1
                                                             
                          DEPARTMENT OF DEFENSE   
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
 --------------------------- )     ISCR Case No. 09-02461
SSN: ------------------- )
)
Applicant for Security Clearance )
Appearances
For Government: Candace L. Garcia, Esquire, Department Counsel
For Applicant: Pro se
______________
Decision
______________
MATCHINSKI, Elizabeth M., Administrative Judge:
Applicant owes delinquent state taxes of almost $26,000 due in part to his failure
to file timely income tax returns for tax years 1998 through 2004. He has made no
payments on his delinquent taxes since 2008 and is operating at a net monthly deficit of
$700 as of March 2010. He is currently making payments on two student loans that had
been delinquent. It is too soon to conclude that his financial problems are safely in the
past. Clearance denied.
Statement of the Case
On November 5, 2009, the Defense Office of Hearings and Appeals (DOHA)
issued to Applicant a statement of reasons (SOR) detailing the security concerns under
Guideline F, Financial Considerations, that provided the basis for its preliminary
decision to deny him a security clearance and to refer the matter to an administrative
judge. 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
2
(January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG)
effective within the Department of Defense on September 1, 2006.
On December 17, 2009, Applicant answered the SOR allegations and requested
a hearing. The case was assigned to me on December 31, 2009, to conduct a hearing
and to determine whether it is clearly consistent with the national interest to grant or
continue a security clearance for him. With the agreement of the parties, on February
11, 2010, I scheduled a hearing for March 4, 2010.
I convened the hearing as scheduled. Four Government exhibits (Ex. 1-4) and
one Applicant exhibit (Ex. A) were admitted into evidence without objection, and
Applicant testified, as reflected in a transcript (Tr.) received on March 19, 2010. At
Applicant’s request, I held the record open until March 19, 2010, for him to update the
record about his state tax debt, but no documents were received.
Findings of Fact
The SOR alleged under Guideline F, Financial Considerations, that as of
November 2009, Applicant owed delinquent state taxes of $25,862 for tax years 1998
through 2004 (SOR 1.a), was past due $790 on student loan debt totaling $16,000
(SOR 1.b), and owed collection debt of $227 (SOR 1.c) and $282 (SOR 1.d), and a
judgment debt of $8,643 to a student loan lender (SOR 1.e). Applicant admitted
incurring the debts but added that he had been trying to resolve the state tax debt since
2002, was making payments on the student loan debts in SOR 1.b and 1.e, and had
paid the collection debts in SOR 1.c and 1.d. After considering the pleadings, exhibits,
and transcript, I make the following factual findings.
Applicant is a 62-year-old test engineer, who has worked for his present
employer since November 2009. (Ex. 1, Tr. 32.) He and his spouse have been married
for 39 years, and have owned the home where they currently reside in state X since
1982. (Ex. 1.) They have three grown children. (Tr. 66.)
Applicant worked for one company for 25 years, until 1998. (Tr. 40) He was
unemployed for six months thereafter. (Tr. 46.) In June 2000, Applicant began working
for employers and at facilities located outside of state X. (Ex. 1.) Until April 2004,
Applicant and his spouse rented living quarters outside of state X while their son and
some renters resided in the family home in state X. Applicant incurred about $500 to
$600 per month in additional household expenses. (Tr. 47, 74.) After undergoing
cancer treatment in 2001, Applicant worked until July 2002 in state Y. (Ex. 1, 2.) He
collected unemployment compensation until March 2003. Over the next year, he held a
succession of short term contract engineer positions in state Z at pay less than that of a
qualified engineer, and for a few months, supplemented his income by substitute
teaching. In April 2004, Applicant and his spouse returned to state X to live, and he
relied on unemployment from state Z to cover their expenses. (Ex. 1, 2.)
From August 2004 until September 2008, Applicant worked as a test engineer for
a succession of employers located in states Y and Z. After a few months of
Jurisdiction was retained based on the Government’s assertion that Applicant was still being1
sponsored by the defense contractor and Applicant’s testimony that he would be reinstated to his defense
contractor position if he is granted a security clearance. (Tr. 33-34.)
Applicant testified that he had filed most of his delinquent returns by 2004. He was delinquent in most2
cases only about a year “because they go about three years before they do a demand and one of the filings
was about a year after the demand.” Then, after he filed, state X did not accept a credit for taxes paid through
withholding. (Tr. 37-38.)
