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ISCR Case 15-08863.h1 — CASE

ISCR Case 15-08863.h1denied

Case Headnote

ISCR Case No. 15-08863.h1

deniedAug 18, 2017· Hon. Jennifer I. Goldstein· hearing

Summary

A 59-year-old government contractor was denied a security clearance under Guideline F (Financial Considerations) due to unresolved financial issues. The Statement of Reasons (SOR) cited an outstanding debt of approximately $21,296 on a charged-off account and the applicant's failure to file federal and state income tax returns for the tax years 2008 through 2013.

Specifically, the applicant remained indebted on a vehicle loan co-signed for her daughter and had not filed the required income tax returns for the six-year period. Disqualifying conditions under Adjudicative Guideline paragraphs 19(a), 19(c), and 19(f) were raised.

The judge determined that the applicant did not provide sufficient documentation to substantiate claims of resolving debts or filing the outstanding tax returns. Consequently, the applicant failed to demonstrate adequate financial responsibility or mitigation efforts, leading to the denial of the security clearance.

Why the Applicant Was Denied

Applicant remains indebted on a vehicle loan co-signed for her daughter.
Applicant failed to file Federal and state income tax returns for tax years 2008 through 2013.
Applicant did not provide documentation to substantiate claims of resolving debts or filing tax returns.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Annual Federal, State, or Local Income Tax Returns

Key Rule Quoted

“"Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems."”
— ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016)

Procedural Posture

SOR issuedJun 7, 2016
Answer filedJul 5, 2016
Hearing held—Decided on the written record without a hearing.
Decision dateAug 18, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations
Failure to File Tax Returns as a Disqualifying Factor
Lack of Evidence for Mitigating Financial Conditions

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 unresolved debts, including a vehicle loan of $2,183, and failed to file federal and state income tax returns for the years 2008 through 2013. The applicant's financial issues were deemed significant enough to deny her eligibility for a security clearance under Guideline F.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	The SOR alleged that Applicant was indebted on a charged off account in the approximate amount of $21,296 in SOR ¶ 1.a. $2,183	Against Applicant	Auto Loan Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	The SOR alleged that Applicant failed to file Federal and state income tax returns for tax years 2008 through 2013 in SOR ¶¶ 1.b and 1.c.	Against Applicant	Tax Filing Failure	Denied	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.c	specific text not stated in this decision	Against Applicant	Unspecified Financial	Denied	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—

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. 15-08863 ) Applicant for Security Clearance )

For Government: Julie Mendez, Esquire, Department Counsel For Applicant: Pro se

August 18, 2017 ______________

STATEMENT OF CASE

______________

GOLDSTEIN, Jennifer I., Administrative Judge:

Applicant remains indebted to a creditor on a vehicle loan she co-signed for her daughter in the approximate amount of $2,183. Additionally, she failed to file Federal and state income tax returns for tax years 2008 through 2013. She failed to produce documentation to show she resolved the vehicle loan or delinquent tax returns. Based upon a review of the pleadings and exhibits, eligibility for access to classified information is denied.

On May 4, 2015, Applicant submitted a security clearance application (SF-86). On June 7, 2016, the Department of Defense Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of Reasons (SOR), detailing security concerns under Guideline F, Financial Considerations. (Item 1.) 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 for Determining Eligibility for Access to Classified Information. Applicant answered the SOR on July 5, 2016. (Item 2.) She requested that her case be decided by an administrative judge on the written record without a hearing. (Item 3.) On August 24, 2016, Department Counsel submitted the Government’s written case. A complete copy of the File of Relevant Material (FORM), containing five Items, was mailed to Applicant on August 24, 2016, and received by her on August 29, 2016. The FORM notified Applicant that she had an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of her receipt of the FORM.

Applicant did not respond to the FORM within the 30 days allotted, which ended September 28, 2016. DOHA assigned the case to me on August 2, 2017. Items 1 through 5 are admitted into evidence.

The SOR in this case was issued under the adjudicative guidelines that came into effect within the DoD on September 1, 2006. Security Executive Agent Directive (SEAD) 4, National Security Adjudicative Guidelines, implements new adjudicative guidelines, effective June 8, 2017. All security clearance decisions issued on or after June 8, 2017, are to be decided using the new National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), as implemented by SEAD 4. I considered the previous adjudicative guidelines (AG), effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s security clearance eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG.

FINDINGS OF FACT

Applicant is 59 years old. She has worked for her current employer, a government contractor, since 2004. She divorced in 2000, and has three adult children. (Item 3.)

