ISCR Case 14-03157.h1

Case Headnote

ISCR Case No. 14-03157.h1

grantedJan 26, 2015· Hon. Robert Robinson Gales· hearing

Summary

A 46-year-old logistics specialist for a defense contractor was granted a security clearance despite concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The issues stemmed from unfiled federal income tax returns for 2006, 2007, and 2009, and several delinquent debts. The applicant failed to timely file these tax returns, resulting in the disallowance of potential refunds totaling $1,185 for 2006 and $562 for 2007, and an unspecified refund for 2009.

Additionally, a federal tax lien of $42,179.79 covering tax periods 2006-2008 was imposed due to an administrative error after his business was destroyed. Two home mortgage loans, one on his primary residence and another on a rental property, went into foreclosure in 2009 and 2010, respectively, though both were resolved without deficiency balances. Other debts included a $100 gas utility bill, a $420 telephone account, and an $81 motorcycle insurance account, all of which were placed for collection.

The applicant successfully mitigated these concerns by demonstrating that his financial difficulties were largely due to the destruction of his business by Hurricane Katrina. He took proactive steps to resolve all outstanding issues, including hiring an accountant to file overdue tax returns, correcting the federal tax lien, and paying all delinquent debts in full. As a result of these mitigating actions, the security clearance was granted.

Why the Applicant Prevailed

The applicant's financial issues were primarily caused by Hurricane Katrina, which destroyed his business.
The applicant took responsible actions to resolve his financial issues, including hiring a new accountant to file overdue tax returns.
All delinquent debts were paid in full, and the federal tax lien was released.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations
AG ¶ 19(g)raisedFailure to File Annual Federal, State, or Local Income Tax Returns as Required

Mitigating

AG ¶ 20(a)appliedThe Behavior Happened so Long Ago, Was so Infrequent, or Occurred Under Such Circumstances That It Is Unlikely to Recur
AG ¶ 20(b)appliedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person’s Control
AG ¶ 20(d)appliedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve Debts

Key Rule Quoted

“Eligibility for a security clearance and access to classified information is granted.”

Procedural Posture

SOR issuedAug 21, 2014
Answer filedSep 4, 2014
Hearing heldDec 17, 2014
Decision dateJan 26, 2015

Cite For

Mitigation of Financial Issues Due to Natural Disasters Under Guideline F
Resolution of Tax Filing Issues as a Mitigating Factor Under Guideline E
Good-faith Efforts to Repay Debts as a Basis for Granting Security Clearance

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	As noted above, Applicant failed to timely file his federal income tax returns for 2006, 2007, and 2009.	For Applicant	Omission or Failure to Disclose	Other	Denied	—	—	—

Allegation

Finding

Conduct

Concealed Issue

Response

Disqualifying (¶16)

Mitigating applied (¶17)

Mitigation

2.a

As noted above, Applicant failed to timely file his federal income tax returns for 2006, 2007, and 2009.

