CASE · Clearance Adjudication Search EngineCASE

Loading case…

ISCR Case 16-02473.h1 — CASE

ISCR Case 16-02473.h1denied

Case Headnote

ISCR Case No. 16-02473.h1

deniedJun 28, 2017· Hon. Gregg A. Cervi· hearing

Summary

A 60-year-old structural mechanic, employed by a defense contractor, was denied a security clearance under Guideline F (Financial Considerations) due to significant financial delinquencies. The Statement of Reasons detailed several allegations, including approximately $61,895 in delinquent federal and state taxes, and a failure to file federal and state income tax returns for the years 2009, 2011, 2012, and 2013. Additionally, the applicant owed $53,750 in delinquent child support, as reported in 2016. The applicant also filed for Chapter 7 bankruptcy, which was discharged in 2016.

The denial was based on the applicant's numerous recent financial delinquencies, including the unpaid taxes and child support. The applicant failed to provide evidence of timely payments or compliance with tax arrangements.

Ultimately, the applicant's financial situation was deemed not under control, and he had not demonstrated a willingness to address his debts responsibly, leading to the denial of his security clearance.

Why the Applicant Was Denied

The applicant has numerous recent financial delinquencies, including unpaid taxes and child support obligations.
He failed to provide evidence of timely payments or compliance with tax arrangements.
The applicant's financial situation is not under control, and he has not shown a willingness to address his debts responsibly.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Annual Federal, State, or Local Income Tax Returns

Key Rule Quoted

“Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems.”
— ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016)

Procedural Posture

SOR issuedNov 16, 2016
Answer filedDec 20, 2016
Hearing held—Decided on the written record in lieu of a hearing.
Decision dateJun 28, 2017

Cite For

Evaluation of Financial Delinquencies Under Guideline F
Impact of Failure to File Tax Returns on Security Clearance Eligibility
Consideration of the Whole-person Concept in Security Clearance Decisions

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

Standardized Decision Profile

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

Posture: Decision on RecordDecided: denied

The judge found multiple financial concerns under Guideline F, including delinquent taxes and unpaid child support, which totaled approximately $61,895. The applicant's failure to file tax returns and manage his financial obligations raised significant questions about his judgment and reliability, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Owes delinquent federal and state taxes totaling about $61,895. $61,895	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	Failed to file federal and state income tax returns for tax years 2009, 2011-2013.	Against Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.c	Owes delinquent child support totaling $53,750 based on a 2016 credit bureau report. $53,750	Against Applicant	Child Support Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Filed Chapter 7 bankruptcy discharged in 2016.	Against Applicant	Bankruptcy Filing	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	specific text not stated in this decision	Against Applicant	Unspecified Financial	Unknown	—	—	—

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. 16-02473 ) Applicant for Security Clearance )

For Government: Andre M. Gregorian, Esq., Department Counsel For Applicant: Pro se

06/28/2017 ______________

STATEMENT OF CASE

______________

CERVI, Gregg A., Administrative Judge

This case involves security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is denied.

Statement of the Case

Applicant submitted a security clearance application (SCA) on October 8, 2015. On November 16, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) sent him a Statement of Reasons (SOR) alleging security concerns under Guideline F.1 Applicant answered the SOR on December 20, 2016, and elected to have the case decided on the written record in lieu of a hearing. The Government’s written brief with supporting documents, known as the File of Relevant Material (FORM), was submitted by Department Counsel on January 25, 2017.

A complete copy of the FORM was provided to Applicant, who was afforded an opportunity to file objections and submit material to refute, extenuate, or mitigate the security concerns. Applicant received the FORM on February 1, 2017. He submitted material in response to the FORM. The Government’s exhibits included in the FORM (Items 1 to 8), and the Applicant’s exhibits (AE) collectively marked as AE A, are admitted into evidence. The case was assigned to me on June 19, 2017.

FINDINGS OF FACT

Applicant is a 60-year-old structural mechanic employed by a defense contractor since February 2013. He received an associate’s degree in 1986 and a bachelor’s degree in 1987. He was married in 1990 and divorced in 1992. He has not served in the military but last held a security clearance in the 1970’s while employed by a defense contractor.

The SOR alleges debts to the federal and state governments for delinquent taxes and unpaid child support, totaling about $61,895, failure to file federal and state income tax returns for tax years 2009, 2011-2013, and a Chapter 7 bankruptcy discharged in 2016. He reported financial delinquencies in his SCA. In his answer to the SOR, Applicant admitted the allegations with explanations and supporting documents.

Applicant owned an insurance company from 2006 to 2012, but due to economic conditions, he had to close the business. He stated in his answer to the SOR that he was more concerned about keeping the business open rather than filing income tax returns. He also used funds to recapitalize the business instead of paying his income taxes, or simply did not have the money to pay taxes.

