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                        DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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        )
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)       ISCR Case No. 11-09158
Applicant for Security Clearance  )
Appearances
For Government: Alison O’ Connell, Esq., Department Counsel
For Applicant: Pro se
                                                                            
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Decision
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LYNCH, Noreen, A., Administrative Judge:
The Department of Defense (DoD) issued Applicant a Statement of Reasons
(SOR) alleging security concerns arising under Guideline F (Financial Considerations).
The SOR was dated October 17, 2012. The action was taken under Executive Order
10865, Safeguarding Classified Information within Industry (February 20, 1960), as
amended; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance
Review Program (January 2, 1992), as amended (Directive); and the Adjudicative
Guidelines (AG) implemented in September 2006. 
Applicant timely answered the SOR and requested a hearing before an
administrative judge. The case was assigned to me on January 4, 2013. A notice of
hearing was issued on January 22, 2013, scheduling the hearing for February 26, 2013.
Government Exhibits (GX) 1-4 were admitted into evidence, without objection. Applicant
testified, presented the testimony of one witness, and submitted Applicant Exhibits (AX)
A-D, which were admitted without objection. The transcript (Tr.) was received on March
5, 2013. Based on a review of the pleadings, testimony, and exhibits, eligibility for
access to classified information is denied.
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Findings of Fact
In his answer to the SOR, Applicant admitted the factual allegations under
Guideline F (Financial Considerations), with explanations. 
Applicant is a 42-year-old project manager employed by a defense contractor.
He graduated from high school and started his own business. He is married and has
two children. Applicant has never held a security clearance. (GX 1) He has been with
his current employer since December 2010.  (Tr.44)
The SOR alleges total debts in the amount of $440,000, which includes federal
and state taxes that are owed by Applicant for failure to file income tax returns from
2001 until 2005. He also has a judgment against him that was entered in 2008, and
credit card debts.  Applicant also admitted that he owes $45,000 in state and federal
taxes for 1999. Applicant’s credit reports confirm the debts. (GX 3 and 4)
Applicant owned his own telecommunications business from 1996 until
November 2010. He employed as many as 15 employees during the life of the
business. Applicant relied heavily on his accountants to manage the fiscal aspect of the
business, including payroll, benefits, and tax preparation. He acknowledges that he
could have been more active in the process, but left the details to them. He felt he had
no reason to question them. His federal and state taxes were filed each year from 1996
until 2000. (Tr. 49) However, they were not filed from 2001 until 2005 as required by
law.  (SOR 1.a, and 1.b) Applicant takes responsibility for the non-filing of his federal
and state taxes. (Tr. 53)
In 2005, Applicant received a notice from the Internal Revenue Service (IRS)
informing him that his taxes had not been filed. He received a notice for an audit
regarding a payroll tax and his personal taxes. (Tr. 57) 
Applicant met with a different accountant to begin addressing the tax issues. He
wanted the accountant to focus on his business structure and management of his
accounts moving forward so that Applicant could save his business. At the same time,
he did hire someone to address the tax issues from 2001 until 2005. Applicant
acknowledged that he did not make it his priority to address the early tax issues
because he wanted to get his business in order and recover from other financial issues.
(Tr. 68) Applicant was credible when he states that he has no idea what happened to
the money for the years that the tax returns were not filed. His accountant was later
investigated for fraud. Applicant was certain that he had money in the proper account to
pay the taxes from 2000 until 2005, but that when he started addressing the issue
firsthand the money was not there. 
From 2005 until 2010, Applicant admits that he did not have the focus or energy
to deal with the federal and state tax issues. He realizes that he also procrastinated.
(Tr. 69) Applicant’s business eventually failed in 2010. He obtained his current position
and focused on his new employment. He believed he needed his energy to transition
from a self-employed individual to a company employee. (Tr. 70) 
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In 2010, Applicant met with an IRS agent to develop a plan to address the
federal tax that is due. Initially, a levy was assigned to his account until he completes
the filing of all federal tax returns at issue. (GX 2) The levy on Applicant’s wages is
$200 bi-monthly. (AX C) The levy began in July 2011.
