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ISCR Case 17-00962.h1 — CASE

ISCR Case 17-00962.h1denied

Case Headnote

ISCR Case No. 17-00962.h1

deniedSep 6, 2018· Hon. Richard A. Cefola· hearing

Summary

A 64-year-old married applicant with one adult child was denied a security clearance under Guideline F (Financial Considerations) due to significant unresolved financial issues. The Statement of Reasons cited an outstanding Federal tax lien of $11,075 and a history of bankruptcy.

Specifically, the applicant had an outstanding Federal tax lien for $11,075. While the applicant initially denied an outstanding state tax lien of $5,327, that amount was later reduced to $2,404, and the state lien was released. The applicant also filed for Chapter 7 bankruptcy in July 2014, which was subsequently converted to Chapter 13. However, the Chapter 13 bankruptcy was voluntarily dismissed because the applicant could not maintain the scheduled payments.

The denial was based on the applicant's failure to adequately address the outstanding Federal tax lien and a lack of response to the Government's File of Relevant Material, which meant no evidence was provided to mitigate the financial concerns. These significant and unresolved financial difficulties raised doubts about the applicant's judgment and reliability.

Why the Applicant Was Denied

The applicant has an outstanding Federal tax lien of $11,075, which he failed to address adequately.
The applicant did not respond to the Government's File of Relevant Material, failing to provide evidence to mitigate financial concerns.
The applicant's financial difficulties were significant and unresolved, raising doubts about his judgment and reliability.

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 Pay Annual Federal, State, or Local Income Tax as Required

Key Rule Quoted

“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.”

Procedural Posture

SOR issuedApr 27, 2017
Answer filedMay 16, 2017
Hearing held—Decided on the written record without a hearing.
Decision dateSep 6, 2018

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations Under Guideline F
Importance of Responding to the Government's File of Relevant Material
Impact of Financial Difficulties 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 had significant financial concerns, including an outstanding Federal tax lien of $11,075 and a history of bankruptcy filings. However, the applicant successfully mitigated one allegation regarding a state tax lien, which had been reduced and released, leading to a mixed outcome with some allegations found against the applicant and one in favor.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant has an outstanding Federal tax lien in the amount of $11,075, as evidenced by court documents, and documentation from the Internal Revenue Service (IRS). $11,075	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts	—	—
1.b	Applicant denies that he had an outstanding state tax lien in the amount of $5,327. That amount has been reduced to $2,404, and the state tax lien has been released, as evidenced by letters from the state. $2,404	For Applicant	Tax Unpaid	Denied	—	—	—
1.c	Applicant initially filed for the protection of a Chapter 7 bankruptcy in July of 2014. However, once he realized said bankruptcy would not address Applicant’s outstanding Federal and state tax liens, that bankruptcy was converted to a Chapter 13 bankruptcy.	Against Applicant	Bankruptcy Filing	Admitted	(c) a history of not meeting financial obligations	—	—
1.d	As a result, he could not keep up with his scheduled payments; and as such, his Chapter 13 bankruptcy was voluntarily dismissed.	Against Applicant	Bankruptcy Filing	Admitted	(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: 17-00962 ) Applicant for Security Clearance )

For Government: Daniel F. Crowley, Esquire, Department Counsel For Applicant: Pro se

September 6, 2018 ______________

STATEMENT OF CASE

______________

CEFOLA, Richard A., Administrative Judge:

On July 7, 2016, Applicant submitted a security clearance application (SF-86). On April 27, 2017, the Department of Defense Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of Reasons (SOR), detailing security concerns under Guideline F, Financial Considerations. (Item 1.) 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 after September 1, 2006.

Applicant answered the SOR on May 16, 2017 (Answer), and further supplemented that answer on May 21, 2017 (Answer 2). (Items 2 and 3.) He admitted the SOR allegations concerning his bankruptcy filings; but denied the allegations concerning Federal and state tax liens, and requested that his case be decided by an administrative judge on the written record without a hearing. (Item 3.) On July 27, 2017, Department Counsel submitted the Government’s written case. A complete copy of the File of Relevant Material (FORM), containing 12 Items, was mailed to Applicant on August 1, 2017, and received by him on August 7, 2017. The FORM notified Applicant that he had an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of his receipt of the FORM.

