TSO-01113

* 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: September 20, 2011 )
) Case No.: TSO-01113
)
___________________________________ )
Issued: January 11, 2012
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Hearing Officer Decision
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Kent S. Woods, Hearing Officer:
This Decision considers the eligibility of XXXXXXX XXXXXXX (hereinafter referred to as
“the individual”) to hold an 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.” As explained below, it is my decision that the individual’s access
authorization should not be restored at this time.
I. BACKGROUND
The individual currently is employed by a DOE contractor, and that contractor has requested that
he receive a DOE security clearance. Based on financial issues contained in the individual’s
security file, the Local Security Office (LSO) conducted a Personnel Security Interview (PSI)
with the individual in July 2011. PSI, DOE Ex. 13
In August 2011, the LSO issued the individual a Notification Letter, together with a statement
(Enclosure 2) setting forth the information that created a substantial doubt about his eligibility to
hold a DOE security clearance. (DOE Ex. 1). Specifically, the LSO alleges that, as of July 2011,
the individual had not filed his federal tax return for 2010 and had not requested an extension of
the April 15, 2011, deadline for filing that return. The LSO also alleges that the individual has
current tax debts and other delinquent debts totaling more than $15,000. In addition, the letter
states that the individual has exhibited financial irresponsibility, including an established pattern
of unwillingness or inability to satisfy his debts. These alleged actions raise security concerns
that the individual has engaged in unusual conduct or is subject to circumstances which tend to
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show that he is not honest, reliable or trustworthy under the provisions of 10 C.F.R. § 710.8(l)
(Criterion L). Enclosure 2, DOE Ex. 1.
In September 2011, the individual requested a hearing (hereinafter “the hearing”) to respond to
the concerns raised in the Notification Letter. DOE Ex. 2. On September 21, 2011, the Office of
Hearings and Appeals Director appointed me the Hearing Officer in this case. At the hearing I
convened in this matter, the individual testified concerning the circumstances that contributed to
his financial problems, and the efforts he has made to resolve his tax issues and his delinquent
debts.
II. APPLICABLE STANDARDS
A DOE administrative review proceeding under this Part is not a criminal case, in which the
burden is on the government to prove the defendant guilty beyond a reasonable doubt. In this
type of case, we apply a different standard, which is designed to protect national security
interests. A hearing 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). The burden is on the
individual to come forward at the hearing with evidence to convince the DOE that granting or
restoring his access authorization “would not endanger the common defense and security and
would be clearly consistent with the national interest.” 10 C.F.R. § 710.27(d). This standard
reflects a presumption against granting or restoring a security clearance. See Dep’t of Navy v.
Egan, 484 U.S. 518, 531 (1988) (the “clearly consistent with the interests of national security
test” for the granting of 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).
III. FINDINGS OF FACT AND ANALYSIS
A. The Individual Has Raised Security Concerns Involving Failure to Comply with Tax Laws
and Financial Irresponsibility
As previously noted, the LSO cites one criterion as the basis for suspending the individual’s
security clearance, Criterion L. To support its allegations, the LSO states that the individual
admitted at his July 2011 PSI that he had not yet filed his 2010 federal income tax return because
he could not afford to file them, and that he had not requested an extension of time from the
Internal Revenue Service (IRS). It also finds that at the 2011 PSI, the individual admitted to
owing $4,000 in additional taxes to the IRS for tax year 2009 and $4,000 in additional taxes to
his state government for tax year 2009. Enclosure 2, DOE Ex. 1. In his request for a hearing,
the individual acknowledged the validity of these concerns, and offered two factual corrections.
He stated that at the 2011 PSI he mis-stated the year, and that the IRS and his state identified
additional tax liability for tax year 2008 rather than tax year 2009. He also stated that the IRS
found new tax liability in the amount of $4,060 in tax year 2008, but that his state government
has not yet assessed his additional liability. DOE Exhibit 2. I accept these factual clarifications
provided by the individual.