For Applicant

Omission or Failure to Disclose

Other

Denied

—

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	There were federal income tax returns for the tax years 2006, 2007, and 2009 that were not timely filed. The tax returns for the two earlier years were filed on February 21, 2013 – three months before Applicant was interviewed by an investigator from the U.S. Office of Personnel Management (OPM). For the tax year 2006, because of a tax overpayment, Applicant would have been entitled to a refund of $1,185, but because the tax return was filed more than three years after it was due, the refund claim was disallowed by the Internal Revenue Service (IRS). For the tax year 2007, because of another tax overpayment, Applicant would have been entitled to a refund of $562, but, once again, because the tax return was filed more than three years after it was due, the refund claim was disallowed by the IRS. For the tax year 2009, because of another tax overpayment, Applicant would have been entitled to an unspecified refund, but because the tax return would have been filed more than three years after it was due, the IRS stated that Applicant was no longer bound to file his tax return and he was no longer eligible for the refund. The tax return filing issues have been resolved.	For Applicant	Tax Filing Failure	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations (g) unexplained affluence	(a) behavior happened long ago / infrequent / unlikely to recur (b) conditions largely beyond the person’s control; acted responsibly	—
1.b	There is a federal tax lien in the amount of $42,179.79 covering the tax periods of 2006, 2007, and 2008. When Applicant’s business was destroyed and closed, the proper paperwork was submitted to the state authorities, but the information was not forwarded to the IRS. As a result, the IRS treated the business as a continuing enterprise and taxes and interest kept accumulating. Once Applicant found out about the lien, he called the IRS and the error was corrected. The entire tax lien was released on October 1, 2014. The issue has been resolved. $42,179	For Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly	—
1.c	There is a home mortgage loan on Applicant’s primary residence with a high credit of $48,750 that went into foreclosure in February 2009. Applicant owed the mortgage holder $23,279 at the time of foreclosure. The house was purchased at auction by the highest bidder for $25,471.76, an amount which exceeded Applicant’s responsibility. There is no deficiency balance. Applicant eventually repurchased the residence, and does not have a mortgage. He spent $42,000 rebuilding the residence for his grandmother who resides in the house. The account has been resolved.	For Applicant	Mortgage or Home Loan Debt	Unknown	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.d	There is a home mortgage loan on Applicant’s rental property that he built in 2001 or 2002 with a high credit of $60,000 that went into foreclosure in February 2010. Applicant owed the mortgage holder approximately $50,000 at the time of foreclosure. The house was purchased by the highest bidder, the mortgage holder, for $59,428.25, an amount which exceeded Applicant’s responsibility. The residence was subsequently resold to another purchaser for $95,000. Applicant has spoken to the mortgage holder on several occasions, and they have told him there is a zero balance, but they refuse to put the facts in written form without his sending them his social security by facsimile or going to a local bank branch to prove who he is. Applicant is reluctant to put his social security number on a facsimile, and he noted that the closest local bank branch for the mortgage holder is 300 miles away. It is unlikely that a deficiency balance remains. Applicant has submitted some documentation to support his contentions, and it appears that the matter has been resolved.	For Applicant	Mortgage or Home Loan Debt	Unknown	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.e	There is a gas utility account with a past-due balance of $100 that was placed for collection and charged off in 2010. Applicant had previously converted the residence to electric and cancelled the gas account, and was not aware that the account was delinquent until he tried to reconnect the gas for his grandmother. Applicant paid the entire amount on July 11, 2014, over a month before the SOR was issued. The account has been resolved. $100	For Applicant	Utility or Phone Debt	Unknown	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.f	There is a telephone account with a past-due balance of $420 that was placed for collection in 2010. The account was subsequently transferred or sold to another collection agent who increased the unpaid balance to $433.83. Applicant was not aware that the account was delinquent until he was interviewed by the OPM investigator. It took him several months to track down the actual creditor and collection agent, and once he was successful, he paid the entire bill on December 8, 2014. The account has been resolved. $420	For Applicant	Utility or Phone Debt	Unknown	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.g	There is a motorcycle insurance account with a past-due balance of $81 that was placed for collection in 2009. The account was subsequently transferred or sold to another collection agent. Applicant was not aware that the account was delinquent until he was interviewed by the OPM investigator. It took him some time to track down the actual creditor and collection agent, and he paid the entire bill on December 8, 2014. The account has been resolved. $81	For Applicant	Unspecified Financial	Unknown	—	(b) conditions largely beyond the person’s control; acted responsibly	—

Allegation

Finding

Type

Response

Disqualifying (¶19)

Mitigating applied (¶20)

Mitigation

1.a

There were federal income tax returns for the tax years 2006, 2007, and 2009 that were not timely filed. The tax returns for the two earlier years were filed on February 21, 2013 – three months before Applicant was interviewed by an investigator from the U.S. Office of Personnel Management (OPM). For the tax year 2006, because of a tax overpayment, Applicant would have been entitled to a refund of $1,185, but because the tax return was filed more than three years after it was due, the refund claim was disallowed by the Internal Revenue Service (IRS). For the tax year 2007, because of another tax overpayment, Applicant would have been entitled to a refund of $562, but, once again, because the tax return was filed more than three years after it was due, the refund claim was disallowed by the IRS. For the tax year 2009, because of another tax overpayment, Applicant would have been entitled to an unspecified refund, but because the tax return would have been filed more than three years after it was due, the IRS stated that Applicant was no longer bound to file his tax return and he was no longer eligible for the refund. The tax return filing issues have been resolved.

