1
 
                                                             
                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 14-05509
)
Applicant for Security Clearance )
Appearances
For Government: Candace Garcia, Esquire, Department Counsel
For Applicant: Alan V. Edmunds, Esquire
                                                            Ryan C. Nerney, Esquire
______________
Decision
______________
HENRY, Mary E., Administrative Judge:
Based upon a review of the pleadings, exhibits, and testimony, Applicant’s
eligibility for access to classified information is granted.
Statement of the Case
Applicant completed and certified an Electronic Questionnaire for Investigations
Processing (e-QIP) on November 19, 2013, which he signed on November 20, 2013.
The Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued
Applicant a Statement of Reasons (SOR) on December 2, 2014, detailing security
concerns under Guideline F, financial considerations. 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 for Determining Eligibility for Access to Classified Information
(AG), implemented on September 1, 2006. 
W hen  SOR allegations are controverted, the Government bears the burden of producing evidence sufficient1
to prove controverted allegations. Directive, ¶ E3.1.14. “That burden has two components. First, the
Government must establish by substantial evidence that the facts and events alleged in the SOR indeed took
place. Second, the Government must establish a nexus between the existence of the established facts and
events and a legitimate security concern.” See ISCR Case No. 07-18525 at 4 (App. Bd. Feb. 18, 2009),
(concurring and dissenting, in part) (citations omitted). 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. 08-06605 at 3 (App. Bd. Feb. 4, 2010); ISCR Case No. 08-07290 at 2 (App. Bd. Nov. 17,
2009).
2
 Applicant received the SOR on December 10, 2014, and he answered it through
counsel on December 19, 2014. Applicant requested a hearing before an administrative
judge with the Defense Office of Hearings and Appeals (DOHA). Department Counsel
was prepared to proceed on July 2, 2015, and I received the case assignment on
August 25, 2015. DOHA issued a Notice of Hearing on September 2, 2015, and I
convened the hearing as scheduled on September 24, 2015. The Government offered
exhibits (GE) marked as GE 1 through GE 4, which were received and admitted into
evidence without objection. Applicant testified. He submitted exhibits (AE) marked as
AE A through AE S, which were received and admitted into evidence without objection. I
held the record open until September 30, 2015, for Applicant to submit additional
matters. Applicant timely submitted AE T and AE U, which were received and admitted
without objection. The record closed on September 30, 2015. DOHA received the
hearing transcript (Tr.) on October 2, 2015. 
Procedural and Evidentiary Rulings
Motions
At the hearing, Department Counsel moved to amend the SOR to correct
Applicant’s name. The motion was granted, and the SOR was amended to correct
Applicant’s name (Tr. 8-9)
At the hearing, Department Counsel objected to the admission of AE M. After
Applicant clarified the information contained in this exhibit, it was admitted into evidence
without objection. (Tr. 21-22, 67).
Findings of Fact
In his Answer to the SOR, Applicant denied the factual allegations in ¶¶ 1.a and
1.b of the SOR with explanations.  He also provided additional information to support1
his request for eligibility for a security clearance. After a complete and thorough review
of the evidence of record, I make the following findings of fact.  
Applicant, who is 56 years old, works as a management consultant in his own
company. His company competes as a prime contractor to the DOD. His company is
formed as a S Corporation under the law, and he employs approximately 22 staff.
GE 1; AE G; Tr. 25, 39-42, 60.2
GE 1; Tr, 23-25.3
GE 2; Tr. 25, 43-45, 56.4
Tr. 50-61.5
3
Before starting his business in 2006, Applicant worked for the United States Marine
Corps in a civilian position as a logistics management specialist. He served in the
United States Marine Corps for 21 years. He retired in the pay grade of E-7 in 1997 with
an honorable discharge. Following his military service, the Department of Veteran’s
Affairs gave him an 80% disability rating based on two service connected injuries, which
left him with serious arthritis issues.2
Applicant married his first wife in 1981, they separated in 2004, and they finalized
their divorce in 2009. He and his first wife have three adult children, ages 33, 31 and 29.
He married his current wife in 2009. He is helping to raise her two children, who are 16
and 14 years of age.   3
In 2006, Applicant started his own business, a consulting service. His business
provides engineering and logistical services, program management services, financial
support, and administrative support. Initially, Applicant and a lady friend, now his wife,
comprised the only employees of the business. Early in his business, Applicant could
not compete as a prime government contractor; rather, his business came from his
status as a subcontractor. As a subcontractor, he received less income, but incurred
similar costs to the prime contractor. During the first few years of his business
operations, the economic downturn and the withdrawal of troops from Iraq in 2009
impacted his ability to fully develop his business and his ability to create other business
opportunities. This status created tight finances for his business. The federal
government sequestration in 2013 also hurt his business. He is now a prime contractor
to DOD, which improved his business finances.4
Applicant’s lady friend kept the business financial records when his business first
started, as the recording involved was basic bookkeeping. As his business grew, the
financial record keeping became more complex. In 2008, Applicant sent his lady friend
for QuickBooks training to help her manage the financial records. His company
continued to grow, and his financial records management grew even more complex. In
2009, he hired a certified public accountant (CPA) to take over the management of his
business financial records and to teach him more about business finances.5
By 2010, Applicant understood that he needed to change his business plan and
structure. He decided that he could no longer provide jobs to family and friends who
were not qualified for positions his company needed to fill. In 2010, he hired a
professional contracts manager and a professional contracts cost accounting manager
to help improve his business. With these changes, Applicant’s business improved, and
his business finances stabilized. His business has a solid rating. The Defense
AE I - AE L; AE O; AE S; Tr. 34-35.6
AE E; AE N.7
AE D.8
SOR; GE 3; Tr. 35-37.9
Tr. 60, 64-65.10
4
Contracting Auditing Agency conducted an audit of his finances and accounting
systems in 2012. The agency found his systems compliant with financial accounting
standards and in compliance with the agency requirements.6
The SOR alleges that Applicant owes the Internal Revenue Service (IRS)
$76,828 in past-due taxes as shown by two tax liens filed in February and June 2010.
