ISCR Case No. 16-03678.h1

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ---------------------- ) ISCR Case No. 16-03678 ) Applicant for Security Clearance )

For Government: Julie R. Mendez, Esq., Department Counsel For Applicant: Pro se

10/13/2017 ______________

______________

KATAUSKAS, Philip J., Administrative Judge:

Applicant contests the Defense Department’s intent to deny his eligibility for access to classified information. Applicant failed to mitigate the security concern raised by his repeated failures to timely file his federal income tax returns. Accordingly, this case is decided against Applicant.

Statement of the Case

Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on March 1, 2016. This document is commonly known as a security clearance application. On December 23, 2016, after reviewing the application and the information gathered during a background investigation, the Department of Defense Consolidated Adjudications Facility sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the national interest to grant his eligibility for access to classified information.1 It detailed the factual reasons for the action under the security guideline known as Guideline F for financial considerations. Applicant answered the SOR on January 12, 2017, and requested a decision based on the written record without a hearing.

On February 15, 2017, Department Counsel submitted a file of relevant material (FORM).2 The FORM was mailed to Applicant on the same day. He was given 30 days to file objections and submit material to refute, extenuate, or mitigate the Government’s evidence. Applicant received the FORM on February 21, 2017.3 He did not respond to the FORM. The case was assigned to me on October 1, 2017.

Included in the FORM were four items of evidence, which are marked as Government Exhibits (GE) 1 and 2.4 Exhibit 1 is admitted into evidence without objection. GE 2 is a report of investigation (ROI) summarizing Applicant’s interview that took place during the April 2016 background investigation. The ROI is not authenticated, as required under ¶ E3.1.20 of the Directive.5 Department Counsel’s written brief includes a footnote advising Applicant that the summary was not authenticated and that failure to object may constitute a waiver of the authentication requirement. Nevertheless, I am not persuaded that a pro se applicant’s failure to respond to the FORM, which response is optional, equates to a knowing and voluntary waiver of the authentication requirement. The record does not demonstrate that Applicant understood the concepts of authentication, waiver, and admissibility. It also does not demonstrate that he understood the implications of waiving an objection to the admissibility of the ROI. Accordingly, Exhibit 2 is inadmissible, and I have not considered the information in the ROI.

Applicant is 56 years old and married with three children (ages 23, 18, and 16). He has a bachelor’s degree, and since February 2016 he has worked for a defense contractor.6

The SOR alleged that Applicant failed to file federal income tax returns for the tax years 2010 through 2015.7 Applicant admitted those allegations. In a handwritten note attached to his Answer, he stated that a tax preparer was in the process of filing his tax returns, with an anticipated filing date of January 27, 2017. Other than a copy of the tax preparer’s business card, Applicant submitted no documents supporting his Answer.8 In his security clearance application, Applicant said that his failure to file tax returns was due to “negligence on my part.”9

Law and Policies

It is well-established law that no one has a right to a security clearance.10 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.”11 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security.

A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.12 An unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.13 There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.14 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.15 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.16 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.17

In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.18 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.19

Under Guideline F for financial considerations,20 the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is:

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.21

The concern is broader than the possibility that a person might knowingly compromise classified information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified or sensitive information.

In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions: AG ¶ 19(c) a history of not meeting financial obligations;

AG ¶ 19(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;

AG ¶ 20(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;

AG ¶ 20(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;

AG ¶ 20(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; and,

AG ¶ 20(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 failure to file income tax returns for six consecutive years raises security concerns under AG ¶¶ 19(c) and (f).22 The next question is whether any mitigating conditions apply.

Applicant’s failure to file federal income tax returns was a recent as 2015. And he failed to file from 2010 through 2015. His failure to file was recent and was not infrequent. Thus, AG ¶ 20(a) does not apply. By Applicant’s own admission his failure to file was due to his own negligence. Thus, AG ¶ 20(b) does not apply. Even if I credit Applicant with hiring a tax preparer, Applicant has submitted nothing to show that his tax problem has been resolved or is under control. Thus, AG ¶ 20(c) does not apply. Finally, Applicant has submitted nothing showing that he has made any arrangement with the IRS about filing his returns or paying his income taxes. Thus, AG ¶ 20(g) does not apply.

The record raises doubts about Applicant’s reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. I also gave due consideration to the whole-person concept.23 Accordingly, I conclude that Applicant failed to meet his ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant him eligibility for access to classified information.

As required by section E3.1.25 of Enclosure 3 of the Directive, I make the following formal findings on the SOR allegations:

Paragraph 1, Guideline F: Against Applicant

Subparagraphs 1.a-1.f: Against Applicant

In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information.

Philip J. Katauskas Administrative Judge

1 This action was taken under Executive Order (E.O.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended, as well as Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on June 8, 2017, apply here. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2016). In this case, the SOR was issued under Adjudicative Guidelines effective within the Defense Department on September 1, 2006. My Decision and Formal Findings under the revised Guideline F would not be different under the 2006 Guideline F.

2 The file of relevant material consists of Department Counsel’s written brief and supporting documentation, some of which are identified as evidentiary exhibits in this decision.

3 The Defense Office of Hearings and Appeals’ (DOHA) transmittal letter is dated February 15, 2017, and Applicant’s receipt is dated February 21, 2017. The DOHA transmittal letter informed Applicant that he had 30 days after receiving it to submit information.

4 The first and second items in the FORM are the SOR and Applicant’s Answer, respectively. Because the SOR and the Answer are the pleadings in this case, they are not marked as Exhibits. Items 3 and 4 are marked as Exhibits 1 and 2.

5 See generally ISCR Case No. 12-10933 (App. Bd. Jun. 29, 2016) (In a concurring opinion, Judge Ra’anan notes the historical concern about reports of investigation in that they were considered by some to present a heightened problem in providing due process in security clearance cases. Judge Ra’anan raises a number of pertinent questions about using an unauthenticated ROI in a non-hearing case with a pro se applicant.). 6 GE 1.

7 SOR ¶¶ 1.a-f.

8 Answer.

9 GE 1.

10 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance).

11 484 U.S. at 531

12 Directive, ¶ 3.2.

13 Directive, ¶ 3.2. 14 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004) 15 Directive, Enclosure 3, ¶ E3.1.14.

16 Directive, Enclosure 3, ¶ E3.1.15.

17 Directive, Enclosure 3, ¶ E3.1.15.

18 Egan, 484 U.S. at 531.

19 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted).

20 AG ¶¶ 18, 19, and 20 (setting forth the concern and the disqualifying and mitigating conditions).

21 AG ¶ 18. 22 The Appeal Board has held that a person who has a history of not fulfilling his legal obligation to file tax returns may be said not to have the high degree of judgment and reliability required for access to classified information. ISCR Case No. 12-5053 at 4 (App. Bd. Oct. 30, 2014). 23 AG ¶¶ 2(d)(1)-(9) and 2(f)(1)-(6).