PSH-13-0046

*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: April 16, 2013 ) Case No.: PSH-13-0046
)
____________________________________)
Issued: July 16, 2013j
______________________
Hearing Officer Decision
______________________
William M. Schwartz, Hearing Officer:
This Decision concerns the eligibility of XXXXXXXXXX (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 DOE should not restore the
individual’s access authorization at this time.2
I. BACKGROUND
The individual is an employee of a DOE contractor and holds a suspended access authorization. A
Local Security Office (LSO) summoned the individual for an interview (PSI), with a personnel
security specialist on January 28, 2012, in order to address issues raised by information that he had
failed to meet his income tax obligations. Exhibit 19. After the PSI, the LSO determined that
derogatory information existed that cast into doubt the individual’s eligibility for access
authorization. The LSO informed the individual of this determination in a letter that set forth the
DOE’s security concerns and the reasons for those concerns. Exhibit 1. 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 an access authorization.
1 An 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 be referred to in this Decision as access
authorization or a security clearance.
2 Decisions issued by the Office of Hearings and Appeals (OHA) are available on the OHA website located at
http://www.energy.gov/oha.
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The individual requested a hearing in this matter. The LSO forwarded this request to OHA, and I
was appointed the Hearing Officer. The DOE introduced 23 exhibits into the record of this
proceeding. The individual introduced eight exhibits, and presented the testimony of four witnesses,
in addition to his own testimony.
II. REGULATORY STANDARDS
The criteria for determining eligibility for security clearances set forth at 10 C.F.R. Part 710 dictates
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 and
unfavorable, that has a bearing on the question of whether restoring the individual’s 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).
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). 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).
III. NOTIFICATION LETTER AND ASSOCIATED SECURITY CONCERNS
The Notification Letter cited information pertaining 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. Exhibit 1.3
Under Criterion L, the LSO cited the following: (1) the individual owed $62,117.96 to the Internal
Revenue Service (IRS) for income tax years 2002, 2004, 2005, and 2007 through 2011; (2) the
individual owed the state $12,179.03 in delinquent income taxes and $1,852.59 in delinquent gross
receipt taxes for the years 2004, 2006, and 2008 through 2011; (3) the individual admitted that on
January 17, 2013, the IRS placed a levy and froze his bank account for failure to establish a payment
plan on his delinquent taxes; (4) the individual admitted that he did not have a payment plan
established with the IRS nor the state; and (5) during three previous personnel security interviews
(PSIs) in 2002, 2003 and 2011, the individual was made aware of DOE’s concerns regarding his
financial responsibility, yet had not resolved his financial problems. Exhibit 1.
3 Paragraph (l) defines as derogatory information that an individual has “[e]ngaged in any unusual conduct or is
subject to any circumstances which tend to show that the individual is not honest, reliable, or trustworthy; or which
furnishes reason to believe that the individual may be subject to pressure, coercion, exploitation, or duress which may
cause the individual to act contrary to the best interests of the national security.” 10 C.F.R. § 708.8(l).
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The above information adequately justifies the DOE’s invocation of criterion (l), and raises
significant security concerns. The failure or inability to live within one's means, satisfy debts, and
meet financial obligations, including the failure to file tax returns as required, 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. See Revised Adjudicative Guidelines for Determining Eligibility for Access to
Classified Information, The White House (December 19, 2005) at Guideline F. Further, an
individual who is financially overextended is at risk of having to engage in illegal acts to generate
funds. Id.
IV. FINDINGS OF FACT AND ANALYSIS
The individual has not disputed the allegations set forth in the Notification Letter. Exhibit 2. He
has, however, offered some evidence of progress toward resolving the concerns raised by the
allegations. Nonetheless, as discussed below, I cannot find that the individual has established a
pattern of financial responsibility that would resolve the risk of a recurrence of his past financial
irresponsibility.
A. Failure to File Income Taxes
The individual has demonstrated, and DOE has stipulated, that he paid his state income taxes from
2002 through 2011, and is therefore current on those payments. Exhibit 2A; Tr. at 6. As a result,
DOE’s concerns regarding the individual’s state tax payments, as outlined in Paragraph A.2 of the
Summary of Security Concerns, are sufficiently mitigated.
