DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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                                                                     )                                                           
          -----------------------                                )         ISCR  Case No.   09-00918      
         SSN: ---------------- )
)
Applicant for Security Clearance )
Appearances
For Government: Melvin A. Howry, Esquire, Department Counsel
For Applicant: Pro Se
______________
 Decision
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WESLEY, Roger C., Administrative Judge:
Statement of Case
On September 11, 2009, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) detailing reasons why DOHA could not make the
preliminary affirmative determination of eligibility for granting a security clearance, and
recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. The action was taken
under Executive Order 10865, Safeguarding Classified Information within Industry
(February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense
Industrial Personnel Security Clearance Review Program (January 2,1992), as
amended (Directive); and the revised Adjudicative Guidelines (AGs) promulgated by the
President on December 29, 2005, and effective within the Department of Defense for
SORs issued after September 1, 2006.
Applicant responded to the SOR on October 13, 2009, and requested a hearing.
The case was assigned to me on November 17, 2009, and was scheduled for hearing
on January 12, 2010. The hearing was convened on the scheduled date for the purpose
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of considering whether it would be clearly consistent with the national interest to grant,
continue, or deny, Applicant’s application for a security clearance. At hearing, the
Government's case consisted of seven exhibits; Applicant relied on one witness
(himself) and nine exhibits. The transcript (R.T.) was received on January 26, 2010.
Based upon a review of the case file, pleadings, exhibits, and testimony, eligibility for
access to classified information is denied. 
Procedural Rulings and Evidentiary Issues
Before the close of the hearing, Appellant requested leave to supplement the
record with documented filed state and federal tax returns for 2001 and 2002. For good
cause shown, Applicant was granted seven days to supplement the record. The
Government was afforded two days to respond. Within the time permitted, Applicant
supplemented the record with a copied cover letter listing his enclosures, a voided 2001
IRS refund check, a creditor monitoring alert related to the debt alleged in subparagraph
1.e, a checking account statement reflecting payment of the debt alleged in
subparagraph 1.f, and a billing notice associated with the debt alleged in subparagraph
1.f  Applicant’s submissions were admitted as exhibits J through N. 
Summary of Pleadings
Under Guideline F, Applicant is alleged to (a) have filed no State A or federal tax
returns for the tax years of 2000 through 2007; (b) to be indebted to State A on a tax
lien for $67,896; (c) ; to be indebted to State A on a tax lien for $233,000; and (d) to be
indebted to two consumer creditors for $516 and $238, respectively.
In his response to the SOR, Applicant admitted to not filing his state and federal
tax returns for the years 2000 through 2007, but denied the remaining allegations
without any explanations.  He requested a copy of his investigative file. 
                                              
Findings of Fact
Applicant is a 57-year-old quality assurance engineer of a defense contractor
who seeks a security clearance.  The allegations covered in the SOR and admitted to by
Applicant are incorporated herein and adopted as relevant and material findings.
Additional findings follow.
Applicant has never been married and has no children. He was awarded a
bachelor’s of science degree in industrial engineering in 1975 (see ex. 1).
Between 2000 and 2007, Applicant failed to file state and federal tax returns.  His
state‘s franchise tax board obtained judgments against him in 2003 to discharge a tax
lien against him in the amount of $233,000, and in 2004 to discharge a tax lien against
him for $67,896 (see exs. 6 and 7). Applicant has never paid anything towards the
satisfaction of either state tax lien, and the tax liens remain outstanding (see exs. 4 and
5).  
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Applicant has never been assessed any tax liabilities or subjected to any
enforcement actions by the IRS for any of the tax years (2000 through 2007), and does
not know how much (if any) he might owe to the IRS at the present time for any of his
prior tax years (Tr. 69-72).  Although he did receive a refund check of $3,552 from the
IRS in 2001, the check does not indicate the tax year, and was subsequently voided
(see ex. K). 
Applicant has not made any payments to the IRS since 2000 and attributes any
potential tax liability to the IRS’ failure to properly calculate the differences in the cost of
certain public stock he sold and what he sold the stock for following the collapse of the
company in the wake of the terrorist attacks of September 2001 (see ex, 5; Tr. 74).  He
has never hired a tax preparer, accountant, or attorney, however, to help him with his
taxes (Tr. 84-88).
Since 2002, his state’s franchise tax board has garnished his wages at the rate of
$500 a week.  He claims the state has recovered in excess of $19,000 a year on its tax
liens (Tr. 64), and owes him money.  To date, the state has recovered over $50,000 in
garnished wages from his savings account, and over $2,000 from his checking account
(Tr. 65-67). To date, though, he has taken no action to obtain refunds for any of the
monies he claims from the state (see ex. 5; Tr.  69-71).  
