1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) Redacted ) ISCR Case No. 15-04712 ) Applicant for Security Clearance ) Appearances For Government: Eric H. Borgstrom, Esq., Department Counsel For Applicant: Michael A. Blanchard, Esq. ______________ Decision ______________ MATCHINSKI, Elizabeth M., Administrative Judge: Applicant did not file timely income tax returns for tax years 2010 through 2013 because of poor budgeting that left him without the funds needed to either pay for the help he needed to file his returns or to pay his taxes. A credit card account and two utility accounts totaling $1,116 went to collection. The issues have been largely resolved and recurrence is unlikely, given a conservator has been appointed to handle Applicant’s finances going forward. Clearance is granted. Statement of the Case On December 11, 2015, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the security concerns under Guideline F, financial considerations, and explaining why it was unable to find it clearly consistent with the national interest to grant or continue security clearance eligibility for him. The DOD CAF took the action under Executive Order (EO) 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 2 Determining Eligibility for Access to Classified Information (AG) effective within the DOD on September 1, 2006. On January 22, 2016, Applicant answered the SOR allegations and requested a hearing before an administrative judge from the Defense Office of Hearings and Appeals (DOHA). On April 22, 2016, the case was assigned to a DOHA administrative judge to conduct a hearing to determine whether it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. On May 23, 2016, the case was transferred to me because of my jurisdictional responsibilities. On May 31, 2016, counsel for Applicant entered his appearance and I scheduled a hearing for July 11, 2016. I convened the hearing as scheduled. Five Government exhibits (GEs 1-5) and three Applicant exhibits (AEs A-C) were accepted into the record without objection. Applicant and his sister testified, as reflected in a transcript (Tr.) received on July 15, 2016. I held the record open for 45 days after the hearing for additional documentary submissions from Applicant. On August 24, 2016, Applicant submitted through his counsel 14 exhibits, which were admitted into the record as AEs D-Q. The Government filed no objection by the September 19, 2016 deadline for comment, and the record closed on that date. Findings of Fact The SOR alleges under Guideline F that, as of December 11, 2015, Applicant had not filed his federal income tax returns for tax years 2010 through 2013 (SOR ¶¶ 1.a-1.d) and that he owed three collection debts of $534 (SOR ¶ 1.e), $492 (SOR ¶ 1.f), and $90 (SOR ¶ 1.g). When Applicant answered the SOR allegations, he denied SOR ¶¶ 1.a through 1.c in that he had filed his federal returns for 2011 on March 30, 2015, and his returns for 2012 and 2013 on April 3, 2015. He admitted that he had not filed a timely federal return for tax year 2010, but the Internal Revenue Service (IRS) filed a return for him. Applicant denied the collection debts and explained that they had been fully satisfied on January 20, 2016. After considering the pleadings, exhibits, and transcript, I make the following findings of fact. Applicant is a 52-year-old janitor, who has worked for his current employer, a defense contractor, since September 2002. (GE 1; Tr. 52.) He has held a secret security clearance for his duties since September 2003. (GE 1.) He cleans offices that are empty and understands that he is required to notify his supervisor if he sees important paperwork out in the open. (Tr. 54.) Applicant has had a disability since birth that affected his ability to learn in the public school environment. From the age of 18 months, he was educated in a school for students with his disability. When he was around age 12, the school closed, and he was mainstreamed with support into the local public school. The public school was not 3 equipped to appropriately address his disability, and he graduated with a special diploma. After high school, he had some vocational training in the printing trade. He worked for a family-owned print shop until the business closed, and he began his present employment. (AE Q; Tr. 15-18.) Applicant lived at home with his parents until he was age 26. (Tr. 18.) In October 1991, he married a woman with the same disability. They had a son in September 1999. Applicant’s mother-in-law handled the finances for Applicant and his spouse during their marriage. (AE Q; Tr. 56.) Around October 2006, Applicant and his spouse separated, and they were divorced in February 2008. (GE 1; Tr. 19, 56.) Applicant’s parents had died by the time of his marital breakup. With the help of his two sisters, Applicant rented an apartment from October 2006 to November 2009. Sometime during the first six months, the husband of Applicant’s older sister taught Applicant about writing checks, balancing a checkbook, and setting up a budget. Applicant wanted to prove to his four siblings that he could live on his own, and he did not express that he had some trouble understanding his personal finances. (AE Q; Tr. 19-21, 29, 59.) Applicant lived with his younger sister from November 2009 to September 2012. His siblings began to notice how difficult life was for him, but Applicant displayed a confident image and was resistant to any assistance. (AE Q; Tr. 26-27.) In September 2012, he moved to his present residence. His landlord has the same disability, but was able to help Applicant with his finances. Applicant did not file