DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
--------------------------------- )      ISCR Case No. 14-03390
)
Applicant for Security Clearance )
Appearances
For Government: Jeff A. Nagel, Department Counsel
For Applicant: Pro se
January 22, 2015
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Decision
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LOKEY ANDERSON, Darlene D., Administrative Judge:
Applicant submitted his Electronic Questionnaire for Investigations Processing
(E-QIP) on November 4, 2013.  (Government Exhibit 1.)  On August 7, 2014, the
Department of Defense (DoD), pursuant to Executive Order 10865 and Department of
Defense Directive 5220.6 (Directive), dated January 2, 1992, (as amended), issued a
Statement of Reasons (SOR) to the Applicant, which detailed reasons why the
Department of Defense (DoD) could not make the preliminary affirmative finding under
the Directive that it is clearly consistent with the national interest to grant or continue a
security clearance for the Applicant and recommended referral to an Administrative
Judge to determine whether clearance should be denied or revoked.
Applicant responded to the SOR on September 12, 2014, and he requested an
administrative hearing before a Defense Office of Hearings and Appeals (DOHA)
Administrative Judge.  This case was assigned to the undersigned Administrative
Judge on October 27, 2014.  A notice of hearing was issued on October 27, 2014, and
the hearing was scheduled for December 4, 2014.  At the hearing the Government
presented seven exhibits, referred to as Government Exhibits 1 through 7, which were
admitted without objection.  The Applicant presented two exhibits, referred to as
Applicant’s Exhibits A and B, which were also admitted into evidence without
objection.  He testified on his own behalf. The record remained open until close of
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business on December 14, 2014, to allow the Applicant the opportunity to submit
additional supporting documentation.  The Applicant submitted 12 Post-Hearing
Exhibits, referred to as Applicant’s Post-Hearing Exhibits 1 through 12, which were
admitted without objection.  The official transcript (Tr.) was received on December 15,
2014.  Based upon a review of the pleadings, exhibits, and testimony, eligibility for
access to classified information is granted.
 FINDINGS OF FACT
Applicant is 53 years old and married with two sons.  He has a Bachelor of Arts
degree in Political Science, and a Master’s degree in Business Administration.  He
holds the position of Integrator or Project Manager for a defense contractor.  He is
seeking to obtain a security clearance in connection with this employment.   
The Government opposes the Applicant's request for a security clearance, on
the basis of allegations set forth in the Statement of Reasons (SOR).  The following
findings of fact are entered as to each paragraph and guideline in the SOR:
Paragraph 1 (Guideline F - Financial Considerations)  The Government alleges that
the Applicant is ineligible for clearance because he is financially overextended and at
risk of having to engage in illegal acts to generate funds.      
Applicant admitted the allegations set forth in the SOR under this guideline.
(See Applicant’s Answer to SOR.)  Credit Reports of the Applicant dated December 6,
2013; and October 20, 2014, reflect that Applicant was indebted to the state and
federal government for back taxes owed totaling approximately $20,000.
(Government Exhibits 5 and 6.)  
 
Applicant accepted an ROTC scholarship in college, and was commissioned in
1983.  He served honorably as a pilot in the United States Navy for 20 years before
retiring as a Lieutenant Commander in June 2003.  During his military career he
received numerous awards, decorations and commendations for his outstanding
service.  (Applicant’s Post-Hearing Exhibit 8.)  Applicant was never subject to any
military discipline, nor did he ever violate any Navy rules or regulations.  Applicant was
unemployed for only seven days before he was hired on with a defense contractor.
Applicant has held a security clearance for almost 35 years without incident.  (Tr. p.
30.)  
Until 2009, Applicant had a history of being financially responsible and paying
his bills on time.  He has never filed bankruptcy, had a repossession, short sale, or
otherwise defaulted on a loan.  However, from 2009 through 2012, Applicant failed to
file both his state and federal income tax returns in a timely fashion.  He explained that
during this period, he was living beyond what he could afford, and did not have the
money to pay his taxes.  He believes the real problem was the transition from living on
a military budget in various low cost areas, to receiving a significant pay increase as a
civilian, but living in a higher cost area.  He did not watch his finances closely.  He
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allowed his credit load to grow without managing it properly, and was not earning
enough in retirement pay or his civilian job to afford his cost of living.  Each year his
income tax withholding was short almost $5,000.    
