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ISCR Case 16-03111.h1 — CASE

ISCR Case 16-03111.h1denied

Case Headnote

ISCR Case No. 16-03111.h1

deniedMay 25, 2018· Hon. Robert J. Kilmartin· hearing

Summary

A 51-year-old mechanical technician was denied a security clearance under Guideline F (Financial Considerations) due to unresolved financial issues. The Statement of Reasons detailed several allegations, including the failure to timely file federal and state income tax returns for tax years 2012 through 2014.

Additionally, the applicant faced two judgments for credit card debt, one for $5,559 and another for $20,830. There were also 11 other delinquent debts totaling approximately $35,000, encompassing credit card debts, judgments, and medical debts, alongside a home foreclosure in November 2015.

Despite filing for Chapter 13 bankruptcy and making payments, the judge determined that the applicant did not provide sufficient evidence to demonstrate that his financial problems were under control or unlikely to recur. Consequently, the security clearance was denied.

Why the Applicant Was Denied

The applicant failed to timely file federal and state income tax returns for multiple years.
The applicant admitted to significant delinquent debts totaling approximately $35,000, including credit card debts and judgments.
The applicant did not provide sufficient evidence to demonstrate that his financial problems were under control or unlikely to recur.

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 Income Tax Returns

Mitigating

AG ¶ 20(g)rejectedArrangements with Tax AuthorityThe applicant's late filing of tax returns was insufficient to demonstrate compliance with tax obligations.
AG ¶ 20(b)rejectedConditions Largely Beyond ControlWhile some circumstances were beyond the applicant's control, he did not provide adequate documentation to show responsible actions taken.
AG ¶ 20(c)rejectedFinancial CounselingThe applicant did not provide evidence of receiving credible financial counseling.

Key Rule Quoted

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

Procedural Posture

SOR issuedNov 29, 2016
Answer filedDec 15, 2016
Hearing heldApr 12, 2018Record left open until May 25, 2018 for additional evidence.
Decision dateMay 25, 2018

Cite For

Failure to Mitigate Financial Concerns Under Guideline F
Insufficient Evidence of Financial Stability
Impact of Unresolved Debts on 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: denied

The judge found that the applicant failed to mitigate financial concerns under Guideline F, which included failure to file tax returns and multiple delinquent debts. As a result, the applicant's eligibility for a security clearance was denied.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failure to timely file federal and state income tax returns for TY 2012–2014	Against Applicant	Tax Filing Failure	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	a judgment entered against Applicant for $5,559 as a result of credit-card debt $5,559	Against Applicant	Judgment Against Applicant	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.c	another judgment in the amount of $20,830 $20,830	Against Applicant	Judgment Against Applicant	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.k	11 delinquent debts totaling approximately $35,000 for credit-card debts, judgments, and delinquent medical debts plus a home foreclosure in November 2015 $35,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—

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. 16-03111 ) Applicant for Security Clearance )

For Government: Andrew H. Henderson, Esq., Department Counsel For Applicant: Pro se 05/25/2018 ______________

STATEMENT OF CASE

______________

KILMARTIN, Robert J., Administrative Judge:

Applicant has not mitigated the security concerns under Guideline F, financial considerations. Applicant’s eligibility for access to classified information is denied.

Statement of the Case

Applicant submitted a security clearance application (SCA) on January 11, 2016. On November 29, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations. The DOD CAF acted 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 (AGs) implemented by DOD on September 1, 2006. On December 10, 2016, the Director of National Intelligence signed Security Executive Agent Directive 4 (SEAD 4), implementing new AGs effective within the DOD on June 8, 2017. Accordingly, I have applied the June 8, 2017 AGs in this decision.1

Applicant answered the SOR on December 15, 2016, admitting all of the SOR allegations with explanations. He stated that the delinquent debts alleged in SOR ¶¶ 1.b, 1.c, and 1.f, had been paid, and he would provide confirmation. Applicant also requested a hearing before an administrative judge. The case was assigned to me on September 6, 2017. On March 22, 2018, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for April 12, 2018. I convened the hearing as scheduled.

