PSH-19-0040

*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 26, 2019 ) Case No.: PSH-19-0040
)
_________________________________________ )
Issued: October 31, 2019
_______________
Administrative Judge Decision
_______________
Steven L. Fine, Administrative Judge:
This Decision concerns the eligibility of XXXXXX (hereinafter referred to as “the Individual”) for
access authorization under the Department of Energy’s (DOE) regulations set forth at 10 C.F.R.
Part 710, entitled, “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 be denied.
I. BACKGROUND
The LSO alleged that it had obtained derogatory information showing that the Individual had not
filed his Federal income tax return for tax year 2017, as of April 8, 2019. The LSO had also
obtained derogatory information showing that the Individual had not filed his state tax returns for
tax years 2011, 2012, 2013, 2014, 2015, 2016, and 2017. In addition, the LSO alleged that the
Individual had signed a Questionnaire for National Security Positions (QNSP) on February 13,
2018, certifying that in the last seven years, he had filed and paid Federal taxes when required by
law or ordinance, when he allegedly had not filed his Federal income taxes for the 2015 and 2016
tax years. After the Individual’s responses to the Letters of Interrogatory (LOI) that the LSO sent
to the Individual failed to resolve the security concerns raised by the allegations and derogatory
information, the LSO began the present administrative review proceeding by issuing a Notification
Letter informing the Individual that he was entitled to a hearing before an Administrative Judge in
order to resolve the substantial doubt regarding his eligibility for a security clearance. See
10 C.F.R. § 710.21.
The Individual requested a hearing and the LSO forwarded the Individual’s request to the Office
of Hearings and Appeals (OHA). The Director of OHA appointed me as the Administrative Judge
in this matter on July 26, 2019. I took testimony from the Individual at the hearing I convened
1 Under the regulations, “Access authorization” means an administrative determination that an individual is eligible
for access to classified matter or is eligible for access to, or control over, special nuclear material.” 10 C.F.R.
§ 710.5(a). Such authorization will also be referred to in this Decision as a security clearance.
- 2 -
pursuant to 10 C.F.R. § 710.25(d), (e) and (g). See Transcript of Hearing, Case No. PSH-19-0040
(hereinafter cited as “Tr.”). The LSO submitted seven exhibits, marked as Exhibits 1 through 7
(hereinafter cited as “Ex.”). The Individual submitted 21 exhibits, marked as Exhibits A through
Q.
II. THE NOTIFICATION LETTER AND THE ASSOCIATED SECURITY CONCERNS
As indicated above, the Notification Letter informed the Individual that information in the
possession of the DOE created a substantial doubt concerning his eligibility for a security clearance.
That information pertains to Guidelines E and F of the National Security Adjudicative Guidelines
for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive
Position, effective June 8, 2017 (Adjudicative Guidelines).
Under Guideline E, the LSO alleges that the Individual had signed a QNSP on February 13, 2018,
certifying that in the last seven years, he had filed and paid Federal taxes when required by law or
ordinance, when he had allegedly not filed his Federal income taxes for the 2015 and 2016 tax
years. If true, this information would have adequately justified the LSO’s invocation of Guideline
E and would have raised significant security concerns. The Adjudicative Guidelines state:
“Conduct involving questionable judgment, lack of candor, dishonesty, or unwillingness to comply
with rules and regulations can raise questions about an individual's reliability, trustworthiness, and
ability to protect classified or sensitive information. Of special interest is any failure to cooperate
or provide truthful and candid answers during national security investigative or adjudicative
processes.” Guideline E at § 15. Among those conditions set forth in Guideline E that could raise
a disqualifying security concern are: (a) deliberate omission, concealment, or falsification of
relevant facts from any personnel security questionnaire . . . used to conduct investigations, . . .
determine national security eligibility or trustworthiness, or award fiduciary responsibilities.”
Guideline E at §16(a). However, as I will discuss in detail below, I find that the Individual had, in
fact, filed his Federal taxes for tax years 2015 and 2016 when he signed the QNSP on February 13,
2018.
