CASE · Clearance Adjudication Search EngineCASE

Loading case…

ISCR Case 15-08052.h1 — CASE

ISCR Case 15-08052.h1denied

Case Headnote

ISCR Case No. 15-08052.h1

deniedJan 25, 2018· Hon. Richard A. Cefola· hearing

Summary

A 57-year-old defense contractor employee was denied a security clearance under Guideline F (Financial Considerations) due to a history of federal and state income tax delinquencies. The applicant failed to file tax returns for tax years 2007 through 2010 until 2012, and for tax years 2012 through 2014 until 2016. This pattern of non-filing occurred despite the applicant being notified in 2001 about the importance of timely tax filings, stemming from a 1997 deficiency.

The Statement of Reasons cited Disqualifying Conditions F.1.a, F.1.b, and F.1.c. While the applicant eventually hired a Certified Public Accountant (CPA) and became current with all tax filings, this corrective action was not sufficient to overcome the long-standing issues.

The denial was based on the finding that the applicant's extensive history of tax delinquencies demonstrated an unwillingness to abide by rules and regulations. The judge determined that the applicant's efforts to become current, though a mitigating condition under F.2.g, were "too little too late" given the multi-year span of the tax filing problems.

Why the Applicant Was Denied

The applicant had a long history of failing to file tax returns in a timely manner, demonstrating an unwillingness to abide by rules and regulations.
The corrective action of hiring a CPA was deemed too little too late, as the applicant's tax filing issues spanned several years.

Conditions Referenced

Disqualifying

F.1.araisedFailure 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.
F.1.braisedUnwillingness to Satisfy Debts Regardless of the Ability to Do So.
F.1.craisedA History of Not Meeting Financial Obligations.

Mitigating

F.2.grejectedThe Individual Has Made Arrangements with the Appropriate Tax Authority to File or Pay the Amount Owed and Is in Compliance with Those Arrangements.The applicant's corrective action was considered insufficient given the long history of delinquencies.

Key Rule Quoted

“Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of national security.”

Procedural Posture

SOR issuedJun 17, 2016
Answer filedJul 15, 2016
Hearing heldMar 6, 2017Rescheduled from November 21, 2016.
Decision dateJan 25, 2018

Cite For

Denial of Security Clearance Due to Long History of Tax Filing Delinquencies Under Guideline F
Unwillingness to Abide by Financial Obligations as a Disqualifying Condition
Insufficient Corrective Action in the Context of Financial Considerations

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 against the applicant on financial considerations due to a history of tax filing delinquencies. Despite the applicant's efforts to hire a CPA for compliance, the judge determined that these actions were insufficient to mitigate the security concerns raised.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	In April of 2001, Applicant was put on notice as to the importance of filing both Federal and state income taxes in a timely fashion, as it related to a 1997 tax filing deficiency. Despite acknowledging the Government’s concerns, Applicant did not file his Federal and state income tax returns for tax years 2007~2010 until 2012. Furthermore, he did not file his Federal and state income tax returns for tax years 2012~2014 until 2016. He has now hired a Certified Public Accountant (CPA) to file his Federal and state income tax returns, and is current with his filings.	Against Applicant	Tax Filing Failure	Denied	(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	—	—

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. 15-08052 ) ) Applicant for Security Clearance )

For Government: Jeff A. Nagel, Esq., Department Counsel For Applicant: Pro se

January 25, 2018 ______________

STATEMENT OF CASE

______________

CEFOLA, Richard A., Administrative Judge:

Statement of the Case

On June 17, 2016, in accordance with DoD Directive 5220.6, as amended (Directive), the Department of Defense issued Applicant a Statement of Reasons (SOR) alleging facts that raise security concerns under Guideline F.1 The SOR further informed Applicant that, based on information available to the government, DoD adjudicators could not make the preliminary affirmative finding it is clearly consistent with the national interest to grant or continue Applicant’s security clearance.

