1 
 
 
                                                             
                           DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
In the matter of: ) 
 ) 
[Name Redacted] )  ISCR Case No. 15-03640 
  ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Eric Borgstrom, Esquire, Department Counsel 
For Applicant: Pro se 
 
 
______________ 
 
Decision 
______________ 
 
 
HOGAN, Erin C., Administrative Judge: 
 
On November 14, 2015, the Department of Defense (DOD) issued a Statement 
of Reasons (SOR) to Applicant detailing security concerns under Guideline F, Financial 
Considerations; and Guideline E, Personal Conduct. 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 after September 1, 2006.  
  
 On December 16, 2015, Applicant answered the SOR and requested a hearing 
before an administrative judge. Department Counsel was ready to proceed on April 12, 
2016. The case was assigned to me on May 10, 2016.  On August 1, 2016, a Notice of 
Hearing was issued, scheduling the hearing for August 23, 2016. The hearing was held 
as scheduled. During the hearing, the Government offered eight exhibits which were 
admitted as Government Exhibits (Gov) 1 – 8.  Applicant testified and offered seven 
exhibits which were admitted as Applicant Exhibits (AE) A – G. The transcript (Tr.) was 
received on August 31, 2016. The record was held open until September 7, 2016, to 
allow Applicant to submit additional documents. Applicant timely submitted additional 
 
2 
 
 
documents. Based upon a review of the pleadings, exhibits, and testimony, eligibility for 
access to classified information is granted. 
 
Findings of Fact 
 
 In his response to the SOR, Applicant admits all SOR allegations.  
 
 Applicant is a 54-year-old employee of a Department of Defense contractor 
seeking to maintain a security clearance. He has worked for his current employer since 
October 2002. He served on active duty in the United States Navy from 1980 to 2001, 
retiring honorably in the grade of chief petty officer (E-7). His first marriage was from 
1986 to 2001.  A son and daughter were born during this marriage. He married again in 
2002. His second wife has two children. All of the children are adults and no longer live 
with them. (Tr at 27-28; Gov 1)   
 
Applicant’s security clearance background investigation revealed a Chapter 7 
bankruptcy filed in April 2001 and discharged in July 2001 (SOR ¶ 1.a: Gov 2 at 12; Gov 
6 at 2; Gov 7; Gov 8); a $21,889 state tax lien entered against Applicant in 2011 (SOR ¶ 
1.b: Gov 3 at 2; Gov 4 at 5; Gov 5 at 3; Gov 6 at 3); and Applicant failed to pay federal 
income taxes for tax years 2007 through 2011, resulting in a delinquent federal tax debt 
in the amount of $34,839. (SOR ¶ 1.c: Gov 1 at 30-32; Gov 3 at 1; Gov 5 at 3; Gov 6 at 
2-3). 
 
Under personal conduct, the SOR alleged that Applicant deliberately falsified his 
security clearance application, dated April 20, 2014, by answering “no” to the question 
in section 26, “In the past seven years have you failed to file or pay Federal, state, or 
other taxes when required by law or ordinance? Applicant answered. “yes” and listed 
that he owed federal income taxes for tax years 2007 to 2011, because he “FELL 
BEHIND WITH MY WIFE BEING SELF EMPLOYED.” He also mentioned that he 
entered into a payment plan with the IRS. He pays $2,000 a month. It is alleged 
Applicant falsified the answer to this question because he failed to mention the state 
taxes. (Gov 1 at 30) 
 
The SOR also alleged that Applicant deliberately falsified his security clearance 
application, dated April 20, 2014, by answering “no” to the question in section 26, “Other 
than previously listed have any of the following happened to you? In the past seven (7) 
years, you had a lien placed against your property for failing to pay taxes or other 
debts? Applicant failed to list a federal tax lien filed against him in July 2010 which was 
released in December 2012, and a state tax lien entered against Applicant in 2011. 
(Gov 1 at 32)   
 
