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ISCR Case 12-08983.h1 — CASE

ISCR Case 12-08983.h1denied

Case Headnote

ISCR Case No. 12-08983.h1

deniedMar 6, 2017· Hon. Nichole L. Noel· hearing

Summary

A software engineer was denied a security clearance under Guideline F (Financial Considerations) due to unresolved financial issues. The Statement of Reasons detailed several concerns, including an outstanding collection account of $1,876 owed to a university and a $24,356 judgment related to a credit card.

Further issues included the applicant's failure to file federal and state income taxes for 2010 and 2011, and an approximately $26,000 lien for unpaid federal taxes. These conditions raised disqualifying concerns under Adjudicative Guidelines Paragraphs 19, 19(c), and 19(g).

The denial was primarily based on the applicant's failure to timely file federal and state income taxes for the specified years, and the unresolved $26,000 in unpaid federal taxes. The applicant also did not provide sufficient documentation to substantiate claims of financial stability or established payment plans, leading to the ultimate denial of the security clearance.

Why the Applicant Was Denied

The applicant failed to timely file federal and state income taxes for 2010 and 2011.
The applicant has approximately $26,000 in unpaid federal taxes, which remains unresolved.
The applicant did not provide documentation to support claims of financial stability or payment plans.

Conditions Referenced

Disqualifying

AG ¶ 19raisedFinancial ConsiderationsThe applicant's financial problems raise concerns about reliability and trustworthiness.
AG ¶ 19(c)appliedInability to Satisfy DebtsThe applicant has a history of not paying financial obligations.
AG ¶ 19(g)appliedFailure to File Tax ReturnsThe applicant failed to file required tax returns.

Key Rule Quoted

“Unresolved delinquent debt is a serious security concern because failure to satisfy debts 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 information.”

Procedural Posture

SOR issuedNov 9, 2015
Answer filed—Applicant requested a hearing.
Hearing heldJul 14, 2016
Decision dateMar 6, 2017

Cite For

Failure to Mitigate Financial Concerns Under Guideline F
Impact of Unresolved Tax Issues on Security Clearance Eligibility
Importance of Providing Corroborating Documentation for Financial Claims

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 unresolved financial issues, including a collection account, a judgment for a credit card, and unpaid federal taxes. While the applicant resolved the credit card debt, the judge determined that the applicant failed to mitigate the security concerns related to her financial history, leading to a denial of her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant owes a collection account to a university for $1,876 $1,876	Against Applicant	Unspecified Financial	Unknown	—	—	—
1.b	a $24,356 judgment for a credit card $24,356	For Applicant	Credit Card Debt	Admitted	—	(g) arrangements made with the tax authority; in compliance	Documented Debt Paid in Full
1.c	failed to file federal and state income taxes in 2010 and 2011	Against Applicant	Tax Filing Failure	Unknown	—	—	—
1.d	approximately $26,000 lien for unpaid federal taxes $26,000	Against Applicant	Tax Unpaid	Admitted	—	—	—

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. 12-08983 ) ) Applicant for Security Clearance

For Government: Caroline E. Heintzelman, Esq., Department Counsel For Applicant: Pro se

03/06/2017 ______________

STATEMENT OF CASE

______________

NOEL, Nichole L., Administrative Judge:

Applicant contests the Department of Defense’s (DOD) intent to deny her eligibility for a security clearance to work in the defense industry. Although Applicant has paid the largest consumer credit account alleged in the SOR, she failed to mitigate the concerns raised by her failure to timely file federal and state income taxes in 2010 and 2011, as well as the concerns raised by her approximately $26,000 in unpaid federal taxes. Clearance is denied.

Statement of the Case

On November 9, 2015, the Department of Defense (DOD) issued a Statement of Reasons (SOR) detailing security concerns under the financial considerations guideline.1 DOD adjudicators were unable to find that it is clearly consistent with the national interest to grant or continue Applicant’s security clearance and recommended that the case be submitted to an administrative judge for a determination whether to revoke or deny Applicant’s security clearance.

