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ISCR Case 15-06046.h1 — CASE

ISCR Case 15-06046.h1denied

Case Headnote

ISCR Case No. 15-06046.h1

deniedNov 3, 2016· Hon. Edward W. Loughran· hearing

Summary

A 47-year-old defense contractor employee was denied a security clearance due to significant financial considerations under Guideline F, specifically concerning unpaid tax liabilities. The Statement of Reasons (SOR) detailed multiple federal and state tax liens. The IRS filed liens against the applicant in 2005 for $146,108; in February 2008 for $12,401; in June 2008 for $92,493; in July 2008 for $92,529; and in 2009 for $101,542. Additionally, the state filed tax liens in 2008 for $79,461 and in 2009 for $8,910. These liens collectively amounted to approximately $490,000 in unpaid taxes.

The denial was based on the applicant's failure to pay any of these taxes, which raised concerns about his reliability and trustworthiness. Although the applicant claimed his taxes were in currently-not-collectible status with both the IRS and the state, the judge determined this did not mitigate his non-compliance with tax laws.

Ultimately, the judge found no applicable mitigating conditions to alleviate the financial concerns, leading to the denial of the applicant's security clearance.

Why the Applicant Was Denied

The applicant has not paid any of his taxes, which raises concerns about his reliability and trustworthiness.
The applicant's claim of currently-not-collectible status for his taxes does not mitigate his failure to comply with tax laws.
There were no applicable mitigating conditions that could alleviate the financial concerns.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations

Key Rule Quoted

“Failure to comply with Federal and/or state tax laws suggests that an applicant has a problem with abiding by well-established Government rules and systems.”
— ISCR Case No. 14-06686 at 2 (App. Bd. Apr. 27, 2016)

Procedural Posture

SOR issuedApr 16, 2016
Answer filedMay 12, 2016
Hearing heldSep 21, 2016
Decision dateNov 3, 2016

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Impact of Unpaid Tax Liabilities on Security Clearance Eligibility
Importance of Compliance with Tax Laws in Security Clearance Determinations

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 multiple financial concerns under Guideline F, including significant unpaid tax debts to both the IRS and state authorities. While one allegation regarding a state tax lien was ruled in favor of the applicant, the majority of the financial allegations were found against him, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401); July 2008 ($92,529); and 2009 ($101,542). $146,108	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401); July 2008 ($92,529); and 2009 ($101,542). $92,493	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401); July 2008 ($92,529); and 2009 ($101,542). $12,401	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401); July 2008 ($92,529); and 2009 ($101,542). $92,529	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401); July 2008 ($92,529); and 2009 ($101,542). $101,542	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	SOR ¶ 1.f alleges an unpaid state tax lien.	For Applicant	Tax Unpaid	Unknown	—	—	—
1.g	The state filed tax liens against him in 2008 ($79,461); and 2009 ($8,910). $79,461	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

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. 15-06046 ) Applicant for Security Clearance )

For Government: Bryan J. Olmos, Esq., Department Counsel For Applicant: Pro se

11/03/2016 ______________

STATEMENT OF CASE

______________

LOUGHRAN, Edward W., Administrative Judge:

Applicant did not mitigate the financial considerations security concerns. Eligibility for access to classified information is denied.

Statement of the Case

On April 16, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant 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 (AG) implemented by the DOD on September 1, 2006.

Applicant responded to the SOR on May 12, 2016, and requested a hearing before an administrative judge. The case was assigned to me on July 28, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on August 10, 2016, scheduling the hearing for September 21, 2016. The hearing was convened as scheduled. Government Exhibits (GE) 1 through 4 were admitted in evidence without objection. Applicant testified, but he did not submit any documentary evidence. DOHA received the hearing transcript (Tr.) on September 30, 2016.

FINDINGS OF FACT

Applicant is a 47-year-old employee of a defense contractor. He has worked for his current employer since December 2013. He is applying for a security clearance for the first time. He has an associate’s degree that was awarded in 2013. He is single after two marriages ended in annulment and divorce. He has two minor children.1

Applicant owned a business in the 1990sand another business from about 1999 to 2008. Both businesses ultimately failed, but Applicant extended them by failing to pay the IRS and the state payroll taxes that he withheld from his employees’ paychecks. The IRS filed tax liens against him in 2005 ($146,108); June 2008 ($92,493); February 2008 ($12,401);2 July 2008 ($92,529); and 2009 ($101,542). The state filed tax liens against him in 2008 ($79,461); and 2009 ($8,910).3

Applicant has not paid any of the taxes. He estimated that he owes the IRS about $340,000 and the state about $150,000 for the payroll taxes from his second business. He stated that the IRS placed his taxes in currently-not-collectible status.4 He indicated that the state also told him that it was not pursuing him about his unpaid taxes. He has not had any contact with the IRS or the state in about five years. He is happy at his current job and does not plan to open any other businesses.5

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.”

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

Guideline F, Financial Considerations

The security concern 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.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following are potentially applicable in this case: (a) inability or unwillingness to satisfy debts; and

The IRS and Applicant’s state filed tax liens against him after he failed to pay the taxes he withheld from his employees’ paychecks. AG ¶¶ 19(a) and 19(c) are established as disqualifying conditions.

SOR ¶ 1.falleges an unpaid state tax lien. The evidence shows the tax lien in question is a federal tax lien. SOR ¶ 1.fis concluded for Applicant.

Conditions that could mitigate financial considerations security concerns are provided under AG ¶ 20. The following 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;

(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; and

(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.

Applicant has not paid any of his taxes. Any determination by the IRS that his taxes are currently-not-collectible does not mitigate Applicant’s egregious conduct.6 The Appeal Board has stated that “[f]ailure to comply with Federal and/or state tax laws suggests that an applicant has a problem with abiding by well-established Government rules and systems. Voluntary compliance with rules and systems is essential for protecting classified information.” See e.g. ISCR Case No. 14-06686 at 2 (App. Bd. Apr. 27, 2016). There are no applicable mitigating conditions.

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 relevant 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.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. I conclude Applicant did not mitigate the financial considerations security concerns.

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.e: Against Applicant Subparagraph 1.f: For Applicant Subparagraph 1.g: 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 eligibility for a security clearance. Eligibility for access to classified information is denied.

________________________ Edward W. Loughran Administrative Judge

FOOTNOTES

1 Tr. at 27, 31-33; GE 1, 2. 2 SOR ¶ 1.fidentified this lien as a state tax lien. The two credit reports list it as a federal tax lien. 3 Tr. at 19-31; Applicant’s response to SOR; GE 1-4. 4 See https://taxpayeradvocate.irs.gov/get-help/currently-not-collectible. 5 Tr. at 19-31. See https://www.irs.gov/uac/employer-and-employee-responsibilities-employment-tax-enforcement: “Employers who do not comply with the employment tax laws may be subject to criminal and civil sanctions for willfully failing to pay employment taxes.”