ISCR Case No. 16-01261.h1

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ) ISCR Case No: 16-01261 ) ) Applicant for Security Clearance )

For Government: Caroline Heintzelman, Esq., Department Counsel For Applicant: Pro se

04/28/2017 ______________

______________

DAM, Shari, Administrative Judge:

Applicant has a history of failing to file Federal and state income tax returns, and not paying taxes and delinquent debts. He did not mitigate the resulting financial security concerns. Eligibility for access to classified information is denied.

Statement of the Case

On July 27, 2016, the Department of Defense (DOD) 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 for Determining Eligibility for Access to Classified Information effective within the DOD on September 1, 2006. Applicant answered the SOR in writing (Answer) on August 25, 2016, and requested a hearing before an administrative judge. On November 1, 2016, the Defense Office of Hearings and Appeals (DOHA) assigned the case to me. On December 20, 2016, DOHA issued a Notice of Hearing setting the case for January 11, 2017. The case was heard as scheduled. Department Counsel offered Government Exhibits (GE) 1 through 5 into evidence. Applicant testified and offered Exhibits (AE) A through C into evidence. All exhibits were admitted without objections. The record closed at the end of the hearing.

Applicant admitted the allegations in SOR ¶¶ 1.c, 1.d, 1.e and 1.f. He denied the allegations in SOR ¶¶ 1.a and 1.b, on the basis that he resolved the allegations. Those admissions are incorporated into these findings of fact.

Applicant is 61 years old. He married his wife in 1981, and separated from her about 20 years ago. In 1992, he began a position with a company that has defense contracts. (Tr. 14-15.)

On December 12, 2014, Applicant submitted a security clearance application (SF-86). In response to questions related to his financial record, he disclosed that he failed to file Federal and state tax returns and pay taxes for years 2008 through 2013. (GE 1.)

Applicant’s tax and financial problems began while he lived with his wife. Earlier in his career, he was traveling for long periods for his job and relied on his wife to manage their finances. In 1998 or 1999, he learned that his wife had a serious drug problem and was spending large amounts of money. They subsequently separated causing him additional financial problems. He became responsible for numerous delinquent debts. (Tr. 16-18.)

Applicant could not remember if he filed tax returns after he separated in 1998 or 1999. He admitted that from 2000 until 2014 or 2015, he had no contact with the Internal Revenue Service (IRS) and did not file Federal or state returns for those years.1 (Tr. 18-20.) He did not know how to manage his tax problem because his wife had the necessary tax documents. Subsequently, one year of not filing returns turned into many years. He said, “It was just too much for me to deal with.” (Tr. 18-19.)

When Applicant’s employer asked him to apply for a security clearance in or about December 2014, Applicant knew that he needed to resolve his unfiled tax returns and pay any outstanding taxes. Applicant spoke to his supervisor and told him about his tax problems. The supervisor referred Applicant to an accountant to help him handle the matters. (Tr. 19.) Applicant knows that he should have filed his tax returns sooner, and did not offer any excuses for his failure to do so. (Tr. 20.)

In February 2015, after consulting with an accountant, Applicant filed Federal tax returns for years 2008, 2009, 2010, and 2013. In June 2015, he paid the IRS $23,650 for unpaid taxes for some of those years, which resolved all taxes owed to the IRS. (AR.) He borrowed money from his 401(k) to make that payment. He is making monthly payments on this loan. (Tr. 23-24.)

Applicant admitted that he failed to timely file income tax returns with State 1 for years 2008 through 2012. However, he was not indebted to State 1 for unpaid taxes for those years. His accountant learned that State 1 had failed to credit Applicant’s yearly withholdings to the state taxes, which resulted in a levy for years 2008 through 2012. After that mistake was corrected, Applicant did not have an outstanding tax liability. In August 2016, State 1 released a $21,575 levy it had issued in April 2016. (Tr. 26; AR; AE B.)

Applicant admitted that he failed to timely file income tax returns with State 2 for years 2008 through 2013. After filing his returns, Applicant paid $2,383 to State 2 for outstanding taxes he owed for tax years 2008 through 2013. He made that payment in October 2016. (Tr. 27; AR; AE C.)

In addition to tax matters, the SOR alleged two delinquent medical debts, one for $680 and one for $60. They became delinquent in 2013 and 2015. Applicant paid the $60 medical bill, but did not provide proof of payment. He has not resolved the $680 medical bill.

