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ISCR Case 16-00896.h1 — CASE

ISCR Case 16-00896.h1denied

Case Headnote

ISCR Case No. 16-00896.h1

deniedOct 4, 2017· Hon. Carol G. Ricciardello· hearing

Summary

A 58-year-old federal contractor was denied a security clearance under Guideline F (Financial Considerations) due to unresolved financial issues primarily stemming from a 2011 divorce. The Statement of Reasons (SOR) detailed several significant financial delinquencies. These included a failure to pay 2012 federal and state income taxes, resulting in a 2014 state judgment for $7,419 in unpaid taxes.

Additionally, the SOR listed 19 delinquent medical debts totaling approximately $6,898, and a past-due mortgage with a balance of $87,944, of which $25,144 was past due. While the applicant claimed to be making payments towards these debts, he did not provide sufficient documentation to substantiate his assertions.

The denial was based on the applicant's failure to provide evidence of payments, the ongoing nature of his financial problems, and his inability to demonstrate responsible financial management. Disqualifying conditions under Guideline F were raised, with one mitigating condition applied, but ultimately, the applicant's security clearance was denied.

Why the Applicant Was Denied

Applicant failed to provide evidence of payments towards his debts.
Delinquent debts included unpaid federal and state taxes, a judgment for unpaid state taxes, and numerous medical debts.
Applicant's financial problems were ongoing and he did not demonstrate responsible management of his finances.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(b)raisedUnwillingness to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Income Tax Returns

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond ControlApplicant attributed financial problems to a divorce, but did not act responsibly in managing debts.

Key Rule Quoted

“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.”
— AG ¶ 18

Procedural Posture

SOR issuedJul 13, 2016
Answer filedAug 26, 2016Applicant elected to proceed without a hearing.
Hearing held—Case decided on the written record.
Decision dateOct 4, 2017

Cite For

Failure to Provide Evidence of Financial Responsibility Under Guideline F
Impact of Unresolved Financial Obligations on Security Clearance Eligibility
Application of Mitigating Conditions in Financial 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 mitigate financial concerns under Guideline F, which included multiple delinquent debts such as unpaid taxes, a judgment, medical debts, and a past-due mortgage. The applicant's financial issues were deemed ongoing and unresolved, leading to a denial of eligibility for a security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant failed to pay his 2012 federal and state income taxes.	Against Applicant	Tax Unpaid	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations (f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	A judgment was filed against him by the state in 2014 for unpaid taxes in the amount of $7,419. $7,419	Against Applicant	Judgment Against Applicant	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	The SOR alleges 19 delinquent medical debts totaling approximately $6,898. $6,898	Against Applicant	Medical Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d–1.g	4 sub-charges — specific text not stated in this decision (against the applicant). (low confidence)	Against Applicant			—	—	—
1.h	The debt in SOR ¶ 1.h (balance $87,944, past due $25,144) is a past-due mortgage. $87,944	Against Applicant	Mortgage or Home Loan Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i–1.v	14 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. 16-00896 ) ) Applicant for Security Clearance

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

10/04/2017 ______________

STATEMENT OF CASE

______________

RICCIARDELLO, Carol G., Administrative Judge:

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

Statement of the Case

On July 13, 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 AG were implemented and are effective for decisions issued after that date.1 Applicant answered the SOR on August 26, 2016, and elected to have his case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s file of relevant material (FORM). Applicant received it on October 25, 2016. He was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. The Government’s evidence is identified as Items 1 through 5. Applicant did not provide a response to the FORM, object to the Government’s evidence, or submit documents. Items 1 through 5 are admitted into evidence. The case was assigned to me on October 1, 2017.

FINDINGS OF FACT

Applicant did not admit or deny the SOR allegations, but rather provided comments next to each allegation. I will consider his comments as a denial to each allegation. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact.

Applicant is 58 years old. He was married from 1989 to 2011. He has two children from the marriage, ages 27 and 19 years old. He has been working for the same federal contractor since 1980.2

Credit reports from June 2016, July 2014, and Applicant’s statements substantiate the delinquent debts alleged in the SOR. Applicant attributes his financial difficulties to his 2011 divorce and the loss of his wife’s income.3

In 2010, Applicant withdrew money from his 401kpension plan thereby creating a tax liability. He believed he and his wife would file their tax returns jointly. Due to the divorce, she filed separately. He was responsible for the taxes on the pension plan withdrawal. Applicant disclosed on his 2014 security clearance application (SCA) that he failed to pay his 2012 federal and state income taxes. He disclosed that he had been paying the state $50, but it was no longer taking this amount from him, and the debt remained delinquent.4