The Government’s Exhibits (GE) were not available for the hearing.2 I left the record open until May 25, 2018, for Department Counsel to provide the GEs to Applicant. He did not object and GE 1 through 5 were later admitted into evidence without objection. At the hearing, Applicant testified and submitted Applicant’s Exhibits (AE) A through K, including four character reference letters, which were admitted without objection. Applicant also submitted additional documents post-hearing including: federal tax returns for tax years (TY) 2011 – 2016; state A tax returns for TY 2011 – 2014; and state B tax returns for TY 2014 – 2016; an IRS tax transcript for TY 2013; another character reference letter, and pay stubs from July 2015 to December 2016 reflecting garnishments every two weeks to pay the debt at SOR ¶ 1.c. (AE L) All were admitted without objection.

Findings of Fact3

Applicant is 51 years old. He graduated from high school in 1985. Applicant has two adult stepdaughters, ages 31 and 37. He also lost a stepdaughter who died in 2009 at age 24. Applicant has been married for 22 years and his wife was with him at the hearing. He was previously married in 1987 and divorced 13 months later; and married in 1994 and divorced one month later. Applicant has been employed as a mechanical technician for a federal contractor since April 2013. He had a security clearance previously in 2002.

In § 26 of his January 2016 SCA, he disclosed that he was contemplating filing for bankruptcy protection because he fell behind when his wife lost her job and they moved to another state He also disclosed his failure to file federal and state tax returns for TY 2012–2014, and several other delinquent debts. He claimed these delinquencies were due to unexplained financial hardship. (GE 1)

The SOR alleges failure to timely file federal and state income tax returns for TY 2012–2014 (SOR ¶ 1.a). It also alleges 11 delinquent debts totaling approximately $35,000 for credit-card debts, judgments, and delinquent medical debts plus a home foreclosure in November 2015 (SOR ¶1.k). Applicant admitted to all of these delinquent debts in his Answer to the SOR. At the hearing, Applicant testified that he has now filed for Chapter 13 bankruptcy protection as of December 2017. (Tr. 30) The plan requires that payments of $709 be deducted from his paycheck each two weeks and paid to the bankruptcy trustee. He has been making the payments since December 2017. (AE E, Tr. 20)

At the hearing, Applicant provided tax returns for State A for TYs 2016, 2015, and 2014 (AE F, G, and H), which reflected that they were filed or submitted in April 2016. He also provided a tax return for state B for TY 2011 and a federal (IRS form 1040) tax return for FY 2011 (AE I, K). Additionally, he provided an IRS tax transcript for TY 2013 (AE J). All were filed in April 2016. Applicant ascribed the reason for his failure to file these returns timely as stupidity and grieving the loss of his 24-year-old stepdaughter in 2009. (Tr. 28) He provided no evidence that he requested extensions from the IRS or state taxing authorities to file late. Post-hearing submissions indicate that he subsequently filed several TYs of state and federal tax returns for 2011-2016 in April 2016. (AE L)

Applicant testified that his job moved from state B to state A in late 2013. When they moved, his wife lost her job and was out of the workforce for two years. (Tr. 25, 39) Since they were constrained to one income, they had difficulties keeping up with debts. They used credit cards to pay for daily living expenses. (Tr. 39) SOR ¶¶ 1.g, 1.hand 1.i are all charged-off credit card debts that have now been included in his bankruptcy repayment plan. (Tr. 39) SOR 1.bis a judgment entered against Applicant for $5,559 as a result of credit-card debt. It has now been included in his bankruptcy plan. (Tr. 29) SOR ¶ 1.cis another judgment in the amount of $20,830. Applicant testified that it has been paid and provided evidence in post-hearing documents showing that his pay is being garnished every two weeks, to pay this judgment. The record was kept open for two weeks until April 26, 2018. (Tr. 29) SOR ¶¶ 1.d, 1.e, and 1.fare for delinquent- tuition payments for a gunsmithing course, and a medical debt, that have now been included in Applicant’s bankruptcy plan. (Tr. 36-37) Applicant did not know how much the deficiency was when his home in state B was foreclosed upon in 2015. (Tr. 49) He had no explanation why he couldn’t pay his debts on a salary consistently in the range of $100,000 per year in State A. (Tr. 48-49)

Applicant needs a security clearance for his job. Applicant’s earns $2,860 every two weeks. His wife now works in the same demilitarization facility and she earns $1,100 every two weeks. (Tr. 40) Applicant has approximately $10,000 in his 401kretirement account. (Tr. 44) His tax returns indicate that Applicant had gross income of $155,000 in 2011, and $160,000 in 2012. (AE I and J) In 2014, it was $128,000. (AE H) Applicant testified that he had taken online credit counseling as a precondition to filing for bankruptcy, and they had formulated a budget. He promised to produce their budget, but did not deliver. (Tr. 42) He provided no other evidence of financial counseling or debt consolidation services. He did provide four very favorable character reference letters (AE A – D) that all attest to his work ethic, character and trustworthiness.

