Summary
The applicant, a 49-year-old defense contractor and retired Navy chief petty officer, faced security clearance denial under Guidelines E (Personal Conduct) and F (Financial Considerations) due to a history of financial instability, including two Chapter 13 bankruptcies and failure to file tax returns. The judge found that the applicant's financial issues were ongoing and not sufficiently mitigated, leading to the denial of his security clearance.
Under Guideline E (Personal Conduct) and Guideline F (Financial Considerations), the Statement of Reasons alleged the following: Applicant and his wife filed a Chapter 13 petition for bankruptcy in May 1996, and they completed the payment plan in November 2000 (1.a). Applicant filed a second Chapter 13 petition for bankruptcy in March 2006, after he fell behind on his home mortgage payments and the lender took steps to foreclose on the property. This bankruptcy was dismissed in May 2008 for failure to make the required payments (1.b). Federal income tax debt of $8,106 (1.c). Applicant willfully failed to file federal tax returns for tax years 1999, 2000, 2002, 2003, 2005, and 2006 (1.d). Applicant failed to file state tax returns for 2003, 2004, and 2005 (1.e). Cable service debt of $322 (1.f). Car repossession deficiency of $2,802 (1.g). Car repossession deficiency of $3,011 (1.h). Medical debt of $50 (1.i). Medical debt of $155 (1.j). Time share foreclosure deficiency of $9,526 (1.k). Credit card debt of $438 (1.l). Credit card debt of $11,607 (1.m). Credit card debt of $14,574 (1.n). Credit card debt of $353 (1.o). Medical debt of $3,162 (1.p). Cell phone debt of $342 (1.q). Car loan debt of $11,233 (1.r). Credit card debt of $469 (1.s).
The judge denied the clearance. The government raised disqualifying conditions AG ¶ 19(a), AG ¶ 19(c), AG ¶ 19(e), AG ¶ 19(g). The judge applied mitigating conditions AG ¶ 20(b), AG ¶ 20(c), AG ¶ 20(d), AG ¶ 20(e). The decision turned on the following: The applicant has a history of financial instability, including two Chapter 13 bankruptcies; The applicant failed to file federal and state tax returns as required, demonstrating a lack of financial responsibility; The applicant's financial situation is ongoing and unresolved, indicating a risk of future issues.
Why the Applicant Was Denied
- The applicant has a history of financial instability, including two Chapter 13 bankruptcies.
- The applicant failed to file federal and state tax returns as required, demonstrating a lack of financial responsibility.
- The applicant's financial situation is ongoing and unresolved, indicating a risk of future issues.
Conditions Referenced
- AG ¶ 19(a)appliedInability or Unwillingness to Satisfy Debts
- AG ¶ 19(c)appliedA History of Not Meeting Financial Obligations
- AG ¶ 19(e)appliedConsistent Spending Beyond One's Means
- AG ¶ 19(g)appliedFailure to File Annual Federal, State, or Local Income Tax Returns
- AG ¶ 20(b)rejectedConditions Beyond the Person's ControlWhile the applicant's wife's illness was a condition beyond their control, the applicant did not act responsibly in managing their finances.
- AG ¶ 20(c)rejectedReceived or Is Receiving Counseling for the ProblemThe applicant's financial situation is not under control despite previous counseling.
- AG ¶ 20(d)rejectedInitiated a Good-faith Effort to Repay Overdue CreditorsThe applicant had not made payments on several debts as of the record closing.
- AG ¶ 20(e)rejectedReasonable Basis to Dispute the Legitimacy of the Past-due DebtThe applicant did not provide documentation to substantiate disputes of several debts.
Key Rule Quoted
“Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG.”
Procedural Posture
- SOR issuedDec 22, 2010
- Answer filedJan 25, 2011
- Hearing heldApr 6, 2011
- Decision dateMay 25, 2011
Cite For
- Financial Instability as a Basis for Security Clearance Denial
- Failure to File Tax Returns as a Disqualifying Condition
- Ongoing Financial Issues Not Mitigated by Past Circumstances