1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) -------------------------- ) ISCR Case No. 14-05458 ) Applicant for Security Clearance ) Appearances For Government: Jeff A. Nagel, Esquire, Department Counsel For Applicant: William Pannier, Esquire Holland & Knight LLP September 28, 2015 ______________ DECISION ______________ ROSS, Wilford H., Administrative Judge: Applicant submitted his Electronic Questionnaire for Investigations Processing (e-QIP), on March 31, 2014. (Government Exhibit 1.) On December 5, 2014, the Department of Defense issued a Statement of Reasons (SOR) detailing the security concerns under Guidelines F (Financial Considerations) and E (Personal Conduct) concerning Applicant. 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 (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the Department of Defense on September 1, 2006. Applicant answered the SOR in writing on January 19, 2015 (Answer), and requested a hearing before an administrative judge. Department Counsel was prepared to proceed on February 23, 2015. This case was assigned to me on March 2, 2015. The 2 Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on March 30, 2015. I convened the hearing as scheduled on May 7, 2015. The Government offered Government Exhibits 1 through 5, which were admitted without objection. Applicant testified on his own behalf, called one additional witness, and submitted Applicant Exhibits A through P, which were also admitted without objection. Applicant asked that the record remain open for the receipt of additional documents. Applicant submitted Applicant Post-Hearing Exhibits 1 through 9 on May 28, 2015, which were admitted without objection. DOHA received the transcript of the hearing (Tr.) on May 18, 2015. The record closed on May 29, 2015. Based upon a review of the pleadings, exhibits, and testimony, eligibility for access to classified information is denied. Findings of Fact Applicant is 56, divorced, and has two children. He is employed by a defense contractor and seeks to obtain a security clearance in connection with his employment. Paragraph 1 (Guideline F, Financial Considerations) The Government alleges in this paragraph that Applicant is ineligible for clearance because he is financially overextended and therefore potentially unreliable, untrustworthy, or at risk of having to engage in illegal acts to generate funds. Applicant admitted allegations 1.a, 1.b, 1.c, 1.d, 1.f, 1.g, 1.h, 1.i, 1.j, 1.k, 1.n, 1.o, and 1.p in the SOR under this Paragraph. Those admissions are findings of fact. Applicant denied allegations 1.e, 1.l, 1.m, and 1.q. He also submitted additional evidence to support his continued holding of a security clearance. Applicant has worked for several different defense contractors at the same job location, in the same responsible position, for approximately 25 years. From 1999 to the end of 2011, Applicant’s closely-held Subchapter S corporation was the primary contractor. Applicant was the President, Chief Executive Officer, and Facility Security Officer (FSO) of the corporation. His then-wife was Chief Financial Officer (CFO). In 2007 she filed for divorce from Applicant, and also resigned as CFO on the same day. He submits that most of his financial problems stem from his work as a Federal contractor, as well as his divorce, as further described below. Since January 2012 he has worked for the corporation that took over the contract. (Government Exhibit 1 at Sections 13A, 17; Tr. 53-60, 74.) The SOR lists fifteen delinquent debts, which include delinquent taxes for the 2009 tax year (allegation 1.p). The existence and amount of these debts is supported by credit reports dated April 3, 2014; October 1, 2014; February 22, 2015; and June 6, 2015. (Government Exhibits 2, 3, 4, and 5.) The debts totaled $79,801. The current status of the debts is as follows: 1.a. Applicant admitted owing this past-due debt to a bank in the amount of $31,829. He stated that this was a line of credit for his company. Applicant stated concerning this debt, “It’s what’s left over on my government contract to close out. And, Applicant states that he has to perform an internal audit of the approved delivery orders to make sure he is1 requesting the right amount for payment. He submitted a voucher for one of his delivery orders. It shows that the last communication sent by Defense Contact Audit Agency (DCAA) was in January 2014. He further stated that the approval letter from DCAA concerning the final year his company was in business was received in March 2014. Applicant has not yet completed his internal audits, which are necessary for him to be paid. He states, “I have got a lot of the initial paperwork. It’s all started. But have I finalized, am I comfortable with saying you need to add this money to the account to pay it? I’m not comfortable with those numbers just yet. They’re in process.” (Tr. 131-134; Applicant Post-Hearing Exhibits 1, 6.) 