Regarding his federal taxes, the individual stated that he filed his taxes jointly with his wife every
year since they married in 1987, and that it was not until 2002 that he and his wife faced issues with
the filing of their taxes, which is also the year they started filing their taxes electronically through
TurboTax. Tr. at 45, 71, 105. While they eventually discovered that their federal taxes for a number
of years had not been accepted for filing, at the time they filed their income taxes electronically,
TurboTax allegedly sent them a confirmation of their filings. Tr. at 70. Moreover, the individual
and his wife contend that there were no issues with the filings of their state taxes, which they also
filed through TurboTax. Tr. at 107. However, sometime in 2005 or 2006, the IRS notified the
individual that they had to pay penalties and interest because there was an issue with the 2002 filing.
Tr. at 102-103. Subsequently, the individual contacted the IRS to request to enter into a payment
plan, and the representative informed him that he could not enter into a payment plan until his
previous tax filings have been received and processed. Tr. at 103.
The individual and his wife later discovered that the issue with the filing of their taxes arose because
his wife’s name on her social security card differed from the name she used in filing their taxes. He
claimed that after filing electronically with TurboTax, the IRS must have rejected their filing
because of the discrepancy in the wife’s last name on her social security card, which had her birth
name, not her married name. Tr. at 106. When they were notified about this issue, his wife changed
her name on her social security card sometime in 2004 or 2005 to reflect her married name. Tr. at
107. Apparently, after they re-filed their tax returns with his wife’s name as written on her corrected
social security card, they were held liable for the taxes owed on each of the two returns they filed for
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each year. Tr. at 104. At the time of the hearing, the individual was still unclear as towhether the
amount they owe to the IRS is based on his wife being double-taxed and accordingly, whether the
IRS’s estimate as to their tax debt is accurate. Tr. at 105.
The individual stated that he and his wife attempted for the last two years to enter into a payment
plan with the IRS without much success, and that they only recently entered into an installment
agreement, for which they pay $297 a month towards their federal income taxes. Tr. at 7. The DOE
stipulated as much at the hearing. Tr. at 7. Moreover, the individual provided a letter from a case
advocate at the IRS’s Taxpayer Advocate Service, who indicated that the individual has “been
working with the IRS since 2011,” and that as of the date of the letter, April 5, 2013, the individual
was in compliance with the filing of his tax returns. Exhibit B. The individual further explained that
in the past, there were difficulties in working with the IRS to resolve the errors with their tax returns.
For example, when he spoke to an IRS representative, he was advised to call the IRS back to get
more information about their filings, only to find that when they called the IRS again, they had to
start the process of investigating their tax issues all over again. Tr. at 56.
Given that the individual is current on the filing of his taxes, and that he made a good faith effort to
work with the IRS and its Taxpayer Advocate Service to resolve the problems with his filings, which
was stipulated by the DOE, I am confident that the concerns raised by the individual’s failure to file
tax returns have been resolved. However, as further explained, this does not end my inquiry
regarding the DOE’s concerns with the individual’s financial responsibility.
B. Financial Irresponsibility and Unwillingness or Inability to Satisfy Debts
In the Notification Letter, the LSO characterized the individual’s outstanding income tax liability as
evidence of his “irresponsibility, including an established pattern of an unwillingness or inability to
satisfy his delinquent taxes.” Exhibit 1.
The individual and his wife testified that it was not until 2002 that they faced financial difficulties,
and that before 2002, they were able to make their payments on their taxes. Tr. at 72-74. In 2002
and the following years, they had three children in parochial school, and were having difficulty in
finding employment with sufficient income to cover their costs. Tr. at 72. While the individual and
his wife were working multiple jobs, they were still not able to make the payments on their taxes.
Tr. at 73-74. The individual also acknowledged that when he filed his taxes through TurboTax,
including in 2002, he knew that he owed taxes to the federal government. Tr. at 63, 71. They owed
payments because the five exemptions they claimed to support their three children resulted in
underwithholding, and consequent tax liability at year end. Tr. at 85. Consequently, the individual
and his wife could not afford to make the payments. Accordingly, he and his wife paid a portion of
what they owed to the IRS and requested to enter into a payment plan. Tr. at 72. Subsequently, the
IRS put them on a payment plan, for which they paid $105 each month. Tr. at 63, 75. However, the
individual eventually stopped making payments as they were once again financially struggling. Tr.
at 75, 80. In late 2004, they entered into a new payment plan in late 2004, but then again stopped
making payments in 2007. Tr. at 80.
