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ISCR Case 16-00880.h1 — CASE

ISCR Case 16-00880.h1denied

Case Headnote

ISCR Case No. 16-00880.h1

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

Summary

A 61-year-old federal contractor was denied a security clearance under Guideline F, Financial Considerations, due to a history of financial difficulties and unresolved debts. The Statement of Reasons cited a federal tax lien filed in 2015 for approximately $53,247, which remains unpaid. Additionally, a civil suit for a $2,398 debt resulted in a payment plan, with the applicant making monthly payments.

The applicant's financial issues raised several disqualifying conditions, including a history of not meeting financial obligations and an inability or unwillingness to satisfy debts. While some mitigating conditions were considered, such as the debts not being recent and the applicant seeking assistance, these were insufficient to overcome the concerns.

The denial was based on the applicant's unresolved delinquent debts totaling approximately $70,846, the outstanding federal tax lien from 2015, and a failure to provide sufficient evidence of a reliable track record of financial stability.

Why the Applicant Was Denied

Applicant has unresolved delinquent debts totaling approximately $70,846.
A federal tax lien was filed against the applicant in 2015, which remains unpaid.
The applicant failed to provide sufficient evidence of a reliable track record of financial stability.

Conditions Referenced

Disqualifying

AG ¶ 19(a)appliedInability to Satisfy Debts
AG ¶ 19(b)appliedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
AG ¶ 19(c)appliedA History of Not Meeting Financial Obligations
AG ¶ 19(f)appliedFailure 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

AG ¶ 20(b)rejectedConditions That Resulted in the Financial Problem Were Largely Beyond the Person's ControlAlthough the applicant's unemployment was beyond his control, he did not act responsibly under the circumstances.
AG ¶ 20(g)appliedThe Individual Has Made Arrangements with the Appropriate Tax Authority to File or Pay the Amount Owed and Is in Compliance with Those Arrangements

Key Rule Quoted

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

Procedural Posture

SOR issuedSep 7, 2016
Answer filedOct 10, 2016
Hearing heldJun 7, 2017
Decision dateJul 5, 2017

Cite For

Insufficient Evidence of Financial Stability Under Guideline F
Impact of Unresolved Debts on Security Clearance Eligibility
Consideration of Tax Obligations in Security Clearance Decisions

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 unresolved debts and a federal tax lien. The applicant's financial history raised significant doubts about his reliability and trustworthiness, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	a federal tax lien was filed in 2015 against Applicant in the approximate amount of $53,247 $53,247	Against Applicant	Tax Unpaid	Admitted	(a) inability to satisfy debts (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b–1.i	8 sub-charges — specific text not stated in this decision (against the applicant).	Against Applicant			—	—	—
1.j	the debt in SOR ¶ 1.j ($2,398) resulted in a civil suit, and he is making monthly payments to satisfy it $2,398	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.k–1.m	3 sub-charges — specific text not stated in this decision (against the applicant).	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. 16-00880 ) ) Applicant for Security Clearance

For Government: David Hayes, Esquire, Department Counsel For Applicant: Pro se

07/05/2017 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Applicant’s eligibility for access to classified information is denied.

Statement of the Case

On September 7, 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 AGs were implemented and are effective for decisions issued after that date.1 Applicant answered the SOR on October 10, 2016, and requested a hearing before an administrative judge. The case was assigned to me on March 22, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on May 4, 2017. I convened the hearing as scheduled on June 7, 2017. The Government offered exhibits (GE) 1 through 4, and they were admitted into evidence without objection. Applicant testified and did not offer any documents. The record was held open until June 21, 2017, to allow Applicant to submit documents. Applicant submitted documents that were marked as Applicant Exhibits (AE) A through D, and were admitted into evidence without objection. The record then closed.2 DOHA received the hearing transcript on June 15, 2017.

FINDINGS OF FACT

Applicant admitted all of the 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 61 years old. He has some college education, but did not earn a degree. He served in the military from 1975 to 1979 and was honorably discharged. He married in 1985 and has a grown stepchild. He has worked for his current employer, a federal contractor, since 2011, except for a short-period of unemployment for three weeks in 2014. He was unemployed from January 2009 to October 2010. His wife is self-employed with a home business, earning about $28,000 to $34,000 annually. Applicant’s annual salary is approximately $84,000. Applicant’s father lives with him, but has his own income, although Applicant also provides financial assistance.3

Applicant acknowledged that before 2009, he and his wife were doing well financially, but had a high debt-to-income ratio. They paid their bills on time and interest rates were low on his accounts. He lost his job in 2009 and had difficulty finding a new one, and interest rates were then raised. He testified that he made the mistake of withdrawing money from his 401kpension plan. He understood that he had the option of having the taxes withheld upfront, but chose not to do that.4

SOR ¶ 1.a alleges a federal tax lien was filed in 2015 against Applicant in the approximate amount of $53,247. Applicant testified that he has had a few agreements with the Internal Revenue Service (IRS) to pay the debt through an installment payment plan. He explained that he would miss a payment and then the agreement would be terminated, and he would have to start over. He testified he has an agreement with the IRS and provided a document that shows he has made payments of $690 in December 2016 through May 2017. These payments were applied to tax years 2009, 2010, 2015, and 2016. It appears his April 2017 payment was for his 2016 tax return. He also made payments in February ($583), March ($690), and April 2017 ($1,286). In November 2016, he made two payments of $7,789 and $7,210 that were applied to his 2009 tax debt. Applicant stated he received some assistance to help him set up a payment arrangement with the IRS. He did not receive financial counseling.5