3 frankly, I just don’t have the means to close it.” He further stated that the reason he cannot pay any money on this debt is because he has, “Twelve open delivery orders still existing on my contract that ended at the end of 2011.” Applicant believes that the Government owes him approximately $85,000 on the open orders. Finally, Applicant1 understands that he is personally responsible for this debt because of the nature of his corporation. (Tr. 65-68, 128-131; Post-Hearing Exhibit 5 at 1.) It is not resolved. 1.b. Applicant admitted owing this charged-off credit card debt in the amount of $17,897. This debt has been delinquent since his divorce. He stated that he has made an arrangement with the collector on this account. Bank records submitted by Applicant show that he paid $1,000 on this account on May 1. 2015. He stated after the hearing that he had paid an additional amount to this creditor. (Tr. 68-72, 134-136; Applicant Exhibit N; Applicant Post-Hearing Exhibit 7.) This debt is not yet resolved. 1.c. Applicant admitted owing a past-due debt to a bank in the amount of $15,830. According to Applicant this debt was taken out by his wife without his knowledge when she was CFO of the corporation. However, the debt is in the name of his corporation, no evidence was submitted showing that his ex-wife entered into the arrangement, and Applicant admitted that he is personally responsible for the debt. As stated under 1.a, above, Applicant is waiting to get his delivery orders paid by the Government so that he can pay off this debt as well. (Tr. 72-75, 136-139; Applicant Post-Hearing Exhibit 5.) This debt is not resolved. 1.d. Applicant admitted owing this past-due medical debt in the amount of $2,116. This debt, as well as those set forth in allegations 1.f, 1.g, 1.h, 1.j, and 1.k, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 1.e. Applicant denied owing this past-due credit card debt in the amount of $1,101. He made a payment arrangement with the credit card holder and paid the debt. (Tr. 81-87; Applicant Exhibits L, O.) This debt is resolved. 1.f. Applicant admitted owing this past-due medical debt in the approximate amount of $415. This debt, as well as those set forth in allegations 1.d, 1.g, 1.h, 1.j, and 1.k, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 4 1.g. Applicant admitted owing this past-due medical debt in the approximate amount of $374. This debt, as well as those set forth in allegations 1.d, 1.f, 1.h, 1.j, and 1.k, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 1.h. Applicant admitted owing this past-due medical debt in the approximate amount of $236. This debt, as well as those set forth in allegations 1.d, 1.f, 1.g, 1.j, and 1.k, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 1.i. Applicant admitted owing this past-due medical debt in the approximate amount of $159. He stated in his Answer that this debt was paid directly to the affected hospital. At the hearing he was very confused about the status of this debt. (Tr. 88-93.) In Applicant Post-Hearing Exhibit 1 he states that this debt was paid in full and refers to a “Statement 3,” which does not correspond to any exhibit in the record. Based on all available information, I find that this debt is not resolved. 1.j. Applicant admitted owing this past-due medical debt in the approximate amount of $115. This debt, as well as those set forth in allegations 1.d, 1.f, 1.g, 1.h, and 1.k, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 1.k. Applicant admitted owing this past-due medical debt in the approximate amount of $80. This debt, as well as those set forth in allegations 1.d, 1.f 1.g, 1.h, and 1.j, were all owed to the same collection agency. The accounts were consolidated and Applicant paid them off in May 2015. (Tr. 77-81; Applicant Exhibits J, K, N; Applicant Post-Hearing Exhibit 5.) This debt is resolved. 1.l. Applicant denied owing this past-due medical debt in the amount of $97. Applicant paid this debt in full in January 2015. (Tr. 94-95; Applicant Exhibit M.) This debt is resolved. 1.m. Applicant denied owing this past-due medical debt in the amount of $183. Applicant paid this debt in full in January 2015. (Tr. 95-96; Applicant Exhibit M.) This debt is resolved. 1.n. Applicant admitted owing this past-due medical debt in the amount of $369. Applicant paid this debt in full in May 2015. (Tr. 96-97; Applicants Exhibit M and N.) This debt is resolved. 