Under Guideline F, the LSO alleges that the Individual has a history of failing to meet his financial
obligations, and failing to file his Federal and state tax returns. To this end, the LSO alleged that
the Individual has failed to file his Federal income tax returns for tax years 2015, 2016, and 2017,
and has failed to file his state tax returns for tax years 2011, 20013, 2014, 2015, 2016, and 2017.
These allegations adequately justify the LSO’s invocation of Guideline F. Guideline F (Financial
Considerations) provides: “failure 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 or sensitive information.”2 Guideline F at § 18. Guideline F sets forth
nine conditions that “could raise a security concern and may be disqualifying.” Guideline F at
§ 19. Among these conditions that can raise security concerns under Guideline F are an
individual’s inability to satisfy debts; unwillingness to satisfy debts regardless of the ability to do
so; history of not meeting financial obligations; a history of late payments or non-payment, other
2 Guideline F further provides: “Financial distress can also be caused or exacerbated by, and thus can be a possible
indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance
misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to
engage in illegal or otherwise questionable acts to generate funds.” Guideline F at § 18.
- 3 -
negative financial indicators; failure to file annual Federal or state income tax returns, and failure
to pay annual Federal, or state income tax. Guideline F at § 19(a), (b), (e), and (f).
III. REGULATORY STANDARDS
A DOE administrative review proceeding under Part 710 requires me, as the Administrative Judge,
to issue a Decision that reflects my comprehensive, common-sense judgment, made after
consideration of all of the relevant evidence, favorable and unfavorable, as to whether the granting
or continuation of a person’s access authorization will not endanger the common defense and
security and is clearly consistent with the national interest. 10 C.F.R. § 710.7(a). The regulatory
standard implies that there is a presumption against granting or restoring a security
clearance. See Department of Navy v. Egan, 484 U.S. 518, 531 (1988) (“clearly consistent with
the national interest” standard for granting security clearances indicates “that security
determinations should err, if they must, on the side of denials”); Dorfmont v. Brown, 913 F.2d
1399, 1403 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991) (strong presumption against the
issuance of a security clearance).
The individual must come forward at the hearing with evidence 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 individual is afforded a
full opportunity to present evidence supporting his eligibility for an access authorization. The
Part 710 regulations are drafted so as to permit the introduction of a very broad range of evidence
at personnel security hearings. Even appropriate hearsay evidence may be admitted. 10 C.F.R.
§ 710.26(h). Hence, an individual is afforded the utmost latitude in the presentation of evidence to
mitigate the security concerns at issue.
The discussion below reflects my application of these factors to the testimony and exhibits
presented by both sides in this case.
IV. FINDINGS OF FACT
On November 8, 2017, the Individual filed his Federal tax returns for tax years 2015 and 2016 with
the Internal Revenue Service (IRS). Ex. A. and Ex. B.
On February 13, 2018, the Individual signed and submitted a QNSP to the LSO. Section 26 of the
QNSP asked the Individual “In the last seven (7) years have you failed to file or pay Federal, state,
or other taxes when required by law or ordinance?” (emphasis in the original). The Individual
answered in the affirmative. Ex. 6 at 58. The QNSP further required the Individual to report each
year that he failed to file Federal or state tax returns. The Individual reported that he had failed to
file state tax returns for tax years 2011, 2012, 2013, 2014, 2015, and 2016. Ex. 6 at 58-60. The
Individual did not indicate that he had not filed his Federal tax returns for tax years 2015 and 2016.
Ex. 6. The Individual further indicated that he intended “to start filing process in Feb 2018.” Ex.
6 at 58-60.
