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ISCR Case 15-02410.h1 — CASE

ISCR Case 15-02410.h1denied

Case Headnote

ISCR Case No. 15-02410.h1

deniedMay 30, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 34-year-old federal contractor was denied a security clearance under Guideline F (Financial Considerations) due to a history of unfiled tax returns. The Statement of Reasons alleged that the applicant failed to file both federal and state income tax returns for the tax years 2007 through 2013. This conduct raised disqualifying condition F.1.g.

The applicant admitted to failing to file these returns and stated an intention to resolve the issue. However, the judge noted that no evidence was provided to demonstrate that any of the delinquent returns had actually been filed.

The denial was based on the applicant's failure to file federal and state income tax returns for multiple years and the lack of proof that these delinquent returns had been submitted. This ongoing non-compliance with tax obligations led the judge to conclude that the applicant's reliability and trustworthiness were significantly in doubt.

Why the Applicant Was Denied

Applicant failed to file federal and state income tax returns for multiple years.
Applicant did not provide proof of having filed any of the delinquent tax returns.
The applicant's conduct raised serious questions about his reliability and trustworthiness.

Conditions Referenced

Disqualifying

F.1.graisedFailure to File Annual Federal, State, or Local Income Tax Returns 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 issuedOct 21, 2015
Answer filedNov 16, 2015
Hearing held—Decided on written record
Decision dateMay 30, 2017

Cite For

Failure to File Tax Returns as a Disqualifying Condition Under Guideline F
Importance of Compliance with Tax Obligations in Security Clearance Evaluations
The Whole-person Concept in Assessing Eligibility for Security Clearance

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 the years 2007 through 2013, which raised significant financial concerns under Guideline F. The applicant's failure to mitigate these concerns led to a denial of his eligibility for a security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file his Federal and state income tax returns for tax years 2007 through 2013	Against Applicant	Tax Filing Failure	Admitted	—	—	—
1.b	failed to file his Federal and state income tax returns for tax years 2007 through 2013	Against Applicant	Tax Filing Failure	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. 15-02410 ) ) Applicant for Security Clearance

For Government: Candace L. Garcia, Esq., Department Counsel For Applicant: Pro se

05/30/2017 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

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

Statement of the Case

On October 21, 2015, the Department of Defense (DOD) issued to Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations. 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 effective within the DOD for SORs issued after September 1, 2006.

Applicant answered the SOR on November 16, 2015, and elected to have his case decided on the written record. Department Counsel submitted the Government’s file of relevant material (FORM). The FORM was mailed to Applicant, and it was received by him on May 13, 2016. Applicant was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. Applicant did not respond to the FORM. Therefore, the Government’s evidence identified as Items 2 through 9 are admitted into evidence without objection. The case was assigned to me on May 3, 2017.

FINDINGS OF FACT

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

Applicant is 34 years old. He is not married and has no children. He has worked for a federal contractor since 2002.

Applicant failed to file his Federal and state income tax returns for tax years 2007 through 2013. He disclosed this information on his October 2014 security clearance application (SCA) and discussed it during his December 2014 background interview with a government investigator. Applicant explained that in the past he gave his father his tax returns to prepare for him. When he moved out of his father’s house in 2007, he forgot to file his tax returns. Initially he was embarrassed, but then was scared of the potential consequences and penalties the Internal Revenue Service (IRS) might impose and repeatedly did not file his tax returns for subsequent years. He told the investigator that he did not owe state or federal taxes because he believed he had sufficient funds withheld from his pay. After he completed his SCA, he researched failing to file tax returns or pay taxes. He told the investigator that there were no penalties for not filing tax returns if he was due a refund. He intended to give an accountant his tax documents in January 2015, so all of his delinquent tax returns could be filed. He believed he would receive a tax refund for all of the delinquent years. No other information was provided. Applicant did not provide proof that he has filed his delinquent tax returns.

POLICIES

When evaluating an applicant’s suitability for a security clearance, 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 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. 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. Under Directive ¶ E3.1.15, 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 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.

This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handing and safeguarding classified information.1

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

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

Applicant failed to timely file his 2007 through 2013 federal and state 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, or a death, divorce or separation), and the individual acted responsibly under the circumstances; and

(c) the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control.

Applicant admitted he forgot to file his 2007 federal and state tax returns. Subsequently, he became embarrassed and scared of the consequences. He then failed to file his 2008 through 2013 federal and state tax returns. He failed to provide documentary proof that he has filed any of the delinquent returns. Without such proof, I cannot find his behavior is unlikely to recur. His conduct is recent, ongoing, and casts doubt on his current reliability, trustworthiness, and good judgment. AG ¶ 20(a) does not apply. Applicant provided no evidence that the conditions that caused his financial problem were beyond his control. He provided no evidence that the problem is being resolved or under control. AG ¶¶ 20(b) and 20(c) do not apply.

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(a):

(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 in my whole-person analysis. Some of the factors in AG ¶ 2(a) were addressed under that guideline, but some warrant additional comment.

Applicant is 34 years old. He admitted he failed to file his 2007 through 2013 federal and state tax returns. He told the government investigator that he would give his accountant the documents to prepare his delinquent tax returns in January 2015. He failed to provide proof that he has filed any of the delinquent returns. 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. 01894 at 5 (App. Bd. Aug 18, 2015) See Cafeteria v. Restaurant Workers Union Local 473 v. McElroy 284 F.2d 173, 183 (D.C. Cir. 1960, aff’d, 367 U.S. 886 (1961).2

Applicant’s repeated failure to comply with rules and regulations concerning his legal obligation to timely file tax returns is a security concern. He has failed to meet his burden of persuasion. The record evidence leaves me with serious 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.

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.b: Against 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’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 See ISCR Case No. 11-05365 at 3 (App.Bd. May 1, 2012). 2 ISCR Case. No. 12-10933 at 3 (App. Bd. Jun 29,, 2016)