For Applicant

Tax Filing Failure

Unknown

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(g) unexplained affluence

(a) behavior happened long ago / infrequent / unlikely to recur

(b) conditions largely beyond the person’s control; acted responsibly

—

1.b

There is a federal tax lien in the amount of $42,179.79 covering the tax periods of 2006, 2007, and 2008. When Applicant’s business was destroyed and closed, the proper paperwork was submitted to the state authorities, but the information was not forwarded to the IRS. As a result, the IRS treated the business as a continuing enterprise and taxes and interest kept accumulating. Once Applicant found out about the lien, he called the IRS and the error was corrected. The entire tax lien was released on October 1, 2014. The issue has been resolved.

$42,179

For Applicant

Unspecified Financial

Unknown

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(b) conditions largely beyond the person’s control; acted responsibly

—

1.c

There is a home mortgage loan on Applicant’s primary residence with a high credit of $48,750 that went into foreclosure in February 2009. Applicant owed the mortgage holder $23,279 at the time of foreclosure. The house was purchased at auction by the highest bidder for $25,471.76, an amount which exceeded Applicant’s responsibility. There is no deficiency balance. Applicant eventually repurchased the residence, and does not have a mortgage. He spent $42,000 rebuilding the residence for his grandmother who resides in the house. The account has been resolved.

For Applicant

Mortgage or Home Loan Debt

Unknown

—

(b) conditions largely beyond the person’s control; acted responsibly

—

1.d

There is a home mortgage loan on Applicant’s rental property that he built in 2001 or 2002 with a high credit of $60,000 that went into foreclosure in February 2010. Applicant owed the mortgage holder approximately $50,000 at the time of foreclosure. The house was purchased by the highest bidder, the mortgage holder, for $59,428.25, an amount which exceeded Applicant’s responsibility. The residence was subsequently resold to another purchaser for $95,000. Applicant has spoken to the mortgage holder on several occasions, and they have told him there is a zero balance, but they refuse to put the facts in written form without his sending them his social security by facsimile or going to a local bank branch to prove who he is. Applicant is reluctant to put his social security number on a facsimile, and he noted that the closest local bank branch for the mortgage holder is 300 miles away. It is unlikely that a deficiency balance remains. Applicant has submitted some documentation to support his contentions, and it appears that the matter has been resolved.

For Applicant

Mortgage or Home Loan Debt

Unknown

—

(b) conditions largely beyond the person’s control; acted responsibly

—

1.e

There is a gas utility account with a past-due balance of $100 that was placed for collection and charged off in 2010. Applicant had previously converted the residence to electric and cancelled the gas account, and was not aware that the account was delinquent until he tried to reconnect the gas for his grandmother. Applicant paid the entire amount on July 11, 2014, over a month before the SOR was issued. The account has been resolved.

$100

For Applicant

Utility or Phone Debt

Unknown

—

(b) conditions largely beyond the person’s control; acted responsibly

—

1.f

There is a telephone account with a past-due balance of $420 that was placed for collection in 2010. The account was subsequently transferred or sold to another collection agent who increased the unpaid balance to $433.83. Applicant was not aware that the account was delinquent until he was interviewed by the OPM investigator. It took him several months to track down the actual creditor and collection agent, and once he was successful, he paid the entire bill on December 8, 2014. The account has been resolved.

$420

For Applicant

Utility or Phone Debt

Unknown

—

(b) conditions largely beyond the person’s control; acted responsibly

—

1.g

There is a motorcycle insurance account with a past-due balance of $81 that was placed for collection in 2009. The account was subsequently transferred or sold to another collection agent. Applicant was not aware that the account was delinquent until he was interviewed by the OPM investigator. It took him some time to track down the actual creditor and collection agent, and he paid the entire bill on December 8, 2014. The account has been resolved.

$81

For Applicant

Unspecified Financial

Unknown

—

(b) conditions largely beyond the person’s control; acted responsibly

—

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Case Profile

Summary

Why the Applicant Prevailed

Conditions Referenced

Key Rule Quoted

Procedural Posture

Cite For

Full decision

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

STATEMENT OF CASE

FINDINGS OF FACT

POLICIES

ANALYSIS

WHOLE PERSON CONCEPT

FORMAL FINDINGS

CONCLUSION

FOOTNOTES