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ISCR Case 15-08870.h1 — CASE

ISCR Case 15-08870.h1denied

Case Headnote

ISCR Case No. 15-08870.h1

deniedOct 17, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 42-year-old applicant was denied a security clearance under Guideline F (Financial Considerations) due to a history of financial difficulties, including unpaid state and federal tax liens and a prior bankruptcy. The Statement of Reasons (SOR) alleged that the applicant had outstanding federal and state tax liens, filed for Chapter 7 bankruptcy in April 2014, resulting in the discharge of approximately $42,000 in debt by July 2014, and failed to pay federal and state income taxes for several years, leading to the filing of tax liens.

The applicant admitted all allegations in the SOR. Disqualifying conditions F.1.a, F.1.b, F.1.c, and F.1.f were raised. The judge determined that the applicant had unpaid federal and state tax liens and failed to provide sufficient evidence of progress in resolving these financial issues.

Ultimately, the applicant did not mitigate the security concerns related to their financial history, leading to the denial of the security clearance.

Why the Applicant Was Denied

Applicant admitted all allegations in the SOR.
Applicant has unpaid federal and state tax liens.
Applicant failed to provide evidence of progress in resolving his financial issues.

Conditions Referenced

Disqualifying

F.1.araisedInability to Satisfy Debts
F.1.braisedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
F.1.craisedA History of Not Meeting Financial Obligations
F.1.fraisedFailure to File or Fraudulently Filing Annual Federal, State, or Local Tax Returns or Failure to Pay Annual Federal, State, or Local Tax as Required

Key Rule Quoted

“Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.”

Procedural Posture

SOR issuedJun 14, 2016
Answer filedAug 11, 2016Applicant elected to proceed without a hearing.
Hearing held—Decided on the written record.
Decision dateOct 17, 2017

Cite For

Failure to Mitigate Financial Concerns Under Guideline F
Impact of Unpaid Tax Liens on Security Clearance Eligibility
Importance of Providing Evidence in Financial Mitigation 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 failed to mitigate financial concerns under Guideline F, primarily due to unpaid federal and state tax liens and a history of bankruptcy. The applicant admitted to the allegations but did not provide sufficient evidence to demonstrate a good-faith effort to resolve his financial issues, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant has unpaid federal and state tax liens.	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	Applicant filed for Chapter 7 bankruptcy in April 2014 and approximately $42,000 in debt was discharged in July 2014. $42,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Applicant failed to pay his federal and state income taxes for several years, which resulted in tax liens being filed.	Against Applicant	Tax Filing Failure	Admitted	(a) inability to satisfy debts (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. 15-08870 ) ) Applicant for Security Clearance

For Government: Daniel Crowley, Esq., Department Counsel For Applicant: Pro se

10/17/2017 ______________

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 June 14, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) 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 (AG) effective within the DOD on September 1, 2006. On June 8, 2017, new AG were implemented and are effective for decisions issued after that date.

Applicant answered the SOR on August 11, 2016, and elected to have his case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s file of relevant material (FORM). Applicant received it on October 14, 2016. He was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. The Government’s evidence is identified as Items 1 through 9. Applicant did not provide a response to the FORM, object to the Government’s evidence, or submit documents. Items 1 thought 9 are admitted into evidence. The case was assigned to me on October 1, 2017.

FINDINGS OF FACT

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

Applicant is 42 years old. He graduated from high school in 1996. He married in 2003 and has two children, ages 11 and 8 years old. He has been employed steadily since 2004. He was self-employed from 2005 to 2014. He began working for his present employer in November 2014.1

Applicant filed for Chapter 7 bankruptcy in April 2014 and approximately $42,000 in debt was discharged in July 2014.2 Applicant disclosed on his security clearance application (SCA) that the reason he filed bankruptcy was “lack of funds/work.”3 No other amplifying information was provided.4

Applicant was interviewed by a government investigator in July 2015. He advised the investigator that the reason he failed to pay state and federal income taxes was because of a lack of funds. He did not elaborate. He told the investigator that he was currently making payments, but was not specific as to whether his payments were for the state or federal tax lien. He confirmed he filed his state and federal income tax returns for tax years 2011, 2012, 2013, and 2014, but did not pay the taxes owed.5

Applicant’s home state filed a tax lien against him in February 2013. Applicant stated in his answer to the SOR that this lien was paid in November 2015. He did not provide supporting documents to show the lien is paid and released.6

The IRS filed a tax lien against Applicant in August 2015 for $27,259. Applicant told the government investigator in July 2015 that he was working with a tax relief firm that negotiates delinquent taxes on behalf of the taxpayer. In Applicant’s August 2016 answer to the SOR, he admitted the tax lien is unpaid, and he stated that he was in the “process of negotiations with a tax relief company.” He did not provide information about the current state of his finances. No other information was provided.

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 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.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states 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 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. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage.

AG ¶ 19 provides conditions that could raise security concerns. The following are potentially applicable:

(a) inability to satisfy debts;

(b) unwillingness to satisfy debts regardless of the ability to do so;

(f) failure to file or fraudulently filing annual Federal, state, or local tax returns or failure to pay annual Federal, state, or local tax as required.

Applicant has state and federal tax liens that are unpaid. He had debts discharged in bankruptcy in 2014. There is sufficient evidence to support the application of the above disqualifying conditions.

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

(c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control;

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

(e) the individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue.

Applicant had more than $40,000 in debt discharged in bankruptcy in 2014. He has unpaid federal and state tax liens. His financial problems are ongoing and unresolved. AG ¶ 20(a) does not apply.

Applicant failed to provide amplifying information regarding the cause of his financial problems, other than to state “lack of funds/work.” He failed to pay his federal and state taxes for several years, which resulted in tax liens being filed. I am unable to determine whether there were conditions that resulted in his financial problems that were largely beyond his control, and he acted responsibly under the circumstances. AG ¶ 20(b) does not apply. Applicant received financial counseling when he filed bankruptcy. There is insufficient evidence to conclude his financial problems are under control because he did not provide evidence that he is paying or in a payment plan to resolve his tax liens. He stated he resolved his state tax lien, but did not provide supporting documents. He stated that he is working with a tax relief company regarding the federal tax lien, but did not provide supporting documents to show he has made progress in resolving this lien. There is insufficient evidence to show he has made a good-faith effort to repay or resolve these liens. AG ¶¶ 20(c) and 20(d) do not apply. Applicant admitted the SOR allegations. Therefore, AG ¶ 20(e) has not been raised.

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(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.

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(d) were addressed under that guideline, but some warrant additional comment.

Applicant is 42 years old. He was self-employed from 2005 to 2014. He has been working for his current employer since November 2014. Applicant discharged more than $40,000 of debt in bankruptcy in July 2014. He failed to explain the circumstances leading to his financial problems beyond stating “lack of funds/work.” He failed to explain why he did not pay his state and federal income taxes for numerous tax years, beyond what he previously stated, or make payment arrangements at the time with the entities. His conduct raises security concerns. Even if Applicant has paid the state tax lien, as he stated in his answer, his failure to provide a reasonable explanation for timely complying with his legal obligations for numerous years raises serious security concerns. He did not provide sufficient evidence in mitigation. The record evidence leaves me with 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.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 security to grant Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 Item 3. 2 Item 7. 3 Item 3. 4 Items 3, 7. 5 I will not consider any derogatory information that was not alleged for disqualifying purposes. I may consider it when making a credibility determination, in mitigation, and when analyzing the whole person. 6 Items 2, 8.