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ISCR Case 16-00515.h1 — CASE

ISCR Case 16-00515.h1denied

Case Headnote

ISCR Case No. 16-00515.h1

deniedJul 21, 2017· Hon. Noreen A. Lynch· hearing

Summary

A 41-year-old administrative assistant for a defense contractor was denied a security clearance under Guideline F, Financial Considerations. The denial stemmed from significant financial issues, including multiple delinquent debts and a failure to file tax returns.

The Statement of Reasons detailed a past-due mortgage loan of $9,617, collection accounts totaling approximately $21,000, and medical accounts also totaling about $21,000. Additionally, the applicant owed the Federal Government $6,000 for unpaid taxes from 2012 and 2013 and failed to file federal and state tax returns for those years. Disqualifying conditions 19(a), 19(b), 19(c), and 19(f) were raised.

While mitigating condition 20(b) was applied, the judge found insufficient evidence to overcome the security concerns. The applicant admitted to the delinquent debts and tax filing failures but did not provide documentation to support claims of tax filings or payment plans. The applicant also acknowledged poor financial management skills and had not received financial counseling, leading to the denial of her clearance.

Why the Applicant Was Denied

The applicant admitted to having multiple delinquent debts totaling approximately $21,000 and failure to file federal and state tax returns for 2012 and 2013.
The applicant did not provide documentation to support her claims regarding tax filings and payment plans.
The applicant acknowledged poor financial management skills and had not received financial counseling.

Conditions Referenced

Disqualifying

19(a)raisedInability to Satisfy Debts
19(b)raisedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
19(c)raisedA History of Not Meeting Financial Obligations
19(f)raisedFailure 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

Mitigating

20(b)appliedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person's Control

Key Rule Quoted

“Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of national security.”
— Executive Order 10865

Procedural Posture

SOR issuedJun 24, 2016
Answer filed—Timely answered the SOR.
Hearing heldJun 22, 2017Hearing conducted.
Decision dateJul 21, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Issues Under Guideline F
Impact of Financial Mismanagement on Security Clearance Eligibility
Consideration of Mitigating Factors Related to Financial Distress Caused by External Circumstances

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 multiple delinquent debts, including a past-due mortgage and unpaid taxes, which raised significant security concerns under Guideline F. Despite some mitigating factors related to her husband's immigration issues, the applicant's overall financial management and lack of documentation led to a denial of her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	past-due mortgage loan in the amount of $9,617 $9,617	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	collection accounts totaling about $21,000 $21,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	medical accounts totaling about $21,000 $21,000	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	indebtedness to the Federal Government for taxes not paid for tax years 2012 and 2013, in the amount of $6,000 $6,000	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.e	failure to file federal and state tax returns for tax years 2012 and 2013	Against Applicant	Tax Filing Failure	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.f–1.n	9 sub-charges — specific text not stated in this decision (against the applicant). (low confidence)	Against Applicant			—	—	—

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.16-00515 ) ` ) Applicant for Security Clearance )

For Government: Rhett Petcher, Esq. Department Counsel For Applicant: Pro se

07/21/2017 ______________

STATEMENT OF CASE

______________

LYNCH, Noreen, A., Administrative Judge:

The Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant alleging security concerns arising under Guideline F (Financial Considerations). The SOR was dated June 24, 2016. The action was taken under Executive Order (EO) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; DOD 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the Adjudicative Guidelines (AG) implemented in September 2006. Revised Adjudicative Guidelines were issued on December 10, 2016, and became effective on June 8, 2017.1

Applicant timely answered the SOR and requested a hearing. The case was assigned to me on February 15, 2017. A notice of hearing was issued on March 27, 2017, scheduling the hearing for June 22, 2017. Government Exhibits (GX) 1-5 were admitted into evidence without objection. Applicant testified and submitted Applicant Exhibits (AX) A-B, which were admitted without objection. I kept the record open for additional submissions and Applicant timely submitted a document, which was marked as AX C. The transcript was received on July 3, 2017. Based on a review of the pleadings, testimony, and exhibits, eligibility for access to classified information is denied.