Applicant did not respond to the FORM, nor did he object to Items 1 through 12. DOHA assigned the case to me on December 18, 2017. Items 1 through 12 are admitted into evidence.

The SOR in this case was issued under the adjudicative guidelines that came into effect within the DoD on September 1, 2006. Security Executive Agent Directive (SEAD) 4, National Security Adjudicative Guidelines, implements new adjudicative guidelines, effective June 8, 2017. All national security eligibility decisions issued on or after June 8, 2017, are to be decided using the new National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), as implemented by SEAD 4. I considered the previous adjudicative guidelines, effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s national security eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG.

FINDINGS OF FACT

Guideline F – Financial Considerations

Applicant is 64 years old, married, with one adult child. (Item 4 at pages 5, 34 and 39.)

1.c. and 1.d. Applicant initially filed for the protection of a Chapter 7 bankruptcy in July of 2014. (Item 7.) However, once he realized said bankruptcy would not address Applicant’s outstanding Federal and state tax liens, that bankruptcy was converted to a Chapter 13 bankruptcy. (Item 6, and Item 11 at page 4.) On March 11, 2015, Applicant’s “was terminated,” and on March 16, 2015, he had “a total hip replacement on his right side.” (Item 6 at page 14.) As a result, he could not keep up with his scheduled payments; and as such, his Chapter 13 bankruptcy was voluntarily dismissed. (Id.)

1.a. Applicant has an outstanding Federal tax lien in the amount of $11,075, as evidenced by court documents, and documentation from the Internal Revenue Service (IRS). (Item 9, and Answer at page 3.) His “offer in compromise” was rejected by the Department of the Treasury (DoT), and Applicant was told he could “appeal” DoT’s decision. (Answer at page 4.) As Applicant has offered nothing further in this regard, this allegation is found against Applicant. 1.b. Applicant denies that he had an outstanding state tax lien in the amount of $5,327. That amount has been reduced to $2,404, and the state tax lien has been released, as evidenced by letters from the state. (Answer at page 5, and Answer 2 at page 2.) As it appears that Applicant is making a good-faith effort to address this tax debt, this allegation is found for Applicant.

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 adjudicative guidelines (AG) 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, 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 applicable guidelines in the context 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. I have not drawn inferences based on mere speculation or conjecture.

Directive ¶ E3.1.14, requires the Government to 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 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 national security eligibility. 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 or sensitive information. Finally, as emphasized in Section 7 of EO 10865, “[a]ny determination under this order adverse to an applicant shall be a determination 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 concerns relating to the guideline for financial considerations are set out in AG ¶ 18, which reads in pertinent part:

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. . . .

AG ¶ 19 describes four conditions that could raise security concerns and may be disqualifying 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 had significant tax liens that cause him to seek the protection of a Chapter 13 bankruptcy. These facts establish prima facie support for the foregoing disqualifying conditions, and shift the burden to Applicant to mitigate those concerns. The guideline includes seven conditions in AG ¶ 20 that could potentially mitigate the security concerns arising from Applicant’s alleged financial difficulties:

(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.

None of these apply. Although Applicant’s financial difficulties can be attributed to unforeseen circumstances that were beyond his control, he still owes a substantial outstanding Federal tax lien. Although given an opportunity to address this in a Response to the FORM, Applicant has submitted nothing further. This allegation is found against Applicant.

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.

According to AG ¶ 2(c), the ultimate determination of whether to grant national security eligibility must be an overall commonsense judgment based upon careful consideration of the applicable guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all pertinent facts and circumstances surrounding this case. Overall, the record evidence leaves me with questions and doubts as to Applicant’s judgment, eligibility, and suitability for a security clearance. He has not 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: AGAINST APPLICANT

Subparagraphs 1.a., 1.c. and 1.d.: Against Applicant

Subparagraph 1.b.: For 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. National security eligibility is denied.

________ Richard A. Cefola Administrative Judge