PSH-12-0089

* The original of this document contains information which is subject to withholding from disclosure
under 5 U.S.C. § 552. Such material has been deleted from this copy and replaced with XXXXXX’s.
United States Department of Energy
Office of Hearings and Appeals
In the matter of Personnel Security Hearing )
)
Filing Date: July 18, 2012 ) Case No.: PSH-12-0089
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Issued: November 16, 2012
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Decision and Order
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Robert B. Palmer, Hearing Officer:
This Decision concerns the eligibility of XXXXXXXXXXXXX (hereinafter referred to as “the
individual”) for access authorization under the regulations set forth at 10 C.F.R. Part 710, entitled
"Criteria and Procedures for Determining Eligibility for Access to Classified Matter or Special
Nuclear Material.” 1 For the reasons set forth below, I conclude that the individual’s security
clearance should not be restored at this time. 2
I. BACKGROUND
The individual is employed by the Department of Energy (DOE), and was granted a security
clearance in connection with that employment. In January 2012, the local security office (LSO)
learned that the Internal Revenue Service (IRS) had placed a lien against the individual’s property,
1An access authorization is an administrative determination that an individual is eligible for access
to classified matter or special nuclear material. 10 C.F.R. § 710.5. Such authorization will also be
referred to in this Decision as a security clearance.
2 Decisions issued by the Office of Hearings and Appeals (OHA) are available on the OHA website
located at http://www.oha.doe.gov . The text of a cited decision may be accessed by entering the
case number of the decision in the search engine located at http://www.oha.doe.gov/search.htm.
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and that the individual had a number of unpaid debts. Because this information raised security
concerns, the LSO summoned the individual for an interview with a personnel security specialist
in May 2012. After reviewing the transcript of this Personnel Security Interview (PSI) and the rest
of the individual’s personnel security file, the LSO determined that derogatory information existed
that cast into doubt the individual’s eligibility for access authorization. They informed the individual
of this determination in a letter that set forth the DOE’s security concerns and the reasons for those
concerns. I will hereinafter refer to this letter as the Notification Letter. The Notification Letter also
informed the individual that he was entitled to a hearing before a Hearing Officer in order to resolve
the substantial doubt concerning his eligibility for access authorization.
The individual requested a hearing on this matter. The LSO forwarded this request to the Office of
Hearings and Appeals, and I was appointed the Hearing Officer. The DOE introduced 15 exhibits
into the record of this proceeding. The individual introduced a number of exhibits and was the only
witness who testified at the hearing.
II. THE NOTIFICATION LETTER AND THE DOE’S SECURITY CONCERNS
As indicated above, the Notification Letter included a statement of derogatory information that
created a substantial doubt as to the individual’s eligibility to hold a clearance. This information
pertains to paragraph (l) of the criteria for eligibility for access to classified matter or special nuclear
material set forth at 10 C.F.R. § 710.8.
Criterion (l) defines as derogatory information indicating that the individual has “engaged in any
unusual conduct or is subject to any circumstances which tend to show that he is not honest, reliable,
or trustworthy; or which furnishes reason to believe that he may be subject to pressure, coercion,
exploitation or duress which may cause him to act contrary to the best interests of the national
security.” Such conduct includes, but is not limited to, “a pattern of financial irresponsibility.”