Applicant’s annual salary is $60,000. He does not have a written budget. His accountant has provided him some credit counseling. (Tr. 21-22.) He does not intend to ignore his taxes in the future. (Tr. 32.)

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 (AG) list potentially disqualifying and mitigating conditions, which are useful 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 AG ¶ 2(a), describing 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 avoided drawing inferences grounded on mere speculation or conjecture.

According to 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 the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance 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 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 an adverse decision shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”

Guideline F, Financial Considerations

The security concerns relating to the guideline for financial considerations are 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 handling and safeguarding classified information.2

AG ¶ 19 notes three disqualifying conditions that could potentially raise security concerns in this case:

(a) inability or unwillingness to satisfy debts;

(c) a history of not meeting financial obligations; and

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

Applicant has a history of unwillingness to satisfy his Federal and state tax obligations. He failed to timely file Federal and state income tax returns from 2008 through 2013 and failed to timely pay outstanding Federal and state taxes. He also has been unwilling to resolve delinquent debts. The evidence is sufficient to raise the above disqualifying conditions.

After the Government produced substantial evidence of the disqualifying conditions, the burden shifted to Applicant to produce evidence and prove mitigation of the security concerns. AG ¶ 20 sets out four conditions that could potentially mitigate financial security concerns under this guideline:

(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;

(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; and

(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts. Applicant’s failure to resolve unfiled and unpaid Federal and state taxes on a timely basis continued for about 15 years. He also has two medical debts that remain unresolved. His failure to comply with legal tax obligations for years casts doubt on his current judgment and reliability. Applicant failed to establish mitigation under AG ¶ 20(b), as there is insufficient evidence to conclude that circumstances beyond his control prevented him from timely filing or paying taxes from 2000 to 2013, or that he acted responsibly during those years. He acknowledged that he did not know how to manage these problems, and did not seek professional help until late 2014 or early 2015, when he applied for a security clearance.

The evidence establishes limited mitigation under AG ¶ 20(c). Applicant recently received credit counseling from his accountant. He filed all outstanding Federal and state tax returns in 2015, and finished resolving all unpaid taxes in October 2016. Given the length of his history of non-compliance with tax laws and two unresolved medical debts, full mitigation is not established.

Applicant did not make a good-faith effort to timely file outstanding Federal and state tax returns for many years or pay delinquent taxes. He did not begin to resolve those problems until 2014 or 2015, when he applied for a security clearance. He did not document proof of payment for two medical debts that have been delinquent since 2013 and 2015. AG ¶ 20(d) does not establish mitigation for the allegations in SOR ¶¶ 1.a., 1.c, 1.d, 1.e, or 1.f.

Applicant established mitigation under AG ¶ 20(d) as to the allegation in AG ¶ 1.b. After contacting State 1 in 2015, Applicant’s accountant learned that the state made a mistake in assessing tax liability for the years alleged, and that Applicant did not owe any taxes.

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). They include the following:

(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) 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 include 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. Applicant is an intelligent 61-year-old man, who has successfully worked for his employer since 1992. These are positive factors in this case.

Applicant’s 15-year history of failing to timely file Federal and state tax returns, and resolve unpaid taxes and two delinquent debts, precludes his eligibility for a security clearance. He acknowledged that his procrastination caused the security concerns. While testifying, he displayed candor and remorse about his conduct and stated his intention to stay current with tax obligations in the future. At this time, however, he has not established a record of complying with tax laws and managing financial obligations. His recent actions are not sufficient to outweigh his history of non- compliance with a fundamental legal obligation to file and pay taxes. The DOHA Appeal Board has held that:

Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems. Voluntary compliance with these things is essential for protecting classified information. ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). Someone who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961).3

The record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. Applicant failed to mitigate the security concerns arising under the financial considerations guideline.

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

Subparagraph 1.a: Against Applicant Subparagraph 1.b: For Applicant Subparagraphs 1.c through 1f: Against Applicant

3 ISCR Case No. 12-10933 at 3 (App. Bd. June 29, 2016).

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 or continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

_________________ SHARI DAM Administrative Judge

1 The SOR did not allege security concerns based on these unfiled returns for these years. Hence, these facts will not be considered in an analysis of disqualifying conditions. They may be discussed in the analysis of mitigating conditions, the whole-person concept, and Applicant’s credibility. 2 See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012).