State tax records show delinquencies due for tax years 1998 through 2004. According to his attorney,3
Applicant met with the state to discuss resolution of his tax issues for tax years 1997 through 2006. (Ex. 2.)
There is no evidence that Applicant currently owes for 1997, 2005, or 2006, although they may have been at
issue in the past.
The payments consisted of around $1,000 in 2005, and another $500 in April 2008. Otherwise, state4
X intercepted state refunds and federal refunds and economic stimulus payments. (Ex. 2.)
3
unemployment, he took a position with a defense contractor in November 2008. (Ex. 1.)
He was let go after only three weeks because of his lack of a security clearance.  (Tr.1
32.) Applicant then collected unemployment compensation from state Y at $600 weekly
until November 2009, when he started his present employment. (Tr. 52-53.)
Due to unemployment, illness, and periods of nonresidency in state X, Applicant
did not file his state X income tax returns on time.  Applicant had taxes withheld and2
had previously received refunds, so he assumed he owed a small amount if he owed
anything. (Tr. 37.) While he filed most of his delinquent returns by 2004, he did not pay
the taxes owed. (Tr. 46.)
Around November 2003, state X assessed unpaid income taxes against
Applicant and his spouse for tax years 1997 through 2000.  Applicant requested3
reconsideration of the assessment in January 2004. In September 2004, state X filed a
$35,588 tax lien against him for unpaid state X income taxes and penalties assessed for
tax years 1997 through 2000. In 2006, state X filed three liens totaling $41,280.
Applicant again appealed the assessment on the basis that he was a nonresident from
June 20, 2000 through April 2004, and derived all his income from out-of-state sources.
In September 2006, Applicant received a decision from the state that addressed his tax
liability only for 2004. (Ex. 2.) In 2007, the state filed liens of $18,250 and $3,078. (Ex.
4.) Applicant retained an attorney to address his tax debt with state X. In November
2007, Applicant and his attorney met with a state X tax official, and provided
documentary evidence of Applicant’s residency and employment in states Y and Z
between June 2000 and April 2004. (Ex. 2, Tr. 45-47.)
On July 18, 2008, Applicant submitted an offer in compromise to state X’s
department of revenue. Applicant requested, in part, that all tax, interest, and penalties
be abated for the period that he was a nonresident between June 2000 and April 2004,
and that his remaining liability be recalculated to credit him with $3,740 in payments and
applied refunds to date.  Applicant expressed his willingness to pay the tax and interest4
balance within 10 days of state X’s acceptance of his offer in compromise. Applicant
The notice for tax years 1998, 1999, 2000, 2003, and 2004 was issued to Applicant and his spouse5
jointly. The notice for tax years 2001 and 2002 was issued to Applicant in his name only. (Ex. 2.) Applicant
has maintained that the state improperly assessed his taxes based on status as a single taxpayer and the
billing notices tend to substantiate his assertion. (Tr. 71-72.) 
4
intended to withdraw funds from his pension to pay the tax debt. (Ex. 2.) Applicant did
not receive a response from state X to his offer in compromise. (Ex. A.)
Applicant also did not make his student loan payments on time. As of January
2001, Applicant was legally obligated to repay a student loan of $12,883.52 that he took
out for an adult daughter (Tr. 66.), with repayment terms of $142.83 per month from
June 14, 2003 through October 14, 2017, and a final payment of $141.19 on November
14, 2017 (SOR 1.b). He fell behind ninety days 13 times, and was 150 days past due in
October 2008 when he was unemployed. (Ex. 2.) Applicant made a payment of $300 in
November 2008 on a balance around $20,000. In February 2009, he was granted a
deferment from March 1, 2009 to September 15, 2009. Interest continued to accrue on
the $20,738.35 balance. (Ex. 2.) He has been paying $200 per month on the debt since
it came out of deferment. (Tr. 59.)
Applicant claimed he did not receive notice from another student lender about his
repayment of a second loan for his daughter (SOR 1.e). (Tr. 62, 66-67.) In January
2004, the lender obtained a judgment against him of $9,374.86. In July 2004, the
assignee filed a lien against him in the amount of $12,372.99. Applicant began repaying
the debt at $80.77 biweekly in November 2004, and he had reduced the balance to
$8,642.55 as of May 2009. (Ex. 2, A.) 