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations, 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, Appendix A, ¶ 2(a), the adjudicative process is an examination of a sufficient period and a careful weighing of a number of variables of an individual’s life to make an affirmative determination that the individual is an acceptable security risk. This is 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, Appendix A, ¶ 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. Under Directive ¶ E3.1.15, 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.”

ANALYSIS

Guideline F, Financial Considerations

The security concern relating to 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 abuse, 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 . . . .

This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information.

AG ¶ 19 provides conditions that could raise security concerns. The following apply here:

(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’s failure to timely file income tax returns and his delinquent debts alleged in the SOR are confirmed by his credit reports, tax returns, and answer to the SOR. The Government produced substantial evidence to support the disqualifying conditions in AG ¶¶ 19(a), 19(b), 19(c), and 19 (e) thereby shifting the burden to Applicant to produce evidence to rebut, explain, extenuate, or mitigate the facts.4 Applicant has not met that burden.

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 . . . , 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 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 lost his 24-year-old daughter in 2009. However, he filed his tax returns for that year and TY 2010. People grieve differently and it is impossible to know when and what impact grief will have on a particular individual. It is nonetheless unclear how this tragedy precluded Applicant from filing timely federal and state tax returns in 2012, 2013, and 2014. Applicant has not presented sufficient information to develop this possible mitigation. He filed the majority of his delinquent tax returns in April 2016. It was too little, too late. AG ¶ 20 (g) only has partial application. Applicant had to move to follow his job in 2013, and this caused the loss of his wife’s income. To some extent, these conditions were beyond his control. However, he has not produced relevant and responsive documentation, demonstrating that he acted responsibly under the circumstances. Applicant only recently filed for bankruptcy protection at the end of 2017. To his credit, he entered into a chapter 13 repayment plan, and he has made several months of payment to the trustee. However, these delinquencies go back almost a decade and it is inexplicable how he was unable to make payments in the first place. He was consistently earning $100,000 or more in salary in a low-cost-of living area. Applicant has not met his burden to provide sufficient evidence to show that his financial problems are under control, and that his debts were incurred under circumstances making them unlikely to recur. He produced no substantiating documents to show that the judgment in SOR ¶ 1.cwas in fact paid off, and he submitted no budget. The delinquent debts have not been resolved. The mitigating conditions enumerated above do not apply.

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, Appendix A, ¶ 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, Appendix A, ¶ 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, Appendix A, ¶ 2(d) were addressed under that guideline. Most importantly, Applicant has not addressed the specific allegations in the SOR and taken affirmative measures to resolve them. He has not met his burden of production.

Applicant’s finances remain a security concern. There is insufficient evidence to conclude that his financial problems are under control. The record evidence leaves me with questions and doubts as to Applicant’s suitability for a security clearance. For all these reasons, I conclude Applicant has not mitigated 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 through 1.m: Against Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the interests of national security to grant Applicant a security clearance. Eligibility for access to classified information is denied.

________________________ Robert J. Kilmartin Administrative Judge

FOOTNOTES

1 Although I have decided this case under the adjudicative guidelines (AG) effective June 8, 2017, I also considered the case under the former AG effective on September 1, 2006, and my decision would be the same under either version.

2 Department Counsel’s briefcase was sidetracked en route to the hearing. I left the record open for him to submit the GEs, which had already been provided in discovery, to Applicant. I also allowed time for Applicant to object. He did not raise an objection.

3 Unless stated otherwise, the source of the information in this section is Applicant’s January 11, 2016 Security Clearance Application (SCA). 4 Directive ¶ E3.1.15. See ISCR Case No. 02-31154 at 5 (App. Bd. Sep 22, 2005) (An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government).