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ISCR Case 16-02448.h1 — CASE

ISCR Case 16-02448.h1denied

Case Headnote

ISCR Case No. 16-02448.h1

deniedOct 17, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 34-year-old male applicant was denied a security clearance under Guideline F (Financial Considerations) due to a history of financial irresponsibility. The Statement of Reasons (SOR) detailed multiple failures to file federal and state income tax returns for the years 2003, 2004, 2009, 2013, and 2014, as well as numerous unresolved delinquent debts totaling approximately $5,243. The applicant admitted all allegations in the SOR.

On his Security Clearance Application (SCA), the applicant disclosed that his failure to file 2009 tax returns was due to being on Family and Medical Leave Act. He also stated he owed approximately $4,000 and had contacted the IRS, indicating paperwork was being sent for filing. For 2013, he reported filing through a commercial preparer and intended to send those returns with other unfiled years.

The applicant also disclosed potential medical bills and a charged-off vehicle loan on his credit report. He noted a $400 balance on the vehicle loan, which he could not afford due to six months of unemployment, despite his insurance company being responsible for the primary debt. Ultimately, the judge found that the applicant did not provide sufficient evidence of efforts to resolve his financial issues, leading to the denial of his security clearance.

Why the Applicant Was Denied

Applicant failed to file multiple federal and state income tax returns for several years.
Applicant has unresolved delinquent debts totaling approximately $5,243.
Applicant did not provide evidence of efforts to resolve his financial issues.

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 Tax Returns

Key Rule Quoted

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

Procedural Posture

SOR issuedAug 26, 2016
Answer filedSep 14, 2016Applicant elected to proceed without a hearing.
Decision dateOct 17, 2017

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Impact of Unresolved Debts on Security Clearance Eligibility
Importance of Providing Evidence in Rebuttal to SOR Allegations

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 failed to mitigate financial concerns under Guideline F, as he had multiple unresolved debts and did not file several years of federal and state tax returns. The applicant admitted to the debts but did not provide sufficient evidence of efforts to resolve them, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant failed to file his 2003, 2004, 2009, 2013, and 2014 federal and state income tax returns.	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	Applicant has numerous delinquent debts that are unresolved.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Applicant admitted all of the allegations in the SOR.	Against Applicant	Unspecified Financial	Admitted	—	—	—
1.d	Applicant disclosed on his SCA that he failed to file his 2009 federal and state income tax returns and pay because he was in the middle of [Family and Medical Leave Act] and did not file for that year. $4,000	Against Applicant	Tax Filing Failure	Admitted	(a) inability to satisfy debts (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.e	Applicant stated he owed approximately $4,000. $4,000	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts	—	—
1.f	Applicant stated he had contacted the IRS and said: 'All info has been received and paperwork is on its way to the IRS for filing.'	Against Applicant	Unspecified Financial	Admitted	—	—	—
1.g	Applicant disclosed on his SCA that he filed his 2013 federal and state tax returns through a commercial tax preparer.	Against Applicant	Tax Filing Failure	Admitted	—	—	—
1.h	Applicant stated he was sending the 2013 returns with the other years he failed to file.	Against Applicant	Tax Filing Failure	Admitted	—	—	—
1.i	Applicant disclosed on his SCA that he had multiple medical bills that may be reported on his credit report.	Against Applicant	Medical Debt	Admitted	—	—	—
1.j	Applicant disclosed that there was a vehicle loan that may also be reported on his credit report as charged off.	Against Applicant	Auto Loan Debt	Admitted	—	—	—
1.k	Applicant stated his insurance company was required to pay this debt, but there was a $400 balance that he could not afford to pay because he was out of work for six months. $400	Against Applicant	Unspecified Financial	Admitted	—	—	—
1.l	Applicant admitted he is responsible for the debts alleged in SOR ¶¶ 1.d through 1.l (totaling approximately $5,243). $5,243	Against Applicant	Unspecified Financial	Admitted	—	—	—

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. 16-02448 ) ) Applicant for Security Clearance

For Government: Chris Morin, Esq., Department Counsel For Applicant: Pro se

10/17/2017 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Eligibility for access to classified information is denied.

Statement of the Case

On August 26, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued to Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations. 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 (AG) effective within the DOD on September 1, 2006. On June 8, 2017, new AG were implemented and are effective for decisions issued after that date.

Applicant answered the SOR on September 14, 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). Applicant received it on October 13, 2016. He was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. The Government’s evidence is identified as Items 1 through 5. Applicant did not provide a response to the FORM, object to the Government’s evidence, or submit documents. Items I through 5 are admitted into evidence. The case was assigned to me on October 1, 2017.

FINDINGS OF FACT

Applicant admitted all of the SOR allegations. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact.