These tax liens apply to the tax years 2006, 2007, and 2008.  IRS documentation also7
identifies tax issues for the tax years 2005, 2009, 2010, and 2012.  Applicant’s tax8
issues began when he and his first wife sold the marital home in 2005. His first wife
refused to provide him with the necessary documentation from this sale to complete his
2005 federal income tax return, despite repeated requests. The title company ceased
operations, making it impossible for Applicant to obtain the necessary documentation
from this company. The IRS required Applicant to file this return before it would accept
later income returns. After discussions with the IRS about the document problem,
Applicant agreed to file the return absent the documentation and pay the resulting
higher taxes. He filed the 2005 income tax return in 2009 as well as the tax returns for
2006 through 2008.9
In addition to the documentation problem, Applicant’s business entity, the S
Corporation created significant issues with taxes. Applicant is the sole shareholder in his
company. Under the tax laws, any money remaining on his company financial records at
the end of the calendar year is treated as personal income to him and becomes the
basis for his own taxable income. Each year, particularly when he was a subcontractor,
companies distributed contracting income to his company late in the calendar year as
these companies sought to clear their books before the end of the tax year. He learned
that he also needed to distribute this income quickly. With the assistance of his
accountants, he worked to distribute this income from his company quickly.10
In 2007, Applicant realized that he had a tax issue and hired an accountant to
resolve his 2005 and 2006 tax issues. It is unclear if this hiring helped. By 2009, he
hired an accountant to regularly manage his income and expenses, as well as work on
his tax issues. In that same year, Applicant began discussions with the IRS about his
past-due taxes. He reached an agreement to make payments as he could because his
business income fluctuated. He made three payments of $299 each and one payment
of $252 in 2009 before the IRS filed any liens and a $398 payment in March 2010
before the IRS filed its second lien. Beginning in July 2010, Applicant made regular
payments of $1,500 to the IRS. In July 2011, these payments increased to $2,600 a
GE 3; GE 4; AE D; AE E; AE N; Tr. 26,-28, 36-37, 51-59.11
AE Q; AE R; AE T.12
AE A; Tr. 38-39.13
5
month, and in March 2014, Applicant and the IRS reached an agreement for him to pay
$2,500 a month to resolve his remaining tax debts. As his business income improved,
Applicant periodically made a large payment to the IRS towards the resolution of his tax
liens. He also paid any additional taxes owed on his timely filed business and personal
income taxes. On March 26, 2014, the IRS released the $29,940 tax lien filed on
February 12, 2010, noting that the tax debt had been fully paid. On April 22, 2015, the
IRS released the $46,888 tax lien filed on June 3, 2010, noting that it had been fully
paid. Applicant timely files his business and personal income taxes with the assistance
of his account.11
Applicant’s work facility has a security clearance. His financial advisor has
provided him with financial counseling and guidance on both business and personal
finances. His financial advisor indicates that his overall financial situation is “very stable”
and that they have worked together for five years on achieving good financial choices
for him.12
Applicant and his current wife established a nonprofit to provide a community
breakfast every Sunday morning. Their nonprofit also provides meals to the elderly on a
fixed income, medical shut-ins, and motel families during the week. Applicant also
supports another charitable foundation in his community.13
Policies
When evaluating an applicant’s suitability for a security clearance, the
administrative judge must consider the adjudicative guidelines. In addition to brief
introductory explanations for each guideline, the adjudicative guidelines list potentially
disqualifying conditions and mitigating conditions, which are used 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 the adjudicative process. The administrative judge’s overarching
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.
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
6
decision, I have drawn only those conclusions that are reasonable, logical, and based
on the evidence contained in the record.
Under Directive ¶ E3.1.14, the Government must present evidence to establish
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, 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. . . .” An
applicant has the ultimate burden of persuasion for obtaining a favorable security
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. Decisions include, by necessity, consideration of
the possible risk an 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.  
 
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.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites
for access to classified or sensitive information).  
Analysis
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. 
AG ¶ 19 describes the disqualifying conditions that could raise security concerns.
I have considered all the conditions, and the following are potentially applicable: 
(a) inability or unwillingness to satisfy debts;
(c) a history of not meeting financial obligations; and
7
(g) failure to file annual Federal, state, or local income tax returns as
required or the fraudulent filing of the same. 
