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ISCR Case 15-02333 — CASE

ISCR Case 15-02333denied

Case Headnote

ISCR Case No. 15-02333

deniedJun 20, 2016· Hon. Edward W. Loughran· hearing

Summary

This case concerns a 57-year-old male applicant with a master's degree and military service whose eligibility for a Common Access Card (CAC) was denied under Guideline J (Criminal Conduct). The Statement of Reasons included allegations both for and against the applicant regarding criminal or dishonest conduct.

The denial was primarily based on the applicant's history of financial problems, specifically significant tax debts and defaulted student loans. Disqualifying conditions raised included 2.b.(4) and 2.b.(6). The judge found that the applicant failed to demonstrate that he had filed all required tax returns and still owed an indeterminate amount to the IRS, raising concerns about financial responsibility.

Ultimately, the applicant did not provide sufficient evidence of successful rehabilitation or mitigation of these financial issues, leading to the denial of CAC eligibility.

Why the Applicant Was Denied

The applicant failed to demonstrate that he filed all required tax returns.
The applicant still owed an indeterminate amount to the IRS, raising concerns about financial responsibility.
The applicant did not provide sufficient evidence of successful rehabilitation or mitigation of financial issues.

Conditions Referenced

Disqualifying

2.b.(4)raisedDeceptive or Illegal Financial Practices
2.b.(6)raisedFinancial Irresponsibility

Key Rule Quoted

“A CAC will not be issued to a person if there is a reasonable basis to believe, based on the individual’s criminal or dishonest conduct, that issuance of a CAC poses an unacceptable risk.”

Procedural Posture

SOR issuedMay 20, 2015
Answer filedJun 17, 2015
Hearing heldMar 29, 2016scheduled as planned
Decision dateMay 16, 2016

Cite For

Denial of CAC Eligibility Due to Unresolved Tax Debts
Failure to Mitigate Financial Irresponsibility Under Guideline J
Criteria for Assessing Unacceptable Risk Based on Criminal or Dishonest Conduct

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 J (Criminal Conduct) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge ruled against the applicant on the allegation of criminal or dishonest conduct, determining that the applicant did not mitigate the concerns raised. The applicant's eligibility for a Common Access Card (CAC) was denied based on the findings related to financial irresponsibility and failure to file tax returns.

¶	Allegation	Finding	Offense	Criminal disposition	Response	Disqualifying (¶31)	Mitigating applied (¶32)	Mitigation
1.a	Criminal or Dishonest Conduct: Against Applicant	Against Applicant	Unspecified Criminal Conduct	—	Unknown	(b) evidence of criminal conduct, regardless of charge or conviction	—	—
1.b	Criminal or Dishonest Conduct: For Applicant	For Applicant	Unspecified Criminal Conduct	—	Unknown	—	—	—
1.c	Criminal or Dishonest Conduct: For Applicant	For Applicant	Unspecified Criminal Conduct	—	Unknown	—	—	—

Descriptive standardized rendering of a decided public case (Guideline J). 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: ) ) ) CAC Case No. 15-02333 ) Applicant for CAC Eligibility )

For Government: Daniel F. Crowley, Esq., Department Counsel For Applicant: [Redacted], Personal Representative

06/20/2016 ______________

STATEMENT OF CASE

______________

LOUGHRAN, Edward W., Administrative Judge:

Applicant did not mitigate Common Access Card (CAC) credentialing concerns raised under the criminal or dishonest conduct supplemental adjudicative standards. CAC eligibility is denied.

Statement of the Case

On May 20, 2015, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing criminal or dishonest conduct eligibility concerns. The DOD was unable to find that it was clearly consistent with the national interest to grant Applicant CAC eligibility. The action was taken under Homeland Security Presidential Directive – 12 (HSPD-12); the Adjudicative Standards found in DOD Instruction (DODI) 5200.46, DOD Investigative and Adjudicative Guidelines for Issuing the CAC, dated September 9, 2014; and the procedures set out in Enclosure 3 of DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive).