Applicant answered the SOR on July 15, 2016, and requested a hearing before an administrative judge. (Answer.) The case was assigned to me on September 12, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on October 13, 2016, scheduling the hearing for November 21, 2016. The hearing was convened as scheduled. At that initial hearing, the Government amended the SOR, adding a Subparagraph 1.b. As a result, in conjunction with “the principle of fundamental fairness,” the hearing was continued. (Transcript (TR) #1 at pages 8–9). On January 24, 2017, a second notice of hearing was issued, scheduling the hearing for March 6, 2017. At that rescheduled hearing, the Government withdrew the prior amendment, and offered Exhibits (GXs) 1 through 9, which were admitted without objection. Applicant testified on his own behalf and called one witness. Applicant presented two sets of documents, which I marked Applicant’s Exhibits (AppXs) A and B, and admitted without objection. The record was left open until April 6, 2017, for receipt of additional documentation. On April 5, and 6, 2017, Applicant offered two separate exhibits that were admitted into evidence as AppXs C and D. DOHA received the transcripts of the hearing (TR) on November 29, 2016, and on March 16, 2017.

FINDINGS OF FACT

Applicant denied SOR allegation ¶ 1.a. After a thorough and careful review of the pleadings, exhibits, and testimony, I make the following findings of fact.

Applicant is a 57-year-old employee of a defense contractor. (GX 1 at page 5.) He has been employed with the defense contractor since 1983. (TR#2 at page 25 at lines 17–20.) However, he has held a security clearance since 1978, when he went on active duty with the U.S. Air Force. (TR#2 at page 24 line 25 to page 25 line 11.) He is married to a naturalized U.S. citizen, and has one child. (GX 1 at pages 16–18.)

Guideline F – Financial Considerations

1.a. In April of 2001, Applicant was put on notice as to the importance of filing both Federal and state income taxes in a timely fashion, as it related to a 1997 tax filing deficiency. (TR#2 at page 38 line 24 to page 40 line 16, and GX 7 at pages 1–2.) This is evidenced by a sworn statement executed by Applicant on April 9, 2001. Despite acknowledging the Government’s concerns, Applicant did not file his Federal and state income tax returns for tax years 2007–2010 until 2012. (TR#2 at pages 27 line 7 to page 38 line 21.) Furthermore, he did not file his Federal and state income tax returns for tax years 2012–2014 until 2016. (Id.) He has now hired a Certified Public Accountant (CPA) to file his Federal and state income tax returns, and is current with his filings. (TR at page 30 line 22 to page 31 line 16.)

POLICIES

When evaluating an applicant’s national security eligibility, 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 to be used in evaluating an applicant’s national security eligibility.

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, administrative judges apply the guidelines 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. According to AG ¶ 2(a), 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 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.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states the “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 who applies for access to classified information 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.

Section 7 of Executive Order (EO) 10865 provides that adverse 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.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. Four are potentially applicable in this case:

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

Applicant has a history of not filing his Federal and state income tax returns in a timely fashion. The evidence is sufficient to raise these disqualifying conditions.

AG ¶ 20 provides conditions that could mitigate security concerns. I considered all of the mitigating conditions under AG ¶ 20 including:

(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;

(f) the affluence resulted from a legal source of income; 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.

Arguably, AG ¶ 20(g) applies, but Applicant’s corrective action of hiring a CPA is too little too late. He has a long history, going back to 1997, of tax filing delinquencies. These filing delinquencies continued from 2007–2010, and again from 2012–2014. This demonstrates an “unwillingness to abide by rules and regulations.” Mitigation under AG ¶ 20(g) has not been fully established.

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):

(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 facts and circumstances surrounding this case. Applicant is well respected in the workplace. (AppXs C and D.) Overall, 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 Financial Considerations security concerns.

FORMAL FINDINGS

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

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraph 1.a: 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 interest to grant Applicant national security eligibility and a security clearance. Eligibility for access to classified information is denied.

________________________ Richard A. Cefola Administrative Judge

FOOTNOTES

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