Applicant timely answered the SOR and requested a hearing. On June 23, 2016, I issued a pre-hearing order to the parties regarding the exchange and submission of discovery, the filing of motions, and the disclosure of any witnesses. Department Counsel submitted documents by the July 6, 2016 deadline. At the hearing, which proceeded as scheduled on July 14, 2016, I admitted Government’s Exhibits (GE) 1 through 5 and Hearing Exhibits I through III, without objection. After the hearing, the record remained open until August 31, 2016, to allow Applicant to submit documentation to support her claims regarding her finances.2 She did not submit any documents. The Defense Office of Hearing and Appeals (DOHA) received the transcript (Tr.) on July 20, 2016.

PROCEDURAL MATTERS

SOR Amendment

At hearing, Department Counsel moved to amend the SOR to add an allegation under the financial considerations guideline, specifically that the IRS filed a tax lien against Applicant in November 2016, seeking to collect approximately $26,000 in unpaid federal taxes. Applicant received notice of the proposed amendment in March 2016, but did not respond. At hearing, Applicant acknowledged receipt of the proposed amendment. She did not object to the amendment, which she admitted and denied, in part. Applicant admitted that she owed unpaid federal taxes, but she denied the amount owed or the existence of a lien. The SOR was amended without objection, the allegation is added to the SOR as ¶ 1.d, and Applicant’s answer was noted for the record.3

FINDINGS OF FACT

Applicant has worked for a federal contactor as a software engineer since May 2006. She completed her first security clearance application in April 2012, disclosing her failure to file and pay state and federal taxes for 2010 and 2011. She also disclosed participating in a debt consolidation program and retaining legal counsel to resolve a credit debt. Applicant did not disclose any delinquent or past-due accounts. In addition to failing to file state and federal tax returns for the years reported (1.c), the credit reports in the record show Applicant owes a collection account to a university for $1,876 (1.a), a $24,356 judgment for a credit card (1.b), and approximately $26,000 lien for unpaid federal taxes (1.d).4

Applicant incurred SOR ¶ 1.a while pursuing her post-graduate degree. Although she did not complete her studies, she believes that she paid the alleged account in 2010 or 2011 when she withdrew from her program. However, she did not submit any documentation showing that the account has been resolved. The largest debt in the SOR, ¶ 1.b, is for a credit card Applicant and her ex-husband used during their marriage, which lasted from 1999 to 2002. For a time, Applicant resisted paying the account because she believed that her ex-husband should have to pay for the charges he incurred. However, Applicant is the primary account holder while her ex-husband was an authorized user. As a result, he had no legal obligation to help her repay the debt. The creditor obtained a judgment against Applicant and garnished her wages to recover the delinquent balance. In 2014, Applicant settled the account with the creditor and it is resolved.5

Applicant’s tax problems stem from the financial help she provided to her family members between 1998 and 2010. As the oldest of six siblings and the only one with consistent employment, Applicant assumed financial responsibility for younger siblings after she completed college and began working in the late 1990s. From 2004 to 2010, Applicant’s younger brother and his two minor children lived with her. Applicant claimed head of household status on her federal taxes. She increased the number of tax exemptions to decrease the amount of taxes withheld from her pay. In 2010, Applicant’s brother became financially independent and assumed financial responsibility for his children. In an effort to make sure that he was filing his tax returns correctly, Applicant delayed filing her own 2010 and 2011 federal and state tax returns. As of April 2016, Applicant claims that her federal and state income tax filings are up to date; however, she did not provide any corroborating documentation.6