Applicant responded to the SOR on June 17, 2015, and requested a hearing before an administrative judge. The case was assigned to me on January 6, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on March 15, 2016, scheduling the hearing for March 29, 2016. The hearing was convened as scheduled. Government Exhibits (GE) 1 and 2 were admitted in evidence without objection. Applicant testified, called a witness, and submitted Applicant’s Exhibit (AE) A through F, which were admitted without objection. The record was held open until May 16, 2016, for Applicant to submit additional information. He submitted documents that were marked AE G through I and admitted without objection. DOHA received the hearing transcript (Tr.) on April 6, 2016.

FINDINGS OF FACT

Applicant is 57 years old. He has worked for his current employer since April 2014. He served in the U.S. military from 1981 until he was honorably discharged in 1987. He has a master’s degree. He married his current wife in 2008. He has three adult children.1

Applicant has a history of financial problems, which he attributed to a long and acrimonious divorce and custody battle. He and his current wife filed a Chapter 7 bankruptcy case, and their dischargeable debts were discharged in September 2011.2

Applicant’s student loans and delinquent taxes were not discharged in bankruptcy. As of April 22, 2016, he owed $158,970 in defaulted student loans. On April 24, 2016, he entered into a rehabilitation agreement in which he agreed to make at least nine monthly payments of $380. If he completes the nine payments, the loans will be rehabilitated and in good standing.3

Applicant owes his state about $10,300 for overpaid unemployment compensation from 2013. There is no evidence that the overpayment was due to fraud. He is contesting the matter. He indicated that if it is determined that he owes the state, he will pay the debt. He paid the state $100 in February 2016.4

Applicant admitted owing the IRS about $20,000 in back taxes from 2009 through 2011.5 He wrote in response to the SOR:

During the years identified I was currently proceeding through a very long and contested divorce. Based on the advice of my attorney and CPA I filed my taxes claiming only the minimum exemptions allowed so as not to cause conflict with my divorce proceedings. I was informed that upon completion of my divorce I could amend my filings. I have retained the services of [CPA]. At this time my returns are in the process of being amended. It appears at this time the debt will be eliminated and I will receive approximately $5,000.00 in returns for overpayment of income taxes. In the event that for some reason there is still a debt to the IRS I have full intentions to make payment in full to the IRS.

In October 2015, Applicant retained a CPA to file his tax returns. The CPA noted that as of March 1, 2016, Applicant owed $2,508 for the CPA’s services. The CPA wrote that he prepared Applicant’s and his wife’s tax returns for tax years 2011 through 2014. The 2014 tax return was filed, but the 2011 through 2013 returns were not filed as Applicant and his wife had not reviewed and signed the returns. The CPA also noted that he had been in discussions with the IRS about an Offer-in-Compromise as Applicant and his wife indicated that “they would have a difficult time paying the balances due for returns prepared and filed for years prior to 2011.”6

Applicant initially testified that the 2011 through 2013 tax returns were amended returns. He later admitted they were not amended returns and that they were the original returns. IRS transcripts from April 22, 2016, indicate that Applicant’s 2010 tax return was filed in August 2011, and that $1,070 was transferred as a credit toward his 2008 tax liability. The transcripts do not show the 2011 through 2013 returns as filed. The 2014 return was filed in November 2015. The IRS transferred $374 from his 2014 refund as a credit toward his 2008 tax liability. Applicant testified that he thought he owed the IRS about $9,000. Applicant submitted a letter from the IRS about his 2009 back taxes, but the amount owed was not reflected in the letter. Tax transcripts for 2008 and 2009 and tax returns for 2011 through 2013 were not submitted. The exact amount owed cannot be determined.7

Applicant’s supervisor testified and Applicant submitted a letter attesting to his outstanding job performance, trustworthiness, reliability, and judgment.8

POLICIES

Every CAC eligibility decision must be a fair and impartial overall commonsense decision based on all available evidence, both favorable and unfavorable. The specific issues raised are listed in DODI 5200.46, Enclosure 4, Appendix 1, Basic Adjudicative Standards, and Appendix 2, Supplemental Adjudicative Standards. The overriding factor for all of these conditions is unacceptable risk. The decision must be arrived at by applying the standard that the grant of CAC eligibility is clearly consistent with the national interest.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion to obtain CAC eligibility.

