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ISCR Case 14-01376.h1 — CASE

ISCR Case 14-01376.h1denied

Case Headnote

ISCR Case No. 14-01376.h1

deniedAug 5, 2016· Hon. Matthew E. Malone· hearing

Summary

A 58-year-old former Army service member and security officer was denied a security clearance under Guideline F, Financial Considerations. The denial stemmed from his failure to file federal and state income tax returns from 2006 to 2012. This deliberate non-filing was an attempt to prevent his tax refunds from being applied to outstanding child support debts.

Although the applicant subsequently filed all past-due returns in 2013 and repaid his tax debts, the adjudicator determined that his actions demonstrated poor judgment and a lack of reliability. The decision highlighted that his calculated avoidance of financial obligations outweighed his later efforts to resolve the tax debts.

Specifically, the applicant was alleged to have failed to file both federal and state income tax returns for the years 2006 through 2012. Disqualifying conditions under Guideline F were raised, while one mitigating condition was applied. Ultimately, the security clearance was denied.

Why the Applicant Was Denied

Applicant failed to file federal and state income tax returns for multiple years to avoid child support debt diversion.
Applicant's deliberate non-filing of tax returns demonstrated poor judgment and lack of reliability.
The applicant's attempts to resolve his tax debts were outweighed by his calculated avoidance of financial obligations.

Conditions Referenced

Disqualifying

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

Mitigating

AG ¶ 20(d)appliedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve Debts

Key Rule Quoted

“A security clearance decision is intended only to resolve whether it is clearly consistent with the national interest for an applicant to either receive or continue to have access to classified information.”
— Department of the Navy v. Egan, 484 U.S. 518 (1988)

Procedural Posture

SOR issuedJun 7, 2015
Answer filed—Applicant requested a decision without a hearing.
Hearing held—No hearing was held.
Decision dateAug 5, 2016

Cite For

Denial of Security Clearance Due to Failure to File Tax Returns Under Guideline F
Impact of Financial Obligations on Security Clearance Eligibility
Judgment and Reliability Concerns Stemming From Financial Misconduct

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 file his federal and state income tax returns for seven consecutive years, which raised significant financial concerns under Guideline F. Despite some efforts to resolve his tax debts, the applicant's actions were deemed insufficient to mitigate the security risks associated with his financial conduct, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file his federal income tax returns for tax years 2006 through 2012 $2,475	Against Applicant	Tax Filing Failure	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations (g) unexplained affluence	—	—
1.b	failed to file his state income tax returns for the same years	Against Applicant	Tax Filing Failure	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations (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: ) ) ) [NAME REDACTED] ) ISCR Case No. 14-01376 ) ) Applicant for Security Clearance )

For Government: Stephanie C. Hess, Esq., Department Counsel For Applicant: Pro se

08/05/2016 ______________

STATEMENT OF CASE

______________

MALONE, Matthew E., Administrative Judge:

Applicant failed to file his income tax returns as required between 2006 and 2012. He did so to avoid diversion of his tax refunds to satisfy his child support debts. His request for continued access to classified information is denied.

Statement of the Case

On April 9, 2014, Applicant submitted an Electronic Questionnaire for Investigations Processing (EQIP) to obtain or renew his eligibility for access to classified information. After reviewing the completed background investigation, Department of Defense (DOD) adjudicators could not determine that it is clearly consistent with the national interest for Applicant to have access to classified information.1 On June 7, 2015, DOD issued a Statement of Reasons (SOR) alleging facts that raise security concerns about financial considerations (Guideline F). Applicant timely responded to the SOR and requested a decision without a hearing. On January 21, 2016, Department Counsel for the Defense Office of Hearings and Appeals (DOHA) issued a File of Relevant Material (FORM) in support of the SOR. Applicant received the FORM on February 4, 2016, but did not submit any response to the FORM within the time allotted. The record closed on March 5, 2016, and the case was assigned to me on June 6, 2016.

FINDINGS OF FACT

Under Guideline F, the Government alleged Applicant failed to file his federal income tax returns for tax years 2006 through 2012 (SOR 1.a); and that he failed to file his state income tax returns for the same years (SOR 1.b). Applicant denied both allegations, and provided information showing that he had filed his past-due returns in 2013. He also established that he was in repayment of both his federal and state tax debts, which totaled $2,475. (FORM, Items 1 and 3)

Applicant is 58 years old. He served in the United States Army from July 1978 until July 1982, when he received a general discharge under honorable conditions. From 1996 until 2004, Applicant worked for the federal government as a police officer. After he left federal service, he worked as a security guard for several different federal contractors. He was hired for his current position as a security officer in September 2013. (FORM, Item 4)