federal or state income tax returns for 2010, 2011, or 2012. Applicant was not forthcoming about his tax issues with his siblings. (GE 1; AEs K, Q.) Applicant’s younger sister learned in September 2013 that he had not filed his income tax returns because she helped him complete a Questionnaire for National Security Positions (SF 86) to renew his security clearance eligibility. (Tr. 77, 83.) In response to a SF 86 financial record inquiry concerning any failure to file or pay federal, state, or other taxes in the past seven years, Applicant indicated that he had not filed his federal or state income tax returns or paid his federal and state taxes for tax years 2010 through 2013 (SOR ¶¶ 1.a-1.d).1 He indicated that he was “looking into filing and paying these back taxes.” In response to financial record inquiries concerning delinquency involving routine accounts, Applicant listed one credit card debt of approximately $510 from September 2012 (SOR ¶ 1.e).2 He explained that he would start making payments on that debt. (GE 1.) As of September 19, 2013, the credit card account was reportedly in collection for $534. Applicant also owed two electric utility debts from 2009 that were in collection for $492 (SOR ¶ 1.f) and $90 (SOR ¶ 1.g). (GE 3.) Applicant’s sister advised him to file his delinquent tax returns. (Tr. 83.) 1 He did not explain why he included tax year 2013 on his SF 86 since his returns for that tax year would not have been due. 2 When asked at his hearing why he did not pay his credit card bill, Applicant responded, “I refused to pay . . . I think I just didn’t want to pay.” (Tr. 69.) 4 On November 1, 2013, Applicant was interviewed by an authorized investigator for the Office of Personnel Management (OPM). He told the investigator that he had yet to file his delinquent tax returns for 2010 through 2012 due to “laziness,” although he testified that he was ashamed to admit that he did not have the funds to pay his taxes.3 (Tr. 78.) Applicant expressed intent to file and pay all his delinquent taxes during the upcoming tax season. About the past-due credit card balance, Applicant indicated that he was going to try to satisfy the debt in full. When asked about the utility debts in collection, Applicant explained that his sister was supposed to have taken care of those bills for him. (GE 4.) With the assistance of his younger sister, Applicant had his federal and state income tax returns for tax years 2011 through 2013 prepared by a tax service. (Tr. 22.) The tax preparer apparently could not obtain the information needed to file for earlier years, including 2010. (Tr. 33.) Applicant’s federal and state income tax returns were completed for 2011 on March 30, 2015 (AEs A, J) and for 2012 and 2013 on April 3, 2015. (AEs B-C, F-G). Applicant went on his own to the same tax preparer to complete his 2014 income tax returns, and he filed them on time. (AEs E-F, H; Tr. 58, 72.) He reportedly overpaid his federal income taxes by $16 but owed $199 in state taxes for 2011. He expected refunds totaling $468 for 2012, $175 for 2013, and $310 for 2014. (AEs A-C, E-G, H, and J.) Applicant expressed shame at his hearing about not filing timely federal and state income tax returns for several years. (Tr. 61-62.) He knew he had an obligation to file annual returns, but he did not know what he needed to do to file them. (Tr. 62.) He plans to have his younger sister help him with filing his income tax returns in the future. (Tr. 68.) In September 2015, Applicant had a $197 medical debt from 2012 placed for collection (not alleged in SOR). As of December 2015, Applicant had made no progress toward resolving the collection accounts in the SOR. After he received the SOR, Applicant informed his sisters about his financial issues. (Tr. 22, 39.) In January 2016, his older sister paid the debts in SOR ¶¶ 1.e-1.g for him. (GE 5; AEs D, P.) She also paid some medical bills for him, including possibly the $197 collection debt inasmuch as the debt is no longer on his credit record. (AE P; Tr. 39.) Applicant had the tax preparer complete his 2015 federal and state income tax returns, and he filed them on time. (Tr. 72, 75-76.) On wages of $42,757, he overpaid his federal income taxes by $73 and his state income taxes by $9 for 2015. (AEs F, I.) Applicant did not receive the anticipated refunds. On May 2, 2016, the IRS intercepted his $73 refund for 2015 and applied it to taxes owed for 2009 leaving him with a tax underpayment of approximately $3,900 for 2009. (AE K.) On July 30, 2016, Applicant arranged to repay his federal income tax debt for 2009 through payroll deduction at $25 a week. (AE M.) He signed an installment agreement with the IRS on August 3, 2016, confirming his repayment at $100 a month. (AE K.) Applicant does not know the extent of his state tax liability, if any. (Tr. 71-72.) 3 Evidence that Applicant owes about $3,900 to the IRS for tax year 2009 (AE K) tends to substantiate Applicant’s testimony that he did not file his returns for 2010 through 2013 because he did not have the funds. Since he had not completed timely returns for 2010 through 2013, Applicant would not have known that he overpaid his taxes for those years. 