Applicant attributes some of his filing delays to his recurrent medical problems,
which cause fatigue, numbness, and stress in handling papers, and walking (Tr. 73-79)
He still feels the financial repercussions of his lost company stock in a major American
company (Tr. 73=74). He has no tax or payment documentation in his possession to
corroborate his claims.
Besides his tax debts and filing problems, Applicant incurred two smaller
consumer debts.  These debts are covered by subparagraph 1.e ($516) and 1.f ($238).
Applicant documents his payment of the creditor 1.e debt (see exs. 2, 4, and M), but not
his creditor 1.f debt (see exs. 2 and N).  He has no payment receipts for his creditor 1.f
account (Tr. 92-93).
Applicant has a net income of around $4,000 a month (see ex. 5).  He has about
$40,000 in his savings account and $1,500 in cash. He estimates to have about
$600,000 in his 401(k) stock portfolio and $20,000 in home equity (ex. 5).  
Afforded an opportunity to supplement the record, Applicant did not provide any
character references or personnel evaluations from his employer. Potentially helpful but
not available either are his performance evaluations and any awards and meritorious
citations he may have earned.  
Policies
The AGs list guidelines to be used by administrative judges in the decision-
making process covering DOHA cases. These guidelines take into account factors that
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could create a potential conflict of interest for the individual applicant, as well as
considerations that could affect the individual’s reliability, trustworthiness, and ability to
protect classified information. These guidelines include "[c]onditions that could raise a
security concern and may be disqualifying” (disqualifying conditions), if any, and many
of the "[c]onditions that could mitigate security concerns.” These guidelines must be
considered before deciding whether or not a security clearance should be granted,
continued, or denied. The guidelines do not require administrative judges to place
exclusive reliance on the enumerated disqualifying and mitigating conditions in the
guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the
context of the whole person in accordance with AG ¶ 2(c) 
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a)
of the revised AGs, which are intended to assist the judges in reaching a fair and
impartial commonsense decision based upon a careful consideration of the pertinent
guidelines within the context of the whole person. The adjudicative process is designed
to examine a sufficient period of an applicant’s life to enable predictive judgments to be
made about whether the applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered together with the following AG ¶ 2(a) factors: (1) the nature, extent, and
seriousness of the conduct; (2) the circumstances surrounding the conduct, to include
knowledgeable participation; (3) the frequency and recency of the conduct; (4) the
individual’s age and maturity at the time of the conduct; (5) the extent to which
participation is voluntary; (6) the presence or absence of rehabilitation and other
permanent behavioral chances; (7) the motivation for the conduct; (8) the potential for
pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
Viewing the issues raised and evidence as a whole, the following adjudication
policy concerns are pertinent herein:
Financial Considerations
The Concern: Failure or inability 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 information.  An individual who is financially
overextended is at risk of having to engage in illegal acts to generate
funds.  Compulsive gambling is a concern as it may lead to financial
crimes including espionage.  Affluence that cannot be explained by known
sources of income is also a security concern.  It may indicate proceeds
from financially profitable criminal acts. AG ¶ 18.
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Burden of Proof
Under the Directive, a decision to grant or continue an applicant's request for
security clearance may be made only upon a threshold finding that to do so is clearly
consistent with the national interest.  Because the Directive requires administrative
judges to make a commonsense appraisal of the evidence accumulated in the record,
the ultimate determination of an applicant's eligibility for a security clearance depends, in
large part, on the relevance and materiality of that evidence. As with all adversarial
proceedings, the judge may draw only those inferences which have a reasonable and
logical basis from the evidence of record.  Conversely, the judge cannot draw factual
inferences that are grounded on speculation or conjecture.
The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR; and (2) it must demonstrate that the
facts proven have a material bearing to the applicant's eligibility to obtain or maintain a
security clearance.  The required showing of material bearing, however, does not require
the Government to affirmatively demonstrate that the applicant has actually mishandled
or abused classified information before it can deny or revoke a security clearance.
Rather, consideration must take account of cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the burden of proof shifts to the applicant for the purpose of
establishing his or his security worthiness through evidence of refutation, extenuation or
mitigation of the Government's case.  Because Executive Order 10865 requires that all
security clearances be clearly consistent with the national interest, “security-clearance
determinations should err, if they must, on the side of denials.” See Department of the
Navy v. Egan, 484 U.S. 518, 531 (1988).
Analysis  
Applicant is a longstanding employee of a defense contractor who failed to file
state and federal tax returns over an extended period (between 2000 and 2007).  While
there are no federal tax liens of record, his state’s franchise tax board has tax liens filed
against him in excess of $300,000.  None of these liens have been discharged to date.
Besides his tax liens, Applicant accumulated two small consumer debts totaling about
$700.
