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ISCR Case 16-03277.h1 — CASE

ISCR Case 16-03277.h1granted

Case Headnote

ISCR Case No. 16-03277.h1

grantedAug 11, 2017· Hon. Shari Dam· hearing

Summary

A 54-year-old defense contractor was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The primary issue was his failure to timely file his 2013 federal income tax return, which raised a disqualifying condition under F.19.

However, the applicant successfully mitigated these concerns by demonstrating a commitment to resolving his financial obligations. He took responsibility for the unfiled return and established a payment plan with the IRS, making multiple payments toward his tax liability. These actions aligned with mitigating conditions F.20(a) and F.20(g).

The administrative judge found no questions regarding the applicant's judgment and suitability. His overall conduct and credible testimony indicated reliability and trustworthiness, leading to the decision to grant his security clearance.

Why the Applicant Prevailed

The applicant took responsibility for his failure to file his 2013 federal tax return and demonstrated a commitment to resolving his tax issues.
He established a payment plan with the IRS and made multiple payments towards his tax liability.
The applicant's overall conduct and credible testimony indicated reliability and trustworthiness.

Conditions Referenced

Disqualifying

F.19raisedFailure 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.

Mitigating

F.20(a)appliedThe 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.
F.20(g)appliedThe Individual Has Made Arrangements with the Appropriate Tax Authority to File or Pay the Amount Owed and Is in Compliance with Those Arrangements.

Key Rule Quoted

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

Procedural Posture

SOR issuedDec 2, 2016
Answer filedDec 14, 2016
Hearing heldApr 5, 2017
Decision dateAug 11, 2017

Cite For

Mitigation of Financial Issues Under Guideline F
Consideration of the Whole-person Concept in Security Clearance Decisions
Responsibility for Financial Obligations as a Factor in Security Clearance Eligibility

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 timely file his 2013 federal income tax return, which raised security concerns under Guideline F. However, the applicant mitigated these concerns by demonstrating compliance with a repayment plan and timely filing his other tax returns, leading to a decision in favor of the applicant.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant failed to timely file his 2013 federal income tax return. $4,380	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	Claimed Debt Paid in Full Claimed Financial Counseling

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: 16-03277 ) ) Applicant for Security Clearance )

For Government: Caroline E. Heintzelman, Esq., Department Counsel For Applicant: Pro se

08/11/2017 ______________

STATEMENT OF CASE

______________

DAM, Shari, Administrative Judge:

Applicant failed to timely file his 2013 federal income tax return. He mitigated the resulting security concern. National security eligibility for access to classified information is granted.

Statement of the Case

On December 2, 2016, the Department of Defense (DOD) 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 for Determining Eligibility for Access to Classified Information effective within the DOD on September 1, 2006. This decision applies the new Adjudicative Guidelines (AG) that came into effect on June 8, 2017.1

Applicant answered the SOR in writing (Answer) on December 14, 2016, and requested a hearing before an administrative judge. On February 8, 2017, the Defense Office of Hearings and Appeals (DOHA) assigned the case to me. On March 9, 2017, DOHA issued a Notice of Hearing setting the case for April 5, 2017. The case proceeded as scheduled. Department Counsel offered Government Exhibits (GE) 1 through 4 into evidence. Applicant testified and offered Applicant Exhibits (AE) 1 through 17 into evidence. All exhibits were admitted without objections. DOHA received the hearing transcript (Tr.) on April 13, 2017. The record remained open until June 2, 2017, to give Applicant time to submit additional information. He submitted two exhibits that I marked as AE 18 and AE 19, and admitted into the record without an objection from Department Counsel.

FINDINGS OF FACT

Applicant is 54 years old and married for eight years. He and his wife have one child and he has two stepchildren with her. He earned a bachelor’s degree in 1994 and completed a certificate program. Since June 2013, he has worked for his current employer. Prior to this position, he worked for another defense contractor for about eight years. He has held a security clearance since 2005 and a position of trust position for two years. He coaches a community program for children. (Tr. 19-25, 31.)

The SOR alleged that Applicant failed to timely file his 2013 federal income tax return. Applicant admitted that allegation. He filed the return on December 14, 2016, along with a request for a payment plan. About a month later, the Internal Revenue Service (IRS) returned Applicant’s income tax return because he and his wife had not signed it. They signed and sent it back in February 2017. Applicant said he forgot to sign it because he normally filed his returns electronically. (Tr. 38-39; AE 4, AE 6.)

On April 3, 2017, Applicant made a first payment on the monthly repayment plan. He owes the IRS $4,380 for unpaid taxes for 2013.2 He paid the monthly amount of $100 and a user fee. (Tr. 42, 44; AE 2, AE 3, AE 5.) He made $100 payments in May and June 2017. (AE 18, AE 19.) He intends to make monthly payments until the tax is paid. (Tr. 36.) His filed his federal and state tax returns for years 2012, 2014, 2015, and 2016 on time. He received refunds from the IRS for years 2012, 2014, 2015, and 2016. He owes state income taxes for 2016 in the amount of $450. He has not established a repayment plan for that, but intended to pay the debt soon. (Tr. 28-23, 37.)