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In addition to his tax issues, the LSO finds that despite certifying his intention in July 2008 to
fulfill all of his financial obligations and to pay off his overdue accounts, the individual has not
done so. Specifically, it finds that the individual’s wages currently are being garnished by a
creditor for the amount of $7,172, and his January 2010 credit report reflects an additional
$7,866 in overdue debt. Enclosure 2, DOE Ex. 1. In his request for a hearing, the individual
acknowledged the validity of these concerns. DOE Ex. 2 at 2.
The individual’s failure to satisfy his debts and to meet his financial obligations raises a security
concern under Criterion L because his actions may indicate “poor self-control, lack of judgment,
or unwillingness to abide by rules and regulations,” all of which can raise questions about the
individual’s reliability, trustworthiness and ability to protect classified information. See
Guideline F of the Revised Adjudicative Guidelines for Determining Eligibility for Access to
Classified Information issued on December 29, 2005, by the Assistant to the President for
National Security Affairs, The White House (Adjudicative Guidelines). Moreover, a person who
is financially overextended is at risk of having to engage in illegal acts to generate funds. Id.
Similarly, the individual’s failure to file his 2010 tax returns in a timely manner, and his failure
to correctly report and calculate his tax liability on his 2008 returns may indicate a lack of ability
or willingness to comply with laws, rules and regulations in the future. See Personnel Security
Hearing, Case No. TSO-0457 (2007).1 Accordingly, I conclude that the allegations raised by the
LSO raise valid concerns regarding the individual’s eligibility for access authorization. The
burden is with the individual to come forward with evidence to mitigate those concerns.
B. The Individual’s Contentions at the Hearing
At the hearing, the individual contended that his failure to file his 2010 income tax return in a
timely manner was the result of his misunderstanding of tax requirements, and that he filed that
return shortly after his 2011 PSI. He stated that the additional taxable income identified by the
IRS on his 2008 return resulted from his ex-wife’s failure to report the cancellation of a debt as
income, and that the IRS is no longer assessing additional tax liability for this cancelled debt.
With respect to his personal financial problems, he contends that he has lived frugally in recent
years and that his current indebtedness is the result of the failure of his ex-wife’s business in
2007 and his divorce in 2010. He stated that he is continuing to pay off his overdue debts, and
expects to have additional income for that purpose in 2012.
I have carefully considered the record of this proceeding, including the testimony of the
witnesses presented at the hearing. In resolving the question of the individual’s eligibility for
access authorization, I have been guided by the applicable factors prescribed in 10 C.F.R.
§ 710.7(c)2 and the Adjudicative Guidelines. As discussed below, I conclude that the individual’s
access authorization should not be restored at this time.
1 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.
2 Those factors include the following: the nature, extent, and seriousness of the conduct, the circumstances
surrounding the conduct, to include knowledgeable participation, the frequency and recency of the conduct, the age
and maturity at the time of the conduct, the voluntariness of his participation, the absence or presence of
rehabilitation or reformation and other pertinent behavioral changes, the motivation for the conduct, the potential for
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1. The Individual’s Explanations Concerning his Tax Problems
The individual testified that he and his wife incurred substantial debt due to the failure of his
wife’s home-based business in 2007. He stated that in 2008, one of their creditors agreed to
cancel $15,357 of debt, and his wife failed to report the cancelled debt as income when she filed
their joint income tax return. The individual stated that he was not aware of the tax
consequences of the debt cancellation, and that his wife prepared their tax returns. He stated that
in August 2010, the IRS wrote to them and stated that it proposed to count the cancelled debt
amount as income and to raise their 2008 tax liability by $4,060. TR at 11-14. See Individual’s
November 14, 2011, submission at 3-16 (IRS’ August 16, 2010 Notice of Proposed Changes for
Tax Year 2008). The individual stated that he and his wife contested the additional tax liability
and provided information to the IRS that they were insolvent in 2008 in the amount of $45,889.
