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ISCR 15-07158.h1: Guideline C security clearance hearing, denied (2017) · CASE

ISCR Case 15-07158.h1denied

Case headnote

ISCR Case No. 15-07158.h1

deniedJun 2, 2017· Hon. Marc E. Curry· hearing

Summary

A 50-year-old federal government subcontractor was denied a security clearance due to unmitigated financial considerations under Guideline F, despite mitigating concerns under Guideline C (Foreign Preference). The applicant had applied for French citizenship in 2005, but mitigated this concern by expressing a willingness to renounce it.

The primary reason for denial was the applicant's failure to file federal and state income tax returns for nine years. He owes approximately $24,000 in delinquent state income taxes and is unaware of the amount owed in federal taxes. This long-standing financial issue, persisting for nearly ten years without resolution, raised significant concerns regarding his reliability and trustworthiness.

The decision cited Disqualifying Conditions AG ¶ 19(a), AG ¶ 19(c), and AG ¶ 19(g), while applying Mitigating Conditions AG ¶ 20(b) and AG ¶ 20(d) for the foreign preference issue. Ultimately, the unresolved and persistent financial difficulties led to the denial of the security clearance.

Why the applicant was denied

The applicant has not filed federal and state income tax returns for nine years.
He owes approximately $24,000 in delinquent state income taxes and does not know the amount owed in federal taxes.
The applicant's financial difficulties have persisted for nearly ten years without resolution.

Conditions referenced

Disqualifying

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

Mitigating

AG ¶ 20(b)rejectedConditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlAlthough circumstances were beyond the applicant's control, the ongoing nature of the issues diminished the weight of this condition.
AG ¶ 20(d)rejectedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve DebtsThe applicant's recent hiring of an accountant does not demonstrate sufficient progress in resolving his tax issues.

Key rule quoted

“A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence.”

Procedural posture

SOR issuedApr 18, 2016
Answer filedMay 10, 2016
Hearing heldMar 16, 2017
Decision dateJun 2, 2017

Cite for

Unmitigated Financial Considerations Under Guideline F
Mitigation of Foreign Preference Concerns Under Guideline C
Importance of Timely Filing Income Tax Returns for Security Clearance Eligibility

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

From the decision

Facts this decision states, each with the exact sentence it comes from. Descriptive of the record, not an assessment.

Age at decision: 50: “Applicant is a 50-year-old man who has been married for 21 years.”
Tenure: ~18 years: “He has been in business since 1999.”
Delinquent debt cited: $27,000 (on a payment plan): “A representative informed him that he owed approximately $27,000 of delinquent income taxes, and helped him to arrange a payment plan.”

Standardized Decision Profile

SEAD-4 Guideline C (Foreign Preference) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found that the applicant mitigated the foreign preference concerns related to his acquisition of French citizenship. The applicant expressed a willingness to renounce his French citizenship, which further supported the mitigation of these concerns.

¶	Allegation	Finding	Type	Response	Disqualifying (¶10)	Mitigating applied (¶11)	Mitigation

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 concerns, including failure to file income tax returns for nine years and owing approximately $24,000 in delinquent state income tax. Despite some mitigating circumstances, the applicant's ongoing financial issues were deemed unmitigated, leading to a denial of the security clearance.

The sub-allegation breakdown is part of the Professional plan. See what it includes.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation

Descriptive standardized rendering of a decided public case. 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. 15-07158 ) ) Applicant for Security Clearance

For Government: Erin Thompson, Esq., Department Counsel For Applicant: Pro se

06/02/2017 ______________

STATEMENT OF CASE

______________

Curry, Marc E., Administrative Judge:

Applicant mitigated the foreign preference concerns generated by his application for French citizenship in 2005. Conversely, financial considerations security concerns remain unmitigated because Applicant has yet to file multiple income tax returns dating as far back as tax year 2007. Clearance is denied.

Statement of the Case

On April18, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the security concerns under Guideline F, financial considerations, and Guideline C, foreign preference, explaining why it was unable to find it clearly consistent with the national interest to grant security clearance eligibility. The DOD CAF took the action 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 for Determining Eligibility for Access to Classified Information (AG) effective within the DOD on September 1, 2006. On May 10, 2016, Applicant answered the SOR, admitting the allegations and requesting a hearing, whereupon the case was assigned to me on December 6, 2016. On February 1, 2017, the Defense Office of Hearings and Appeals issued a notice of hearing, scheduling Applicant’s case for March 16, 2017. The hearing was held as scheduled. I received two Government exhibits (GE 1 – GE 2), and four Applicant’s exhibits (AE A and D). At the close of the hearing, I left the record open, at Applicant’s request, to allow him to submit additional exhibits. Within the time allotted, he submitted 12 exhibits that I incorporated into the record as AE E through AE P. The transcript (Tr.) was received on March 24, 2017.

FINDINGS OF FACT

Applicant is a 50-year-old man who has been married for 21 years. He has a high school diploma and has earned some college credits over the years. He is a federal government subcontractor who programs and designs remote audiovisual systems. (Tr. 40) He has been in business since 1999. (Tr. 30)

By 2005, the business had grown to the point that Applicant’s wife decided to quit her full-time job and begin working as its corporate secretary. In this capacity, she was responsible for bookkeeping. (Tr. 42)

The first year that Applicant’s wife was on the job, her father passed away after a lengthy illness. (Tr. 18) Approximately a year later, in 2008, Applicant’s mother suffered a debilitating illness, and in 2012, Applicant’s father suffered a disabling injury. Applicant’s wife was unable to balance her responsibilities as the company record keeper with her responsibilities as the primary caretaker for these relatives. (Tr. 23)

In 2007, a massive computer glitch corrupted all of the Applicant’s company’s financial records, making them completely inaccessible. (GE 2 at 4; Tr. 43) The company’s problems were exacerbated further that year when the national economic downturn led to a revenue decrease. Before the downturn, Applicant retained an accountant to file his business’ income tax returns. After the downturn, he could no longer afford an accountant, and tried to save money by relying on accounting students, assisting his wife, to file his income tax returns (AEs N, O) Ultimately, Applicant and his wife did not file their federal or state income tax returns after tax year 2006, and have not filed any tax returns since then.