FINDINGS OF FACT

In her answer to the SOR, Applicant admitted all allegations with the exception of SOR ¶¶ 1.mand 1.n. She provided explanations for the allegations under Guideline F (Financial Considerations).

Applicant is a 41-year-old administrative assistant for a defense contractor. She graduated from high school and attended college courses for approximately one year. She is married and has one minor child and two stepchildren. Applicant has worked for her current employer for seven years. She is being considered for a promotion to a Facility Security Officer position. (FSO) In 2011, she obtained a security clearance. Applicant completed her latest security clearance application in January 2015. (GX 1)

Financial Considerations

The SOR alleges 13 delinquent debts including charged-off accounts, past-due mortgage loan in the amount of $9,617, collection accounts, and medical accounts, which total about $21,000. It also alleges indebtedness to the Federal Government for taxes not paid for tax years 2012 and 2013, as well as failure to file the federal AND state tax returns for those years, in the amount of $6,000.

Applicant admitted that she had a poor financial history, but she stated that she was an extremely loyal and trustworthy person. She explained that her husband encountered many immigration issues. (Tr. 16) He also has child support for which he is responsible. He was not allowed to seek employment, and Applicant was the sole support for the family. Despite the fact that those two issues relating to her husband are almost resolved, Applicant has not been able to gain financial stability. She considered bankruptcy as an option, but Applicant stated that she does not have the money for an attorney. (Answer to SOR)

Applicant obtained help from a loan officer recently to help repair her credit. (AX A). However, she has only spoken to him on the phone. She has not received financial counseling. Her husband starts a job soon and she hopes that they will be on a sound financial ground to pay their delinquent debts. She also noted that there was some poor money management.

As to the SOR allegation in 1.a, Applicant submitted a form 1099-C, dated October 31, 2016, which showed a cancellation of debt in the amount of $91,385.86 from the mortgage company. (AX C) This was the primary residence which went to foreclosure in 2016.

As to the other SOR allegations 1.bthrough 1.l, Applicant has not yet made any payments. She is relying on the credit repair company to guide her through the process of identifying creditors and repairing her credit. As to the medical debts, Applicant is not sure, but she believes the amounts are for not meeting her deductibles. She has health insurance. (Tr. 43) She explained that she has not reached out to any of the SOR creditors. (Tr. 45)

Applicant stated that she has filed her federal and state 2012 and 2013 tax returns, but presented no documentation to confirm her assertion. (SOR 1m.) Applicant stated that the “back taxes” will be garnished from her husband’s paycheck. (Tr. 20) She also noted that she will get a refund from the 2016 tax return. She thought that the federal tax had been resolved, but not the state. Again, Applicant could not produce any documentation. She believed she had started a payment plan with the state, but she could not maintain the payments. (Tr. 50)

Applicant earns an annual salary of about $65,000. (Tr. 25) Her husband’s new job will add about $2,000- $4,000 a month. Applicant’s husband is still paying child support arrearages in the amount of $5,000. She stated that they live paycheck to pay check. (Tr. 56) Applicant noted that they sometimes help their grandchildren financially.

Applicant submitted performance evaluations from 2011 to 2016. They reflect the highest rating of a “5". Applicant is described as a team player who always goes out of her way to assist otherS. Her work is of the highest caliber. (AX B)

POLICIES

When evaluating an applicant’s suitability for a security clearance, an 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. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, they are applied in conjunction with the factors listed in the adjudicative process. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. Under AG ¶ 2(a), this process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” An 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 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. The Government must present evidence to establish controverted facts alleged in the SOR. 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. . . .” The burden of proof is something less than a preponderance of evidence. The ultimate burden of persuasion is on the applicant.