5 Applicant’s older sister was concerned because Applicant did not understand how to budget his finances. (Tr. 21, 37, 42-43, 51, 79.) Applicant consented to his attorney and his older sister becoming conservators of his estate, and his attorney was named a conservator on August 16, 2016. (AE N.) Applicant does not fully understand the legal ramifications, but he knows that his finances will be handled for him. Applicant has agreed to hand over his paycheck to his sister, who plans to pay him an allowance. He assented to the arrangement because his job is important to him. (Tr. 79-80, 82.) Applicant has about $57 in monthly discretionary income after deductions and expenses. (AE O.) He pays $120 a week to his landlord for his rent and utilities. (Tr. 51.) Applicant pays his $66 monthly cell phone bill in cash. (Tr. 65, 68.) Applicant has a checking account with a debit card but he has no open credit accounts. (AE P; Tr. 66-67.) His child support for his son at $85 per week is being paid automatically by court-ordered wage deduction. (Tr. 46, 50, 74.) His child support obligation ends in 2017, although he hopes to assist his son with college costs if he is financially able to do so. (Tr. 25-26.) Applicant no longer drives a vehicle because he had an accident and is afraid of driving. (Tr. 80-81.) It takes him over 1.5 hours to get to work each day because of an hour-long wait between busses. (Tr. 53, 81.) He has been working on third shift for the past five or six years. (Tr. 55.) Policies The U.S. Supreme Court has recognized the substantial discretion the Executive Branch has in regulating access to information pertaining to national security, emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 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 required to be considered 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 overall 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 6 mitigate facts admitted by applicant or proven by Department Counsel. . . .” The applicant has the ultimate burden of persuasion to obtain 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 that the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Section 7 of EO 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 concerns about financial considerations are set forth 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. When Applicant applied to renew his security clearance eligibility in September 2013, he disclosed that he had not filed his federal and his state income tax returns for tax years 2010, 2011, 2012, or 2013. He included tax year 2013, even though those tax returns were not yet due, but the evidence shows that he then made no effort to complete and file timely returns for 2013 in 2014. The Government did not allege Applicant’s noncompliance with his state tax obligations, so it cannot provide a basis for security disqualification.4 However, Applicant’s failure to file timely state income tax returns can be considered when assessing other factors, such as mitigation.5 Applicant was aware that he was required to file timely returns. His need for some assistance from a family member or professional tax preparer does not excuse him from complying. Disqualifying condition 4 It is unclear why the SOR does not allege Applicant’s failure to comply with his state tax obligations, given his admissions on his SF 86. 5 The DOHA Appeal Board has long held that the administrative judge may consider non-alleged conduct to assess an applicant’s credibility; to evaluate an applicant’s evidence of extenuation, mitigation, or changed circumstances; to consider whether an applicant has demonstrated successful rehabilitation; to decide whether a particular provision of the Adjudicative Guidelines is applicable; or to provide evidence for a whole- person analysis under Section 6.3 of the Directive. See, e.g., ISCR Case No. 03-20327 (App. Bd. Oct. 26, 2006); ISCR Case No. 09-07219 (App. Bd. Sep. 27, 2012). 7 AG ¶ 19(g), “failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same,” applies because of his failure to file timely federal income tax returns for 2010 through 2013. Even so, his filing of delinquent returns in late March and early April 2015, before the SOR was issued, is a significant factor in mitigation. The Government also met its burden of establishing by substantial evidence financial delinquency which raises security concerns under disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting financial obligations.” As of the issuance of the SOR in late December 2015, Applicant owed three collection debts totaling approximately $1,116 (SOR ¶¶ 1.e-1.g). Financial issues of security concern that involve delinquency may be mitigated under AG ¶ 20 by one or more of the following conditions: (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 resolved or is under control; (d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts; and (e) the individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue. The debts in SOR ¶¶ 1.f and 1.g are from 2009, so they were incurred some time ago. However, Applicant stopped paying on the credit card account in SOR ¶ 1.e in January 2013. Given the recency of that delinquency and the pattern of Applicant’s noncompliance with his income tax filing obligation, AG ¶ 20(a) does not fully mitigate the security concerns. AG ¶ 20(b) is implicated in that Applicant’s lifelong disability and the actions of others, however well-intentioned, have contributed to his poor financial judgment. At age 12, Applicant was mainstreamed into the public school with support that turned out to be inadequate. He graduated from high school with a special diploma. He had some success in learning a trade, but he lived with his parents. After he married a woman with the same disability, his mother-in-law took over his finances. After his divorce, he was on his own 8 with little knowledge or experience handling his own finances and with a limited ability to understand concepts such as budgeting. Nonetheless, Applicant knew that he had past- due debts and that he had