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ISCR Case 17-03660.h1 — CASE

ISCR Case 17-03660.h1denied

Case Headnote

ISCR Case No. 17-03660.h1

deniedJul 1, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 60-year-old college graduate was denied a security clearance due to unresolved financial issues and a lack of demonstrated compliance with tax obligations, primarily under Guideline F (Financial Considerations). The applicant failed to file federal income tax returns for 2014, 2015, and 2016.

Additionally, the applicant did not disclose on her security clearance application that she had not filed her federal income tax returns for 2014 and 2015, raising concerns under Guideline E (Personal Conduct). The judge found that the applicant did not provide sufficient evidence of compliance with her tax obligations or participation in financial counseling.

Ultimately, the judge determined there was insufficient evidence to mitigate the financial concerns, leading to the denial of the security clearance.

Why the Applicant Was Denied

Applicant failed to file federal income tax returns for 2014, 2015, and 2016.
Applicant did not provide evidence of compliance with tax obligations or financial counseling.
The judge found insufficient evidence to mitigate the financial concerns under Guideline F.

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.

Key Rule Quoted

“Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems.”
— ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016)

Procedural Posture

SOR issuedDec 15, 2017
Answer filedJan 25, 2018Applicant elected to proceed without a hearing.
Hearing held—Case decided on the written record.
Decision dateJul 3, 2018

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Lack of Evidence for Compliance with Tax Obligations
Successful Mitigation of Personal Conduct Concerns Under Guideline E

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 E (Personal Conduct) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found in favor of the applicant under Guideline E, personal conduct, concluding that the government did not support the allegation of deliberate omission regarding tax filings. The applicant's failure to disclose her tax issues was not deemed intentional, leading to a favorable ruling on this guideline.

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	Applicant failed to disclose on her security clearance application that she did not file her federal income tax returns for tax years 2014 and 2015.	For Applicant	Omission or Failure to Disclose	—	Denied	—	—	—

Descriptive standardized rendering of a decided public case (Guideline E). The verbatim source decision is shown in full below.

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 the financial considerations under Guideline F due to her failure to file federal income tax returns for the years 2014, 2015, and 2016. The applicant did not provide sufficient evidence to mitigate the concerns regarding her financial obligations, leading to a denial of her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file her 2014, 2015, and 2016 federal income tax returns	Against Applicant	Tax Filing Failure	Admitted	(g) unexplained affluence	—	—

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. 17-03660 ) ) Applicant for Security Clearance

For Government: Allison Marie, Esq., Department Counsel For Applicant: Pro se

07/03/2018 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, financial considerations. She mitigated the Guideline E, personal conduct security concerns. Eligibility for access to classified information is denied.

Statement of the Case

On December 15, 2017, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued to Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations, and Guideline E, personal conduct. 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 (AG) effective within the DOD on June 8, 2017.

Applicant answered the SOR on January 25, 2018, and elected to have her case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s file of relevant material (FORM), and Applicant received it on March 1, 2018. She was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. The Government’s evidence is identified as Items 1 through 7. Applicant did not respond to the FORM, provide documentary evidence, or object to the Government’s evidence, and it is admitted. The case was assigned to me on June 11, 2018.

FINDINGS OF FACT

Applicant admitted the SOR allegation in ¶ 1.a and denied the allegation in ¶ 2.a. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact.

Applicant is 60 years old. She has never married and has no children. She is a college graduate and has earned various culinary and food service certificates. She owned a business in 2010, but closed the business in favor of full-time employment in 2016. She currently works part-time for two companies.1

The SOR (¶ 1.a) alleges that Applicant failed to file her 2014, 2015, and 2016 federal income tax returns, which she admitted. She did not provide a response to the FORM or any documentary evidence to show that her federal income tax returns have been filed for those tax years.2

In September 2016, Applicant completed a security clearance application (SCA). In it she failed to disclose she did not file her federal income tax returns for tax years 2014 and 2015.3

Applicant was interviewed by a government investigator in July 2017. When questioned, she voluntarily disclosed to the investigator that she failed to file her 2016 federal income tax return. She explained to the investigator that she did not file because she was not financially stable and did not have any money. She told the investigator she had not resolved the delinquent tax filing, but planned to do so once she obtained a full- time job. Applicant did not disclose to the investigator that she also had not filed her 2014 and 2015 federal income tax returns. On December 4, 2017, she verified and swore that the results of her interview were accurate.4

