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ISCR Case 15-06867.h1 — CASE

ISCR Case 15-06867.h1denied

Case Headnote

ISCR Case No. 15-06867.h1

deniedMar 9, 2017· Hon. Robert E. Coacher· hearing

Summary

A 60-year-old federal contractor employee was denied eligibility for access to sensitive information under Guideline F (Financial Considerations) due to trustworthiness concerns stemming from financial issues. The Statement of Reasons specifically cited the applicant's failure to file federal tax returns for 2013 and 2014, as well as a Chapter 7 bankruptcy filed in 2014.

Disqualifying conditions F.1.a (inability or unwillingness to satisfy debts), F.1.c (a history of not meeting financial obligations), and F.1.g (failure to file tax returns) were raised. While mitigating conditions F.2.b (the financial problems were not recent), F.2.c (the amount of the debt was small), and F.2.d (the applicant initiated a good-faith effort to repay overdue debts) were considered, they were not sufficient to overcome the concerns.

The denial was based on the applicant's failure to file the 2013 and 2014 federal income tax returns, a history of financial difficulties including the Chapter 7 bankruptcy and outstanding federal tax liabilities, and a lack of demonstrated financial responsibility.

Why the Applicant Was Denied

Applicant failed to file 2013 and 2014 federal income tax returns, raising trustworthiness concerns.
Applicant has a history of financial difficulties, including a Chapter 7 bankruptcy and outstanding federal tax liabilities.
There was a lack of evidence showing a meaningful track record of financial responsibility.

Conditions Referenced

Disqualifying

F.1.araisedInability or Unwillingness to Satisfy Debts
F.1.craisedA History of Not Meeting Financial Obligations
F.1.graisedFailure to File Annual Federal, State, or Local Income Tax Returns as Required

Mitigating

F.2.bappliedConditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlApplicant experienced unemployment and severe medical issues.
F.2.cappliedThe Person Has Received or Is Receiving Counseling for the ProblemThere is evidence of financial counseling.
F.2.drejectedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve DebtsLack of evidence showing good-faith efforts to resolve tax debts.

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedApr 15, 2016
Answer filedMay 13, 2016
Hearing heldOct 25, 2016
Decision dateMar 9, 2017

Cite For

Failure to File Tax Returns Under Guideline F
Impact of Financial Difficulties on Trustworthiness
Consideration of Mitigating Conditions in Financial Cases

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 significant financial issues, including failure to file federal tax returns for 2013 and 2014, and a Chapter 7 bankruptcy filing due to medical debts. The applicant's financial problems were deemed recent and unresolved, leading to a denial of eligibility for access to sensitive information.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failure to file 2013 and 2014 federal tax returns $5,000	Against Applicant	Tax Filing Failure	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (g) unexplained affluence	—	—
1.b	2014 Chapter 7 bankruptcy $120,000	Against Applicant	Bankruptcy Filing	Admitted	(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: ) ) ) ADP Case No. 15-06867 ) Applicant for Public Trust Position )

For Government: Andre M. Gregorian, Esq., Department Counsel For Applicant: Pro se

03/09/2017 ______________

STATEMENT OF CASE

______________

COACHER, Robert E., Administrative Judge:

Applicant has not mitigated the financial considerations trustworthiness concerns. Eligibility for access to sensitive information is denied.

Statement of the Case

On April 15, 2016, the Department of Defense (DOD) issued Applicant a Statement of Reasons (SOR) detailing trustworthiness concerns under Guideline F, financial considerations. DOD acted under Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); DOD Regulation 5200.2-R, Personnel Security Program, dated January 1987, as amended (Regulation); and the adjudicative guidelines (AG) effective within the DOD on September 1, 2006.

Applicant answered (Ans.) the SOR on May 13, 2016, and requested a hearing before an administrative judge. The case was assigned to me on May 15, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on September 20, 2016, and the hearing was convened as scheduled on October 25, 2016. The Government offered exhibits (GE) 1 through 3, which were admitted into evidence without objection. Applicant testified and offered exhibits (AE) A and B, which were admitted into evidence without objection. DOHA received the hearing transcript (Tr.) on November 3, 2016.

FINDINGS OF FACT

Applicant admitted all the SOR allegations, with explanations. Her admissions are incorporated as findings of fact. After a review of the pleadings and evidence, I make the following additional findings of fact.

Applicant is a 60-year-old employee of a federal contractor. She has worked for this employer since April 2013. She is a high school graduate. She is married and has three adult children (she also had a 14-year-old daughter, but in 2010 or 2011, her parental rights were terminated based upon child sexual abuse allegations against her husband. No criminal charges were ever brought).1

The SOR alleges Applicant failed to timely file her 2013 and 2014 federal income tax returns, and in September 2014, she filed a Chapter 7 bankruptcy, which resulted in the discharge of her debts. The allegations are supported by admissions in her security clearance application and court documents showing the bankruptcy.2

Applicant has a history of financial difficulties. From 2007 to 2013, she was underemployed or unemployed. She also experienced some major medical problems. In 2010, she was diagnosed with congestive heart failure, and in 2013, she had stints put in for her heart condition. She did not have insurance at the time and accrued approximately $100,000 in medical expenses, which necessitated filing for Chapter 7 bankruptcy protection. Her current income from both her jobs is approximately $36,000. The status of the SOR-related debts is as follows:3