2 The SOR did not allege that Applicant failed to pay his 2013 federal taxes as required. Hence, that Applicant’s tax accountant timely prepared his 2013 federal and state returns. Applicant filed the state return, but did not file the federal return. There appears to have been miscommunication between Applicant and his accountant about filing the federal taxes and including a payment with it. In March 2015, Applicant learned that his 2013 federal taxes had not been filed when he inquired about filing his 2014 returns. (Tr. 34- 35, 47; AE 8.)

Although he knew in March 2015 that his 2013 federal return had not been filed, Applicant waited until December 2016 to file his 2013 federal return because he was fearful and uncertain. He did not have enough money to pay the unpaid taxes or penalties. (Tr. 35.) He admitted that he and his wife procrastinated and did not take responsibility for managing their financial obligations. (Tr. 36.) He acknowledged that receiving the SOR and the reinvestigation of his security clearance motivated him to resolve his tax issue. (Tr. 50.)

Applicant submitted letters of recommendation, certificates of achievement, and merit commendations. (AE 11, AE 15, AE 16.) Applicant’s human resource department is aware of his financial issue; however, its director stated that they are not aware of any security violations by Applicant since he began working in 2013. (AE 10.) The company’s chief of staff complimented Applicant on his commitment to excellence, as did others who work with him. (AE 12, AE 14, AE 17.) His 2016 performance evaluation gave him a 4.6 rating out of a 5.0 scale. (AE 13.)

POLICIES

When evaluating an applicant’s suitability for national security eligibility, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the AG list potentially disqualifying and mitigating conditions, which are useful 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 AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. 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. Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states that an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance decision.”

A person applying for national security eligibility seeks to enter 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 the applicant may deliberately or inadvertently fail to protect or 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. Finally, Section 7 of EO 10865 provides that an adverse decision shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”

Guideline F: Financial Considerations

AG ¶ 18 sets forth the security concern pertaining to 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 security concern insofar as it may result from criminal activity, including espionage.

AG ¶ 19 describes a condition that could raise a security concern and may be disqualifying in this case:

(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 admitted that he failed to timely file his 2013 federal tax return until 2016. The evidence established the above disqualifying condition. AG ¶ 20 provides three conditions that could mitigate security concerns arising under this guideline:

(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; 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.

There is evidence to establish some mitigation under AG ¶ 20(a). Applicant failed to timely file his 2013 federal tax return, but timely filed his federal returns for 2012, 2014, 2015 and 2016. He timely filed his state tax returns for 2012, 2013, 2014, 2015, and 2016. Other than this instance, he does not have history of failing to file federal or state tax returns.

The evidence does not establish mitigation under AG ¶ 20(b). Applicant honestly admitted that the circumstances leading to his failure to file his 2013 federal tax return were within his control. He accepts responsibility for the mismanagement of his taxes.

The evidence establishes some mitigation under AG ¶ 20(g). Although he waited over two years to file his 2013 tax return and did so after receiving the SOR, Applicant has made three payments to the IRS on his 2013 tax liability. He credibly asserted that he intends to pay his taxes until they are resolved. He is demonstrating compliance with his installment agreement.

ANALYSIS

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, commonly referred to as the whole-person concept. The administrative judge should also consider the following 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) 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.

According to AG ¶ 2(c) the ultimate determination of whether to grant national security eligibility must include 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 facts and circumstances surrounding this case. Applicant is a credible and educated 54- year-old man. He has successfully worked for a defense contractor since 2013, as documented by recent letters of recommendation and a performance evaluation. He is dedicated to his current job. He testified candidly and humbly. He admitted his conduct and takes responsibility for it. There is no evidence in the record which would lead me to believe he will not continue to pay the installment agreement he has with the IRS. Overall, the record evidence leaves me without questions as to Applicant’s judgment and suitability for a security clearance at this time. He met his burden to mitigate the security concerns arising under the guideline for financial considerations.

FORMAL FINDINGS

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

Paragraph 1, Guideline F: FOR APPLICANT

Subparagraph 1.a: For Applicant

CONCLUSION

In light of all circumstances presented by the record in this case, it is clearly consistent with the national interest to continue Applicant’s security clearance. National security eligibility for access to classified information is granted.

_________________ SHARI DAM Administrative Judge

FOOTNOTES

1 I considered the previous AG, effective September 1, 2006, as well as the new AG, effective June 8, 2017. My decision would be the same if the case was decided under the previous AG.

information will not be considered in the analysis of disqualifying conditions. It may be considered in the analysis of mitigating conditions, the whole-person concept, and Applicant’s credibility.