Factors to be applied consistently to all information available include: (1) the nature and seriousness of the conduct; (2) the circumstances surrounding the conduct; (3) the recency and frequency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) contributing external conditions; and (6) the absence or presence of efforts towards rehabilitation. (DODI 5200.46, Enclosure 4, ¶ 1) In all adjudications, the protection of the national interest is the paramount consideration. Therefore, any doubt concerning personnel being considered for CAC eligibility should be resolved in favor of the national interest.

ANALYSIS

Criminal or Dishonest Conduct

DODI 5200.46, Appendix 2 to Enclosure 4, Supplemental Adjudicative Standards, ¶ 2 provides:

A CAC will not be issued to a person if there is a reasonable basis to believe, based on the individual’s criminal or dishonest conduct, that issuance of a CAC poses an unacceptable risk.

a. An individual’s conduct involving questionable judgment, lack of candor, dishonesty, or unwillingness to comply with rules and regulations can raise questions about his or her reliability or trustworthiness and may put people, property, or information systems at risk. An individual’s past criminal or dishonest conduct may put people, property, or information systems at risk.

DODI 5200.46, Appendix 2 to Enclosure 4, Supplemental Adjudicative Standards, ¶ 2.blists several conditions that could raise a CAC concern and may be disqualifying. The following are potentially applicable in this case:

(4) Deceptive or illegal financial practices such as embezzlement, employee theft, check fraud, income tax evasion, expense account fraud, filing deceptive loan statements, or other intentional financial breaches of trust; and

(6) Financial irresponsibility may raise questions about the individual’s honesty and put people, property or information systems at risk, although financial debt should not in and of itself be cause for denial.

Applicant owes more than $158,000 in defaulted student loans, and he owes his state more than $10,000 for overpaid unemployment compensation. However, there is no evidence that the overpayment was due to fraud. Disqualifying condition ¶ 2.b.(6) states that “financial debt should not in and of itself be cause for denial.” Those debts do not raise a disqualifying condition. SOR ¶¶ 1.band 1.care concluded for Applicant.

Applicant owes the IRS for tax year 2009. He does not owe for 2010, but he did not file his 2011 return, so the amount owed has not been determined. The above disqualifying conditions have been established.

DODI 5200.46, Appendix 2 to Enclosure 4, Supplemental Adjudicative Standards, ¶ 2.clists circumstances relevant to the determination of whether there is a reasonable basis to believe there is an unacceptable risk. The following may be relevant:

(1) The behavior happened so long ago, was minor in nature, or happened under such unusual circumstances that it is unlikely to recur; and

(4) Evidence has been supplied of successful rehabilitation, including but not limited to remorse or restitution, job training or higher education, good employment record, constructive community involvement, or passage of time without recurrence.

Applicant has not established that he filed all his tax returns. He still owes the IRS an indeterminate amount. The above mitigating circumstances are not established. I also considered the factors in DODI 5200.46, Enclosure 4, ¶ 1.

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, Criminal or Dishonest Conduct: Against Applicant

Subparagraph 1.a: Against Applicant Subparagraphs 1.b-1.c: 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 CAC eligibility. CAC eligibility is denied.

_______________________ Edward W. Loughran Administrative Judge

FOOTNOTES

1 Tr. at 34-35, 38; GE 1, 2. 2 Tr. at 19, 23; Applicant’s response to SOR; AE E. 3 Tr. at 19, 26-27, 29-33; Applicant’s response to SOR; GE 2; AE E-G. 4 Tr. at 25-26, 33-34; Applicant’s response to SOR; GE 2; AE D. 5 Tr. at 19; Applicant’s response to SOR. 6 Tr. at 20-23; Applicant’s response to SOR; AE C, I. 7 Tr. at 20-25, 27-29; AE A, C, I. 8 Tr. at 38-41; AE H.