Applicant is 34 years old. He is not married, but lives with his cohabitant since May 2011. He has no children. He graduated from high school in 2001. He was unemployed from December 2010 to February 2011, but otherwise has been employed since 2008. He has been employed with his current employer since April 2014.1

Applicant admitted that he failed to file his 2003, 2004, 2009, 2013, and 2014 federal and state income tax returns. On his October 2015 security clearance application he disclosed he failed to file his 2003 tax returns and failed to pay them because he “worked for contractor and was unaware of unpaid taxes for that year. Have been paying on this for years out of returns from other employment.”2 He estimated he owed $1,300 in taxes.. He further disclosed that he had contacted the Internal Revenue Service (IRS) and had “received all info[rmation],”3 and he was in the process of paying this tax debt through “returns from recent years.”4

Applicant disclosed on his SCA that he failed to file his 2009 federal and state income tax returns and pay because he “was in the middle of [Family and Medical Leave Act] and did not file for that year.”5 He disclosed he owed approximately $4,000. He stated he had contacted the IRS and said: “All info has been received and paperwork is on its way to the IRS for filing. Returns from 2014 and 2015 will go towards paying this amount down.”6 He also stated that he sent the IRS paperwork to request a payment plan for $50 a month.7 Applicant disclosed on his SCA that he filed his 2013 federal and state tax returns through a commercial tax preparer. He was unaware that his return was rejected until he attempted to file his 2014 returns. He stated he was sending the 2013 returns with the other years he failed to file. He anticipated receiving a refund from the federal and state income tax returns and it would be used to pay the 2003 and 2009 amounts owed. With regard to his 2014 tax returns, he disclosed he had not filed them because his 2013 returns were rejected. He indicated he contacted the IRS and was filing his 2014 federal and state income returns with the other years he did not file. He would use his 2014 refund to apply to taxes he owed.8

Applicant disclosed on his SCA that he had multiple medical bills that may be reported on his credit report. They stemmed from a 2011 car accident. He disclosed there was a vehicle loan that may also be reported on his credit report as charged off. He stated his insurance company was required to pay this debt, but there was a $400 balance that he could not afford to pay because he was out of work for six months. He stated it was charged off when he returned to work.9

In his answer to the SOR, Applicant admitted he is responsible for the debts alleged in SOR ¶¶ 1.dthrough 1.l (totaling approximately $5,243). Six are medical debts and the remaining are consumer debts. They became delinquent beginning in 2011. The debts are supported by credit reports from November 2015, June 2016, and Applicant’s admissions.10 Applicant did not provide evidence that he has filed the delinquent federal and state tax returns alleged in the SOR. He has not provided evidence that he has paid, resolved, or is resolving any of the delinquent debts alleged in the SOR.

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 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(c), 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.

Under Directive ¶ E3.1.14, the Government must 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 applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining 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 as to 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 F: Financial Considerations

The security concern relating to the guideline for financial considerations is set out in AG ¶ 18:

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 security concern insofar as it may result from criminal activity, including espionage.

AG ¶ 19 provides conditions that could raise security concerns. The following are potentially applicable:

(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 tax returns or failure to pay annual Federal, state, or local tax as required.

Applicant failed to file his 2003, 2004, 2009, 2013, and 2014 federal and state tax returns. He has numerous delinquent debts that are unresolved. There is sufficient evidence to support the application of the above disqualifying conditions.

The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions under AG ¶ 20 are potentially applicable:

(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;

(c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control;

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

(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. Applicant failed to provide evidence that he filed his delinquent federal and state tax returns. He did not provide evidence that he has resolved or is resolving his delinquent debts. His financial problems are recent and ongoing. AG ¶ 20(a) does not apply. He stated in his SCA that he had a car accident in 2011 and was unemployed for six months, which contributed to his financial delinquencies. However, he did not offer any amplifying information. I find those conditions were somewhat beyond his control, but he failed to provide evidence he acted responsibly under the circumstances. It has been six years since that incident occurred. There is insufficient evidence showing how that accident prevented him from filing his tax returns. I find AG ¶ 20(b) has minimal application.

There is no evidence that Applicant received or is receiving financial counseling and there are clear indications that his financial problems are being resolved. Although, Applicant stated in his SCA that he contacted the IRS to resolve his tax issues, he failed to provide substantive proof that the delinquent returns have been filed. There is no evidence he has initiated a good-faith effort to repay overdue creditors or otherwise resolve his delinquent debts. AG ¶¶ 20(c) and 20(d) do not apply. Applicant admitted all of the allegations in the SOR. AG ¶ 20(e) has not been raised.

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), 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.

I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F 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 34 years old. He failed to file his federal and state tax returns for several years and has delinquent debts that are unresolved. He did not provide sufficient evidence in mitigation. 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 failed to mitigate the security concerns arising under Guideline F, financial considerations.

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.l: 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 security to grant Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 Item 3. 2 Items 2, 3. 3 Item 3. 4 Item 3. I will not consider Applicant’s failure to pay his federal and state income tax returns for disqualifying purposes, but may consider it when making a credibility determination, in mitigation, and in a whole-person analysis. 5 Item 3. 6 Item 3. 7 Item 3. 8 Item 3. 9 Item 3. 10 Items 2, 3, 4, 5.