Applicant filed for Chapter 7 bankruptcy in 2001 based on the advice of his 
attorney. The bankruptcy occurred around Applicant’s divorce from his first wife. While 
Applicant was still on active duty and serving sea duty, his wife incurred a lot of debt. 
They bought a house and his wife quit her job shortly after the purchase of the house. 
The mortgage was in Applicant’s name. (Tr. 30-31) 
 
3 
 
 
Applicant’s tax issues began in 2004 when his current wife became self-
employed as a private contractor. She did not set aside money to pay her income taxes 
and they did not understand the different tax rules involving self-employed individuals. 
They realized they owed a lot of taxes when they filed taxes in 2005. They initially did 
not know what to do. In 2008, they hired a tax attorney. The tax attorney helped them 
file the correct forms and negotiate a payment plan with the IRS. Their tax returns were 
filed in 2008 with the help of the tax attorney. Applicant and his wife entered into an 
agreement with the IRS on April 20, 2013, to pay $2,000 a month. The federal tax lien 
was released on April 1, 2015. (Tr. 30, 32-36, 39; AE B; AE H at 2-6)  
 
In 2008, Applicant began to put money aside for tax payments and changed his 
tax deduction to have more money taken out. He is doing what he can to pay all of the 
tax debts. They have paid all past-due amounts owed through tax year 2009. The 
federal tax debts will be paid off in mid 2017. He and his wife now use a tax firm to file 
their taxes for them. They are current on all of their taxes for tax years 2012 to 2015. 
(Tr. 41-46, 68; AE H at 1, 15 - 44) 
 
A state tax lien was entered against Applicant and his wife in 2011. Applicant and 
his wife were unaware of the state tax lien until they attempted to refinance their 
mortgage. The tax attorney helped Applicant resolve his state tax debt. The state tax 
debt was garnished from his paycheck (approximately $300 to $400 a pay period, as a 
percentage of his income). The state tax lien was satisfied and removed on November 
15, 2013. (Tr. 46-47; AE A; AE E at 3)  
 
For several years, Applicant and his wife have reviewed their budget using a 
spiral notebook and spreadsheets. His wife is primarily responsible for paying the bills. 
They are current on their bills. (Tr. 49-52) Applicant and his wife’s total monthly income 
is $15,600. Their total monthly expenses, to include the $2,000 monthly payment to the 
IRS is $11,406. After expenses, they have approximately $4,194 remaining each month. 
(AE H at 45) 
 
Personal Conduct 
 
 The SOR alleged that Applicant intentionally falsified his April 2014 security 
clearance application by omitting that he owed state taxes for undisclosed years in 
response to the tax questions in Section 26 of the application which reads, “In the past 
seven (7) years, have you failed to file or pay Federal, state, or other taxes when 
required by law or ordinance?” Applicant listed that he failed to pay federal taxes for tax 
years 2007-2011.  The SOR also alleged Applicant intentionally falsified his security 
clearance application in response to Section 26, Financial Record Delinquency 
Involving Enforcement, “In the past seven (7) years, you had a lien placed against your 
property for failing to pay taxes or other debt(s)? (Include financial obligations for which 
you were the sole debtor, as well as those for which you were a cosigner or guarantor)” 
Applicant failed to list his state and federal tax liens. (Gov 1) 
 
 
4 
 
 
 In his response to the SOR, Applicant denied intentionally falsifying his security 
clearance application. He believed that he provided the government notice about his tax 
issues when he listed that he owed federal taxes for tax years 2007-2011. He forgot to 
include the state taxes owed, but believed that he was talking about his tax issues as a 
whole when answering the SOR. He made no conscious decision to deceive the 
government about his tax issues.  
 
