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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
---------------------------------- ) ISCR Case No. 11-09919
)
Applicant for Security Clearance )
Appearances
For Government: Gregg A. Cervi, Esq., Department Counsel
For Applicant: C. Brent Dishman, Esq.   
                     
           
______________
Decision
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LEONARD, Michael H., Administrative Judge:
Applicant contests the Defense Department’s intent to revoke his eligibility for a
security clearance to work in the defense industry. The evidence shows he has a
longstanding history of state and federal tax problems. He failed to file state and federal
tax returns for several years, and he owes back taxes to state and federal tax
authorities. He is now in compliance with the tax authorities, he has repayment
agreements in place to repay the back taxes, and he is adhering to those agreements.
Applicant produced sufficient evidence to mitigate the security concerns. Accordingly,
this case is decided for Applicant.
  This case is adjudicated under Executive Order 10865, Safeguarding Classified Information within Industry,1
signed by President Eisenhower on February 20, 1960, as amended, as well as DOD Directive 5220.6,
Defense Industrial Personnel Security Clearance Review Program , dated January 2, 1992, as amended
(Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified
Information (AG), effective within the Defense Department on September 1, 2006, apply here. The AG  were
published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). The AG replace the
guidelines in Enclosure 2 to the Directive.    
 The sole allegation under Guideline E is a cross-reference to the four allegations under Guideline F. 2
 Exhibit 1. 3
2
Statement of the Case
Acting under the relevant Executive Order and Directive,  on December 14,1
2012, the Department of Defense (DOD) sent Applicant a statement of reasons (SOR),
explaining it was unable to find that it was clearly consistent with the national interest to
grant Applicant access to classified information. The SOR is similar to a complaint, and
it detailed the reasons for the action under the security guidelines known as Guideline F
for financial considerations and Guideline E for personal conduct.  2
Applicant timely answered the SOR and requested a hearing. The hearing took
place February 21, 2013. The transcript (Tr.) was received March 4, 2013. 
The record was kept open until March 7, 2013, to allow Applicant to submit
additional documentary exhibits. Applicant made a timely post-hearing submission, and
those matters are admitted, without objections, as Exhibits E, F, G, H, and I. 
Findings of Fact
As alleged in the SOR, Applicant admits the following: (1) owing back taxes to
the IRS for approximately $112,000 for tax years 2003–2011 as reflected in a federal
tax lien filed in July 2012; (2) failing to file federal income tax returns for tax years
2004–2009; (3) owing back taxes to his state of residence for approximately $18,264 for
tax years 2003–2009 as reflected in a state tax lien filed in December 2011; and (4)
failing to file state income tax returns for tax years 2004–2009. His admissions are
accepted and adopted and incorporated as findings of fact. In addition, the following
findings of fact are supported by substantial evidence.
Applicant is a 50-year-old employee for a company engaged in defense
contracting. He works as a simulation technician; he is a shift supervisor for three flight
simulators used by the military; and he has had this job since 2008. He is seeking to
retain a security clearance, and he completed a security clearance application in
January 2011 as part of a periodic reinvestigation.  3
Applicant’s employment history includes nearly 25 years of honorable service in
the U.S. Navy, from which he retired in 2007 as a senior chief petty officer. He has held
 Tr. 29. 4
 Exhibits 1–5; Exhibits A–I. 5
 Exhibit 1 at 36 of 38. 6
 Tr. 28–29. 7
 Exhibits A-I. 8
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a security clearance since about 1986, and he has held a top-secret clearance with
access to sensitive compartmented information for many years.  His first marriage was
relatively brief and ended in divorce in 1986. He married his current spouse in 1991.
Together, they had an adjusted gross income of about $166,000 for 2012 consisting of
his annual salary, her annual salary, and military retiree benefits for each, as his spouse
is a retired Navy chief petty officer.   