10 C.F.R. § 710.8(l). As support for this criterion, the Letter alleges that the individual:
1. Has two collection accounts totalling $1,928;
2. Has nine charged off accounts totalling $52,894;
3. Owes federal, state and county taxes totalling $68,800;
4. Failed to live up to a payment agreement negotiated with the IRS for tax debt in 2010, which
resulted in the IRS issuing a levy in 2011 against the individual’s property;
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5. Admitted during his 2012 PSI that his financial difficulties were due to excessive credit card
debt, living beyond his means, purchasing, in 2004, and continuing to live in a house that he
cannot afford, paying $60,000 for landscaping, and paying for expensive vacations, a car for
his wife’s daughter, and for his wife’s use of her employer’s corporate credit card for
personal purchases;
6. Stated during that same PSI that despite having borrowed approximately $200,000 from his
mother-in-law, which he has used to pay off credit card debts, his current delinquent credit
card debt is $54,822;
7. Failed to pay his federal taxes, which resulted in the Internal Revenue Service’s (IRS)
placing a levy on his wages in 2012, despite being informed of the DOE’s concerns
regarding finances; and
8. Acknowledged during a 2010 PSI that he had delinquent accounts totalling $60, 290, federal
tax debt totalling $14,000, and property tax debt totalling $25,885. Despite stating his intent
to resolve these accounts and avoid future financial difficulties, he has not resolved these
debts and has incurred more delinquent debt, currently totalling approximately $123,622.
The LSO correctly determined that these allegations raise serious security concerns. Failure or
inability to live within one’s means, satisfy debts, and meet financial obligations may indicate poor
self-control, lack of judgement, 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. See Revised Adjudicative Guidelines for Determining Eligibility for Access to
Classified Information, The White House (December 19, 2005), Guideline F.
III. REGULATORY STANDARDS
The criteria for determining eligibility for security clearances set forth at 10 C.F.R. Part 710 dictate
that in these proceedings, a Hearing Officer must undertake a careful review of all of the relevant
facts and circumstances, and make a “common-sense judgment . . . after consideration of all relevant
information.” 10 C.F.R. § 710.7(a). I must therefore consider all information, favorable or
unfavorable, that has a bearing on the question of whether granting or restoring a security clearance
would compromise national security concerns. Specifically, the regulations compel me to consider
the nature, extent, and seriousness of the individual’s conduct; the circumstances surrounding the
conduct; the frequency and recency of the conduct; the age and maturity of the individual at the time
of the conduct; the absence or presence of rehabilitation or reformation and other pertinent
behavioral changes; the likelihood of continuation or recurrence of the conduct; and any other
relevant and material factors. 10 C.F.R. § 710.7(c).
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A DOE administrative proceeding under 10 C.F.R. Part 710 is “for the purpose of affording the
individual an opportunity of supporting his eligibility for access authorization.”
10 C.F.R. § 710.21(b)(6). Once the DOE has made a showing of derogatory information raising
security concerns, the burden is on the individual to produce evidence sufficient to convince the
DOE that granting or restoring access authorization “will not endanger the common defense and
security and will be clearly consistent with the national interest.” 10 C.F.R. § 710.27(d). See
Personnel Security Hearing, Case No. VSO-0013, 24 DOE ¶ 82,752 at 85,511 (1995) (affirmed by
OSA, 1996), and cases cited therein. The regulations further instruct me to resolve any doubts
concerning the individual’s eligibility for access authorization in favor of the national security.
10 C.F.R. § 710.7(a).
IV. FINDINGS OF FACT AND ANALYSIS
A. The Individual’s Testimony
At the hearing, the individual testified about his financial problems and what he has done to resolve
them. He said that he discussed the “challenges of reducing the credit card debt” with a money
management and credit card debt service, and then contacted his creditors directly to begin paying
the debts off. Hearing Transcript (Tr.) at 11. As a result of these efforts, all of the credit cards have
been paid off, with the exception of three that are on payment plans. Tr. at 12. With regard to his tax
debt, the property and state income taxes have been paid, and he is attempting to negotiate an
agreement with the IRS whereby they would agree to accept in settlement of his debt an amount that
is lower than the actual amount of money that the individual owes. Id.