Applicant completed an Electronic Questionnaire for Investigations Processing on
November 10, 2008, for a test engineer position with a defense contractor. He disclosed
a $20,000 tax lien filed by state X that he was attempting to resolve through an offer in
compromise. In response to the financial delinquency inquiries, he responded “Yes” to
any debts delinquent over 180 days in the last seven years, but “No” to whether he was
currently delinquent over 90 days on any debts. Applicant listed only one debt, the
student loan in SOR 1.b on which he was $1,200 past due as of March 2008. He listed
his other student loan (SOR 1.e) in response to the public records inquiry, as a
“judgment on student loan default.” (Ex. 1.) He was making payments on his student
loan in SOR 1.e but made no payments on the student loan in SOR 1.b in December
2008 or January 2009. (Ex. 2, A.) 
In April 2009, state X’s department of revenue sent Applicant billing notices of tax
delinquency totaling $25,861.71 for tax years 1998 through 2004 ($20,182.75 on
original returns filed by Applicant for tax years 1998, 1999, 2000, 2003, and 2004, and
$5,679.04 in estimated taxes for 2001 and 2002).  Applicant did not pursue resolution5
because he did not want to commit funds while he was unemployed. (Tr. 48.)
In 2009, state X enacted a 2009 tax reduction receivables initiative open to most
taxpayers who had state X tax liabilities assessed as of September 1, 2009. Under the
initiative, 90% of the penalties would be waived provided payment of taxes, interest, and
Applicant took out a mortgage of $117,000 in February 2004. (Ex. 4.)6
5
10% of the penalties by November 30, 2009. Applicant was notified by state X that his
tax liability would be reduced to $16,630.98 contingent on his full payment by November
30, 2009. (Ex. A.) Applicant did not feel he was in a position to make the payment. (Tr.
49.)
In November 2009, Applicant began working for a commercial company at net
pay of $2,400 per month. (Tr. 33-34, 53-54.) His spouse took home around $2,004 from
her job. (Tr. 54.) In early March 2010, Applicant asked his attorney to pursue a
reduction in his state X tax liability based on “new legislation pending to forgive all (95%)
of interest and penalties.” Applicant had $22,974.27 in savings that he planned to use to
pay off his state tax X debt “should they come up with a reasonable settlement.” (Ex. A,
Tr. 35.) He hopes to settle his tax debt for $11,000 but he understands he will have to
meet the state’s “final offer.” (Tr. 50.)
While Applicant was unemployed, he paid off some smaller debts that had been
due for some time. Applicant owed a couple of utility balances from 2003 in the amounts
of $227.31 (SOR 1.c) and $281.78 (SOR 1.d). The latter debt was supposed to be
repaid in early March 2004 through refinancing of his mortgage loan,  but the funds6
were never disbursed. Applicant paid the utility debts between May and August 2009.
(Ex. A, Tr. 43.) On January 1, 2008, a collection agency offered to settle a $404.24 debt
(not alleged) for a lump sum payment of $202.12 within 45 days. Applicant settled the
debt in May 2009, on payment of $305.14. Also in May 2009, he paid $55.96 to satisfy
an insufficient funds check (not alleged) from July 2002. (Ex. 2, A.) Applicant has been
late 30 days 19 times in his mortgage payment, most recently in April 2009. He
managed to avoid foreclosure, and had brought the loan current as of August 2009. (Ex.
4, Tr. 41.) In September 2008, he took out an automobile loan of $13,000, to be repaid
at $374 per month. He has not been late in his car payments. (Ex. 4.) Applicant had
submitted tax returns for tax years 2005 through 2008 as of March 2010. He owes state
X around $700 for tax year 2008. (Tr. 51.)  Applicant estimates that he was operating at
a monthly deficit of around $700 each month after payment of living expenses and
debts, including $200 on the student loan in SOR 1.b and $175 on the student loan in
SOR 1.e. (Tr. 55-56.) He has been using savings to pay his financial obligations. (Tr.
56.) 
Policies
The U.S. Supreme Court has recognized the substantial discretion the Executive
Branch has in regulating access to information pertaining to national security,
emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy
v. Egan, 484 U.S. 518, 528 (1988). When evaluating an applicant’s suitability for a
security clearance, the administrative judge must consider the adjudicative guidelines
(AG). In addition to brief introductory explanations for each guideline, the adjudicative
guidelines list potentially disqualifying conditions and mitigating conditions, which are
required to be considered in evaluating an applicant’s eligibility for access to classified
information. These guidelines are not inflexible rules of law. Instead, recognizing the
6
complexities of human behavior, these guidelines are applied in conjunction with the
factors listed in the adjudicative process. The administrative judge’s overarching
adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶
2(c), the entire process is a conscientious scrutiny of a number of variables known as
the “whole-person concept.” The administrative judge must consider all available
reliable information about the person, past and present, favorable and unfavorable, in
making a decision.