Currently, the individual and his wife owe $94,362.27 to the IRS, for the years 2002 to 2011. Ex. G.
They owe the following amounts, which includes penalties and interest, for each year: $9,509.41 for
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2002, $8,853.09 for 2004, $9,418.24 for 2005, $32,181.26 for 2006, $1,589.46 for 2007, $16,697.26
for 2008, $1,113.42 for 2009, $4,389.72 for 2010 and $10,610.41 for 2011.
The individual and his wife have hired an attorney to represent them before the IRS regarding their
tax problems. Tr. at 109; Ex. E. In a letter, their attorney informed them that he reviewed the
information that they provided and believes “that there may be a possibility of reducing the tax
liability by either amending [their] previously filed 1040 income tax returns or filing claims for
refunds.” Ex. E. Based on the attorney’s assistance, the individual and his wife have started making
payments on their federal taxes. Tr. at 57. Finally, the individual stated that he and his wife have
paid off their 2012 taxes because they had very little to owe, and were able to satisfy that payment.
Tr. at 114. Since 2011, they claimed zero dependents so that they would not owe additional taxes
after they file their returns. Tr. at 99-100.
Furthermore, the individual submitted a budget, indicating that their monthly expenses are
approximately $7,573.00 and their income is at least $9,328.00 a month. Tr. at 153; Ex. H. Their
expenses have decreasedas they no longer pay for their only daughter still in college to live in a
dormitory, and their entire family has made cost-saving adjustments. Tr. at 93. However, the income
the individual reported for himself and his wife is based on gross earnings; it does not reflect their
net income. Tr. at 153-55. Thus, the individual and his wife have overstated their earnings, and have
substantially less available funds than what they reported.
The fact that the individual recently made arrangements to pay off his federal tax debts may mark
the beginning of a sustained pattern of financial responsibility. Such a pattern, however, has clearly
not yet been established, particularly given the fact that the individual has only recently entered into
a payment plan to pay off his federal tax debt. In prior cases involving financial considerations,
Hearing Officers have held that “[o]nce an individual has demonstrated a pattern of financial
irresponsibility, he or she must demonstrate a new, sustained pattern of financial responsibility for a
period of time that is sufficient to demonstrate that a recurrence of the past pattern is unlikely.” See,
e.g., Personnel Security Hearing, Case No. TSO-1078 (2011); Personnel Security Hearing, Case
No. TSO-0878 (2010); Personnel Security Hearing, Case No. TSO-0746 (2009). Thus, while the
individual has entered into an installment agreement with the IRS and recently made a payment of
$297 towards his federal taxes, there simply has not been enough time for me to conclude that the
individual will remain financially responsible. Moreover, the individual has twice previously
entered into similar payment plans in 2002 and 2004, but eventually discontinued making payments
because of his financial difficulties. Therefore, while I commend him for seeking assistance of
counsel and for entering into a new payment plan, despite his efforts, the individual has not yet
demonstrated a pattern of financial responsibility to satisfy the concerns raised by DOE.
In sum, the individual has not yet fully established a pattern of financial responsibility, and there are
reasons to doubt that he will be able to sustain such a pattern in the long term. Therefore, I cannot
find that the individual has resolved the concerns regarding his past financial irresponsibility.
V. CONCLUSION
In the above analysis, I have found that there was sufficient derogatory information in the possession
of the DOE that raises serious security concerns under Criterion L. After considering all the relevant
information, favorable and unfavorable, in a comprehensive common-sense manner, including
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weighing all the testimony and other evidence presented at the hearing, I have found that the
individual has not brought forth sufficient evidence to mitigate the security concerns at issue. I
therefore cannot find that restoring the individual’s access authorization will not endanger the
common defense and is clearly consistent with the national interest. Accordingly, I have determined
that the individual’s access authorization should not be restored. The parties may seek review of this
Decision by an Appeal Panel under the regulations set forth at 10 C.F.R. § 710.28.
William M. Schwartz
Hearing Officer
Office of Hearings and Appeals
Date: July 16, 2013