Applicant explained that his tax returns for 1999 through 2005 and for 2010
returns are being re-filed, as directed by the IRS agent. He was requested to file the
federal tax return for 2001 first. He did so last year. (AX D) He believes that by the filing
the total amount due drops to $13,604. At the completion and approval of the federal
tax returns, the IRS will evaluate and provide a payment plan that will fit Applicant’s
budget. (AX A)
Applicant further explained that when the federal tax returns are filed, he will
address the state tax returns. Once a final payment structure is in place for the tax
returns, he will address the remaining credit card debts and the judgment.  Applicant
was advised about the option to file for bankruptcy, but he does not wish to take that
action.  To date, Applicant has started a payment plan for a medical collection of $904.
He makes a monthly payment of $25.
Applicant explained that in trying to keep his business going with little capital and
having contractors who did not always pay him, he began to have financial difficulty. In
late 2005. He admits taking a higher risk by spending money to expand personnel and
take a risk of buying more equipment so that he could expand the business rather than
focus on the outstanding tax obligations from the earlier years. He was credible when
he explained that this debt is not the result of poor self-control or improper spending, or
unwillingness to abide by laws or regulations, but he now recognizes that his thinking
was unclear. His duty was to pay taxes each year as they are due. He noted that he did
file his taxes for  2006, 2007, 2008, and 2009. (Tr. 76) He has not filed his tax return for
2010.  He claimed that he did not meet with an IRS agent until 2010 because he had to
collect all the necessary documentation from the various accountants that he had
employed. (Tr. 78) He also has had to pay for accounting services before anyone would
help him.
The unpaid judgment of $14,000 is from 2008. It was due to an auto accident
that occurred in 2005. Applicant has not made any payments on this debt. (SOR 1.c)
Applicant is disputing a credit card collection account (SOR 1.k) due to hidden charges.
He was offered a settlement on the account, but he did not accept it. (Tr. 86) He
believes he disputed the account one year ago. He does not want to close the account
as he has had it for ten years. He wants to reestablish his credit. 
Applicant’s current salary is approximately $120,000.  (AX A) . His monthly net
income is approximately $6,502. He uses a budget. He has approximately $10,000 in
his 401-K.  However, he has two loans against his 401(k) accounts. (Tr. 90) He is
making payments on the loans. Applicant was candid when he stated he did not know
how long it would take for him to complete the federal filings. (Tr. 106)
 See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995).      1
 Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).      2
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      3
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Applicant noted that he and his family tried to make adjustments to their life to
curb outgoing expenses. They moved in 2005 and 2010. His rent is now smaller. He
tried to be cautious with his spending. However, he wanted to provide for his family. 
Applicant’s employer testified that Applicant has worked for him approximately
two years. He has known Applicant for about seven years both personally and
professionally. Applicant disclosed his financial problems with his employer before
taking the position in the company. (Tr. 14) He attests to Applicant’s integrity, credibility,
and ability to protect classified information. Applicant is a valued asset to the company.
Applicant’s employer has received many letters from clients commending Applicant for
his excellent ability to solve their problems. Applicant is highly recommended by his
employer for a security clearance. (Tr. 24)
  Policies
When evaluating an applicant’s suitability for a security clearance, an
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. These guidelines are not inflexible
rules of law. Instead, recognizing the complexities of human behavior, they are applied
in conjunction with the factors listed in the adjudicative process. An administrative
judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision.
Under AG ¶ 2(c), this process is a conscientious scrutiny of a number of variables
known as the “whole-person concept.” An 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. Likewise, I have avoided drawing inferences
grounded on mere speculation or conjecture.
The Government must present evidence to establish controverted facts alleged
in the SOR. An 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 burden of proof is something less than a1
preponderance of evidence.  The ultimate burden of persuasion is on the applicant.  2 3
 See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive      4
information), and EO 10865 § 7.
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      5
 Id.      6
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A person seeking access to classified information enters into a fiduciary
relationship with the Government based on 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
the applicant may deliberately or inadvertently fail to protect classified information. Such
decisions entail a certain degree of legally permissible extrapolation of 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.”  “The clearly consistent standard indicates that security clearance4
determinations should err, if they must, on the side of denials.”  Any reasonable doubt5
about whether an applicant should be allowed access to sensitive information must be
resolved in favor of protecting such information.  The decision to deny an individual a6
security clearance does not necessarily reflect badly on an applicant’s character. It is
merely an indication that the applicant has not met the strict guidelines the President
and the Secretary of Defense established for issuing a clearance.