TR at 15-18. See Individual’s November 14, 2011, submission at 64 (2008 Tax Insolvency
Figures). He reported at the hearing that the IRS had not yet issued a ruling on the issue. TR at
18. See Individual’s November 14, 2011, submission at 17-18 (August 29, 2011 IRS letter
stating that it had not resolved the matter of his 2008 tax liability because it had not completed
“all the processing necessary for a complete response”).
Following the hearing, the individual’s ex-wife informed him by e-mail that in a November 16,
2011, telephone conversation, an IRS representative informed her that the 2008 insolvency
information that they had submitted to the IRS had been accepted, and that the IRS would not
require that the cancelled debt be added as income for 2008. See Individual’s November 30
2011, submission at 4 (November 18, 2011, e-mail from individual’s ex-wife). See also Id. at 2
(November 10, 2011, IRS letter to the individual and his ex-wife stating that their total
underreported income for tax year 2008 is $0.0). This ruling by the IRS also resolves any issue
of underreported income on the individual’s 2008 state tax return. TR at 30-31.
With regard to the late filing of his 2010 tax return, the individual explained at the hearing that
he did not purposefully violate IRS tax rules. He testified that he believed that he would receive
a tax refund for 2010, and that therefore he did not have to file his 2010 tax return by April 15,
2011 or request an extension of time from the IRS. TR at 43-44, 47. The individual stated that
he delayed filing his tax return because he thought that filing tax forms would “complicate things
further down the road” when the IRS ruled on the 2008 tax liability issues. He also stated that
because his on-line tax filing program cost more than $50, he wanted to avoid multiple filings for
the 2010 tax year. TR at 44-48. The individual testified that when he was informed at the July
2011 PSI that his delay in filing his 2010 federal and state tax returns was a violation of tax law,
he filed his federal and state tax returns within a week. TR at 31, 46. He further stated that he
had not yet received his 2010 federal tax refund of $497 because of the unresolved 2008 tax
liability issues. See Individual’s November 30, 2011, submission at 5 (IRS Refund Status
Results).
pressure, coercion, exploitation, or duress, the likelihood of continuation or recurrence, and other relevant and
material factors.
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Based on the individual’s explanations and evidence, I find that he has mitigated the concerns
arising from his 2008 tax issues and his late filing of tax returns in 2010. The individual’s 2008
tax issue involved potential unreported income arising from the cancellation of debt. I find that
the individual’s explanations resolve the concern that he intentionally failed to report taxable
income, and the recent ruling in the individual’s favor by the IRS also supports this finding. The
individual’s failure to file timely 2010 income tax returns or to seek filing extensions is
troubling, but I accept the individual’s explanation that he did not purposefully violate tax rules,
and that his decision to delay filing his returns arose from unusual circumstances involving his
unresolved 2008 tax issues. His prompt filing of the returns when he was informed of his
violation at the 2011 PSI convinces me that he is unlikely to repeat this violation. I therefore
conclude that it is “unlikely to recur in the future” and “does not cast doubt on [his] current
reliability, trustworthiness, or good judgment.” See Adjudicative Guidelines, Guideline F, ¶ 20.
2. The Individual’s Explanations Concerning his Financial Difficulties and his Efforts to
Manage his Finances
At the hearing, the individual stated that he has made substantial progress in reducing his
overdue debt since 2008, despite his 2010 divorce that required legal payments, child support
payments, and the expenses of establishing a separate household. He stated that from 2008 until
the present, he has reduced his insolvency from $46,000 to $9,900. However, three of his four
remaining debts originated in 2008, and two of them arose from purchases of a new automobile
and a very, expensive vacuum cleaner that appear unwise in light of his insolvency. The third
was a high interest loan used to make a payment to a credit counseling agency. TR at 61-65.
None of the individual’s current overdue debt originated after 2008. See Individual’s
November 14, 2011, submission at 47-64 (Individual’s November 10, 2011, credit report).
