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ISCR Case 16-00366.h1 — CASE

ISCR Case 16-00366.h1granted

Case Headnote

ISCR Case No. 16-00366.h1

grantedAug 14, 2017· Hon. Darlene Lokey Anderson· hearing

Summary

A 46-year-old defense contractor and veteran was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons alleged that the applicant failed to file federal and state income tax returns for 2014 and 2015, raising disqualifying conditions F.19(a) and F.19(g). The applicant attributed these omissions to personal difficulties, including a motorcycle accident and his spouse's deployment.

However, the judge found that the applicant took substantial corrective actions. He filed all overdue tax returns for 2014, 2015, and 2016, and established payment plans to resolve his tax debts. He also sought professional assistance for tax preparation, demonstrating a good-faith effort to address his financial obligations.

Mitigating conditions F.20(c), F.20(d), and F.20(g) were applied, supported by letters of recommendation attesting to his trustworthiness and reliability. Based on these efforts and evidence, the security clearance was granted.

Why the Applicant Prevailed

The applicant filed his overdue tax returns for 2014, 2015, and 2016 and made payments to resolve his tax debts.
He demonstrated a good-faith effort to address his financial obligations and sought professional assistance for tax preparation.
Letters of recommendation highlighted his trustworthiness and reliability as an employee.

Conditions Referenced

Disqualifying

F.19(a)raisedInability to Satisfy Debts
F.19(g)raisedFailure to File Annual Federal, State, or Local Income Tax Returns

Mitigating

F.20(c)appliedReceived Counseling or Indications That the Problem Is Being Resolved
F.20(d)appliedInitiated a Good-faith Effort to Repay Overdue Creditors
F.20(g)appliedMade Arrangements with Tax Authority to File or Pay Amounts Owed

Key Rule Quoted

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

Procedural Posture

SOR issuedJul 8, 2016
Answer filedDec 28, 2016
Hearing heldMay 11, 2017
Decision dateAug 14, 2017

Cite For

Mitigation of Financial Issues Under Guideline F
Good-faith Efforts to Resolve Tax Obligations
Whole-person Concept in Security Clearance Evaluations

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 had failed to file his federal and state income tax returns for the years 2014 and 2015, which raised financial concerns under Guideline F. However, the applicant demonstrated a good-faith effort to resolve his tax issues, ultimately filing the returns and making arrangements to pay the owed taxes, leading to a decision in his favor.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to file Federal and state income tax for tax years 2014 and 2015	For Applicant	Tax Filing Failure	Admitted	(g) unexplained affluence	(c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts (g) arrangements made with the tax authority; in compliance	Documented Debt Paid in Full Documented Payment Plan with IRS

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. 16-00366 ) ) Applicant for Security Clearance )

For Government: Adrienne Driskill, Esq., Department Counsel For Applicant: Pro se

August 14, 2017 ______________

STATEMENT OF CASE

______________

LOKEY ANDERSON, Darlene D., Administrative Judge:

On July 30, 2015, Applicant submitted a security clearance application (SF-86). On July 8, 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. 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, effective within the DoD after September 1, 2006.

Applicant answered the SOR on December 28, 2016, and requested a hearing before an administrative judge. The case was assigned to me on February 22, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on March 8, 2017, scheduling the hearing for May 11, 2017. The hearing was convened as scheduled. The Government offered three exhibits, referred to as Government Exhibits 1 through 3, which were admitted without objection. The Applicant offered fourteen exhibits, referred to as Applicant’s Exhibits A through N, which were admitted without objection. He also testified on his own behalf. The record remained open until close of business until May 21, 2017. Applicant submitted one large Post Hearing Exhibit, referred to as Applicant’s Post-Hearing Exhibit A, consisting of multiple pages, including six letters of recommendation, relevant Internal Revenue Service and state tax documentation concerning 2014 and 2015 tax years, and relevant bank statements. Applicant’s Post Hearing Exhibit was admitted without objection. DOHA received the transcript of the hearing (Tr.) on May 19, 2017.

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 national security eligibility 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, effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s national security 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 46 years old. He is married with two children. He has a high school diploma and two years of college. He is employed with a defense contractor as a Subject Matter Expert for Communications. He is seeking to obtain a security clearance in connection with his employment.

Guideline F - Financial Considerations

The Government alleged that Applicant is ineligible for a clearance because he made financial decisions that indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which raise questions about his reliability, trustworthiness, and ability to protect classified information. The SOR identified the fact that the Applicant failed to file Federal and state income tax for tax years 2014 and 2015. Applicant admitted each of the allegations in the SOR. (See Answer) He has been working for his current employer since May 2015.