The protection of the national security is the paramount consideration. AG ¶ 2(b)
requires that “[a]ny doubt concerning personnel being considered for access to
classified information will be resolved in favor of national security.” In reaching this
decision, I have drawn only those conclusions that are reasonable, logical, and based
on the evidence contained in the record. Under Directive ¶ E3.1.14, the Government
must present evidence to establish controverted facts alleged in the SOR. Under
Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other
evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven
by Department Counsel. . . .” The applicant has the ultimate burden of persuasion to
obtain a favorable security decision.
A person who seeks access to classified information enters into a fiduciary
relationship with the Government predicated upon trust and confidence. This
relationship transcends normal duty hours and endures throughout off-duty hours. The
Government reposes a high degree of trust and confidence in individuals to whom it
grants access to classified information. Decisions include, by necessity, consideration of
the possible risk that the applicant may deliberately or inadvertently fail to safeguard
classified information. Such decisions entail a certain degree of legally permissible
extrapolation as to potential, rather than actual, risk of compromise of classified
information. Section 7 of Executive Order 10865 provides that decisions shall be “in
terms of the national interest and shall in no sense be a determination as to the loyalty
of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple
prerequisites for access to classified or sensitive information).
Analysis
Guideline F, Financial Considerations
The security concern about finances is set out in AG ¶ 18:
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.
Applicant did not file timely tax returns to state X for tax years 1998 through
2004, and in September 2004, state X filed a $35,588 tax lien. Additional liens were filed
7
by the state for delinquent taxes totaling around $98,000. Applicant filed his delinquent
returns for all but 2001 and 2002, where the state filed substitute returns. After he
disputed the assessments, his liability was assessed at $25,861.79 in delinquent taxes,
interest, and penalties for tax years 1998 through 2004. Applicant also defaulted on a
student loan taken out for a grown daughter in or before October 2001, and the
assignee obtained a judgment against him in January 2004. In July 2004, a lien was
filed against him for failure to pay the judgment balance, which had increased to
$12,372.99. Applicant fell behind 150 days in his payments of an even larger student
loan, and a couple of utility debts were placed for collection. Some other delinquent
debts, including a sewer lien, were settled before November 2009 and not alleged in the
SOR. Potentially disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy
debts,” AG ¶ 19(c), “a history of not meeting financial obligations,” and 19(g), “failure to
file annual Federal, state, or local income tax returns as required or the fraudulent filing
of the same,” are pertinent.
AG ¶ 20(a), “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,” cannot reasonably
apply in mitigation. Applicant failed to take advantage of state X’s offer to reduce the
penalties assessed on his delinquent taxes, and he has made no payments on his tax
debt since the offer in compromise. Furthermore, concerning the larger of his student
loan debts, his account was reportedly past due in 2009 before he obtained a hardship
deferment due to unemployment.
AG ¶ 20(b), “the conditions that resulted in the financial problem were largely
beyond the person’s control (e.g., loss of employment, a business downturn,
unexpected medical emergency, or a death, divorce or separation), and the individual
acted responsibly under the circumstances,” applies in part. Applicant was out of work
from July 2002 to March 2003, April 2004 to August 2004, September 2008 to
November 2008, and from December 2008 until November 2009. But AG ¶ 20(b) does
not mitigate the poor judgment exhibited by Applicant when he failed to file his state X
tax returns for several years, including for a couple of years before he commenced
employment in state Y in June 2000. While he disputed the assessments beginning in
January 2004, and belatedly filed some returns, there is no indication that he had filed
his returns for tax years 2001 and 2002 by April 2009. He made only about $1,500 in
payments himself toward his tax delinquency when he was gainfully employed. Other
payments were through state X’s interception of refunds or economic stimulus
payments. He made no effort to resolve his tax debt after his offer in compromise in July
2008 until March 2010, when he told his attorney to pursue negotiate a further reduction
of his liabilities. So he bears some responsibility for accrued interest and penalties, even
if the state can be faulted for failing to respond in a timely manner to his offer in
compromise. Moreover, despite his recent unemployment, he had accumulated
$22,974.27 in savings as of March 2010. Some of those funds could have been paid to
the state department of revenue or toward his student loan debt in SOR 1.b, which was
at least sixty days past due when he obtained the deferment (see Ex. 2.).