SOR ¶ 1.a (failure to file 2013 and 2014 federal tax returns):

Applicant testified that she failed to file these years’ tax returns because her husband was not cooperative in supplying information when he learned that they owed tax liability. She finally filed her 2013 federal tax return in 2016, after the SOR was issued, and claimed “married filing separately” status. She provided a copy of the 2013 tax return at the hearing. She also filed her 2014 federal tax return in 2016 using her same filing status. She received a letter back from the IRS in October 2016, stating that her 2014 return had already been filed as “married filing jointly.” The IRS rejected the “married filing separately” return. She does not know when the accepted return was filed. Applicant also stated that she owes federal tax liability of approximately $5,000 for tax years 2009 and 2013-2015.4 She did not provide documentation showing the establishment of a payment plan. Applicant’s husband controls the finances in their household and is unwilling to pay the tax amount owed.5

SOR ¶ 1.b (2014 Chapter 7 bankruptcy):

Applicant and her husband sought bankruptcy relief because of the debts she accumulated, mostly because of her medical debts. They completed the mandatory financial counseling course. The total debt discharged through this bankruptcy was approximately $120,000 in December 2014.6

POLICIES

Positions designated as ADP I and ADP II are classified as “sensitive positions.” (See Regulation ¶¶ C3.1.2.1.1.7 and C3.1.2.1.2.3.) “The standard that must be met for . . . assignment to sensitive duties is that, based on all available information, the person’s loyalty, reliability, and trustworthiness are such that . . . assigning the person to sensitive duties is clearly consistent with the interests of national security.” (See Regulation ¶ C6.1.1.1.) The Deputy Under Secretary of Defense (Counterintelligence and Security) Memorandum, dated November 19, 2004, indicates trustworthiness adjudications will apply to cases forwarded to DOHA by the Defense Security Service and Office of Personnel Management. Department of Defense contractor personnel are afforded the right to the procedures contained in the Directive before any final unfavorable access determination may be made. (See Regulation ¶ C8.2.1.)

When evaluating an applicant’s suitability for a public trust position, the administrative judge must consider the disqualifying and mitigating conditions in the AG. 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 [sensitive] 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, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion as to obtaining a favorable trustworthiness decision.

A person who seeks access to sensitive 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 sensitive information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to protect or safeguard sensitive information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of sensitive information.

ANALYSIS

Guideline F, Financial Considerations

The trustworthiness concern for financial considerations is set out in AG ¶ 18 as follows:

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 trustworthiness concerns under AG ¶ 19. Three are potentially applicable in this case:

(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.

Applicant had numerous delinquent debts that caused her to file for bankruptcy protection in 2014. She also failed to file her 2013 and 2014 federal income tax returns. The evidence is sufficient to raise the above disqualifying conditions. Several financial considerations 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;

(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’s debts are recent, multiple, and cast doubt on her reliability, trustworthiness, and good judgment. Federal tax debt remains outstanding with no clear plan to pay it. AG ¶ 20(a) is not applicable.

Applicant was unemployed for several years and had severe medical issues requiring hospitalization. These are conditions beyond her control. She resolved this debt by filing for bankruptcy protection and having the debts discharged. It is arguable whether using the bankruptcy process to avoid paying one’s debts is responsible action under the circumstances. AG ¶ 20(b) partially applies.

There is evidence of financial counselling. Given the unpaid status of her federal tax debt debts, there are not clear indications that Applicant’s financial problems are under control. Although she had her debts discharged through bankruptcy and filed her taxes after the issuance of the SOR, evidence of good-faith efforts to pay or resolve her debts is lacking. AG ¶ 20(c) and ¶ 20(d) partially apply.

WHOLE PERSON CONCEPT

Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for access to sensitive information 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 access to sensitive information must be an overall commonsense assessment based upon careful consideration of the guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all relevant 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.

I considered the circumstances by which Applicant became indebted. However, I also considered that she has taken limited action to resolve her tax debt. She has not established a meaningful track record of financial responsibility, which causes me to question her ability to resolve her debts.

Overall, the record evidence leaves me with questions and doubts about Applicant’s eligibility and suitability for access to sensitive information. For all these reasons, I conclude Applicant has not mitigated the financial considerations trustworthiness 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.b: Against Applicant

CONCLUSION

In light of all of the circumstances, it is not clearly consistent with national security to grant Applicant eligibility for access to sensitive information. Eligibility for access to sensitive information is denied.

________________________ Robert E. Coacher Administrative Judge

FOOTNOTES

1 Tr. at 5, 18, 19; GE 1. 2 GE 1-3. 3 Tr. at 28, 43-44; Ans. 4 The non-payment of federal tax debt was not alleged in the SOR. I will only use this evidence as it might relate to Applicant’s credibility, the applicability of mitigating conditions, and in assessing the whole-person factors. 5 Tr. at 25, 27-28, 31, 35-36, 39, 42-44; AE A-B. 6 Tr. at 28, 44; GE 2-3.