A background investigation of the Individual was conducted by the Office of Personnel
Management’s Federal Investigative Services (FIS). The Individual was interviewed by a FIS
Investigator on May 16, 2018 (the FIS Interview). Ex.7 at 93. During the FIS Interview, the
- 4 -
Individual admitted that he had not filed state tax returns for 2012 and 2013 in one state (State A)
and 2011, 2014, 2015, 2016, and 2017, in another state (State B). Ex. 7 at 96. The FIS
Investigator’s report states: “Subject did not file federal income taxes in 2015, 2016 or 2017 before
the filing deadline.” Ex. 7 at 96 (emphasis added). The FIS Investigator’s report further states:
Subject filed the back taxes last year and sent checks for $1,439 with his 2015
return and $2,520 with his 2016 federal return. The IRS has since sent Subject
checks for overpayment - $1,117 for the 2016 tax year and Subject is expecting to
receive another check of $3,957 from the IRS for money due in claiming the child
tax credit for one or both of those tax years.
Ex. 7 at 96 (emphasis added). The FIS Investigator indicated that the Individual explained his
failure to file his returns by stating that “he believed he did not have any tax liability and wanted
to wait to claim any refund for a rainy day when he needed the money.” Ex. 7 at 96.
The LSO issued LOI’s to the Individual. On April 8, 2019, the Individual submitted his responses
to these LOIs (the Response). Ex. 5 at 9. In the Response, the Individual admitted that he had not
filed state tax returns for tax years 2011, 2012, and 2013, for State A, and tax years 2011, 2013,
2014, 2015, 2016, and 2017, for State B. Ex. 5 at 1-5. The Individual explained his failure to file
these state tax returns by claiming that he had misplaced some financial forms after moving, and
further stating that there had “been no urgency on my part,” because he expected to receive refunds
for those tax years. Ex. 5 at 1-5. LOI Question No. 21 cited the Individual’s statement to the FIS
Investigator that he had filed his tax year 2015 and tax year 2016 Federal returns. Ex. 5 at 6.
However, LOI Question No. 30 asked: “Explain why question number 26 on the QNSP that you
signed February 13, 2018 . . . may have been answered incorrectly. In the QNSP, you failed to list
that you had not filed your federal income taxes for the 2015, 2016, 2017 tax years.3” Ex. 5 at 8.
The Individual responded by stating: “I am corresponding with the IRS about the returns in
question. I have an appointment with the IRS on April 22, 2019.” Ex. 5 at 8.
On September 12, 2019, the Individual submitted a letter from a Certified Public Accountant (the
CPA) indicating that the CPA was representing the Individual before the United States Tax Court.
Ex. B at 1. The CPA further indicated that he was “in the process of reviewing, correcting, and
filing returns with IRS and with [State A] and [State B] taxing authorities.” Ex. B at 1. The CPA
further stated:
It is anticipated that all individual income tax filings, both federal and state, will be
submitted by the end of this month. The delay in filings relates to having to obtain
W-2 copies from employers going back to 2012. While the IRS has provided
federal taxable amounts reported on W-2s, the IRS records do not include amounts
reported on the W-2 for state income tax withholding. This information is necessary
to file accurate state returns.
3 The Individual’s Federal tax returns for tax year 2017 were not due until April 2018, several months after the
Individual submitted the February 13, 2018, QNSP.
- 5 -
Ex. B at 1. The Individual also submitted a copy of a Power of Attorney that he signed on June 26,
2019, appointing the CPA as his representative before the IRS and state taxing authorities. Ex. B
at 2.
On October 3, 2019, the Individual submitted a letter from the CPA, dated September 24, 2019.
Ex. E. In this letter, the CPA reported that the Individual had submitted his Federal income tax
returns for tax year 2017. Ex. E at 1. The CPA further indicated that the Individual had recently
filed his outstanding tax returns from State A and State B as well. Ex. E at 1. The Individual
further submitted copies of those filings. Ex. F; Ex. G; Ex. H; Ex. I; Ex. K; Ex. L; Ex. M; Ex. N;
Ex. O; Ex. P. The CPA reported that the Individual’s recent tax filings indicated that he owed the
IRS $1,929 for Federal tax year 2017. Ex. E at 2. He further reported that these returns indicated
that the Individual owed State B $221, for tax year 2012, $377 for tax year 2015, $683 for tax year
2016, and $1,243 for tax year 2017. Ex. E at 2. The Individual also owes State A $585 for tax
year 2012, and $180 for tax year 2013. Ex. E at 2. The Individual is owed a refund of $2,156 from
the IRS as a result of a settlement with the IRS. Ex. E at 2. State B also owes refunds to the
Individual of $56 for tax year 2011, $72, for tax year 2013, and $121 for tax year 2014. Ex. E at 2.