Applicant developed significant tax issues after he and his first wife separated,
and she refused to provide him with necessary documentation to file his 2005 income
taxes. Her conduct resulted in delays in filing his yearly income tax returns. Her refusal
to provide information and his decision to form a S Corporation as his business created
significant unpaid tax debts for which the IRS filed tax liens in 2010. These three
disqualifying conditions apply.
The financial considerations guideline also includes examples of conditions that
can mitigate security concerns. I have considered mitigating factors AG ¶ 20(a) through
¶ 20(f), and the following 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; and
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
Applicant’s tax issues began about 10 years ago when his first wife refused to
provide tax documentation to him. Their divorced finalized in 2009, making the initial
source of his tax problem moot. AG ¶ 20(a) is partially applicable because his tax issues
continued until recently.
Applicant’s divorce and former wife’s conduct along with the economic downturn,
sequestration, and the Iraq troop reduction impacted his business income over the
years, factors beyond his control. Despite these adverse impacts on his business, he
experienced enough business growth to necessitate the hiring of an accountant in 2009.
He also realized at this time that if he wanted his business to succeed, he needed to
change his business model. In 2010, he hired a professional contracts manager and a
professional contracts cost accounting manager. With their assistance, he made difficult
decisions about firing employees, who were family members and friends. His work with
these individuals changed the direction of his business in a positive manner. His
business is financially stable and sound. He not only worked to improve his business, he
contacted the IRS in 2009 to resolve his tax issues. He made payments on his taxes
In assessing whether an applicant has established mitigation under Guideline F, the Appeal Board provided14
the following guidance in ISCR Case No. 07-06482 at 3 (App. Bd. May 21, 2008):
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.” See, e.g., ISCR Case No. 05-01920 at 5 (App. Bd. Mar. 1, 2007).
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. See, e.g., ISCR Case No. 02-25499 at 2 (App. Bd.
Jun. 5, 2006). 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.”
See, e.g., ISCR Case No. 04-09684 at 2 (App. Bd. Jul. 6, 2006). 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
8
when he could. As his business improved, he increased his payments to the IRS, and
eventually, he resolved his significant tax debts. His financial advisor provided him with
solid financial counseling, which he followed. His finances are under control, and his tax
debts are resolved. AG ¶¶ 20(b) - 20(d) apply.
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 relevant 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. 
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 decision to grant or
deny a security clearance requires a careful weighing of all relevant factors, both
favorable and unfavorable. In so doing, an administrative judge must review all the
evidence of record, not a single item in isolation, to determine if a security concern is
established and then whether it is mitigated. A determination of an applicant’s eligibility
for a security clearance should not be made as punishment for specific past conduct,
but on a reasonable and careful evaluation of all the evidence of record to decide if a
nexus exists between established facts and a legitimate security concern.14
the payment of such debts one at a time. See, e.g., ISCR Case No. 06-25584 at 4 (App. Bd.
Apr. 4, 2008). 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.
9
The evidence in support of granting a security clearance to Applicant under the
whole-person concept is more substantial than the evidence in support of denial. In
reaching a conclusion, I considered the potentially disqualifying and mitigating
conditions in light of all the facts and circumstances surrounding this case. Applicant’s
divorce from his first wife was acrimonious, causing financial problems for Applicant,
particularly with his income taxes. His decision to make his company an S corporation
further increased his tax liability because any money left on his business records at the
end of the calendar year is treated as his personal income. Applicant recognized he had
a tax problem and took action to correct his problem. This task of correcting his
business problems was not easy. Applicant made difficult decisions about keeping his
initial employees when he realized that he needed individuals with different skills to
make his business a success. He hired professionals to help develop a better business
model. These decisions created a better and stronger business. At the same time, he
hired an accountant to take over the management of his business finances, and he
began a long-term relationship with a financial planner, which has benefitted his overall
financial well-being. Over a six-year period of time, Applicant has taken the right steps
and made good decisions about the growth and continued operation of his company.
These decisions placed his company on solid financial ground. These sound business
decisions made it possible for Applicant to pay his large tax debt quickly. He did not
ignore his tax debt as shown by his small payments in 2009 before the IRS filed its tax
liens. As his income grew, his payments to the IRS increased.  When he had significant
extra income, he voluntarily made large payments to the IRS to reduce his debt faster.
In a short period of time, he paid his tax debts. Applicant supports the community, and
he served honorably in the Marine Corps for more than 20 years. After reviewing all the
evidence of record, I conclude that Applicant’s tax debts are not a security concern.
Overall, the record evidence leaves me without questions or doubts as to
Applicant’s eligibility and suitability for a security clearance. For all these reasons, I
conclude Applicant mitigated the security concerns arising from his finances under
Guideline F.
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
Subparagraph 1.a: For Applicant
Subparagraph 1.b: For Applicant
10
Conclusion
In light of all of the circumstances presented by the record in this case, it is
clearly consistent with the national interest to grant Applicant eligibility for a security
clearance.  Eligibility for a security clearance is granted.
                                                              
MARY E. HENRY
Administrative Judge