The IRS document breaks down the years and the amount of taxes Applicant owes for each year: 2013 ($5,259); 2012 ($10,964); 2011 (1,346); 2010 (5,955); and 2009 ($24,366). Those years are the basis for the federal tax lien.6 He testified that he has timely filed his federal and state tax returns in past years and whatever refunds he was due were applied to his tax debt.7

Applicant admitted owning the debts alleged in SOR ¶¶ 1.bthrough 1.m, totaling approximately $70,846. He stated that the debt in SOR ¶ 1.j ($2,398) resulted in a civil suit, and he is making monthly payments to satisfy it. He provided a list of his debts, indicating the status of the debt in SOR ¶1.e ($1,718 past due on balance of $41,405) was current; SOR ¶ 1.h ($4,450) was paid on June 19, 2017; SOR ¶ 1.k ($6,265) was paid on June 19, 2017; and he has a zero balance on the debt in SOR ¶ 1.l ($3,881). He did not provide documentary evidence to substantiate his payments or resolution of the above debts.8

Applicant testified that his mortgage loan is current. He does not own a car. He teleworks and rents a car because he believes it is more cost effective. He has some savings, but does not want to deplete it in the event he loses his job.9

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. Directive ¶ E3.1.15 states that 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 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 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.

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.10

The guideline notes several conditions that could raise security concerns. I have considered all of the disqualifying conditions under AG ¶ 19, and 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 income tax returns or failure to pay annual Federal, state, or local income tax as required.

Applicant has unresolved delinquent debts that began accumulating in 2009. He has a federal tax lien entered in 2015 that is unpaid. The above disqualifying conditions apply.

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 counseling for the problem from a legitimate and credible source, such as a non-profit credit counselling 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

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

Applicant attributed his financial problems to a period of unemployment beginning in 2009 to 2010, when he could not afford to pay all of his accounts. He subsequently withdrew money from his 401kpension plan that created tax consequences. He stated that he had payment arrangements with the IRS in the past, but missed payments and had to start over. He provided an IRS statement showing that he has made payments since November 2016. He failed to provide documents to support his assertions that he is paying his other delinquent debts. I cannot find that his behavior is unlikely to recur because of his inconsistent payment history. His behavior casts doubt on his current reliability, trustworthiness, and good judgment. AG ¶ 20(a) does not apply.

Applicant’s unemployment was beyond his control. His high debt-to-income ratio was within his control. He acknowledged that he chose not to have taxes withheld when he withdrew money from his pension plan, which caused a significant tax consequence. This was within his control. For the full application of AG ¶ 20(b), Applicant must have acted responsibly under the circumstances. He testified that he had made agreements with the IRS to repay his tax debt, but missed payments. An IRS document shows he owes taxes for tax years 2009 through 2013. Applicant provided a statement saying he had paid some debts, but failed to provide evidence to substantiate the payments. The two debts he indicated he paid occurred after his hearing. He has been employed since late 2011. I find Applicant did not act responsibly under the circumstances and AG ¶ 20(b) partially applies.

There is no evidence that Applicant participated in financial counseling. There is evidence that he is resolving his tax debt with payments that began in November 2016, after he received the SOR. He testified he made other payments, but failed to adhere to installment agreements with the IRS. He provided a post-hearing statement indicating that he had paid two debts and was paying others, but he failed to provide documents to substantiate those payments. There is insufficient evidence to conclude that there are clear indications his finances are under control. AG ¶ 20(c) does not apply.

Applicant was aware that when he withdrew money from his pension plan it would create tax consequences. He chose not to pay the taxes at the time of withdrawal. He did not provide evidence of any past efforts to pay his delinquent taxes before a tax lien was entered in 2015. He has made consistent payments on the tax lien beginning in November 2016, after receipt of the SOR. There is insufficient evidence to conclude he has made good-faith payments on his other delinquent debts. I have considered his recent payments to the IRS, but under the circumstances, I cannot find that he initiated and adhered to a good-faith effort to pay his tax debt because it did not occur until after a lien was entered, and his payments started after he received the SOR. I find AG ¶ 20(d) does not apply. Applicant did not provide evidence as to the specific arrangements he has with the IRS and whether he is in compliance, but there is evidence he has made consistent payments since November 2016. I find there is sufficient evidence to apply AG ¶ 20(g).

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 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 61 years old. He served in the military for four years and received an honorable discharge. He was unemployed from 2009 to 2010, but has been consistently employed since 2011, except for a three-week period. He was aware that he was required to pay taxes on money he withdrew from his pension plan, and did not. In 2015, the IRS imposed a tax lien. Applicant recently began making consistent payments toward resolving the tax lien. He has other delinquent debts that are unresolved. Applicant has not established a reliable track record of financial stability. Although he testified that he had made past payments toward his tax debt, the evidence shows that those consistent payments did not begin until after he received the SOR. Although post- hearing, he indicated he paid two delinquent debts, he did not provide supporting documents. His conduct raises questions about his judgment, reliability, and trustworthiness. Overall, the record evidence leaves me with serious questions and doubts about Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude he 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 ¶ E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a-1.m: 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. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 I considered the previous AGs, effective September 1, 2006, as well as the new AGs, effective June 8, 2017. My decision would be the same if the case was considered under the previous AGs. 2 Hearing Exhibit I is Department Counsel’s email memorandum. 3 Tr. 15-19. 4 Tr. 19-22. 5 Tr. 25-28, 37; AE B. 6 AE B. 7 Tr. 38-39; AE B. 8 Tr. 22, 28-31, 35-37; AE C. 9 Tr. 39-42; AE D. 10 See ISCR Case No. 11-05365 at 3 (App.Bd. May 1, 2012).