The Hearing
At the Hearing, the Individual mitigated the security concerns raised by the LSO’s allegation that
he failed to report his failure to file his Federal tax returns for tax years 2016 and 2017, by
convincingly showing that he had, in fact filed his Federal tax returns for those years at the time he
submitted his February 13, 2018, QNSP. Tr. at 28, 38.
The Individual testified that he hired the CPA, in June 2019, in order to ensure that all of his tax
returns were filed. Tr. at 10-11, 26. As a result, he testified, he has now filed all of his outstanding
tax returns. Tr. at 13. He testified that his Federal tax return for tax year 2017 had just been filed
two days earlier. Tr. at 19, 29. The Individual admitted that he still has some outstanding tax debts
that have not yet been resolved. Tr. at 13. However, he expects to be able to resolve these debts,
since his fiancée has recently become employed as a registered nurse, and their household income
has doubled. Tr. at 13. His annual income is $72,000, and his fiancée has a similar income. Tr. at
33-34. The Individual testified that he has entered into a payment plan with the IRS for his unpaid
taxes for tax years 2017 and 2015. Tr. at 18, 27. The Individual testified that the IRS now owes
him $2,156 as a result of his successfully challenging the IRS’s determinations in tax court. Tr. at
18, 27. He plans to use that payment to address his other tax debts. Tr. at 27. The Individual
admitted that he will need to set up a payment plan with State B, and plans to do so in the near
future. Tr. at 20, 27. The Individual also admitted that he has outstanding tax debts to State A. Tr.
at 23. The Individual, however, does not know what his monthly payments will be for these
payment plans. Tr. at 31. The Individual agreed that he owes State B $765, and State A $2,275.
Tr. at 32-33. The Individual also owes the IRS $248. Tr. at 33. The Individual noted that his
household income now exceeds $100,000 and that he plans to pay off his past debts quickly. Tr.
at 34. The Individual further testified that the CPA had successfully challenged his previous
Federal income tax assessment for 2016, and now plans to use the precedent established by that
challenge in order to challenge the Federal income tax assessment for 2015. Tr. at 37. The
Individual expects to receive approximately $5,000 if he prevails in that challenge. Tr. at 37.
- 6 -
When the Individual was asked why had had failed to file so many tax returns, he stated: “ The
reason why I choose not to do my taxes right away is because I'm usually owed money back every
year so I look at it as money in the bank whenever I can get to it.” Tr. at 19. He further stated that
he now realizes that he is required to file tax returns, even if he believes he is owed a refund.
Tr. at 19, 24.
The Individual attempted to mitigate the security concerns raised by his failure to file his tax returns
in a timely manner by stating: “I think that I've complied with filing all my taxes now and I'm not
going to let it get this far again . . . I filed my 2018 taxes on time. And this is like a huge headache
for me, and I don't care to go through this again.” Tr. at 26. He further indicated that he is going
to have the CPA prepare his tax returns in the future. Tr. at 27. He concluded the hearing by
stating:
It's in my best interest to stay on top of these finances and paying my taxes on time.
I realize my mistake, and I plan on moving forward and not making this mistake
again. As I said, it's far better in my interest to keep my job rather than try to
skedaddle by with $3,500.
Tr. at 38.
V. ANALYSIS
Guideline E
As discussed above, the LSO’s allegations under Guideline E were based upon an invalid factual
basis.
