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ISCR Case 16-00809.h1 — CASE

ISCR Case 16-00809.h1denied

Case Headnote

ISCR Case No. 16-00809.h1

deniedJan 5, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 36-year-old applicant with a bachelor's degree was denied a security clearance under Guideline F (Financial Considerations) due to a history of failing to timely file federal income tax returns. The Statement of Reasons specifically cited the applicant's failure to file returns for the years 2011 through 2015. While the applicant disputed a judgment of $11,194 listed in the Statement of Reasons, claiming it did not belong to him, the primary concern remained the repeated tax filing delinquencies.

Despite filing some of the outstanding returns after being notified of the security concerns, the judge found this insufficient to demonstrate rehabilitation. The applicant did not provide adequate evidence of circumstances beyond his control that would explain the repeated failures to file.

Ultimately, the denial was based on the applicant's pattern of procrastination and lack of timely action, which raised concerns about his reliability, judgment, and willingness to comply with rules and regulations. The mitigating condition 20(c) was considered but did not overcome the disqualifying conditions.

Why the Applicant Was Denied

Applicant failed to timely file federal income tax returns for multiple years, raising concerns about reliability and judgment.
The applicant's procrastination and lack of timely action were not mitigated by evidence of circumstances beyond his control.
The applicant's conduct raised questions about his willingness to abide by rules and regulations.

Conditions Referenced

Disqualifying

FraisedFinancial ConsiderationsApplicant failed to timely file annual Federal income tax returns as required.

Mitigating

20(c)appliedMitigating ConditionsApplicant filed his delinquent tax returns, but the judge found insufficient evidence of overall rehabilitation.

Key Rule Quoted

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

Procedural Posture

SOR issuedJun 6, 2016
Answer filedAug 9, 2016
Hearing heldDec 7, 2016
Decision dateJan 5, 2017

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Importance of Timely Filing Tax Returns for Security Clearance Eligibility
Whole-person Concept in Evaluating Security Clearance 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 timely file his Federal income tax returns from 2011 through 2015, which raised security concerns under Guideline F. However, the judge ruled in favor of the applicant regarding a judgment against him, concluding that it did not belong to him.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	failed to timely file his 2011 through 2015 Federal income tax returns	Against Applicant	Tax Filing Failure	Denied	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	judgment in SOR ¶ 1.b ($11,194) as not belonging to him $11,194	For Applicant	Unspecified Financial	Denied	—	—	—

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. 16-00809 ) ) Applicant for Security Clearance

For Government: Mary M. Foreman, Esq., Department Counsel For Applicant: Pro se

01/05/2017 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Eligibility for a security clearance is denied.

Statement of the Case

On June 6, 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 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.

Applicant answered the SOR on August 9, 2016, and requested a hearing before an administrative judge. The case was assigned to me on October 25, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on October 26, 2016. I convened the hearing as scheduled on December 7, 2016. The Government offered exhibits (GE) 1 through 4, which were admitted into evidence without objection. Applicant testified and offered Applicant Exhibits (AE) A through E, which were admitted into evidence without objection. I held the record open until December 27, 2016, to permit Applicant an opportunity to provide additional documents, which he did. He provided one document that is marked AE F, and I admitted it without objection.1 DOHA received the hearing transcript (Tr.) on December 15, 2016.

Procedural Issues

Department Counsel moved to amend SOR ¶ 1.a to reflect the evidence by adding tax years 2014 and 2015. There was no objection and the motion was granted.

FINDINGS OF FACT

Applicant denied both allegations in the SOR. After a thorough and careful review of the pleadings, exhibits, and testimony, I make the following findings of fact.

Applicant is 36 years old. He earned a bachelor’s degree in 2005 and has been employed with the same company since 2006. He is not married and has no children. He completed a security clearance application in November 2014, and was interviewed by a government investigator in November 2015.2

Applicant testified that he did not timely file his 2011, 2012, 2013, 2014, and 2015 Federal income tax returns. He testified that for tax years 2006 to 2011 he filed extensions, but was not sure if he complied with the extension requirements.3

Applicant provided documentation to show on November 19, 2015, he filed his 2011 Federal income tax return. It appears he was due a refund, but forfeited it. The IRS transcript noted that he was sent an inquiry in March 2013 inquiring about the unfiled tax return.4

Applicant filed his 2012 Federal income tax return on January 27, 2015. He was sent an inquiry by the IRS in December 2013 about his unfiled tax return. He owed taxes, penalties, and interest for that tax year. He indicated that other years’ refunds were applied to said amount, and he paid the remaining amount in August 2016.5 Applicant filed his 2013 Federal income tax return on November 20, 2015. It is unclear if he owed a balance for this year.6 Applicant provided a document that indicates he was contacted by the IRS in October 2015 inquiring about his delinquent 2014 Federal income tax return. He filed the 2014 return on November 19, 2015. Applicant testified that he had not filed his 2015 Federal income tax return.7 After the hearing, Applicant sent an email stating: “I’ve since met with [my] CPA and filed my 2015 federal tax return and I’m awaiting a refund.”8 He did not provide supporting documents.