1.o. Applicant admitted that he had not filed his 2012 and 2013 Federal and state tax returns in a timely fashion. The tax returns for those two years were eventually filed in January 2015. Applicant admits that he was remiss in not filing his tax returns for those two years, stating several times that he was too “busy” to get them done. (Tr. 97- The 2011 Federal and state tax returns for Applicant’s Subchapter S business were not filed until July 2013.2 (Applicant Exhibit E.) As of the date he signed the subject e-QIP (March 31, 2014) the 2013 tax return was not delinquent.3 5 102; Applicant Exhibits F, G.) His 2014 Federal and state tax returns were filed in a timely fashion. (Applicant Post-Hearing Exhibit 3.)2 1.p. Applicant admitted that he owed the Internal Revenue Service (IRS) $9,000 for tax year 2009. This debt has been paid through a combination of direct payments from Applicant, as well as the IRS applying his refunds from his 2012 and 2013 tax returns to the arrearage. This debt was resolved on May 18, 2015. (Tr. 102- 105, 145; Applicant Exhibit P; Applicant Post-Hearing Exhibit 9.) 1.q. Applicant denied that he was being garnished by his state taxing authority for back taxes. According to Applicant, this was due to the state’s estimating his 2011 taxes. As noted in footnote 2, those taxes were not filed until July 2013, which was late. Applicant’s tax returns indicate that no taxes were due for that tax year. I further note that the Applicant’s 2012, 2013, and 2014 state tax returns indicate that he will receive a total of $13,652 in refunds. (Tr. 106-107; Answer.) Based on all of the available information, this debt has been resolved. Applicant submitted no evidence that he has received any financial counseling. He also did not submit a personal financial statement or other budgetary information, from which his future solvency could be predicted with any confidence. Paragraph 2 (Guideline E - Personal Conduct) The Government alleges in this paragraph that Applicant is ineligible for clearance because he has made false statements to the Department of Defense during the clearance screening process. Applicant signed and certified his e-QIP seeking to continue his security clearance on March 31, 2014. Section 26 of the questionnaire is entitled, “Financial Record.” Under the subhead, “Taxes,” Applicant stated that he failed to pay his 2009 taxes, as discussed under 1.p, above. (Emphasis in original.) The questionnaire goes on to ask under the subhead, “Taxes - Summary, Are there any other instances in the past seven (7) years where you failed to file or pay Federal, state or other taxes when required by law or ordinance.” (Emphasis in original.) Applicant answered, “No.” This was a false answer, as Applicant had not filed his 2012 Federal and state tax returns in a timely fashion. 3 Applicant admits intentionally answering that question “No,” but denied he did it with the intent to deceive the Government. He testified, “When I filled out the e-QIP I had the intention of filing both the years [2012 and 2013], especially because I knew I had money coming back that would pay down some of the debt that I was carrying. I 6 just really frankly I just never got around to it. And remiss on my part. But I did have good intentions of doing it right there and I just didn’t.” His testimony indicates that he did not view his answer as false since his intent was to file the 2012 tax return promptly. However, as he testified, he got busy and the return did not get filed until January 2015. (Tr. 99, 115-121, 144, 150-151.) Applicant had an obligation to tell the Government the true extent of his tax situation and he intentionally did not do so. Section 26 of the questionnaire also includes a section entitled, “Delinquency Involving Routine Accounts.” That section asks: Other than previously listed, have any of the following happened? In the past seven (7) years, have you had any possessions or property voluntarily or involuntarily repossessed or foreclosed? . . . defaulted on any type of loan? . . . had bills or debts turned over to a collection agency? . . . had any account or credit card suspended, charged off, or cancelled for failing to pay as agreed? . . . been over 120 days delinquent on any debt? . . . [or] are currently over 120 days delinquent on any debt?” (Emphasis in original.) Applicant stated, “No,” to all of these questions. That was not true, as set forth in detail under Paragraph 1, above. Applicant argues that he did not intend to mislead the Government regarding his answers on the questionnaire. He states in his Answer, “In my haste to complete the e- QIP . . . I failed to provide all of the information requested, and also did not realize all of the contents contained in my credit report.” There is also some indication that Applicant was confused about whether the debts set forth under allegations 1.a and 1.c were actually his debts, since they were technically corporate debts. (Tr. 68.) Applicant’s argument is undercut by several points. First, Applicant argues that he was financially naive and unaware, depending on his ex-wife to