Applicant has a longstanding history of state and federal tax problems, which he
does not dispute. Indeed, he admits not living by the standards he would expect of
others, and he described his tax problems as “the biggest mistake I’ve ever made in my
adult life.”  His tax problems are confirmed by the documentary exhibits.  4 5
Applicant traces the beginning of his tax problems to several years ago when a
company his spouse was then working for went bankrupt. As a result, she did not
receive a Form W-2 for that tax year. Applicant did not know how to proceed with filing
tax returns without the form. What followed then was several years of inaction and
procrastination. Also during the same time, Applicant and his spouse dealt with a
serious illness of his mother-in-law that ended with her death as well as a mental-health
problem for a stepson. Both these matters, as well as a heavy travel schedule when he
was serving in the Navy, distracted Applicant and his spouse from addressing their
taxes.
Finally in about November 2010, Applicant concluded enough was enough. At
the time, he had received correspondence from the IRS. In December 2010, he started
looking for a tax attorney for help and was able to retain one within a month or so. At
about the same time, he received a request to submit a security clearance application
for a periodic reinvestigation. He completed the application in January 2011, disclosing
that he owed approximately $20,000 in back taxes to the IRS, which he was working to
resolve.  He explained at the hearing that $20,000 was a best-guess estimate, and that6
he was shocked when he learned the full extent of his back taxes.7
With the assistance of counsel, Applicant and his spouse are now in compliance
with state and federal tax authorities, the necessary returns have been filed, and they
are adhering to repayment agreements for the back taxes.  For his state of residence, a8
repayment agreement was established in August 2012. It requires him to pay $1,100
monthly, and it includes all outstanding liabilities from 2003 to present. As of August
2012, he owed about $20,321 in taxes and collection fees without including penalties
 Exhibits C and D. 9
 Exhibit C. 10
 Tr. 52. 11
 Tr. 52–53. 12
 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to13
a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10  Cir. 2002) (no right to ath
security clearance).
 484 U.S. at 531.14
 Directive, ¶ 3.2. 15
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and interest. Once he has made the final payment on the taxes and collection fees, he
will request a waiver of penalties and interest. For the IRS, a repayment agreement was
established in about May 2012. It requires him to pay $1,000 monthly beginning in July
2012, on $101,428 in taxes owed as of May 2012, plus penalties and interest. Then in
July 2014, the monthly payment will increase from $1,000 to $1,900. 
In addition to the repayment agreements, Applicant is now taking a far more
proactive approach to his tax obligations and personal finances. State and federal
income tax returns have already been filed for tax year 2012 with taxes due to the IRS
and a refund due from the state.  He was able to pay the federal taxes with money he9
saved for that purpose during the last half of 2012. In addition, he is saving $750
monthly for the sole purpose of paying taxes for tax year 2013. And he intends to make
quarterly payments of $1,750 to the IRS to prepay 2013 income taxes.  Describing this10
situation as “a kick in the pants,”  Applicant acknowledged that he and his spouse lived11
a carefree lifestyle for many years and were fiscally irresponsible.  They are now living12
on a budget and have adjusted their lifestyle to meet their state and federal tax
obligations. His major financial goal is to be debt-free, to include credit card debt, which
he is also actively working on eliminating. 
 
Law and Policies
It is well-established law that no one has a right to a security clearance.  As13
noted by the Supreme Court in Department of Navy v. Egan, “the clearly consistent
standard indicates that security clearance determinations should err, if they must, on the
side of denials.”  Under Egan, Executive Order 10865, and the Directive, any doubt14
about whether an applicant should be allowed access to classified information will be
resolved in favor of protecting national security.  
