1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) XXXXXXXXXX, XXXXX ) ISCR Case No. 14-01578 ) Applicant for Security Clearance ) Appearances For Government: Richard A. Stevens, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ TUIDER, Robert J., Administrative Judge: Applicant has mitigated security concerns pertaining to Guideline F (financial considerations). Clearance is granted. Statement of the Case On October 15, 2013, Applicant submitted an Electronic Questionnaire for Investigations Processing (e-QIP) or security clearance application (SF 86). On June 3, 2014, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued an SOR to Applicant, pursuant to Executive Order 10865, Safeguarding Classified Information Within Industry, dated February 20, 1960, as amended; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (Directive), dated January 2, 1992, as amended; and the adjudicative guidelines (AG) promulgated by the President on December 29, 2005. The SOR alleged security concerns under Guideline F (financial considerations). The SOR detailed reasons why the DOD CAF was unable to find that it is clearly consistent with the national interest to continue a security clearance for 2 Applicant, and it recommended that his case be submitted to an administrative judge for a determination whether his clearance should be continued or revoked. On June 19, 2014 and on July 10, 2014, Applicant responded to the SOR. On October 9, 2014, Department Counsel was ready to proceed on Applicant’s case. On October 17, 2014, DOHA assigned Applicant’s case to me. On October 20, 2014, the Defense Office of Hearings and Appeals (DOHA) issued a hearing notice, setting the hearing for November 3, 2014. Applicant’s hearing was held as scheduled. At the hearing, Department Counsel offered Government Exhibits (GE) 1 through 3, which were received into evidence without objection. Applicant did not call any witnesses, testified, and offered Applicant Exhibits (AE) A through E, which were received into evidence without objection. I held the record open until November 14, 2014 to afford Applicant the opportunity to submit additional documents. Applicant timely submitted AE F, which was received into evidence without objection. On November 12, 2014, DOHA received the hearing transcript (Tr.). Findings of Fact In his SOR answer, Applicant admitted all of the allegations with explanations. Applicant’s answers and explanations are incorporated as findings of fact. After a thorough review of the evidence, I make the following additional findings of fact. Background Information Applicant is a 61-year-old crane mechanic, who has been employed by a defense contractor since September 2013. He seeks a security clearance, which is a requirement of his continued employment. (GE 1, Tr. 13-14, 19-20.) Applicant graduated from high school in June 1972. From 2006 to 2011, he took on-line heavy equipment courses. (GE 1, Tr. 13, 21-22.) Applicant married in March 1974. He has two adult sons, ages 39 and 32. Applicant’s wife was employed as a registered nurse; however, she is now “totally disabled.” (GE 1, Tr. 22-23, 42.) He served in the U.S. Air Force from November 1973 to January 1974 and was medically discharged as an airman basic (pay grade E-1) under honorable conditions. (GE 1, Tr. 13, 23-24.) Financial Considerations Applicant’s SOR contains two separate allegations – a debt owed to the Internal Revenue Service (IRS) for $7,441 for unpaid 2011 taxes and failing to file his 2012 federal income tax return. (SOR ¶¶ 1.a and 1.b.) The facts of this case are relatively straightforward. Applicant and his wife undertook the complete care and costs associated with raising their three minor 3 grandchildren in 2011. The children’s parents, Applicant’s youngest son and ex- daughter-in-law, were unable or unwilling to care for the children due to substance abuse issues or as a result of being incarcerated. Having provided complete support for the children during 2011, Applicant and his wife claimed them as dependents when they filed their federal income tax return in May 2012, and received a $7,441 refund. Unbeknown to Applicant, his son and father of the children, claimed the children as dependents when he filed his 2011 federal income tax return. The IRS subsequently disallowed the children as dependents for Applicant and sought recoupment of his refund. Applicant immediately contacted the IRS seeking reconsideration. Following direction from the IRS, Applicant provided documentation substantiating his 100% support of the children. (Tr. 11-12, 25-33, 42-45, GE 2, AE E.) Frustrated with his attempt to resolve his grandchildren exemption claim with the IRS, Applicant retained the services of a Certified Public Accountant (CPA) in September 2013. Through his CPA, Applicant resubmitted the previous documentation he submitted to the IRS substantiating his support of his grandchildren. Applicant provided two letters from the IRS dated September 11, 2014 and October 14, 2014 as well as two letters from his CPA dated June 19, 2014 and October 31, 2014 corroborating Applicant’s assertions. His CPA stated that they are awaiting the IRS response. Furthermore and based on the advice of his CPA, Applicant did not file his 2012 federal income tax return. He is awaiting resolution of his 2011 pending exemption dispute. He has had sufficient deductions withheld from his pay to cover any potential tax liabilities. (Tr. 12-13, 1, 33-50, GE 2, AE A, AE B, AE E, AE F.) Applicant provided documentation he has the funds to pay any tax arrearage owed for 2011 should the IRS rule against him. (Tr. 41, GE 2, AE D, AE F.) As of the hearing date, Applicant’s dispute with the IRS was pending. (Tr. 48.) Applicant’s house is paid off, his property taxes are current, he is current on his monthly bills, and he lives within his means. Contrary to the IRS, Applicant’s state tax authority allowed him to claim his grandchildren as dependents and he has no tax issues with them. (Tr. 44-46, 53.) Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicant’s eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended. 4 Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable. The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See Exec. Or. 10865 § 7. See also Executive Order 12968 (Aug. 2, 1995), § 3.1. Thus, nothing in this Decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination about applicant’s allegiance, loyalty, or patriotism. It is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability. See ISCR Case No. 95-0611 at 2 (App. Bd. May 2, 1996). Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue her security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of disproving a mitigating condition never shifts to the Government. See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b). Analysis AG ¶ 18 articulates the security concern relating to financial problems: 5 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. AG ¶ 19 provides three potential financial considerations disqualifying conditions that could raise a security concern and may be disqualifying in this case, “(a) inability or unwillingness to satisfy debts;” “(c) a history of not meeting financial obligations;” and “(g) failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same.” Applicant’s tax problems were established by the evidence presented warranting further inquiry. Five financial considerations mitigating conditions under AG ¶¶ 20 are potentially applicable: (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; (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; and (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. Applicant’s conduct does not warrant full application of AG ¶ 20(a) because his tax arrearage issues with the IRS are current and ongoing. His debt is a “continuing course of conduct” under the Appeal Board’s jurisprudence. See ISCR Case No. 07- 11814 at 3 (App. Bd. Aug. 29, 2008) (citing ISCR Case No. 01-03695 (App. Bd. Oct. 16, 2002)). Nevertheless, he receives partial credit under AG ¶ 20(a) because the 6 debt occurred under circumstances that are unlikely to recur and his behavior does not cast doubt on his current reliability, trustworthiness, or good judgment. AG ¶ 20(b) is pertinent inasmuch as Applicant could not have anticipated that he and his wife would suddenly find themselves caregivers for their three grandchildren. Having provided 100% support for his grandchildren, Applicant filed his 2011 federal income tax return claiming them as dependents in good faith. When the IRS disallowed his grandchildren as dependents, Applicant immediately contacted the IRS, provided requested documentation, and retained the services of a CPA.1 AG ¶ 20(c) is not relevant. Applicant produced sufficient documentation to warrant full mitigation under AG ¶ 20(d).2 Applicant has provided documentation that he is in the process of resolving of his SOR allegations. AG ¶ 20(e) is fully applicable for the reasons discussed, supra. 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 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 1 “Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances outside his [or her] control, the Judge could still consider whether Applicant has since acted in a reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99-0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03-13096 at 4 (App. Bd. Nov. 29, 2005)). A component is whether he maintained contact with his creditors and attempted to negotiate partial payments to keep his debts current. 2 The Appeal Board has previously explained what constitutes a “good-faith” effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good-faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term ‘good-faith.’ However, the Board has indicated that the concept of good-faith ‘requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.’ Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy) in order to claim the benefit of [the “good-faith” mitigating condition]. (internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 7 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. 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. AG ¶ 2(c). The discussion in the Analysis section under Guideline F is incorporated in this whole-person section. However, further comments are warranted. Applicant’s service with his defense contractor employer weighs in his favor. He is a law-abiding citizen and a productive member of society. He is current on his day- to-day expenses, lives within his means, and his SOR allegations have been addressed. The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating: In evaluating Guideline F cases, 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. See Directive ¶ E2.2(a) (“Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.”) 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 payment 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. ISCR Case No. 07- 06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted). Applicant’s IRS difficulties stem from his good-faith belief that he was legally entitled to claim his three grandchildren as dependents on his 2011 federal income tax return. His CPA agrees with him and is assisting him to resolve his dispute with the IRS. All requested documentation by the IRS has been submitted -- once by the Applicant before he retained his CPA and once after. Applicant is following the advice of his CPA and has the funds to pay the IRS should they disallow his exemption. These factors show responsibility, rehabilitation, and mitigation. 8 Both the mitigating conditions under Guideline F and the whole-person analysis support a favorable decision. I specifically considered Applicant’s years of financial responsibility before falling into debt, the circumstances that led to his financial difficulties, the steps he has taken to resolve his financial situation, his potential for future service as a defense contractor, the mature and responsible manner in which he dealt with his situation, the responsibility he has shown to his grandchildren, and his testimony and demeanor. After weighing the disqualifying and mitigating conditions, and all the facts and circumstances, in the context of the whole-person, I conclude he has mitigated the financial considerations security concerns. I take this position based on the law, as set forth in Department of Navy v. Egan, 484 U.S. 518 (1988), my careful consideration of the whole-person factors and supporting evidence, my application of the pertinent factors under the adjudicative process, and my interpretation of my responsibilities under the adjudicative guidelines. Applicant has fully mitigated or overcome the Government’s case. For the reasons stated, I conclude he is eligible for access to classified information. 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: FOR APPLICANT Subparagraphs 1.a to 1.b: For Applicant Conclusion In light of all the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant or continue Applicant’s eligibility for a security clearance. Eligibility for a security clearance is granted. ____________________________ Robert J. Tuider Administrative Judge