The individual then testified that the catalyst for his financial problems was a large federal tax bill
that he received in 2008. He explained that after the first full year that he was employed by the DOE
contractor, he got a very large tax refund. In order to reduce the amount of money withheld from his
salary, he began claiming 20 exemptions. For the next 20 years, he would continue to get an annual
tax refund, generally ranging between a few hundred and a few thousand dollars. Tr. at 17. However,
in 2008, he got a $13,000 tax bill. The individual claims that this was the result of pay raises that
he and his wife received in 2007, which put them in a different tax bracket. See Individual’s
Response to Statement of Charges, Department of Energy Exhibit (DOE Ex.) 2. Because he did not
have $13,000, he entered into an agreement with the IRS in 2008 to pay the debt in installments.
Making these payments meant that he could not satisfy some of his other financial obligations, such
as paying his property taxes and credit card bills, and his financial problems “just kept snowballing,
until recently when we were able to restructure our budget, borrow a little bit of money from my
wife’s 401(k), change my withholdings so that I don’t get hit with a huge tax bill every year, and
start paying off some of these debts.” Tr. at 18. Because he was unable to change the number of his
withholdings due to the decrease that would ensue in his take-home pay, he also incurred significant
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tax debt in 2009 and 2010 and was unable to remain current on his payments. Believing that his
failure to remain current on his payments voided the agreement with the IRS, he stopped making
payments until a new agreement could be negotiated. The IRS placed a levy on their property to
protect their interests in the tax debt. The individual has since changed the number of his
withholdings from 20 to zero to avoid future large tax liabilities. Tr. at 19-20. He therefore had to
renegotiate the installment agreement because he was unable to remain current on his payments.
The individual then discussed the allegations in the Notification Letter with which he disagrees. He
said that the claim in the Letter that he was living beyond is means is inaccurate, and reiterated that
his financial problems were due to the unexpectedly large tax bills that he received in 2008, 2009,
and 2010. Tr. at 21. Regarding his house, he said that, while it is more expensive than the house he
used to have, it is not more than he can currently afford, and was not more than he could afford when
he bought the house in 2004. Tr. at 21, 27. He explained that the mortgage loan that he originally
though that he qualified for did not go through, and the loan that he actually received required a
larger down-payment and larger monthly payments. The individual testified that this “put a strain
on” his family’s budget, and put them in a position such that “rather than having a lot of extra cash
flow, which we would have had under the original mortgage, we were in a position where we had
a few hundred dollars every month, rather than, say, $1,500 a month.” Tr. at 22, 27. He added that
it was his tax bills, and not his mortgage payments, that put them in a position where they could not
pay their other creditors. Tr. at 30. The individual went on to state that he and his wife “have not
considered selling our house.” Tr. at 48. He also disagreed with the allegation in the Statement of
Charges concerning his wife’s work-issued credit card, stating that while he did assist her with her
credit card debt, he did not believe that he had helped her to pay the bill for her corporate card. Tr.
at 22.
B. Hearing Officer’s Evaluation of the Evidence
After reviewing this testimony and the record as a whole, I find that there are a number of
discrepancies between the individual’s testimony at the hearing and his statements during his 2010
and 2012 PSIs. These discrepancies cast serious doubt upon the individual’s credibility.
As indicated above, the individual testified that he did not believe that he had helped his wife pay
the bill for her work-issued credit card. He made a similar statement in his response to the DOE’s
Statement of Charges. DOE Ex. 2. Yet, during his 2012 PSI, which occurred approximately two
months before the date of the individual’s response and less than five months prior to the hearing,
the following exchange occurred.
Individual: . . . . And so I ended up not getting $40,000, but getting about $23 or
$24,000. . . . .
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Q: So what did you do with that money?
Individual: Started paying off bills. I paid off [his wife’s mother], paid off [his
wife’s] credit card.
Q: How much was that?
Individual: $5,000.
Q: Which credit card?
Individual: Her [work-issued] credit card.
Q: . . . . Are you talking about the corporate card -
Individual: Yes . . . .
*****
Q. Did she use it for personal stuff?
Individual: Uh, I don’t know . . . .I would guess that since it wasn’t reimbursed by
[her employer] that she had. . . .But she needed $5,000 to pay it off, . . . so we used
some of the money to pay that off.