The individual testified that, aside from a wage garnishment, he is not paying down his
remaining overdue debts because his creditors want larger payments than he can currently afford.
TR at 56. He asserted that he expects to have more income to pay off these debts in 2012, when
his current wage garnishment ends, and when he anticipates that his court ordered child support
payments will decrease. TR at 50-52, 68.
The individual testified that a creditor is garnishing his wages by $300 a month, and that the
garnishment will end in about seven months. TR at 68. He stated that the garnishment arose
from a personal loan for about $5,000 that he took out in January 2005 to pay for Christmas
expenses. TR at 76. He stated that in about 2008, he and his wife attempted to consolidate their
debts with a credit counseling agency, and stopped making payments to this creditor. TR at 78.
He stated that the attorney for the creditor then obtained a court ordered wage garnishment. TR
at 78-79.
The individual stated that his ex-wife, who is in school, has substantially increased her part-time
income, so he has petitioned the court to reduce his monthly child support payment from $1,589
to about $1,000. He testified that when she graduates in 2012, her income should increase
further, and that eventually they will share child care expenses equally. TR at 68-71.
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The individual stated that he has lived frugally since his 2010 divorce. He testified that he
purchased a used car in December 2010 for $1,700 cash that he earned working overtime. TR
at 84. His monthly budget indicates that his rent is $740. However, with his wages reduced by
the garnishment, and with monthly child support payments of $1589, he currently has only $61 a
month available for paying off overdue debts to four creditors totaling $9,933. TR at 59. See
Individual’s November 14, 2011, submission at 2 (Individual’s Monthly Budget) and 47
(Individual’s November 10, 2011, credit report).
In considering this evidence in light of the Adjudicative Guidelines, I find that the individual’s
financial problems involved purchases, i.e., Christmas gifts, a new car, an expensive vacuum
cleaner, and a high interest loan, that were voluntary in nature, and that in at least three instances
appeared to be unwise in light of his financial condition. Although the individual’s 2010 divorce
created additional financial strain, it cannot be viewed as the cause of his indebtedness. Under
these circumstances, I cannot conclude that his financial problems are mitigated under Guideline
F at ¶ 20 (b), i.e. the conditions that resulted in the financial problems were largely beyond the
person’s control.
With regard to the individual’s current efforts, I find that since 2008, the individual has
successfully avoided new debt, and that since his 2010 divorce, he has lived frugally and
exercised good judgment concerning his living expenses. I am convinced that the individual
now fully understands the importance that the DOE places on financial responsibility as a basis
for holding an access authorization, and that he has begun to demonstrate personal financial
responsibility. However, I find that the individual has been unable to voluntarily reduce his
outstanding debt in recent months, and I am not convinced that he will be able to discharge his
remaining overdue debt in a timely manner. The individual admits that he currently does not
have the financial resources to make any payments to his four remaining creditors due to his
wage garnishment and his child support payments. While he expects to have some additional
income in the second half of 2012 when the garnishment ends, that additional $300 per month
may not be sufficient to pay off his creditors at a rate that will avoid additional legal problems.
His expectation that he can reduce his child support payments in 2012 appears speculative, as it
is dependent on court action and the anticipated increased earnings by his wife when she finishes
school.
In prior cases involving financial irresponsibility, 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 Personnel Security Hearing,
Case No. TSO-01078 (2011); Personnel Security Hearing, Case No. TSO-0878 (2010);
Personnel Security Hearing, Case No. TSO-0746 (2009); Personnel Security Hearing, Case No.
TSO-0732 (2009). At this point, it is too early for me to find that the individual has
demonstrated that his financial problem is under control and that he can maintain responsible
financial practices. Accordingly, based on the foregoing, I find that the individual has not yet
mitigated the security concerns associated with Criterion L.
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IV. 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 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 associated with Criterion L at this time. 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.
Kent S. Woods
Hearing Officer
Office of Hearings and Appeals
Date: January 11, 2012