Applicant was married from July 1982 until divorcing in August 2001. He remarried in September 2001, but again divorced in March 2006. He has two adult children and one 16-year-old child for whom he is obligated to pay monthly support to the child’s mother. As of October 2014, Applicant owed more than $17,000 in past-due child support. (FORM, Items 4 - 6)

Applicant deliberately did not file his federal or state income tax returns for the 2006, 2007, 2008, 2009, 2010, 2011, and 2012 tax years. He knew he would be owed refunds for those years, but he did not want those funds diverted for application to his child support debt. However, he decided to file his past-due returns in 2013. The total refunds due from those filings was $3,408 and was, in fact, diverted to his child support debt. He also owed $2,475 for those tax years, and he has been repaying that debt to the IRS and state authorities since 2013. (FORM, Items 3 and 6)

POLICIES

Each security clearance decision must be a fair, impartial, and commonsense determination based on examination of all available relevant and material information,4 and consideration of the pertinent criteria and adjudication policy in the adjudicative guidelines. Decisions must also reflect consideration of the factors listed in ¶ 2(a) of the new guidelines. Commonly referred to as the “whole-person” concept, those factors are:

(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.

The presence or absence of a disqualifying or mitigating condition is not determinative of a conclusion for or against an applicant. However, specific applicable guidelines should be followed whenever a case can be measured against them as they represent policy guidance governing the grant or denial of access to classified information. A security clearance decision is intended only to resolve whether it is clearly consistent with the national interest for an applicant to either receive or continue to have access to classified information. Department Counsel must produce sufficient reliable information on which DOD based its preliminary decision to deny or revoke a security clearance for an applicant. Additionally, Department Counsel must prove controverted facts alleged in the SOR. If the Government meets its burden, it then falls to the applicant to refute, extenuate, or mitigate the case for disqualification.

Because no one is entitled to a security clearance, applicants bear a heavy burden of persuasion to establish that it is clearly consistent with the national interest for them to have access to protected information. A person who has access to such information enters into a fiduciary relationship with the Government based on trust and confidence. Thus, there is a compelling need to ensure each applicant possesses the requisite judgment, reliability, and trustworthiness of one who will protect the nation’s interests as his or her own. The “clearly consistent with the national interest” standard compels resolution of any reasonable doubt about an applicant’s suitability for access to classified information in favor of the Government.9

ANALYSIS

Financial Considerations

Available information supports the SOR allegations. The resulting security concern about the facts established by the Government is expressed at AG ¶ 18:

Failure or inability 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 information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Compulsive gambling is a concern as it may lead to financial crimes including espionage. Affluence that cannot be explained by known sources of income is also a security concern. It may indicate proceeds from financially profitable criminal acts.

More specifically, Applicant’s conduct requires application of the following AG ¶ 19 disqualifying conditions:

(a) inability or unwillingness to satisfy debts;

(g) failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same.

These disqualifying conditions apply because Applicant tried to avoid paying past-due child support by deliberately failing to file any income tax returns for seven tax years in a row. He is still repaying past-due taxes and, presumably, his child support arrearage.

Of the pertinent mitigating conditions, only AG ¶ 20(d) (the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts) is applicable to these facts. Applicant acted to resolve his tax debt and past-due filings in 2013. Nonetheless, the benefit he receives from AG ¶ 20(d) is far outweighed by his calculated attempt to avoid his financial obligations. Applicant failed to mitigate the security concerns raised by the Government’s information.

In addition to evaluating the facts and applying the appropriate adjudicative factors under Guideline F, I have reviewed the record before me in the context of the whole-person factors listed in AG ¶ 2(a). Applicant did not carry his burden of presenting sufficient information to refute or mitigate the security concerns raised by his failure to satisfy his income tax obligations. Without such information, doubts about his suitability for access to classified information remain. Because protection of the national interest is the principal focus of these adjudications, those doubts must be resolved against the Applicant.

FORMAL FINDINGS

Formal findings 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.b: Against Applicant

CONCLUSION

In light of all available information, it is not clearly consistent with the national interest for Applicant to have access to classified information. Applicant’s security clearance is revoked.

MATTHEW E. MALONE Administrative Judge

FOOTNOTES

Required by Executive Order 10865, as amended, and by DOD Directive 5220.6 (Directive). See Directive, Enclosure 2. See also 32 C.F.R. § 154, Appendix H (2006). See Directive, Enclosure 3, Section E3.1.7. The FORM included six exhibits (Items 1 - 6) proffered in support of the Government’s case. Directive. 6.3. See Department of the Navy v. Egan, 484 U.S. 518 (1988). Directive, E3.1.14. Directive, E3.1.15. See Egan, 484 U.S. at 528, 531. See Egan; Adjudicative Guidelines, ¶ 2(b).