8
AG ¶ 20(d), “the individual initiated a good-faith effort to repay overdue creditors
or otherwise resolve debts,” applies to the student loan debt in SOR 1.e, and to the
utility debts in SOR 1.c and 1.d. Applicant paid $9,386.57 on his defaulted student loan
(SOR 1.e) between November 2004 and May 2009. These documented payments
enable me to accept his testimony that he has continued to make his payments on that
loan since May 2009. Applicant was late in resolving the utility debts from 2003 alleged
in SOR 1.c and 1.d in that he did not satisfy them until the summer of 2009. However,
the evidence shows that he made a good-faith effort to satisfy at least the debt in SOR
1.d, if not both debts, in the refinancing of his mortgage in 2004. Applicant was
apparently unaware that the debts had not been paid until they became an issue for his
clearance. (Tr.  43.)
However, even if I accept Applicant’s uncorroborated testimony that he has been
paying $200 per month on the student loan in SOR 1.b since it came out of deferment in
late September 2009, five months of payments is not enough to resolve the financial
concerns about Applicant’s handling of that debt, or for me to conclude that “the
problem is being resolved or is under control.” See AG ¶ 20(c) (stating, “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”). The debt was delinquent as of
February 2009, when he was granted a deferment, and there is no guarantee that he
will continue to make $200 monthly payments, given he is operating at a deficit each
month.
As for the tax debt, Applicant appears to have had legitimate grounds to dispute
state X’s initial assessments. AG ¶ 20(e), “the individual has a reasonable basis to
dispute the legitimacy of the past-due debt which is the cause of the problem and
provides documented proof to substantiate the basis of the dispute or provides evidence
of actions to resolve the issue,” must be considered based on Applicant’s evidence that
he maintained a residence and employment outside of state X from June 2000 until
April 2004. Also, the state may well have erred in calculating Applicant’s tax liabilities for
2001 and 2002. The billing notice was issued only to him rather than jointly to him and
his spouse, although it does not prove that Applicant owes less for those years. After
Applicant and his attorney met with the state in November 2007, the state reduced his
liability from about $98,000 to around $25,000. While he has about $22,974 that he
saved to resolve his tax debt, he is holding out for a further reduction in his tax liability to
$11,000. Neither AG ¶ 20(c) nor AG ¶ 20(d) applies in mitigation of his state tax
delinquency.
Whole-Person Concept
Under the whole-person concept, the administrative judge must evaluate an
applicant’s eligibility for a security clearance by considering the totality of the conduct
and all the relevant circumstances in light of the nine adjudicative process factors listed
The factors under AG ¶ 2(a) are:7
(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 changes; (7) the motivation for the conduct; (8) the potential for
pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
9
at AG ¶ 2(a).  Applicant continues to owe a substantial amount of delinquent debt, most7
notably the $25,861 in state tax debt, but also more than $30,000 in student loan debt
on which he has a history of late payments. While he has been regularly repaying the
smaller student loan since a judgment was awarded against him in 2004, he has yet to
demonstrate an acceptable track record of repayment of the taxes or his larger student
loan. Despite repeated unemployment, including from around December 2008 to
November 2009, Applicant accumulated $22,974.27 in savings by March 2010. The
source of those savings was not clear. While he plans to use these savings to pay off
his tax debts, he is operating at a monthly deficit of about $700 and relying on savings
to cover his shortfall. His financial situation presents an unacceptable risk. 
Formal Findings
Formal findings for or against Applicant on the allegations set forth in the SOR,
as required by section E3.1.25 of Enclosure 3 of the Directive, are:
Paragraph 1, Guideline F: AGAINST APPLICANT
Subparagraph 1.a: Against Applicant
Subparagraph 1.b: Against Applicant
Subparagraph 1.c: For Applicant
Subparagraph 1.d: For Applicant
Subparagraph 1.e: For Applicant
Conclusion
In light of the record in this case, it is not clearly consistent with the national
interest to grant Applicant eligibility for a security clearance. Eligibility for access to
classified information is denied.
Elizabeth M. Matchinski
Administrative Judge