Analysis
Guideline F, Financial Considerations
AG ¶ 18 expresses the security concern pertaining to financial considerations:
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 over-
extended 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 ¶ 19 describes conditions that could raise a security concern and may be
disqualifying:
(a) inability or unwillingness to satisfy debts;
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(b) indebtedness caused by frivolous or irresponsible spending and the
absence of any evidence of willingness or intent to pay the debt or
establish a realistic plan to pay the debt;
(c) a history of not meeting financial obligations;
(d) deceptive or illegal financial practices such as embezzlement,
employee theft, check fraud, income tax evasion, expense account fraud,
filing deceptive loan statements, and other intentional financial breaches
of trust;
(e) consistent spending beyond one's means, which may be indicated by
excessive indebtedness, significant negative cash flow, high debt-to-
income ratio, and/or other financial analysis;
(f) financial problems that are linked to drug abuse, alcoholism, gambling
problems, or other issues of security concern;
(g) failure to file annual Federal, state, or local income tax returns as
required or the fraudulent filing of the same;
(h) unexplained affluence, as shown by a lifestyle or standard of living,
increase in net worth, or money transfers that cannot be explained by
subject's known legal sources of income; and
(i) compulsive or addictive gambling as indicated by an unsuccessful
attempt to stop gambling, "chasing losses" (i.e. increasing the bets or
returning another day in an effort to get even), concealment of gambling
losses, borrowing money to fund gambling or pay gambling debts, family
conflict or other problems caused by gambling.
Applicant admits to the debt owed to the IRS and to his creditors. The
approximate amount of debt is $440,000. He admitted that he did not file federal and
state tax returns from 2001 until 2005.  Consequently, the evidence is sufficient to raise
disqualifying condition ¶ 19(a), 19(c), and 19(g).
AG ¶ 20 provides conditions that could mitigate security concerns:
(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;
(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;
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(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;
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts;
(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; and
(f) the affluence resulted from a legal source of income.
Applicant had some financial difficulty and failed to file his required taxes as
early as 1999. He has outstanding tax liability in the amount of $45,000 for the year
1999, in addition to the allegations on the SOR.  He owned his own business and left
the tax responsibility to the accountants. He admits that he did not learn there was a
problem until 2005. At the same time, he did not act responsibly under the
circumstances. He began to address the issues somewhat in 2005, but admitted that he
put his time and energy in actions to further his business. He did not make the tax
issues a priority. He met with an IRS agent in 2010 and has just filed the federal return
for 2001. He has a levy of $400 a month but he still does not have a tax payment plan
in place. It will take him some time to file all the required federal tax returns. In addition,
he has other delinquent debts and  state tax liens.  Applicant did file his returns for 2006
until 2009 with the help of a new accountant. However, he has not paid the full amount
owed. Part of the reason is that he diverted funds to support other business projects.
He admitted that he has procrastinated in resolving the federal and tax issues.
Applicant also has other delinquent debt in the form of a 2008 judgment and credit card
debt. I find that the financial considerations concerns are not mitigated. 
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 an applicant’s
conduct and all the circumstances. The administrative judge should consider the nine
adjudicative process factors listed at AG ¶ 2(a): 
(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. 
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Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a
security clearance must be an overall commonsense judgment based upon careful
consideration of the guidelines and the whole-person concept. As noted above, the
ultimate burden of persuasion is on the applicant seeking a security clearance. 
I considered the potentially disqualifying and mitigating conditions in light of all
the facts and circumstances surrounding this case as well as the whole-person factors.
Applicant is a 42-year-old employee of defense contractor who has not held a security
clearance. He has excellent recommendations from his employer.  Applicant owned his
own company from 1996 until 2010. He was candid at the hearing and is beginning to
address his financial issues.
Applicant did not meet his burden of proof in this case. He has not addressed the
financial issues at hand. He has just filed his 2001 federal tax return, but still has the
other years (2002 until 2005) and 2010 to complete. Applicant has unresolved state tax
liens as well. He has been on notice since 2005 but has procrastinated. He also has
other delinquent debts and a judgment. He is not sure when the entire process will be
complete. Any doubt must be resolved in favor of the government. He has not mitigated
the security concerns under the financial guideline.
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
Subparagraphs 1.a-1.k: Against Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is not
clearly consistent with the national interest to grant Applicant a security clearance.
Clearance is denied. 
                                                     
NOREEN A. LYNCH.
Administrative Judge