In Applicant’s answer to the SOR, she stated: When asked the question “In the past (7) years have you failed to file or pay federal, state or other taxes when required by law or ordinance” I mis-read the question. Within, the last (7) years I have paid my taxes prior to 2014, 2015, and 2016. Also I do plan to pay taxes for these years.5

The SOR alleged Applicant deliberately failed to disclose on her February 17, 2016 SCA that she did not file her 2014 and 2015 Federal income tax returns. The Government’s evidence included a September 2016 SCA. It does not include a February 2016 SCA as alleged. Federal tax returns for tax year 2015 would not have been due until April 15, 2016.6

POLICIES

When evaluating an applicant’s suitability for 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 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 ¶ 2(c), 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.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states 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.” 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.

AG ¶ 19 provides conditions that could raise security concerns. The following is potentially applicable:

(g) 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 failed to file 2014, 2015, and 2016 federal income tax returns. There is sufficient evidence to support the application of the above disqualifying condition.

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 (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; 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 did not provide an explanation for her failure to file her federal income tax returns for 2014, 2015, and 2016, other than to tell the investigator that she was not financially stable to do so for her 2016 return. That answer only addresses her ability to pay taxes and not her ability to file the returns. Her tax issues are unresolved and the evidence does not support a finding that her behavior is unlikely to recur. AG ¶ 20(a) does not apply. Applicant failed to provide evidence that she has made arrangements to comply with her legal tax obligations. There is insufficient evidence that her ability to file was beyond her control or that she has received financial counseling and there are clear indications the problem is being resolved. AG ¶¶ 20(b), 20(c), and 20(g) do not apply.

Guideline E: Personal Conduct

AG ¶ 15 expresses the security concern for personal conduct:

Conduct involving questionable judgment, lack of candor, dishonesty, or unwillingness to comply with rules and regulations can raise questions about an individual's reliability, trustworthiness and ability to protect classified information. Of special interest is any failure to provide truthful and candid answers during the security clearance process or any other failure to cooperate with the security clearance process.

The guideline notes several conditions that could raise security concerns. I have considered all of the disqualifying conditions under AG ¶ 16, and the following may be potentially applicable:

(a) deliberate omission, concealment, or falsification of relevant facts from any personnel security questionnaire, personal history statement, or similar form used to conduct investigations, determine employment qualifications, award benefits or status, determine national security eligibility or trustworthiness, or award fiduciary responsibilities.

I have considered all of the evidence. The Government’s evidence does not support that Applicant deliberately failed to disclose her failure to file her 2014 and 2015 federal income tax returns on her February 17, 2016 SCA. The documents provided do not include a February 2016 SCA. Federal income tax returns for 2015 are not due until April 2016. I find the above disqualifying condition does not apply. I find in Applicant’s favor under this guideline.

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 ¶ 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 the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F and Guideline E in my whole-person analysis. Some of the factors in AG ¶ 2(d) were addressed under those guidelines, but some warrant additional comment.

Applicant is a 60-year-old educated women. She failed to file her federal income tax returns for 2014, 2015, and 2016. She did not provide evidence that she has subsequently complied with her legal obligation.

The DOHA Appeal Board has held that:

Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems. Voluntary compliance with these things is essential for protecting classified information. ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). Someone who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. August 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). 7

Applicant has not met her burden of persuasion. 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 security concerns arising under Guideline F, financial considerations. I find in her favor under Guideline E, personal conduct.

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

Subparagraph 1.a: Against Applicant

Paragraph 2, Guideline E: FOR APPLICANT

Subparagraph 2.a: 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 security to grant Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 Item 4. 2 Items 3, 5, 6. 3 Item 4. I have not considered any derogatory information for disqualifying purposes that was not alleged in the SOR. I may consider information for the purposes of making a credibility determination, in the application of mitigating conditions, and in my whole-person analysis. 4 Item 5. 5 Item 3. 6 Item 4. 7 ISCR Case No. 12-10933 at 3 (App. Bd. June 29, 2016).