not filed his tax returns. He did not ask for help to deal with the issues. While his desire to live independently is understandable, shame or embarrassment does not justify disregard of legal obligations to pay debts or file taxes. Applicant failed to exercise the good judgment that must be expected from persons with security clearance eligibility. Concerning income tax issues specifically, the Appeal Board has long held that the failure to file tax returns suggests a problem with complying with well-established government rules and systems. See e.g., ISCR Case No. 14-04437 (App. Bd. Apr. 15, 2016); ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002). Applicant shows some reform under AG ¶¶ 20(c) and 20(d) in that he filed his delinquent tax returns for tax years 2011, 2012, and 2013, both federal and state, with the help of his younger sister and a professional tax preparer in the spring of 2015. Perhaps more importantly in rehabilitation, he sought the assistance of the tax preparer on his own to prepare his returns for tax years 2014 and 2015, and he filed those returns on time. Concerning his alleged delinquent federal return for tax year 2010, there is no evidence that Applicant has filed a return for that year. He indicated in response to the SOR that the IRS filed a return for him. It is unclear whether he owes back taxes for 2010, although the evidence suggests that should the IRS notify him of a debt, payment arrangements will be made. In August 2016, Applicant entered into an installment agreement with the IRS to repay his $3,900 tax debt for 2009 at $100 a month. He authorized his employer to deduct $25 from his weekly pay for his tax debt. His tax issues have not been fully resolved, but there has been significant progress. AG ¶ 20(c) applies to the collection debts in the SOR because they have been paid, although the good-faith effort of AG ¶ 20(d) is not met because his older sister paid the debts for him. Applicant’s March 2016 credit report includes another collection debt, of $197 for medical services placed in September 2015. Applicant’s older sister testified that she paid some medical debts. As of July 2016, there were no outstanding collection debts or any open credit accounts on Applicant’s credit record, so that debt may well have been paid for him. Whether or not it has been paid, it is not a source of particular concern given its minor amount. Applicant has not had any financial counseling apart from his brother-in-law’s efforts some years ago to educate him about budgeting and managing a checking account. However, recurrence of future delinquency is unlikely. Applicant has ceded control of his finances to his older sister and his attorney. The attorney was legally appointed conservator in August 2016. Applicant may not fully understand the legal ramifications of the appointment, but his job is of such importance to him that he petitioned for the voluntary representation. 9 Whole-Person Concept Under the whole-person concept, the administrative judge must consider the totality of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative process factors in AG ¶ 2(a).6 The analysis under Guideline F is incorporated in my whole- person analysis. Some of the factors in AG ¶ 2(a) were addressed under that guideline, but some warrant additional comment. Applicant is a longtime janitor who has had a security clearance since 2003 for access to areas and not because he has a need-to-know classified information for his duties. Even so, the Government must be assured that classified material is not at risk, which in Applicant’s case means that he can be relied on to follow instructions concerning the cleaning of office areas and emptying recycle bins. He has no record of having violated any security regulations, which weighs in his favor. It is well settled that once a concern arises regarding an applicant’s security clearance eligibility, there is a strong presumption against the grant or renewal of a security clearance. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990). The Appeal Board has held that even where an applicant has corrected his federal tax problems and is motivated to prevent such problems in the future, the administrative judge is not precluded from considering an applicant’s trustworthiness in light of longstanding prior behavior evidencing irresponsibility. See e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 2015). The appointment of a conservator in this case is reasonable, but it also suggests that the persons that know him best do not fully trust Applicant’s ability to handle his personal financial affairs. However, Applicant was responsible enough to ensure that his income tax returns for 2014 and 2015 were filed on time and to refrain from taking on new credit debt. His importance of his job to him cannot be underestimated in serving as a deterrent to any future irresponsible behavior. Applicant is seen as likely to continue to perform his job with the same dedication he has displayed for the last 14 years. After considering all the circumstances in this case, I conclude that it is clearly consistent with the national interest to continue Applicant’s security clearance eligibility. 6 The factors under AG ¶ 2(a) are as follows: (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. 10 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.g: For Applicant Conclusion In light of all of the circumstances, it is clearly consistent with the national interest to continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is granted. _____________________ Elizabeth M. Matchinski Administrative Judge