Applicant and his wife attempted to file their tax returns over the years themselves, but were overwhelmed with the complexity of the task, as they have not prepared any profit and loss information since 2007. (Tr. 23) Applicant retained a licensed accountant approximately six months before the hearing to help him file his income tax returns. Currently, the accountant is preparing Applicant’s 2007 income tax returns and will file the income tax returns for tax years 2008 to 2015, successively. (Tr. 21)

Applicant does not know the amount of federal income tax that he owes. He contacted the state taxing authority in 2012. A representative informed him that he owed approximately $27,000 of delinquent income taxes, and helped him to arrange a payment plan. Consistent with the plan, Applicant began paying $400 per month. (AE J) Applicant has been making intermittent payments since then. (AE J – AE L) As of June 2015, the balance was approximately $24,500. (AE L)

Applicant’s late mother was a French citizen when Applicant was born. When she became a U.S. citizen in 1970, she had to renounce her French citizenship. In 2005, she applied for reinstatement of her French citizenship after a change in French law enabled her to do so. She desired that her children became French citizens so that they could sign their names in a special registry that contains the names of French citizens worldwide. (Tr. 49; GE 2 at 1) Applicant is a U.S. citizen from birth and has never traveled to France. (GE 1 at 2) However, he decided to fulfil his mother’s wish. Therefore, in 2005, he went to the local French consulate, and with his mother’s help, completed the appropriate paperwork to become a French citizen, and signed his name in the registry. (Tr. 49) He continues to have dual citizenship, and has expressed a willingness to renounce his French citizenship. (GE 2 at 2)

POLICIES

The U.S. Supreme Court has recognized the substantial discretion the Executive Branch has in regulating access to information pertaining to national security, emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 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 required to be considered 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 overall 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 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 that the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Section 7 of Executive Order 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).

Under the whole-person concept, the administrative judge must consider the totality of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative process factors in AG ¶ 2(a).1

ANALYSIS

Guideline F: Financial Considerations

The security concerns about financial considerations are set forth 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.

Applicant has not filed federal and state income tax returns in nine years. Although he does not know if he owes any federal income tax, he owes approximately $24,000 in delinquent state income tax. Disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting financial obligation,” and AG ¶ 19(g), “failure to file annual federal, state, or local income tax returns as required , , .,” apply. The following mitigating conditions are potentially applicable:

AG ¶ 20(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;

AG ¶ 20(bthe 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;”

AG ¶ 20(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

AG ¶ 20(d), “the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.”

Applicant’s ongoing failure to file income tax returns renders AG ¶ 20(a) inapplicable. He fell behind because of a data crash that caused him to lose much of his company records, and an economic downturn which affected his company’s profitability. In addition, his wife was unable to properly manage their company’s financial records after she became preoccupied with the care of her ailing mother and her parents-in-law. All of these factors constitute circumstances beyond Applicant’s control. However, nearly ten years have elapsed since these problems first began to manifest themselves, and Applicant has only recently retained an accountant to organize his financial records and start the filing process. Under these circumstances, AG ¶ 20(b) has little weight.

Applicant’s hiring of an accountant to begin preparing his delinquent tax returns triggers the application of AG ¶ 20(d). Given that he just recently retained the accountant to begin working on these issues, AG ¶ 20(d) does not apply.

Incurring delinquent income taxes poses a security risk that is more serious than incurring commercial delinquencies, as it indicates that Applicant may “have a problem abiding by well-established rules and regulations.” (ISCR Case No. 15-01031 (June 15, 2016) at 4) Consequently, Applicant has failed to mitigate the financial considerations security concerns.

Guideline C: Foreign Preference

Under this guideline, “when an individual acts in such a way as to indicate a preference for a foreign country over the United States, then he or she may be prone to provide information or make decisions that are harmful to the interests of the United States.” (AG ¶ 9) Applicant’s acquisition of French citizenship triggers the application of AG ¶ 10(b), “action to acquire or obtain recognition of a foreign citizenship by an American citizen.” Applicant has expressed a willingness to renounce his French citizenship. AG ¶11(b), “the individual has expressed a willingness to renounce dual citizenship,” applies.

Applicant has never traveled to France. He applied for French citizenship solely to fulfil the sentimental desire of his mother, now deceased, for her children to become French citizens, and for their names to appear in an archive of French citizens worldwide. Under these circumstances, I conclude Applicant has mitigated the foreign preference security concerns.

WHOLE PERSON CONCEPT

A series of misfortunes contributed to Applicant’s failure to file his income tax returns. However, filing one’s tax returns is a legal obligation. Consequently, Applicant’s personal and financial difficulties have limited probative value when considering mitigation. Moreover, this problem has been ongoing for nearly ten years. Under these circumstances, Applicant has failed to mitigate the 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

Paragraph 2, Guideline C: FOR APPLICANT

Subparagraph 2.a: For 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.

_____________________ Marc E. Curry Administrative Judge

FOOTNOTES

1 The factors under AG ¶ 2(a) are as follows:

(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.