 During the hearing, Applicant testified that his state tax lien was removed on 
November 15, 2013, when his state tax issues were resolved. (AE A at 3) He did not 
realize he had a state tax lien until he applied to refinance his mortgage about a year 
ago. He discovered the state tax lien after he paid off the debt. He had no intent to 
withhold information about his taxes. He has been making payments towards his 
repayment plan with the IRS and anticipates his federal tax debt will be resolved in 
2017. (Tr. 59 – 63, 67-68) 
 
 I find that Applicant did not intentionally falsify his security clearance application 
when he omitted that he owed state income taxes and his state and federal tax liens. He 
listed that he owed federal taxes for tax years 2007-2011, a reasonable person could 
conclude that he had state tax issues as well. His explanation for failing to list the 
information is reasonable. I find he had not intent to withhold information on his security 
clearance application and that his omissions were immaterial based on the fact that he 
notified the government of his federal tax issues.  
 
Whole-Person Factors 
 
Applicant provided copies of his performance evaluations for the periods March 
2013 to March 2014, March 2014 to March 2015, and March 2015 to March 2016. Each 
performance evaluation was favorable. He has never been disciplined or suspended 
from work. (Tr. 55, AE G) During his active duty service in the United States Navy, 
Appellant’s awards and decorations include: the Navy Commendation Medal, the Navy 
Achievement Medal (4), Good Conduct Awards (5), United Battle “E” (2), Meritorious 
Unit citation, Navy Expeditionary Medals (2), National Defense Service Medal, 
Submarine Surface Warfare “Dolphins”, Artic Service award, Sea Service Awards (8) 
and the Pistol Expert Award. (AE H at 7-14)  
 
Policies 
 
 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 must be considered when 
determining 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 
 
5 
 
 
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 
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, the applicant is 
responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, 
or mitigate facts admitted by applicant or proven by Department Counsel . . .” The 
applicant has the ultimate burden of persuasion as to 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 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. 
  
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 
 
6 
 
 
overextended is at risk of having to engage in illegal acts to generate 
funds.  
 
The guideline notes several disqualifying conditions that could raise security 
concerns. I find AG &19(a) (an inability or unwillingness to satisfy debts); and AG &19(c) 
(a history of not meeting financial obligations), apply. Applicant previously filed for 
Chapter 7 bankruptcy in April 2001. He owed delinquent federal income taxes for tax 
years 2007 to 2011 and a state tax lien was filed against him in 2011 for $21,889.  
 
An individual who is financially irresponsible may also be irresponsible, 
unconcerned, or careless in his obligations to protect classified information. Behaving 
irresponsibly in one aspect of life provides an indication of how a person may behave in 
other aspects of life. A person’s relationship with his creditors is a private matter until 
evidence is uncovered demonstrating an inability or unwillingness to pay debts under 
agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an 
applicant with a history of serious or recurring financial difficulties is in a situation of risk 
inconsistent with the holding of a security clearance. An applicant is not required to be 
debt free, but is required to manage his finances in such a way as to meet his financial 
obligations.  
 
The Government’s substantial evidence and Applicant’s own admissions raise 
security concerns under Guideline F. The burden shifted to Applicant to produce 
evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive 
¶E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden 
of disproving it never shifts to the Government. (See ISCR Case No. 02-31154 at 5 
(App. Bd. Sept. 22, 2005))  
 
The guideline also includes examples of conditions that could mitigate security 
concerns arising from financial difficulties. The following mitigating conditions apply:  
 
 AG & 20(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) applies. Applicant’s 
Chapter 7 bankruptcy occurred over 15 years ago and was caused by the break-up of 
his first marriage and his first wife’s excessive spending habits. Applicant and his 
current wife encountered tax problems when his wife began to work as an independent 
contractor. They did not understand how to file her income taxes and his wife did not set 
aside money for income tax payments. While there were a number of years when they 
did not pay taxes, they retained a tax lawyer in 2008. They entered into an agreement 
with the IRS and have been dutifully paying $2,000 a month since April 2013 towards 
their federal tax debt. They resolved the state tax debt in November 2013. They took 
steps to insure that they file taxes correctly and have not incurred additional delinquent 
taxes since 2011. They are current on all of their other debts. Applicant has 
demonstrated he is reliable, trustworthy, and has good judgment.  
 