A favorable clearance decision establishes eligibility of an applicant to be granted
a security clearance for access to confidential, secret, or top-secret information.  An15
 Directive, ¶ 3.2. 16
 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004).17
 Directive, Enclosure 3, ¶ E3.1.14.18
 Directive, Enclosure 3, ¶ E3.1.15.19
 Directive, Enclosure 3, ¶ E3.1.15.20
 Egan, 484 U.S. at 531. 21
 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted).22
 Executive Order 10865, § 7.23
 AG ¶¶ 18, 19, and 20 (setting forth the security concern and the disqualifying and mitigating conditions). 24
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unfavorable decision (1) denies any application, (2) revokes any existing security
clearance, and (3) prevents access to classified information at any level.  16
There is no presumption in favor of granting, renewing, or continuing eligibility for
access to classified information.  The Government has the burden of presenting17
evidence to establish facts alleged in the SOR that have been controverted.  An18
applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate
facts that have been admitted or proven.  In addition, an applicant has the ultimate19
burden of persuasion to obtain a favorable clearance decision.  In Egan, the Supreme20
Court stated that the burden of proof is less than a preponderance of the evidence.21
The DOHA Appeal Board has followed the Court’s reasoning, and a judge’s findings of
fact are reviewed under the substantial-evidence standard.22
The AG set forth the relevant standards to consider when evaluating a person’s
security clearance eligibility, including disqualifying conditions and mitigating conditions
for each guideline. In addition, each clearance decision must be a commonsense
decision based upon consideration of the relevant and material information, the
pertinent criteria and adjudication factors, and the whole-person concept. 
The Government must be able to have a high degree of trust and confidence in
those persons to whom it grants access to classified information. The decision to deny a
person a security clearance is not a determination of an applicant’s loyalty.  Instead, it23
is a determination that an applicant has not met the strict guidelines the President has
established for granting eligibility for access.
Discussion
Under Guideline F for financial considerations,  the suitability of an applicant24
may be questioned or put into doubt when that applicant has a history of excessive
 ISCR Case No. 95-0611 (App. Bd. May 2, 1996) (It is well settled that “the security suitability of an applicant25
is placed into question when that applicant is shown to have a history of excessive indebtedness or recurring
financial difficulties.”) (citation omitted); and see ISCR Case No. 07-09966 (App. Bd. Jun. 25, 2008) (In
security clearance cases, “the federal government is entitled to consider the facts and circumstances
surrounding an applicant’s conduct in incurring and failing to satisfy the debt in a timely manner.”) (citation
omitted). 
 AG ¶ 18.  26
 AG ¶ 19(a).  27
 AG ¶ 19(c). 28
 AG ¶ 19(g). 29
 AG ¶¶ 20(a)–(f). 30
 ISCR Case No. 99-0201 (App. Bd. Oct. 12, 1999) (“[T]he concept of ‘good faith’ requires a showing that a31
person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.
Such standards are consistent with the level of conduct that must be expected of persons granted a security
clearance.”) (citations omitted); ISCR Case No. 02-30304 (App. Bd. Apr. 20, 2004) (relying on a legally
available option, such as Chapter 7 bankruptcy, is not a good-faith effort) (citations omitted); ISCR Case No.
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indebtedness or financial problems or difficulties.  The overall concern under Guideline25
F is: 
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.  26
Similarly, an individual who is financially irresponsible may also be irresponsible,
unconcerned, or negligent in handling and safeguarding classified information within the
defense industry.   
The evidence supports a conclusion that Applicant has a history of tax problems,
which indicates inability or unwillingness to satisfy debts  and a history of not meeting27
financial obligations.  The facts are more than sufficient to establish these disqualifying28
conditions. In addition, his failure to file state and federal tax returns for many years is of
serious concern.29
There are six mitigating conditions to consider under Guideline F.  Based on the30
evidence before me, the most pertinent are AG ¶¶ 20(c) and (d). AG ¶ 20(c) applies
because there are clear indications that his tax problems are in the process of being
resolved and are under control. And AG ¶ 20(d) applies because, by coming into
compliance with state and federal tax authorities and entering into repayment
agreements, Applicant has demonstrated a good-faith effort to resolve his tax
problems.  31
99-9020 (App. Bd. Jun. 4, 2001) (relying on the running of a statute of limitations to avoid paying a debt is not
a good-faith effort).  