DOE Ex. 13 at 18-19.
The individual’s previous statements also contradict his testimony at the hearing that he and his
family were not living beyond their means, that they could afford the house they purchased in 2004,
and that their financial problems were caused by the large tax bills they unexpectedly received in
2008, 2009, and 2010. On no fewer than seven occasions during his 2012 PSI, the individual stated
that he and his family had lived beyond their means. He characterized this, and not his tax situation,
as being the biggest reason for his family’s financial problems. DOE Ex. 13 at 42. 3 He later stated
that they had been living beyond their means for years, and were probably still living beyond their
means because of their house. Id. at 45. See also DOE Ex. 13 at 28, 53, 54, 59, 67.
Concerning the question of whether the individual could afford the house that he purchased in 2004
at the time he purchased it, he said that they “were really in financial trouble” until they were able
to negotiate a mortgage modification, Id. at 29, that buying the house had been a mistake because
it had put them in a financial position that they weren’t able to maintain, Id. at 36, that buying the
house had put them in an “initial financial hole,” Id. at 43, “in a horrible situation,” Id. at 44, and
in a position where they had to exhaust their savings and borrow from their respective retirement
accounts to pay the mortgage and their bills. DOE Ex. 14 at 24. The individual had to borrow
$200,000 from his mother-in-law after buying the house in an attempt to remain current on all of his
financial obligations. Finally, during his 2010 PSI, the individual said that he was behind on some
3 During this same PSI, the individual did say that his tax problems were “sort of the straw that broke
the camel’s back,” but added that “the camel’s back was really in trouble” anyway. DOE Ex. 13 at
42.
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of his payments before he received the large tax bills. DOE Ex. 14 at 11. At the hearing, the
individual had no satisfactory explanations for these discrepancies.
I note that the record in this matter does contain substantial mitigating evidence. The individual has
made a concerted effort to pay off his creditors and reduce his indebtedness. Most of his creditors
have been paid off, and the individual has negotiated or is negotiating payment plans regarding his
remaining debt. See Individual’s Exhibits A1a, A1b, A2b, A2e - A2h, A3b, A3c. Moreover, the
individual has received counseling regarding his finances. Nevertheless, the inconsistencies outlined
above cast serious doubt upon the trustworthiness of representations made by the individual for
which he has not submitted supporting evidence, such as those concerning his current budget and
expenses. Moreover, I find that they are so extensive as to call into question the individual’s honesty
and reliability, as those terms are employed in criterion (l).
Even in the absence of these discrepancies, I would be unable to conclude that the individual has
adequately addressed the DOE’s concerns regarding his finances. The individual has exhibited a
history of poor financial decision-making dating back at least to 2004, when he purchased a house
that he could not afford. Symptomatic of this pattern of financial irresponsibility was his decision
to borrow $60,000 to landscape his property when he was exhausting his savings and borrowing
from his retirement plan merely to pay his mortgage and his existing bills, and his decision to spend
$5,000 to send his stepson to Jamaica for a week as a graduation present in 2009, presumably after
the receipt of the first of his unexpectedly large tax bills. Although I find that the individual has
behaved in a financially responsible manner since he adopted a “stringent” budget in May 2012, Tr.
at 38, his four months of responsible behavior, as of the date of the hearing, are insufficient to
convince me that the chances of a return to the behavior of the preceding eight years are sufficiently
remote to justify restoring his access authorization.
V. CONCLUSION
For the reasons set forth above, I find that the individual has not successfully addressed the DOE’s
security concerns under criterion (l). I therefore conclude that he has not demonstrated that restoring
his access authorization would not endanger the common defense and would be clearly consistent
with the national interest. Accordingly, I find that the individual’s security clearance should not
be
restored at this time. The individual may seek review of this Decision by an Appeal Panel under the
procedures set forth at 10 C.F.R. § 710.28.
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Robert B. Palmer
Hearing Officer
Office of Hearings and Appeals
Date: November 16, 2012