 
7 
 
 
 AG & 20(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) applies with respect to Applicant’s 2001 
Chapter 7 bankruptcy.  The bankruptcy occurred during Applicant’s divorce from his first 
wife. His first wife incurred a lot of debt while Applicant was deployed at sea. He was 
unable to pay off the debt. Since the bankruptcy, he has maintained his bills aside from 
the tax issue. Applicant acted responsibly under the circumstances.  
 
AG ¶ 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) 
applies because Applicant took the initiative several years ago and hired a tax attorney. 
The attorney negotiated a repayment plan with the IRS. Applicant has dutifully paid the 
repayment plan since 2013 and the federal tax debt will be resolved in 2017. The state 
tax lien was resolved in November 2013. Applicant is current on his other bills and 
accounts. His financial situation is under control.  
 
AG & 20(d) (the individual initiated a good-faith effort to repay overdue creditors 
or otherwise resolve debts) applies. Applicant resolved the state tax lien. He is paying 
$2000 a month towards the federal tax debt and has made payments since April 2013. 
He demonstrated a good-faith effort to repay his state and federal income tax 
obligations.  
 
Guideline E – Personal Conduct 
 
 The security concern relating to the guideline for Personal Conduct is set out in 
AG &15: 
 
Conduct involving questionable judgment, lack of candor, dishonesty, or 
unwillingness to comply with rules and 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.  
 
 The following disqualifying condition potentially applies to Applicant’s case: 
 
AG ¶ 16(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). 
  
 I cannot conclude Applicant deliberately omitted his state and federal tax liens or 
his delinquent state taxes in response to section 26 on his e-QIP application dated April 
20, 2014.  Applicant listed in his response to section 26 that he owed federal income 
 
8 
 
 
taxes for tax years 2007 to 2011. In his response to the SOR, he believed his listing of 
his tax problems covered all tax concerns. I find that his listing of the delinquent federal 
income taxes should have put the government on notice to investigate the status of his 
state taxes as well. He did not intend to hide the information about his state taxes. His 
failure to list his tax liens and his delinquent state taxes was the result of oversight as 
opposed to an intentional omission. He cooperated fully with the government once he 
learned of the delinquent accounts. It is also noted that Applicant paid off his state tax 
debt in November 2013, five months before completing his security clearance 
application in April 2014. The personal conduct concern is found for 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 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. 
 
       I considered the potentially disqualifying and mitigating conditions in light of all the 
facts and circumstances surrounding this case. I considered Applicant’s favorable 
performance evaluations and his 14-year employment history with a defense contractor.  
I considered Applicant’s 21 years of honorable active duty service in the United States 
Navy. I considered Applicant’s 2001 Chapter 7 bankruptcy filing coincided with his 
divorce from his first wife.  While it took several years for Applicant and his current wife 
to hire a tax attorney to resolve their tax issues, they took the initiative several years 
ago and have resolved the state tax debt and are dutifully paying off their federal tax 
debt. They are current on all of their remaining bills and have sufficient income to 
continue the $2,000 monthly payments to the IRS until it is resolved in 2017.  
Applicant’s failure to list his federal and state tax liens and state tax debt was the result 
of an innocent oversight as opposed to a willful intent to deceive the government.  
 
 
 
 
 
9 
 
 
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 -1.c:    For Applicant 
     
Paragraph 2, Guideline E:    FOR APPLICANT 
 
 Subparagraphs 2.a -2.b    For Applicant 
 
Conclusion 
 
In light of all of the circumstances presented by the record in this case, it is  
clearly consistent with the national security to grant Applicant eligibility for a security 
clearance.  Eligibility for access to classified information is granted. 
 
 
                                                
_________________ 
ERIN C. HOGAN 
Administrative Judge