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ISCR Case 16-00305.h1 — CASE

ISCR Case 16-00305.h1granted

Case Headnote

ISCR Case No. 16-00305.h1

grantedJul 19, 2017· Hon. Gina L. Marine· hearing

Summary

A 56-year-old male applicant, with extensive military and defense contracting experience, was granted a security clearance despite concerns under Guideline F (Financial Considerations). The Statement of Reasons cited his failure to timely file federal income tax returns for tax years 2000 through 2004 and a Chapter 7 bankruptcy filing on or about July 14, 2016. These issues raised disqualifying conditions under Adjudicative Guidelines (AG) ¶ 19(a), (c), and (f).

However, the judge applied several mitigating conditions, including AG ¶ 20(a), (b), (c), (d), and (g). The decision to grant the clearance was based on findings that the applicant's financial difficulties, including multiple layoffs, were largely beyond his control. He demonstrated proactive efforts to resolve his debts prior to bankruptcy and has not incurred new delinquent debt since.

Furthermore, the applicant engaged in financial counseling and successfully implemented a system to manage his finances. These actions demonstrated responsible behavior in addressing his financial history, leading to the favorable outcome.

Why the Applicant Prevailed

The applicant's financial issues were largely due to circumstances beyond his control, including multiple layoffs.
He proactively sought to resolve his debts before filing for bankruptcy and has not incurred new delinquent debt since then.
The applicant received financial counseling and has established a successful system to manage his finances.

Conditions Referenced

Disqualifying

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

Mitigating

AG ¶ 20(a)appliedBehavior Happened Long Ago or Infrequently
AG ¶ 20(b)appliedConditions That Resulted in Financial Problems Were Largely Beyond the Person's Control
AG ¶ 20(c)appliedReceived Financial Counseling From a Legitimate Source
AG ¶ 20(d)appliedInitiated and Adhered to a Good-faith Effort to Repay Overdue Creditors
AG ¶ 20(g)appliedMade Arrangements with the Appropriate Tax Authority

Key Rule Quoted

“Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG.”

Procedural Posture

SOR issuedJun 16, 2016
Answer filedAug 11, 2016
Hearing heldMar 29, 2017
Decision dateJul 19, 2017

Cite For

Mitigation of Financial Issues Under Guideline F Due to Circumstances Beyond Control
Responsible Behavior in Addressing Financial Difficulties
Successful Management of Finances Post-bankruptcy

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: granted

The judge found that the applicant's financial issues, including nine delinquent debts totaling $19,255 and failure to file tax returns for several years, were mitigated by circumstances beyond his control and responsible actions taken to resolve these issues. Ultimately, the applicant demonstrated that his financial situation is now under control, leading to a decision to grant eligibility for access to classified information.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a–1.i	9 sub-charges — specific text not stated in this decision (for the applicant).	For Applicant			—	—	—
1.j	failure to timely file federal income tax returns for tax years 2000 through 2004, as required	For Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	(b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	—
1.k	You filed Chapter 7 bankruptcy on or about July 14, 2016.	For Applicant	Bankruptcy Filing	Admitted	—	(c) received/receiving counseling; problem being resolved	—

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: ) ) [REDACTED] ) ISCR Case No. 16-00305 ) Applicant for Security Clearance )

For Government: Rhett E. Petcher, Esq., Department Counsel For Applicant: Frank J. Flanagan, Esq. 07/19/2017 ______________

STATEMENT OF CASE

______________

MARINE, Gina L., Administrative Judge:

This case involves security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is granted.

Statement of the Case

Applicant submitted a security clearance application (SCA) on June 19, 2015. On June 16, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) sent him a Statement of Reasons (SOR) alleging security concerns under Guideline F. The DOD CAF acted 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.

On August 11, 2016, Applicant answered the SOR (SOR Answer), and requested a hearing before an administrative judge. Department Counsel was ready to proceed on October 27, 2016, and the case was assigned to me on January 25, 2017. On February 28, 2017, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for March 29, 2017. I convened the hearing as scheduled.

Government Exhibits (GE) 1 through 4 were admitted into evidence without objection. I appended to the record a letter that the Government sent to Applicant as Hearing Exhibit (HE) I, and the Government’s exhibit list as HE II. At the hearing, Applicant testified and submitted Applicant’s Exhibit (AE) A, which was admitted without objection. One witness testified on behalf of Applicant. At Applicant’s request, I left the record open to April 19, 2017. Applicant timely provided additional documents which I admitted as AE B through H, without objection. I appended to the record a letter Applicant provided with his post-hearing submission as HE III, and post-hearing emails as HE IV. DOHA received the transcript (Tr.) on April 7, 2017.