Applicant joined the U.S. Marine Corps in 1989. He served as a combat photographer for four years until 1993. When he left the military, he went to college and worked odd jobs until 1999. From 1999 until 2015, he served on active duty in the U.S. Navy as an electronics technician. In May 2015, he retired with an honorable discharge as an E-6. During his military career, he received a number of awards and commendations, including the Navy Achievement Medal, among others. He also underwent a number of deployments including campaigns in support of our most recent wars in Iraq and Afghanistan. Applicant’s spouse is currently on active duty in the U.S. Navy on deployment. (Tr. pp. 21- 24.) Applicant failed to file his Federal and state income tax returns for tax years 2014 and 2015 as required by law. He attributes his failure to these returns on the fact that he was going through life change getting ready to retire and lost track, and simply neglected them. He always believed that he would be getting a refund anyway and did not realize that there could be a problem. Applicant stated that he usually filed jointly with his spouse, but she was deployed this last year and he simply neglected to do it. He also explained that in November 2016, he had a motorcycle accident and received a severe concussion. He blacked out and was taken to the hospital for treatment. Applicant believes that he is still recovering from the concussion, as he has been disoriented and tired at times. He has not been able to do the math necessary and the taxes have been quite a chore. He has had difficulties doing complex tasks but has been increasingly improving. After tying to prepare his own tax returns without success, Applicant hired a professional tax preparer who has assisted him in getting his income taxes filed.

Applicant finally filed both his Federal and state income tax returns for tax years 2014 and 2015 in December 2016. (Applicant’s Post-Hearing Exhibit A.) Regarding his 2014 taxes, Applicant explained that he received a request for payment from the IRS in the amount of $1,491.84 for unpaid taxes for 2014 on April 24, 2017. On May 8, 2017, he paid the debt. (Tr. p. 31, and Applicant’s Exhibit C.) Applicant also made a payment to the state taxing authorities in the amount of $1,481.84 on April 27, 2017. Applicant mistakenly thought he owed the state this amount when he had actually already paid the IRS. The state kept the payment and plans to apply it to any taxes he may owe.

Concerning his 2015 taxes, Applicant received a bill from the IRS in the amount of $8,197.90, due on May 8, 2017. (Applicant’s Exhibit H.) With this debt, he set up an installment plan arranging to pay a minimum of $500 a month to begin on June 20, 2017, and continue until the debt is paid off. (See Applicant’s Post-Hearing Exhibit A.) Applicant also received a Final Notice Before Levy from the state regarding his 2015 taxes with a balance due of $2,041.06. (Applicant’s Exhibit J.) Applicant paid the debt on April 27, 2017. (Applicant’s Exhibit K.)

Applicant also filed his 2016 Federal and state income taxes several days late. He was recently notified by the IRS that he owes $8,213 in back taxes for that year. Applicant had saved money in his bank account for a down payment on a house, but instead he used it to pay the Federal tax debt in full. Applicant was also notified by the state that he owed $1,988 in back taxes for 2016. Applicant paid the debt in full on May 10, 2017. (Applicant’s Exhibit L and Applicant’s Post-Hearing Exhibit A.)

Applicant explained that when he retired, his taxes changed and he and his wife were no longer paying enough taxes. In May 2017, Applicant made adjustments in his tax withholdings so that he will not owe taxes at the end of the year, but will be paying them throughout the year in his salary. Applicant also learned when he spoke to the IRS agent that there was no record of him filing his income tax returns for 2011. Applicant plans to file this return soon. Letters of recommendation from a supervisor, professional associates, coworkers and friends indicate that Applicant is a courteous, respectable, trustworthy and honest. He is an excellent employee, and is a highly knowledgeable technician. He works independently at remote sites and has never received any negative comments about his performance or timeliness. He is highly recommended for a security clearance. (Applicant’s Post-Hearing Exhibit A.)

Applicant is involved in a renaissance jousting play program for children plans to start a non-profit organization where he can provide these services. He provided several pictures of his community service program. (Applicant’s Exhibit N.)

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 to be 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, 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 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.

Directive ¶ E3.1.14 requires the Government to 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 the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance decision.”

A person who applies for access to classified information seeks to enter 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 EO 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 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.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. Four are potentially applicable in this case:

(a) inability to satisfy debts;

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

(g) failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same.

Applicant failed to file his income tax returns for tax years 2014 and 2015 in a timely fashion as required by law. He also failed to file his 2016 Federal and state income tax returns on time. Significant tax liability was assessed against him. The evidence is sufficient to raise the above disqualifying conditions. AG ¶ 20 provides conditions that could mitigate security concerns. I considered all of the mitigating conditions under AG ¶ 20 including:

(c) the person has received or is receiving counseling and/or there are clear indications that the problem is being resolved or is under control;

(d) the individual initiated 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.

Applicant has filed his 2014, 2015 and 2016 income tax returns and has either paid the back taxes owed, or is currently making payments to resolve them. Admittedly, there have been some problems with procrastination, and has not been diligent about handling his tax matters until recently. Even under the assumption that would receive a refund, he now understands that he must file his returns on time, or file an extension to be able to file them late. Applicant realizes that he can no longer prepare his own returns, but must seek out a professional tax preparer for help. He has finally adjusted his withholdings to prevent these tax problems in the future. He has addressed his tax debt in a reasonable and responsible manner.

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.

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 facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. Applicant has proudly served our country on active duty in both the Marine Corps and the Navy, in times of war and combat. In his civilian position, he was worked hard to exemplify dedication and commitment to his job for the defense department. He has the trust and respect from his professional colleagues, management, coworkers and friends.

Overall, the record evidence leaves me without questions or doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant has mitigated the Financial Considerations security concerns.

FORMAL FINDINGS

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

Paragraph 1, Guideline F: FOR APPLICANT

Subparagraph 1.a: For Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted.

Darlene Lokey Anderson Administrative Judge