handle the personal and corporate finances. That was true up to the date of the divorce in 2007. His company lasted four more years, and he obviously was handling the finances of his company by himself for that time. Even assuming he did not know that his corporate debts were personally guaranteed, and needed to be listed, there were well over $30,000 in personal, credit card, and medical debts that he knew, or should have known, existed. With regard to those non-corporate SOR debts, it is not believable that Applicant simply forgot about them. His claims of confusion and ignorance are not credible considering that he was the CEO and FSO of his own corporation for eleven years, and testified that he took pride in his handling of security procedures. (Tr. 122.) Given the state of the evidence, Applicant’s financial situation was precarious and he knew, or should have known, the extent of his problems. Applicant has simply not presented enough evidence to show that the alleged falsifications were the result of innocent error. Therefore, under the circumstances, I find that they were intentional. 7 Mitigation Applicant’s employer testified on his behalf. He is the President and CEO of the corporation holding the contract Applicant works on. The witness realizes that Applicant made a mistake with regard to the answers on the e-QIP, and the state of his finances. The witness stated, “I believe that he [Applicant] is an honest person and he made some errors in judgment, didn’t take some of the things like he should have in a serious way. But I believe that overall he is a strong net value, a positive influence with the Government on this program and it’s best that he retain his clearance.” (Tr. 13-33.) (See Applicant Exhibit A.) A personal friend and two work associates of Applicant submitted written recommendations on his behalf. They state that Applicant is acknowledged to be an expert in his field, as well as a person who is reliable and trustworthy. (Applicant Exhibits C, D, and I.) Applicant received a Letter of Commendation from the armed service Program Executive Officer in 2012 congratulating him for his then 22 years of service. (Applicant Exhibit H.) Policies Security clearance decisions are not made in a vacuum. 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 to be used as appropriate in evaluating an applicant’s eligibility for access to classified information. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in AG ¶ 2 describing the adjudicative process. The administrative judge’s over-arching 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. In addition, the administrative judge may also rely on his or her own common sense, as well as knowledge of the law, human nature, and the ways of the world, in making a reasoned decision. The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that, “Any 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. 8 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 the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance 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. Security clearance decisions include, by necessity, consideration of the possible risk that the applicant may deliberately or inadvertently fail to protect or 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. Finally, as emphasized in Section 7 of Executive Order 10865, “Any determination under this order adverse to an applicant 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.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information). Analysis Paragraph 1 (Guideline F, Financial Considerations) The security concern relating to the guideline for Financial Considerations 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. The guideline notes several conditions that could raise security concerns. Under AG & 19(a), an Ainability or unwillingness to satisfy debts@ is potentially disqualifying. Similarly under AG & 19(c), Aa history of not meeting financial obligations@ may raise security concerns. Applicant had over $79,000 in past-due consumer and personally- guaranteed corporate debts. All of them had been due and owing for several years. The evidence is sufficient to raise these potentially disqualifying conditions. The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. Under AG ¶ 20(a), the disqualifying conditions may be mitigated where Athe behavior happened so long ago, was so 9 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.