On June 8, 2017, the DOD implemented new AG.1 Accordingly, I have applied the June 2017 AG.2 However, because the September 2006 AG were in effect on the date of the hearing, I have also considered the September 2006 AG. Having considered both versions of the AG, I conclude that my decision would have been the same had I applied the September 2006 AG.

SOR Amendment

At the hearing, I granted Department Counsel’s motion to amend the SOR, without objection, to add an additional Guideline F allegation under paragraph 1, as follows:

k. You filed Chapter 7 bankruptcy on or about July 14, 2016.3

Findings of Fact4

Applicant, age 56, married his wife in 1994. They have three children, ages 20, 17, and 15. He has another adult child from a previous marriage. He graduated high school in 1979 and has taken some college courses. In 2000, he retired after having honorably served in the U.S. Navy for 20 years. He has actively maintained a DOD security clearance since he began his naval career in 1980. Applicant has been employed primarily by defense contractors following his naval retirement. He has worked for his current defense-contractor employer since September 2016.5 Between 2009 and 2013, Applicant was laid off three times due to contract- funding issues. He was unemployed for approximately four months between 2009 and 2010, seven months in 2011, and ten months between 2013 and 2014. While he received unemployment compensation, it was insufficient to meet the expenses of a family of five, which resulted in the debt alleged in the SOR and the foreclosure of his former primary residence (not alleged).6

Applicant relocated with his family from State A to State B as a condition of his employment with the contractor that hired him in 2010. He owned a home in State A. Initially, he rented the home to acquaintances with the expectation that they would eventually buy it. However, they ultimately abandoned the home after damaging it and failing to pay rent. Despite best efforts, Applicant was unable to continue paying both the mortgage for the home in State A and the rent for his family’s primary residence in State B after another layoff. He chose to pay the rent. To avoid foreclosure, Applicant worked with a realtor to sell the home and completed the “reams of paperwork” requested by his mortgage lender, who eventually advised that they were unwilling to modify the loan. A 2012 foreclosure absolved Applicant of any liability for the mortgage- loan.7

The SOR, as amended, alleged nine delinquent debts totaling $19,255 (SOR ¶¶ 1.a through 1.i), failure to timely file federal income tax returns for tax years 2000 through 2004, as required (SOR ¶ 1.j), and a Chapter 7 bankruptcy filed in July 2016. (SOR ¶ 1.k). Applicant admitted each allegation. The debts alleged in SOR ¶¶ 1.a through 1.i were resolved through the bankruptcy, which was discharged in October 2016. He has not incurred any new delinquent debt and lives within his means, having a few hundred dollars left over after paying expenses each month.8

Applicant was initially reluctant to file bankruptcy on moral grounds, preferring instead to resolve his delinquent debts on his own. He contacted his creditors to negotiate payment arrangements. He moved in with his in-laws before downsizing from a 2,400 square foot house to a 1,500 square foot apartment. Having never lived an extravagant lifestyle even before his financial problems began, he and his wife further reduced expenses by driving old cars, bargain and thrift-store shopping, and otherwise “cutting corners” wherever they could. While unemployed and actively seeking gainful employment in the defense field, he worked a variety of whatever low-paying jobs were available to help him provide for his family. For example, he worked for a roofing company and Walmart, ran a sandwich shop, did “lobstering,” and sold cutlery door-to- door.9 Applicant did not timely file his 2000 through 2004 federal tax returns. He attributes the delay to having bought and sold a home and his daughter being born during that period. He eventually filed those returns in 2008 and received refunds for each year. Since then, he has timely filed his returns.10

Applicant’s two 2015 credit reports, proffered by the Government, reveal an “unreleased” $62,820 federal tax lien filed against him in 2008. Applicant stated, during his 2015 subject interview and at the hearing, that he did not owe any outstanding IRS tax debt. He received a refund of $1,500 from the IRS in 2015 and anticipated one for 2016. His bankruptcy petition did not reference any tax liens. The Government’s did not allege it as a concern in the SOR or specifically question Applicant about it at the hearing. In light of these facts, I consider the lien to have been either reported in error or resolved.11

Applicant’s wife testified at the hearing. She corroborated Applicant’s testimony about how they accrued their delinquent debts and the efforts they made to resolve them before filing bankruptcy.12 Applicant and his wife were candid, sincere, and credible at the hearing. Applicant is highly regarded for both his trustworthiness and work performance by his current supervisor and two former co-workers. Applicant and his wife received financial counseling through the bankruptcy, and even before that, developed an effective system to manage their finances.13

POLICIES

“[N]o one has a ‘right’ to a security clearance.”14 As Commander in Chief, the President has the authority to “control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.”15 The President has authorized the Secretary of Defense or his designee to grant applicants eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.”16

Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, an administrative judge applies these guidelines in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available and reliable information about the person, past and present, favorable and unfavorable.

The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. 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.