Guideline F
By failing to file his tax returns for an extended period, from 2011, through 2017, the Individual
has exhibited poor judgment, shown that he cannot be relied upon, and shown that he cannot be
considered trustworthy. The only explanation provided by the Individual for his failure to file his
taxes is troubling; he claimed that he believed that he was owed a refund for each of these years
and considered these alleged unclaimed refunds to be assets. As discussed above, the Individual
actually owed taxes for most of these tax years, and his tax liability for those years actually
exceeded his unclaimed refunds by approximately $3,500. Moreover, the Record shows that the
Individual was actually experiencing financial hardship during this period, which suggests either
that his explanation was not credible, or that he exhibited poor judgment by failing to utilize these
resources. See Ex. 6 at 61-65 (reporting several personal debt issues during this time period on his
QNSP); Ex. 6 at 18-23 (reporting several periods of unemployment during this time period on his
QNSP).
The Individual, has however, belatedly taken the appropriate actions to address his failure to file
his tax returns. He has hired a CPA, and he has filed all of his outstanding tax returns. He has not,
however, as of the closing of the Record on October 29, 2019, shown that he has entered into final
payment plans with the IRS and the state taxing authorities.
- 7 -
Guideline F provides seven conditions that can mitigate security concerns, four of which apply to
circumstances present in the instant case. Guideline F at § 20. The Individual has not shown that
any of these conditions are sufficiently present in the instant case.
Section 20(a) provides that mitigation could occur if: “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.” The Individual’s pattern
of failing to file his tax has continued until relatively recently, and therefore cannot be said to have
occurred long ago. Moreover, the Individual’s pattern of failing to file his tax return occurred over
an extended period of time, from 2011 through 2017, and therefore cannot be considered to have
occurred under such circumstances that it can be considered unlikely to recur. The recentness of
the Individual’s failures to file his tax returns continues to cast doubt upon his current reliability,
trustworthiness, or good judgment.
Section 20(c) provides that mitigation could occur if: “the individual has received or is receiving
financial counseling for the problem from a legitimate and credible source, such as a non-profit
credit counseling service, and there are clear indications that the problem is being resolved or is
under control.” The Individual has obtained the services of the CPA and has filed each of the
outstanding tax returns. However, these actions have occurred under the pressure of the present
proceeding, and the Individual has not yet shown that he will be able, or willing to repay his
outstanding tax obligations. Moreover, any mitigation provided by the Individual’s recent filing
of his tax returns is overshadowed by the longstanding nature of the behaviors that have raised
these security concerns. Accordingly, I find that this condition does not mitigate the security
concerns raised under Guideline F.
Section 20(d) provides that mitigation could occur if: “the individual initiated and is adhering to a
good-faith effort to repay overdue creditors or otherwise resolve debts.” While the Individual has
initiated an effort to repay his overdue tax obligations, he has not yet entered into finalized
repayment plans with each of his tax creditors. Therefore, this condition is not yet present in the
instant case.
Section 20(e) provides that mitigation could occur if: “the individual has made arrangements with
the appropriate tax authority to file or pay the amount owed and is in compliance with those
arrangements. However, the Individual has not made final arrangements with the IRS or the state
taxing authorities to repay. Therefore, this condition is not present in the instant case.
Since the Individual has not shown that any of the conditions that can mitigate security concerns
arising under Guideline F at § 20 have been met in the present case, I am not convinced that the
Individual has sufficiently mitigated the significant security concerns arising under Guideline F,
from his failure to file his Federal and state tax returns for several years.
VI. CONCLUSION
For the reasons set forth above, I conclude that the LSO did not properly invoke Guideline E.
However, I also conclude that the LSO properly invoked Guideline F. After considering all of the
evidence, both favorable and unfavorable, in a common sense manner, I find that the Individual
has not mitigated the security concerns raised under Guideline F. Accordingly, the Individual has
- 8 -
not demonstrated that granting his security clearance would not endanger the common defense and
would be clearly consistent with the national interest. Therefore, the Individual’s security clearance
should be denied. The parties may seek review of this Decision by an Appeal Panel under the
procedures set forth at 10 C.F.R. § 710.28.
Steven L. Fine
Administrative Judge
Office of Hearings and Appeals