 ISCR Case No. 09-02160 (App. Bd. Jun. 21, 2010). 32
 ISCR Case No. 07-06482 at 3 (App. Bd. May 21, 2008) (citations and quotations omitted). 33
 AG ¶¶ 15, 16, and 17 (setting forth the security concern as well as disqualifying and mitigating conditions).34
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Of course, a security clearance case is not aimed at collecting debts or enforcing
tax laws.  Rather, the purpose is to evaluate an applicant’s judgment, reliability, and32
trustworthiness consistent with the security guidelines in the Directive. In evaluating
Guideline F cases, the Appeal Board has established the following standard:
The Board has previously noted that the concept of meaningful track
record necessarily includes evidence of actual debt reduction through
payment of debts. However, an applicant is not required, as a matter of
law, to establish that he has paid off each and every debt listed in the
SOR. All that is required is that an applicant demonstrate that he has
established a plan to resolve his financial problems and taken significant
actions to implement that plan. The Judge can reasonably consider the
entirety of an applicant’s financial situation and his actions in evaluating
the extent to which that applicant’s plan for the reduction of his
outstanding indebtedness is credible and realistic. There is no requirement
that a plan provide for payments on all outstanding debts simultaneously.
Rather, a reasonable plan (and concomitant conduct) may provide for the
payments of such debts one at a time. Likewise, there is no requirement
that the first debts actually paid in furtherance of a reasonable debt plan
be the ones listed in the SOR.33
Here, the evidence shows that Applicant established repayment agreements for
the back taxes, and he is adhering to those agreements. Moreover, he is in compliance
with state and federal tax authorities, and he has filed returns for tax year 2012. He is
saving money for future tax payments, and he intends to make quarterly payments to
the IRS to prepay taxes for the current tax year. He also realizes that he made a major
mistake, he is suffering the consequences, and he is determined not to repeat his
mistake. Given these circumstances, he has established a track record of remedial
actions sufficient to mitigate the security concerns under the Appeal Board’s standard.
Under Guideline E for personal conduct,  conduct involving questionable34
judgment, lack of candor, dishonesty, or unwillingness to comply with rules and
regulations can raise questions about a person’s reliability, trustworthiness, and ability
to protect classified information. Here, Applicant’s history of tax problems suggests an
unwillingness to comply with rules and regulations, which is unacceptable in a classified
workplace. Frankly, his conduct is, in many ways, inexplicable. Given his level of
experience, he knew he was neglecting his legal obligations, which calls into question
his good judgment. Accordingly, his history of tax problems falls under the disqualifying
 AG ¶ 2(a)(1)–(9).35
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condition found at AG ¶ 16(e). With that said, as explained above in the Guideline F
discussion, Applicant has made a good-faith effort to put his fiscal house in order. By
doing so, he has taken positive steps to reduce or eliminate any potential vulnerability to
exploitation, manipulation, or duress within the meaning of the mitigating condition
found at AG ¶ 17(e).
Based on the record before me, I have no doubts or concerns about Applicant’s
judgment, reliability, trustworthiness, and ability to protect classified information. In
reaching this conclusion, I weighed the evidence as a whole and considered if the
favorable evidence outweighed the unfavorable evidence or vice versa. I also gave due
consideration to the whole-person concept.  In doing so, I gave weight to his nearly 2535
years of honorable military service, which includes holding a security clearance for
many years. He is acutely aware of his security responsibilities. Although he certainly
failed to meet his tax obligations for several years, I am persuaded that he can be relied
on to fulfill his security responsibilities going forward. Moreover, he is now displaying the
type of fiscal discipline that supports a conclusion that similar conduct will not continue
or recur in the future. Accordingly, I conclude that Applicant met his ultimate burden of
persuasion to obtain a favorable clearance decision.
Formal Findings
The formal findings on the SOR allegations are as follows:
Paragraph 1, Guideline F: For Applicant 
Subparagraphs 1.a–1.d: For Applicant
Paragraph 2, Guideline E: For Applicant
Subparagraph 2.a: For Applicant
Conclusion
In light of the record as a whole, it is clearly consistent with the national interest
to grant Applicant eligibility for a security clearance. Eligibility for access to classified
information is granted.   
Michael H. Leonard
Administrative Judge