Applicant eventually consulted a tax advisor for help.  He now realizes how
wrong he was not to file his income tax returns.  When he did file, he discovered that
the state owed him refunds all four years.  So the amount he paid to the state in fines
for failing to file, would have been money he could have used to pay what he owed to
the Internal Revenue Service (IRS) had he filed on time.  
Since hiring his tax advisor, Applicant has prepared and filed both his state and
federal income tax returns for tax years 2009, 2010, 2011 and 2012.  (Applicant’s
Post-Hearing Exhibits 2, 3 and 7.)  Applicant has also paid all of the back taxes he
owed to the state and the IRS.  Documentation from the IRS shows that he paid
$6,914.23 on November 28, 2014, for 2011 back taxes; and he paid $6,680.05 to the
IRS on November 28, 2014, for 2012 back taxes.  (Applicant’s Exhibit A.)  Applicant
also submitted documentation confirming tax payments he made to the state.
(Applicant’s Post-Hearing Exhibit 6.)  
Applicant testified that it is his tax advisor’s belief that he is due a refund in the
amount of approximately $5,800, minus any penalties for failing to file in the first place.
(Tr. p. 51.)  To prevent this problem from ever recurring, Applicant is now committed
to working closely with his tax advisor to always properly adjust his withholdings to
ensure that sufficient taxes are taken out of his paycheck to cover any future tax
liability.   
Prior to the hearing, Applicant had been negotiating for a promotion on his job
that he recently received.  (Applicant’s Post-Hearing Exhibit 10.)  The promotion will
increase his pay to $165,882.79 annually.  (Applicant’s Exhibit B.)  In addition, he
receives $37,000 annually from his military retirement.  Together, his annual income
now exceeds $200,000.  Applicant is current with all of his financial obligations and
states that he can comfortably live on this income without difficulties or delinquencies.
He also has a 401(k) with his company that contains about $37,000.  (Applicant’s
Post-Hearing Exhibit 11.)   
Excerpts from the Applicant’s military records, specifically his fitness reports
reflect impressive ratings indicative of outstanding performance on the job.  He
possessed all traits for success and was recommended for early promotion.
(Applicant’s Post-Hearing Exhibit 9.)
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POLICIES
Enclosure 2 of the Directive sets forth adjudication policies divided into
"Disqualifying Factors" and "Mitigating Factors."  The following Disqualifying Factors
and Mitigating Factors are found to be applicable in this case:
Guideline F (Financial Considerations)
18.  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. 
Conditions that could raise a security concern:
19.(a) inability or unwillingness to satisfy debts; and
19.(c) a history of not meeting financial obligations. 
Conditions that could mitigate security concerns:
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; and 
20.(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
In addition, as set forth in Enclosure 2 of the Directive at pages 18-19, in
evaluating the relevance of an individual’s conduct, the Administrative Judge should
consider the following general factors:
a. The nature, extent, and seriousness of the conduct;
    b. The circumstances surrounding the conduct, to include knowledgeable
participation;
c.  The frequency and recency of the conduct;
d.  The individual’s age and maturity at the time of the conduct;
e.  The extent to which participation is voluntary;
f.  The presence or absence of rehabilitation and other permanent behavioral
changes;
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g.  The motivation for the conduct; 
h. The potential for pressure, coercion, exploitation, or duress; and
 i.  The likelihood of continuation or recurrence.
The eligibility criteria established in the DoD Directive identify personal
characteristics and conduct, which are reasonably related to the ultimate question,
posed in Section 2 of Executive Order 10865, of whether it is “clearly consistent with
the national interest” to grant an Applicant’s request for access to classified
information.
The DoD Directive states, “The adjudicative process is an examination of a
sufficient period of a person’s life to make an affirmative determination that the person
is an acceptable security risk.  Eligibility for access to classified information is
predicated upon the individual meeting these personnel security guidelines.  The
adjudication process is the careful weighing of a number of variables known as the
whole-person concept.  Available, reliable information about the person, past and
present, favorable and unfavorable, should be considered in reaching a
determination.” The Administrative Judge can draw only those inferences or
conclusions that have reasonable and logical basis in the evidence of record.  The
Judge cannot draw inferences or conclusions based on evidence that is speculative or
conjectural in nature.  Finally, as emphasized by President Eisenhower in Executive
Order 10865, “Any determination under this order . . . shall be a determination in
terms of the national interest and shall in no sense be a determination as to the loyalty
of the Applicant concerned.”