Applicant admits she owes unpaid federal taxes as alleged in SOR 1.d. She cites two reasons for the federal tax liability: her failure to adjust her income tax withholdings after losing her head of household filing status and the tax consequences of cashing out stock options. In 2005, Applicant’s father was arrested and charged with a felony. Applicant sold stock options she received from prior employment to help pay for his legal defense. In 2015, the IRS sent her employer a “lock-in” letter, ordering that her exemptions be reduced to zero. As a result of the adjustment, Applicant’s federal tax withholdings resulted in an overpayment of her federal tax liability. The IRS captured her refund and applied it to her outstanding federal tax balance. Applicant claims that she established a payment plan with the IRS in October 2015 and that she made $400 monthly payments in April and May 2016. She did not provide any documents confirming either the payment plan or payments to the IRS.7

Applicant’s current financial health is unclear. She earns $115,000 annually and is the primary source of income in her household, which includes her long-time partner. He contributes $250 per month to the household expenses. Applicant continues to provide over $1,000 each month in financial support to family members. She testified that in addition to the $400 IRS payment, she is repaying a 401kloan as well as $400 each month toward student loans. Applicant believes that she has at least $1,000 in disposable income each month. The credit reports in the record suggest that Applicant’s monthly expenses exceed the estimate that she provided at hearing. Applicant did not provide a monthly budget or provide any other financial records to establish her ability to live within her means.8

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 for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be 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, administrative judges apply the guidelines 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 access to classified information 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. Under Directive ¶ E3.1.15, 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.” The applicant has the ultimate burden of persuasion to obtain 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 the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information. Section 7 of 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

Unresolved delinquent debt is a serious security concern because failure to “satisfy debts [or] 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 information.”9 Similarly, an individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information.

The record shows that Applicant has one outstanding delinquent account and that a creditor secured a judgment against her and garnished her wages to recover monies owed. Also, she owes at least $26,000 in unpaid federal taxes. Applicant has a history of not paying her financial obligations.10 She also admits that she failed to timely file her federal and state tax returns in 2010 and 2011 as required.11 Applicant did not produce sufficient evidence to mitigate the security concerns raised by her financial history. Although Applicant provided documentation that she has resolved the $24,000 credit card debt alleged in SOR ¶ 1.b, she has not provided documentation to corroborate her testimony that SOR ¶ 1.a has been paid, that she has filed her outstanding federal and state tax returns as alleged in SOR ¶ 1.c, or that she is participating in a payment plan to resolve her outstanding federal taxes as alleged in SOR ¶ 1.d. Accordingly, Applicant’s financial problems are ongoing and remain a concern.

After reviewing the record, it is not appropriate to grant Applicant access to classified information based on her current financial situation. In reaching this conclusion, I have also considered the whole-person factors at AG ¶ 2(a). Applicant’s financial problems are not caused by irresponsible for reckless behavior, but by her willingness to overextend herself to support her family members. Ultimately, Applicant failed to establish that she is able to live within her means, meet her recurring financial obligations, or that her finances are otherwise under control. This decision should not be construed as a determination that Applicant cannot or will not attain the type of financial stability necessary to justify the granting of a security clearance. The award of a security clearance is not a once in a lifetime occurrence, but is based on applying the factors, both disqualifying and mitigating, to the evidence presented. In the future, she may well demonstrate persuasive evidence of her security worthiness.

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, 1.c - 1.d: Against Applicant

Subparagraph 1.b: For Applicant

CONCLUSION

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

________________________ Nichole L. Noel Administrative Judge

FOOTNOTES

1 This case is adjudicated under Executive Order (EO) 10865, Safeguarding Classified Information within Industry, signed by President Eisenhower on February 20, 1960, as amended; as well as DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program, dated January 2, 1992, as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on September 1, 2006, apply to this case. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). The AG replace the guidelines in Enclosure 2 to the Directive. 2 Tr. 75. 3 Tr. 9-14. 4 Tr. 22-23; GE 3-5. 5 Tr. 29-35, 47-49; GE 1; Answer. 6 Tr. 36-40, 40-50, 53, 58, 60-65. 7 Tr. 35-36, 39-41, 50-57, 65. 8 Tr. 43-47, 66-74; GE 3-5. 9 AG ¶ 18. 10 AG ¶¶ 19(c). 11 AG ¶ 19 (g).