Applicant testified that he was aware of his responsibility to timely file his tax returns. He admitted he was at fault and procrastinated. He stated he was looking for an accountant that had experience with his unique tax issues. He stated he was not trying to cheat the government and renege on paying taxes. His employer withholds sufficient taxes from his income so he does not owe taxes. He testified that he filed his delinquent tax returns in preparation for getting a security clearance. He stated that previously he did not timely file his 2015 Federal income tax return because he was still looking for an accountant.9

Applicant disputes the judgment in SOR ¶ 1.b ($11,194) as not belonging to him. He testified that the name and address in the Government’s evidence is his brother’s. He testified that he and his brother’s first five numbers of their Social Security numbers are the same. The extract does not include a complete Social Security number. Applicant’s November 2014 credit report reflects the judgment. Applicant provided a copy of the judgment obtained from the state civil court, and it does not reflect Applicant’s first name, but rather that of his brother.10 I find the judgment alleged in SOR ¶ 1.bdoes not belong to Applicant.

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. 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 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. Likewise, I have not drawn 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. Under Directive ¶ E3.1.15, 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 to obtain 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 the applicant may deliberately or inadvertently fail to safeguard 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.” 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 for financial considerations is set out in AG ¶ 18:

Failure or inability 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 information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds.

This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handing and safeguarding classified information.11

The guideline notes several conditions that could raise security concerns. I have considered all of the disqualifying conditions under AG ¶ 19, and the following is potentially applicable:

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

Applicant failed to timely file his 2011 through 2015 Federal income tax returns. The above disqualifying condition applies.

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, or a death, divorce or separation), and the individual acted responsibly under the circumstances; and

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

Applicant repeatedly failed to timely file his Federal income tax returns from 2011 through 2015. He testified that he had not yet filed his 2015 Federal income tax return. He provided an email after the hearing stating the return was now filed. There is insufficient evidence to apply AG ¶ 20(a) as Applicant’s frequent and ongoing conduct did not occur under circumstances that are unlikely to recur, and his consistent failure to comply with rules casts doubt on his current reliability, trustworthiness, and good judgment.

Applicant admitted he procrastinated and was at fault when he failed to timely file Federal income tax returns. There is insufficient evidence to conclude there were conditions beyond his control that prevented him from acting responsibly. AG ¶ 20(b) does not apply.

Applicant admitted that he began addressing his delinquent tax returns because he was pursuing a security clearance. His 2011 through 2014 tax returns have now been filed. After his hearing, he provided an email stating he had filed his 2015 Federal income tax returns. His delinquent tax returns are now filed and AG ¶ 20(c) applies to the extent that they are no longer overdue.

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(a):

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

Applicant is a 36-year-old educated man. He repeatedly failed to file his Federal income tax returns from 2011 through 2015. Complying with fundamental civic and legal responsibilities is required of those entrusted with our nations secrets. Although being on notice that his conduct was a security concern in June 2016, at the time of his hearing, he had not yet filed his 2015 Federal income tax return. Applicant’s consistent unwillingness to abide by rules and regulations raise questions about his reliability, trustworthiness, and good judgment. Overall, the record evidence leaves me with questions and doubts about Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate financial considerations guideline security concerns.

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

Subparagraph 1.a: Against Applicant Subparagraph 1.b: For 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. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 HE I is Department Counsel’s email response stating that she did not object to the AE F. This document is an email from Applicant. 2 Tr. 17-20; GE 1, 2. 3 Tr. 20-22, 33-34; I have not considered this information for disqualifying purposes, but will consider it in my credibility, mitigation, and whole person analyses. 4 Tr. 25-26; AE A. 5 Tr. 26-30; AE B. 6 Tr. 30-31; AE C. 7 Tr. 31-32, 34; AE D. 8 AE F. 9 Tr. 20, 35-36, 50-55. 10 Tr. 36-49; GE 1 3, 4; AE E. 11 See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012).