He contended in his Answer that he assumed the federal tax returns for 2009 and 2011 were filed; that he filed the 2012 return in October 2016; and that he filed the 2013 return in April 2015. The IRS transcripts he provided with his answer show he filed his 2009 and 2010 returns in October 2011; the 2011 return was filed in 2013; no tax return was filed for 2012; the 2013 and 2014 returns were filed in May 2015; and the 2015 return was filed in March 2016. Copies of signed tax returns were not provided. Applicant acknowledged in his answer to the SOR, that he continues to owe for delinquent federal and state taxes. He claimed that he has an extra $10 per week deducted from his pay for federal taxes, and $5 per week for state taxes. In response to the FORM, Applicant provided a letter from the IRS agreeing to establish a $100 monthly installment plan, with the first payment to begin February 28, 2017. He also attached a partially completed but unsigned payroll deduction form, requesting a deduction of $25 per week from his pay, beginning on February 28, 2017. There was no evidence provided to show the initial payment of the first installment and fees were paid, or that subsequent monthly installments were completed. Applicant owes the state for delinquent child support. The SOR alleged Applicant owes $53,750 based on a 2016 credit bureau report (CBR). Applicant acknowledged that he received two notices from the state in December 2016, but disputes that amount owed. He stated in his answer that he believes he owes about $10,000. He consulted an attorney to review his child support dispute, but he cannot afford to advance the case. In December 2015, he filed Chapter 7 bankruptcy. Applicant discharged approximately $105,756 in liabilities in March 2016, although he claimed in an Office of Personnel Management (OPM) personal subject interview (PSI) that he discharged about $43,000.

Since Applicant elected to have this case decided on the written record in lieu of a hearing, I was unable to further inquire into these allegations, or evaluate his demeanor or credibility in response to questions about his business or the status of his debt payments and current finances.

POLICIES

“[N]o one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to “control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicants eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865 § 2.

National security eligibility is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, an administrative judge applies these guidelines in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider a person’s stability, trustworthiness, reliability, discretion, character, honesty, and judgment. AG ¶ 1(b).

The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk that the 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.

Clearance decisions must be made “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” Exec. Or. 10865 § 7. Thus, a decision to deny a security clearance is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability. See ISCR Case No. 92-1106 at 3, 1993 WL 545051 at *3 (App. Bd. Oct. 7, 1993).

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 the national interest to grant or continue his security clearance.” ISCR Case No. 01- 20700 at 3 (App. Bd. Dec. 19, 2002). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 1(d).

ANALYSIS

Financial Considerations

The security concern under this guideline 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. . . .

The relevant disqualifying conditions under AG ¶ 19 include:

(a) inability to satisfy debts;

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

Applicant’s admissions and the documentary evidence are sufficient to establish the disqualifying conditions. The following mitigating conditions under AG ¶ 20 are potentially relevant:

(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;

(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.

Applicant’s delinquent debts are recent, numerous, and there is insufficient evidence to determine that they were incurred under circumstances making them unlikely to recur. He asserts his tax delinquencies were due to an economic downturn that impacted his business, but he failed to provide evidence to support the assertion. He acknowledged that he disregarded his taxes or returned profits back to the business rather than pay taxes. His willful disregard of his federal and state tax obligations, and his child support responsibilities, raise serious questions about his judgment and willingness to comply with rules and regulations.

The DOHA Appeal Board has commented:2

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.3 As we have noted in the past, a clearance adjudication is not directed at collecting debts. 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. 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.4

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.5

In this case, the negative financial and judgment information is significant. Applicant did not take appropriate, responsible and timely action to resolve his tax and child support obligations. Although he received an installment agreement to begin addressing his federal tax debt, he did not show he has made any payments on the debt. Despite consulting an attorney to review his child support debt, it remains unresolved because he cannot afford to advance the case. He presented no evidence showing his current financial condition or that he sought financial counseling. His financial situation is not under control.

Although a successful bankruptcy may be evidence of mitigation under the right conditions, Applicant has not shown that his bankruptcy has resolved or improved his overall financial condition, and there was no evidence presented to absolve his failure to file and pay taxes or child support obligations when due. Overall, no mitigating conditions fully apply.

WHOLE PERSON CONCEPT

Under AG ¶¶ 2(a), 2(c), and 2(d), the ultimate determination of whether to grant national security eligibility must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(d). Although adverse information concerning a single criterion may not be sufficient for an unfavorable eligibility determination, the individual may be found ineligible if available information reflects a recent or recurring pattern of questionable judgment, irresponsibility, or unstable behavior. AG ¶ 2(e).

I considered all of the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my findings of fact and comments under Guideline F in my whole-person analysis. Applicant’s tax and child support delinquencies remain an ongoing concern, and he has not shown that his financial situation is under control. His bankruptcy discharged other debts, but he has not shown that he is now financially stable and able or willing to adequately address his remaining financial delinquencies.

Accordingly, I conclude he has not carried his burden of showing that it is clearly consistent with the national security interests of the United States to grant him eligibility for access to classified information.

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.e: Against Applicant

CONCLUSION

I conclude that it is not clearly consistent with the national security interests of the United States to continue Applicant’s eligibility for access to classified information. Clearance is denied.

_______________________ Gregg A. Cervi Administrative Judge

FOOTNOTES

1 The DOD CAF acted 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 (AG) implemented by the DOD on September 1, 2006. Security Executive Agent Directive 4 (SEAD 4), was issued on December 10, 2016, revising the 2006 adjudicative guidelines. The SEAD 4 guidelines apply to all adjudicative decisions issued on or after June 8, 2017. My decision is based on the guidelines in SEAD 4, referred to in this decision as “AG.” The changes resulting from issuance of SEAD 4 did not affect my decision in this case. 2 ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). 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). 3 ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002).

4 See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). 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).

5 See 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).