CONCLUSIONS
In the defense industry, the security of classified industrial secrets is entrusted
to civilian workers who must be counted upon to safeguard such sensitive information
twenty-four hours per day, seven days per week.  The Government is therefore
appropriately concerned when available information indicates that an Applicant for
clearance may be involved in instances of financial irresponsibility, which
demonstrates poor judgment or unreliability.
It is the Government’s responsibility to present substantial evidence to support
the finding of a nexus, or rational connection, between the Applicant’s conduct and the
holding of a security clearance.  If such a case has been established, the burden then
shifts to the Applicant to go forward with evidence in rebuttal, explanation, or
mitigation, which is sufficient to overcome or outweigh the Government’s case.  The
Applicant bears the ultimate burden of persuasion in proving that it is clearly
consistent with the national interest to grant him or her a security clearance.
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In this case the Government has met its initial burden of proving that the
Applicant has been financially irresponsible (Guideline F).  This evidence indicates
poor judgment, unreliability, and untrustworthiness on the part of the Applicant.
Because of the scope and nature of the Applicant's conduct, I conclude there is a
nexus or connection with his security clearance eligibility.
The evidence shows that the Applicant, a retired Naval Officer, and current
project manager for a defense contractor began having financial problems when he
transitioned from living on a military budget to a civilian-pay lifestyle.  He failed to file
his state and federal income tax returns from 2009 through 2012, because he did not
have the money to pay his taxes.  He became delinquently indebted to the state and
IRS for back taxes, and the problem escalated over the years.  Recently, Applicant
has been proactive in handling this problem.  He hired a tax advisor, followed her
advice, filed his state and federal income tax returns for tax years 2009 through 2012,
and paid all of his outstanding back taxes.  He is working closely with his tax advisor
to prevent any tax problems in the future.  Applicant is current on all of his bills,
including his credit cards, mortgage, utilities and children’s student loans.      
Under the circumstances, Applicant is making a good-faith effort to resolve his
debts.  He understands that he must remain fiscally responsible if he is to hold a
security clearance.  He has not incurred any new debt that he cannot afford to pay,
and he has no other delinquent debts.  There is clear evidence of financial
rehabilitation.  However, in the event that he does not continue to meet his financial
obligations, or if he does not completely resolve any current outstanding debt, his
security clearance will be immediately in jeopardy.  Applicant has introduced
persuasive evidence in rebuttal, explanation, or mitigation that is sufficient to
overcome the Government's case. 
Under Guideline F (Financial Considerations), Disqualifying Conditions 19.(a)
inability or unwillingness to satisfy debts; and 19.(c) a history of not meeting financial
obligations, apply.  However, Mitigating Conditions 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; and 20.(d) the individual initiated a
good-faith effort to repay overdue creditors or otherwise resolve debts also apply.
Accordingly, I find for the Applicant under Guideline F (Financial Considerations).
    
I have also considered the “whole-person concept” in evaluating the Applicant’s
eligibility for access to classified information.  Under the particular facts of this case,
the totality of the conduct set forth above, when viewed under all of the guidelines as a
whole, support a whole-person assessment of good judgment, trustworthiness,
reliability, candor, and a willingness to comply with rules and regulations, and/or other
characteristics indicating that the person may properly safeguard classified
information.
  I have considered all of the evidence presented, including Applicant’s most
impressive military service.  It mitigates the negative effects of his financial
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indebtedness and the effects that it can have on his ability to safeguard classified
information.  On balance, it is concluded that the Applicant has overcome the
Government's case opposing his request for a security clearance.  Accordingly, the
evidence supports a finding for the Applicant as to the factual and conclusionary
allegations expressed in Paragraph 1 of the SOR.   
    FORMAL FINDINGS
Formal findings For or Against the Applicant on the allegations in the SOR, as
required by Paragraph E3.1.25 of Enclosure 3 of the Directive are:
Paragraph 1: For the Applicant.
        Subpara.  1.a.: For the Applicant.
                           Subpara.  1.b.: For the Applicant.
 
  DECISION
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 a security clearance for the
Applicant.
Darlene Lokey Anderson
Administrative Judge