@ AG ¶ 20(b) states that the disqualifying conditions may be mitigated where “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.” AG ¶ 20(c) says it can be mitigating where “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.” Finally, AG ¶ 20(d) states it can be mitigating where, “the individual has initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.” None of these conditions apply to Applicant’s case. Applicant’s financial difficulties have been long-standing. Many of the debts date from when his corporation was in business, including his personal and medical debts. It is only during the past year that he has even begun to try to take control of his finances. The two personally guaranteed corporate debts total over $47,000 and he has no idea when he may pay them. I have considered the fact that the Government appears to owe Applicant sufficient money to pay them off. However, as set forth in footnote 1, Applicant has not completed his internal audits, which are necessary for him to be paid. This is just more evidence of the procrastination and poor judgment Applicant has shown with regard to his personal finances. He has had seven years since his divorce to take control of his finances, and he submitted little evidence that he has done so, or intends to do so. Paragraph 1 is found against Applicant. Paragraph 2 (Guideline E - Personal Conduct) The security concern relating to Personal Conduct is set out in AG ¶ 15: Conduct involving questionable judgment, lack of candor, dishonesty or unwillingness to comply with rules or regulations can raise questions about an individual’s reliability, trustworthiness and ability to protect classified information. Of special interest is any failure to provide truthful and candid answers during the security clearance process or any other failure to cooperate with the security clearance process. I have examined the disqualifying conditions under AG ¶ 16 and especially considered the following: (a) deliberate omission, concealment, or falsification of relevant facts from any personnel security questionnaire, personal history statement, or similar form used to conduct investigations, determine employment qualifications, award benefits or status, determine security clearance eligibility or trustworthiness, or award fiduciary responsibilities. Applicant knowingly and purposely falsified his security clearance application on March 31, 2014. He alleges that his failure to list his delinquent taxes and other financial 10 difficulties was due to oversight, and not an intentional act. However, the fact remains that for years he has had financial difficulties. It simply strains credulity for Applicant to claim to have forgotten the facts of his very bad financial situation when filling out his e- QIP. I have reviewed the mitigating conditions and find none of them apply to the facts of this case. In particular, I have examined the span of time, less than two years, since the falsifications. There is insufficient evidence that Applicant currently shows good judgment or is trustworthy and reliable. Paragraph 2 is found against Applicant. 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 relevant circumstances. 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. The administrative judge must 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. I considered the potentially disqualifying and mitigating conditions in light of all the relevant facts and circumstances surrounding this case. The discussion under Guidelines F and E, above, applies here as well. Applicant has had financial problems for several years, which he has not resolved. In addition, Applicant failed to show that the false denials and omissions of relevant and material information from his e-QIP were accidental and not intentional. Under AG ¶ 2(a)(3), his conduct is recent. I cannot find that there have been permanent behavioral changes under AG ¶ 2(a)(6). Accordingly, I also cannot find that there is little to no potential for pressure, coercion, exploitation, or duress (AG ¶ 2(a)(8)); or that there is a low likelihood of continuation or recurrence (AG ¶ 2(a)(9)). Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant has not mitigated the security concerns arising from his current financial situation and falsifications to the Government. Accordingly, the evidence supports denying his request for a security clearance. 11 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: Against Applicant Subparagraph 1.d: For Applicant Subparagraph 1.e: For Applicant Subparagraph 1.f: For Applicant Subparagraph 1.g: For Applicant Subparagraph 1.h: For Applicant Subparagraph 1.i: Against Applicant Subparagraph 1j: For Applicant Subparagraph 1.k: For Applicant Subparagraph 1.l: For Applicant Subparagraph 1.m: For Applicant Subparagraph 1.n: For Applicant Subparagraph 1.o: For Applicant Subparagraph 1.p: For Applicant Subparagraph 1.q: For Applicant Paragraph 2, Guideline E: AGAINST APPLICANT Subparagraph 2.a.: Against Applicant Subparagraph 2.b: 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 eligibility for a security clearance. Eligibility for access to classified information is denied. WILFORD H. ROSS Administrative Judge