In March 2015, Applicant was interviewed by a government investigator as part of his background investigation. He explained that he believed he owed the state $8,000 in taxes and did not know how much he owed the IRS. He told the investigator that he contacted the IRS in the spring of 2014 and made a payment plan to resolve his 2012 tax debt. He explained that refunds owed to him for subsequent tax years were withheld and applied to his delinquent tax balance. He did not indicate he was participating in a payment plan, but rather he intended future refunds to be applied to satisfy his tax debt. He explained he did not have the resources to pay his delinquent federal or state tax debts.5

Regarding the judgment entered by the state in 2014 for $7,419 (SOR ¶ 1.b) against Applicant, he told the investigator that he had been making payments of $153 to the state since spring of 2014. In Applicant’s answer to the SOR, he stated that he was paying the IRS $45 and the state $153. He told the investigator that he believed he still owed the IRS $3,000. Applicant did not provide substantiating documents to verify he has a payment agreement with the IRS or the state. He did not provide supporting documents to show he has made payments towards his federal tax debt or the judgment entered by the state.6

The SOR alleges 19 delinquent medical debts totaling approximately $6,898 (SOR ¶¶ 1.cthrough 1.gand 1.i through 1.v). Applicant explained that several of these are debts for his children. He was unaware that he ex-wife was not paying the copays or other expenses. Applicant stated in his SOR answer that he consolidated some of these debts and has been paying $120 a month toward the consolidated debt. He also stated that he was in the process of negotiating payment plans for the remaining medical debts.7 No documents were provided to substantiate Applicant’s payments or actions.

The debt in SOR ¶ 1.h (balance $87,944, past due $25,144) is a past-due mortgage. Applicant attributed this debt to his 2011 divorce. He stated that he could no longer afford to pay the mortgage based on his sole income. He has not made a mortgage payment since November 2013. In March 2014, he was working with the lender to short sale the house. In his SOR answer, he stated that the bank has approved for the house to be listed with realtors and for a short sale. On his July 2014 SCA, Applicant listed this house as his current residence.8 No other information was provided such as the current status of Applicant’s finances.

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 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 national security eligibility will be resolved in favor of the 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.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states 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 as to obtaining 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 that an applicant may deliberately or inadvertently fail to 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 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.

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.9

AG ¶ 19 provides conditions that could raise security concerns. The following four 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 failed to timely pay his 2012 state and federal income taxes. A judgment was filed against him by the state in 2014 for unpaid taxes. He has 19 delinquent medical debts and a past-due mortgage that are unresolved. There is sufficient evidence to support the application of the above disqualifying conditions.

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 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; and

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

Applicant owes a judgment, medical debts, and a past-due mortgage. He indicated he is resolving his mortgage debt, making payments on his Federal and state tax debt, and had consolidated some medical bills and was making monthly payments. He failed to provide evidence to document his actions. He also indicated he was negotiating payments with the remaining medical creditors, but provided no documentary evidence. Applicant’s financial problems are ongoing and recent. AG ¶ 20(a) does not apply.

Applicant attributed his financial problems to a 2011 divorce and the loss of his wife’s income. This was beyond his control. For the full application of AG ¶ 20(b), Applicant must have acted responsibly under the circumstances. It has been six years since his divorce. He has not made a mortgage payment since November 2013, and based on his SCA information, he continues to live in the house. His federal tax debt was incurred in 2010. He indicated that the IRS was withholding yearly refunds he was entitled. In his answer he stated he was paying $45 to the IRS and $153 to his state, but did not provide evidence that he has an installment agreement, date it started, and whether he has made consistent payments. He failed to provide documented evidence of his actions. He also indicated he was making payments for certain medical debts, but did not provide proof of his actions or when they began. The evidence is insufficient to conclude he acted responsibly under the circumstances. AG ¶ 20(b) partially applies.

There is no evidence that Applicant participated in financial counseling. There is insufficient evidence that his financial problems are under control. Applicant did not provide substantiating documentary evidence to conclude that he initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve his debts. AG ¶¶ 20(c) and 20(d) 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 the 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.

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 59 years old with two grown children. He has been divorced since 2011. He has worked for his employer since 1980. He has numerous delinquent debts, including a 2014 judgment for unpaid state taxes. He failed to pay his 2012 federal taxes. His mortgage is past-due, and he has medical debts that are delinquent. Applicant did not provide documentary evidence of his actions to resolve his financial problems or sufficient evidence in mitigation. The record evidence leaves me with sufficient questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant 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 section E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a-1.v 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 security to grant Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________________ Carol G. Ricciardello Administrative Judge

FOOTNOTES

1 I considered the previous AG, effective September 1, 2006, as well as the new AG, effective June 8, 2017. My decision would be the same if the case was considered under the previous AG. 2 Item 2. 3 Items 1, 2, 3, 4, 5. 4 Items 1, 2, 3. 5 Items 1, 3. 6 Items 1, 3. 7 Items 1, 3. 8 Items 1, 2, 3. 9 See ISCR Case No. 11-05365 at 3 (App.Bd. May 1, 2012).