Clearance decisions must be made “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”17 Thus, a decision to deny a security clearance is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance.

Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR.18 “Substantial evidence” is “more than a scintilla but less than a preponderance.”19 The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability.20 Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts.21 An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government.22

An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.”23 “[S]ecurity clearance determinations should err, if they must, on the side of denials.”24

ANALYSIS

Guideline F (Financial Considerations)

The concern under this guideline 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 . . .

Applicant’s financial indebtedness and his failure to timely file his federal income tax returns (as required), establish three disqualifying conditions under this guideline: AG ¶ 19(a) (inability to satisfy debts), AG ¶ 19(c) (a history of not meeting financial obligations), and AG ¶ 19(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).

I find that the security concerns raised in the SOR have been mitigated by the following applicable factors:

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(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;

AG ¶ 20(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;

AG ¶ 20(d): the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and AG ¶ 20(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.

Applicant acted responsibly by filing for bankruptcy to address debts caused by circumstances beyond his control. Before that, he proactively worked to improve his financial position by contacting his creditors to negotiate payment arrangements, by availing himself of employment opportunities whether within or without of his field, and by downsizing and otherwise adjusting his expenses to conform with his means. Applicant resolved the issue of his untimely filed tax returns over nine years ago, and has not filed late since then. Applicant received financial counseling through bankruptcy and, even before that, established a successful system to manage his finances responsibly. Given the circumstances under which he incurred his delinquent debt and failed to timely file his returns, and in light of the responsible manner in which he resolved both issues, I conclude that his finances are now under control.

WHOLE PERSON CONCEPT

Under AG ¶ 2(c), the ultimate determination of whether the granting or continuing of national security eligibility is clearly consistent with the interests of national security must be an overall common sense judgment based upon careful consideration of the following guidelines, each of which is to be evaluated in the context of the whole person. An 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.

I have incorporated my comments under Guideline F in my whole-person analysis, and I have considered the factors in AG ¶ 2(d). After weighing the disqualifying and mitigating conditions under Guideline F, and evaluating all the evidence in the context of the whole person, I conclude that Applicant has mitigated the security concerns raised by his financial indebtedness, and by his failure to timely file his income tax returns. Accordingly, Applicant has carried his burden of showing that it is clearly consistent with the national interest to grant him eligibility for access to classified information.

FORMAL FINDINGS

I make the following formal findings on the allegations in the SOR:

Paragraph 1, Guideline F (Financial Considerations): FOR APPLICANT

Subparagraphs 1.a – 1.k: For Applicant

CONCLUSION

I conclude that it is clearly consistent with the national interest to grant Applicant eligibility for access to classified information. Clearance is granted.

Gina L. Marine Administrative Judge

FOOTNOTES

1 On December 10, 2016, the Security Executive Agent issued Directive 4 (SEAD-4), establishing a “single, common adjudicative criteria for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position.” (SEAD-4 ¶ B, Purpose). The SEAD-4 became effective on June 8, 2017 (SEAD-4 ¶ F, Effective Date). The National Security Adjudicative Guidelines (AG), which are found at Appendix A to SEAD-4, apply to determine eligibility for initial or continued access to classified national security information. (SEAD-4 ¶ C, Applicability). 2 ISCR Case No. 02-00305 at 3 (App. Bd. Feb. 12, 2003) (security clearance decisions must be based on current DOD policy and standards). 3 Tr. at p. 6-8. 4 Unless otherwise indicated by citation to another part of the record, I extracted these facts from the SOR Answer, the SCA (GE 1), and the summary of Applicant’s October 14, 2015 interview with an investigator in connection with this security-clearance investigation (GE 2). 5 See also Tr. at pp. 21-38, 48-57, and 98. 6 See also Tr. at pp. 21-38, 48-57, and 98. I will consider the foreclosure only for purposes of evaluating mitigation and whole person. 7 See also GE 3 and 4; Tr. at pp. 29-33, 38, 57-65, 88-89, and 95-96. 8 See also AE A and C; Tr. at pp. 8, 79-83. 9 Tr. at pp. 35-36, 38-39, 43-45, 50-52, 60-61, 65-73, 98-100. 10 See also Tr. at pp. 73 -75. 11 GE 3 and 4; AE A at p. 7; Tr. at pp. 73-75. 12 Tr. at pp. 92-105. 13 AE D through H; Tr. at p. 91. 14 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 15 Egan at 527. 16 EO 10865 § 2. 17 EO 10865 § 7. 18 See Egan, 484 U.S. at 531. 19 See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). 20 See ISCR Case No. 92-1106 at 3 (App. Bd. Oct. 7, 1993). 21 Directive ¶ E3.1.15. 22 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 23 ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). 24 Egan, 484 U.S. at 531; See also AG ¶ 2(b).