The SOR alleged that Applicant is indebted to a creditor on a delinquent vehicle loan that she co-signed for her daughter in the approximate amount of $21,296. Additionally, she was alleged to have failed to file her Federal and state income tax returns for tax years 2008 through 2013. (Item 1.) Applicant failed to specifically admit or deny any of the three allegations in the SOR, but instead offered explanations. As a result, she is deemed to have denied SOR ¶¶ 1.a through 1.c. (Item 2.)

The SOR alleged that Applicant was indebted on a charged off account in the approximate amount of $21,296 in SOR ¶ 1.a. In her Answer, Applicant explained, “This was for a car loan that [she] cosigned for [her] daughter. The car was repossessed.” (Item 2.) She claimed that she paid off this debt in 2015, but provided no documentation to substantiate her claim. Her credit report, dated May 16, 2016, reflects this debt as a charged-off account. It shows the last payment was made in May 2015 and states that $2,183 is still past-due. This debt is unresolved. (Item 4, line 2.) The SOR alleged that Applicant failed to file Federal and state income tax returns for tax years 2008 through 2013 in SOR ¶¶ 1.band 1.c. She disclosed her failure to file these tax returns in her SF-86. She explained that in 2008, she withdrew money from her 401K to pay debts and incurred an unexpected tax liability as a result of that withdrawal. She then “continued [her] mistakes by procrastinating on fixing the issue.” (Item 3.) In her Answer, she claimed to have filed all of her delinquent Federal and state tax returns “on 9/17/2015.” (Item 2.) However, she failed to provide documentation to support her claim.

Applicant submitted no evidence of financial counseling, or of budget estimates from which to analyze her current financial situation. No character references were submitted to describe Applicant’s judgment, trustworthiness, integrity, or reliability. I was unable to evaluate her credibility, demeanor, or character since she elected to have her case decided without a hearing.

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 useful 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 AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(a), 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 national security eligibility will be resolved in favor of the 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.

Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15, states that an “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, and has the ultimate burden of persuasion as to obtaining a favorable clearance 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 protect or 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 E O 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 concerns relating to the guideline for financial considerations are set out in AG ¶ 18, which reads in pertinent part:

Failure 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 or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds.

AG ¶ 19 describes three conditions that could raise security concerns and may be disqualifying in this case:

(a) inability to satisfy debts;

(f) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required. Applicant remains indebted on the vehicle loan in the amount of $2,183. Further, she failed to file Federal and state income tax returns as required by law for tax years 2008 through 2013. The facts establish prima facie support for the foregoing disqualifying conditions, and shift the burden to Applicant to mitigate those concerns.

The guideline includes conditions in AG ¶ 20 that could mitigate the security concerns arising from Applicant’s alleged financial difficulties:

(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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances;

(d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and

(g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.

The evidence does not establish mitigation under AG ¶ 20(a). Applicant’s SOR- alleged financial problems have been ongoing since 2009 when she failed to file her 2008 state and Federal tax returns, are unresolved, and continue to date.

Applicant failed to present evidence to demonstrate her debts and delinquent tax returns were due to circumstances beyond her control. Further, she did not provide evidence that she acted responsibly under the circumstances with respect to her obligations to file Federal and state income tax returns annually, which is necessary for full mitigation under this condition. Mitigation under AG ¶ 20(b) is not applicable.

Applicant has not established a history of responsible action with respect to her delinquent debt or filing her Federal and state income tax returns. While she appears to have repaid $20,000 of the delinquent vehicle loan, absent other evidence, $2,183 remains outstanding. There is no discernable evidence of a good-faith effort to repay that debt since 2015 in the record. Further, there is no documentation establishing any efforts to resolve the delinquent state and Federal income tax filings. The evidence does not establish mitigation under AG ¶ 20(d). Applicant indicated that she filed her delinquent tax returns. However, she failed to present documentation to support her claim. As a general rule, "[f]ailure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information." (ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016).) The evidence does not establish mitigation under AG ¶ 20(g).

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(d):

(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.

According to 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 applicable guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all pertinent facts and circumstances surrounding this case. Applicant is a mature individual who is accountable for the decisions and choices that led to her financial difficulties. She admitted she procrastinated and failed to file state and Federal income tax returns as required by law. She failed to demonstrate a basis for finding current good judgment, or permanent behavioral change, concerning her continuing pattern of financial irresponsibility. Her delinquent tax returns establish continuing potential for pressure, coercion, or duress.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For these reasons, I conclude that she did not meet her burden to mitigate the security concerns arising from the financial considerations.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by ¶ E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a through 1.c: 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.

Jennifer Goldstein Administrative Judge