Security concerns are raised under the financial considerations guideline of the
AGs where the individual applicant is so financially overextended as to indicate poor self-
control, lack of judgment, or unwillingness to abide by rules and regulations, which can
raise questions about the individual’s reliability, trustworthiness and ability to protect
classified information, and place the person at risk of having to engage in illegal acts to
generate funds. Applicant’s failure to file state and federal tax returns and his
accumulation of state tax liens and other delinquent debts warrant the application of
three of the disqualifying conditions (DC) of the Guidelines for financial considerations: ¶
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DC 19(a) “inability or unwillingness to satisfy debts,” DC ¶ 19(c) “a history of not meeting
financial obligations,” and DC ¶ 19(g), “failure to file annual federal, state, or local income
tax returns as required or the fraudulent filing of the same.”
Applicant’s failure to file tax returns and accrual of state tax liens are for the most
part unexplained. He attributes some of his failures to medical conditions and slow
reactions, but cannot reconcile his actions with his ability to maintain a demanding
engineering position with the same defense contractor over a 15-year period.  To date,
he has not been able to effectuate any repayment plans with the state’s franchise tax
board that do not involve involuntary garnishment.  Without filed taxed returns with both
taxing jurisdictions, it is impossible to know just what Applicant owes the state and the
IRS at this time. 
Applicant does not provide adequate explanations either as to why he has not
made more concerted earlier attempts to work out filing and payment arrangements with
the state and the IRS.  If, as Applicant claims, both taxing authorities owe him money, he
should encounter little difficulty fashioning settlement arrangements with them.
Mitigation credit to Applicant is very limited based on his furnished proofs. Besides
the one small consumer debt that he paid (creditor 1.e), Applicant has made no tangible
effort to file state and federal tax returns for the years covered in the SOR (2000 through
2007), or address any of the state taxes covered by the liens filed against him by the
state’s taxing authority. 
Accordingly, Applicant remains delinquent in the filing of his personal state and
federal tax returns for the covered years (2000 through 2007) and for back taxes owed
the state for the years named in the state’s two outstanding tax liens.  As a result, MC ¶
20(a), “the behavior happened so long ago, was so infrequent, or occurred under
circumstances that it is unlikely to recur and does not cast doubt on the individual’s
reliability, trustworthiness, or good judgment,” cannot be applied to Applicant’ situation.
MC ¶ 20 (d), “the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts,” has some limited applicability based on Applicant’s
documented payment of one of his two smaller consumer creditors.                                  
                  
Because Applicant has not chosen to seek any counseling advice relative to his
identified tax filing and tax lien delinquencies, he may not take any advantage of MC  ¶
20(c), “the person has received or is receiving counseling for the problem and/or there
are clear indications that the problem is being resolved or is under control.”  Considered
together, Applicant’s efforts are not enough to warrant any more than partial application
of MC ¶ 20(c).  
Holding a security clearance involves the exercise of important fiducial
responsibilities, among which is the expectancy of consistent trust and candor.  Financial
stability in a person cleared to access classified information is required precisely to
inspire trust and confidence in the holder of the clearance.  While the principal concern of
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a clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in financial cases (as here).
Whole person assessment does not help Applicant to overcome the judgment
lapses associated with his tax filing failures, tax debt accumulations, and his still
outstanding consumer debt.  His long work history with the same defense contractor is
commendable and deserving of considerable praise.  His failure, though, to diligently
monitor and ensure timely tax filings and discharge of the outstanding state tax liens
against him  reflects the lack of adequate attention to meeting his tax responsibilities.
Security concerns associated with Applicant’s filing deficiencies and accrued state tax
and consumer debts are not mitigated under the whole person concept.
Taking into account all of the facts and circumstances surrounding Applicant’s tax
filing deficiencies and unresolved state tax liens and the absence of any meaningful
efforts to demonstrate his financial responsibility and trustworthiness in managing his
finances, Applicant does not mitigate security concerns related to his proven tax filing
and debt delinquencies.  Unfavorable conclusions warrant with respect to the allegations
covered by subparagraphs 1a through 1.d and 1.f of the SOR.  Favorable conclusions
warrant with respect to subparagraph 1.e.
In reaching my decision, I have considered the evidence as a whole, including
each of the AG 2(a) factors enumerated in the AGs of the Directive.
Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F: (FINANCIAL CONSIDERATIONS): AGAINST APPLICANT
Subparas. 1.a through 1.d and 1.f: Against Applicant    
Subpara.  1.e                                 For Applicant
Conclusions
In light of all the circumstances presented by the record in this case, it is not
clearly consistent with the national interest to grant or continue Applicant’s security
clearance.  Clearance is denied.
                                          
Roger C. Wesley
Administrative Judge 
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