A person seeking access to classified information enters into a fiduciary relationship with the Government based on 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 classified information. Such decisions entail a certain degree of legally permissible extrapolation of 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.” “The clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.” Any reasonable doubt about whether an applicant should be allowed access to sensitive information must be resolved in favor of protecting such information. The decision to deny an individual a security clearance does not necessarily reflect badly on an applicant’s character. It is merely an indication that the applicant has not met the strict guidelines the President and the Secretary of Defense established for issuing a clearance.

ANALYSIS

Guideline F, Financial Considerations

AG ¶ 18 expresses the security concern pertaining to financial considerations:

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 over-extended is at a 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 describes conditions that could raise a security concern and may be disqualifying:

(a) inability to satisfy debts;

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

(d) deceptive or illegal financial practices such as embezzlement, employee theft, check fraud, expense account fraud, mortgage fraud income tax evasion, expense account fraud, filing deceptive loan statements, and other intentional financial breaches of trust;

(e) consistent spending beyond one's means or frivolous or irresponsible spending, which may be indicated by excessive indebtedness, significant negative cash flow, a history of late payments or of non-payment, or other negative financial indicators;

(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;

(g) unexplained affluence, as shown by a lifestyle or standard of living, increase in net worth, or money transfers that are inconsistent with known legal sources of income;

(h) borrowing money or engaging in significant financial transactions to fund gambling or pay gambling debts; and

(i) concealing gambling losses, family conflict, or other problems caused by gambling.

The Government produced credible evidence to establish the delinquent debts and the failure to file federal and state tax returns for the years 2012 and 2013. There is also an indebtedness of about $6,000 . Consequently, the evidence is sufficient to raise disqualifying conditions ¶¶ 19(a), 19(b), 19(c), and 19(f)

AG ¶ 20 provides conditions that could mitigate the security concerns:

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

(c) the person has received or is receiving 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;

(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;

(f) the affluence resulted from a legal source of income; and

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

Applicant’s husband’s immigration issues contributed to her financial problems. The issues are still not resolved. Applicant recently obtained help from a credit repair company, but has no payment plan. She has not paid any of the delinquent debts or provided documentation concerning the federal and state tax returns and tax owed. She has not received financial counseling. She intends to work on her delinquent debts. Applicant was the sole provider for the family for many years. She acknowledged that she has poor financial management skills. Mitigating conditions AG ¶ 20(b) partially applies in this case. Based on the evidence in record, the other mitigating conditions do not apply.

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 an 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. As noted above, the ultimate burden of persuasion is on the applicant seeking a security clearance.

I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case, as well as the whole-person factors.

Applicant is 41 years old. She has been steadily employed. She had financial difficulties arise due to immigration problems with her husband. He could not work and she was the sole provider for the family for many years. She has held a security clearance since 2011. She has excellent performance evaluations.

However, she only recently reached out to a credit repair company to help her resolve the financial issues. She did not provide documentation regarding the tax issues. She has not received financial counseling. She admits that she has poor money management skills.

After weighing the disqualifying and mitigating conditions under Guideline F, and evaluating all the record evidence in the context of the whole person, I conclude Applicant has not mitigated the security concerns under the guideline. Accordingly, I conclude that she has not carried her burden of showing that it is clearly consistent with the national interest to grant her eligibility for access to classified information. Any doubts must be resolved in favor of the Government.

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.n: 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 a security clearance. Clearance is denied.

NOREEN A. LYNCH Administrative Judge

FOOTNOTES

In this case, the SOR was issued under Adjudicative Guidelines effective within the Defense Department on September 1, 2006. Revised Adjudicative Guidelines became effective June 8, 2017. My decision and formal findings under the revised Guidelines B and F would not be different under the 2006 Guidelines. See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995). Department of the Navy v. Egan, 484 U.S. 518, 531 (1988). ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995). See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information), and EO 10865 § 7. ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995). Id.