available at http://ogc.osd.mil/doha/5220-6 R20170608.pdf.

3 Some details were excluded to protect Applicant’s right to privacy. Specific information is available in the cited exhibits.

4 The source of the information in this subsection is Applicant’s June 22, 2015 Questionnaire for National Security Positions (SF-86) and/or her November 18, 2015 OPM PSI. (Items 2, 3) 5 Title 26 U.S.C, § 7203, willful failure to file return, supply information, or pay tax, reads:

Any person . . . required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to . . . make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor . . . .

A willful failure to make return, keep records, or supply information when required, is a misdemeanor without regard to existence of any tax liability. Spies v. United States, 317 U.S. 492 (1943); United States v. Walker, 479 F.2d 407 (9th Cir. 1973); United States v. McCabe, 416 F.2d 957 (7th Cir. 1969); O’Brien v.