1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 15-06020 ) Applicant for Security Clearance ) Appearances For Government: Adrienne Driskill, Esq., Department Counsel For Applicant: Pro se ___________ Decision ___________ HARVEY, Mark, Administrative Judge: Applicant’s statement of reasons (SOR) alleges five delinquent debts totaling $28,978, and that he filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code on November 7, 2014. He also has a history of delinquent federal income taxes. He has not made sufficient progress addressing his delinquent debts. Financial considerations security concerns are not mitigated. Access to classified information is denied. History of the Case On March 6, 2015, Applicant completed and signed a Questionnaire for National Security Positions (SF 86) or security clearance application (SCA). (Government Exhibit (GE) 1) On May 15, 2016, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued an SOR to Applicant pursuant to Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry, February 20, 1960; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (Directive), January 2, 1992; and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), which became effective on September 1, 2006. The SOR detailed reasons why the DOD CAF did not find under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for Applicant, and recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked. (Hearing Exhibit (HE) 2) 2 Specifically, the SOR set forth security concerns arising under the financial considerations guideline. On May 24, 2016, Applicant responded to the SOR and requested a hearing. On August 10, 2016, Department Counsel indicated he was ready to proceed. On August 30, 2016, the case was assigned to me. On December 21, 2016, the Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing, setting the hearing for January 17, 2017. (HE 1) The hearing was held as scheduled. Department Counsel offered five exhibits; Applicant offered eight exhibits; and all proffered exhibits were admitted without objection. (Tr. 16-19; GE 1-5; Applicant Exhibits (AE) A-H) On January 24, 2017, DOHA received the transcript of the hearing. Findings of Fact1 In Applicant’s SOR response, he admitted responsibility for the debts in SOR ¶¶ 1.a through 1.e and the bankruptcy in SOR ¶ 1.f. He also provided extenuating and mitigating information. Applicant’s admissions are accepted as findings of fact. Applicant is 55 years old, and he intended to work for the government contractor as a background investigator. (Tr. 5, 8) In 1979, Applicant graduated from high school. (Tr. 5) In 1981, he received an associate’s degree in an electronics-related area. (Tr. 6) He has never served in the U.S. Armed Forces. (Tr. 6) In 1982, he married; in 1988, he separated from his spouse; and he is unsure if his divorce was ever finalized. (Tr. 6-7) Applicant’s children are ages 11, 13, 24, and 28 years old. (Tr. 7) Applicant’s partner lives with him, and she is a hairdresser. (Tr. 7) His partner has three children living in their home, and Applicant’s 11 and 13-year-old children live with Applicant. (Tr. 7, 24) Applicant and his partner do not receive any child support payments for the five minor children living in their residence. (Tr. 25; GE 5) Applicant worked in law enforcement since 1999. (Tr. 20) He also performed background investigations since 2000; however, he is not currently employed in law enforcement or conducting background investigations. (Tr. 8) In 2015, he retired from his police-department employment after 14 years. (Tr. 26) His monthly income from his police retirement is $4,500, and he receives about $2,500 monthly from two part-time jobs. (Tr. 23, 26, 57) There is no evidence of criminal conduct, abuse of alcohol, or use of illegal drugs. Applicant described himself as a person of good character, who is patriotic, loyal, and reliable. Financial Considerations Applicant’s financial problems were caused by illness. In December 2013, Applicant had a back injury and was diagnosed with cancer. (Tr. 20, 27-28; AE C) In March 2014, he had surgery and received six weeks of radiation treatments. (Tr. 20; AE 1Some details have been excluded in order to protect Applicant’s right to privacy. Specific information is available in the cited exhibits. 3 D) After he used all of his sick time and vacation time, he was not receiving any income. (Tr. 20-21, 29; AE E) He did not receive any income from March to December 2014. (Tr. 43) In December 2015, he was medically retired from law enforcement. (Tr. 20) The police department where he worked refused to pay workers compensation because his employer claimed his cancer was not work related. (Tr. 20-21) After several hearings, a judge determined workers compensation benefits should have been paid to Applicant. (Tr. 21, 30; AE A; AE B; AE F) His most recent correspondence regarding his workers compensation benefits was in April 2016, and he is still waiting to be paid. (Tr. 21, 30; AE B; AE F) On January 9, 2017, Applicant had another workers compensation hearing, and he said he received a ruling that he is 68 percent disabled. (Tr. 31-32) Applicant may receive a substantial lump sum amount from the ongoing workers compensation litigation. (Tr. 61-64) He plans to use the lump sum payment to pay his debts, invest part of the money, and put some aside for the education of his children. (Tr. 63) Applicant reduced his expenses. (Tr. 22-23) He obtained a mortgage modification on his primary mortgage, and he is seeking a mortgage modification on his rental property’s mortgage. (Tr. 23) At one point, Applicant received foreclosure notices on both of his houses, and a BMW used by his security business was repossessed. (Tr. 40) On August 25, 2012, Applicant filed a Chapter 13 bankruptcy because his security businesses could not afford to pay workers compensation claims from employees. His security businesses were in addition to his employment with the police department. (Tr. 35, 38, 40-41) In 2012 and 2013, he closed the security companies. (Tr. 42) The bankruptcy filed on August 25, 2012, was dismissed two years later on August 25, 2014. (GE 4)2 Applicant’s history of delinquent debt is documented in his credit reports, SOR response, bankruptcy records, and hearing record. Applicant’s SOR alleges five delinquent debts totaling $28,978, and he filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code on November 7, 2014. The status of the SOR allegations is as follows: 2Applicant’s SOR does not allege four financial issues: (1) his 2012 Chapter 13 bankruptcy was dismissed in 2014; (2) he had a federal income tax lien for $10,298 filed in 2009 and released in 2010; (3) he is currently making payments on a $19,000 federal income tax debt for tax year 2012; and (4) he has delinquent student loan debts of $24,192. In ISCR Case No. 03-20327 at 4 (App. Bd. Oct. 26, 2006), the Appeal Board listed five circumstances in which conduct not alleged in an SOR may be considered stating: (a) to assess an applicant’s credibility; (b) to evaluate an applicant’s evidence of extenuation, mitigation, or changed circumstances; (c) to consider whether an applicant has demonstrated successful rehabilitation; (d) to decide whether a particular provision of the Adjudicative Guidelines is applicable; or (e) to provide evidence for whole person analysis under Directive Section 6.3. Id. (citing ISCR Case No. 02-07218 at 3 (App. Bd. Mar. 15, 2004); ISCR Case No. 00-0633 at 3 (App. Bd. Oct. 24, 2003)). See also ISCR Case No. 12-09719 at 3 (App. Bd. April 6, 2016) (citing ISCR Case No. 14- 00151 at 3, n. 1 (App. Bd. Sept. 12, 2014); ISCR Case No. 03-20327 at 4 (App. Bd. Oct. 26, 2006)). These four issues will not be considered except for the five purposes listed above. 4 SOR ¶¶ 1.a and 1.b allege collection debts for $100 and $279 owed to the same company. Applicant said the debts might be related to utilities. (Tr. 47-48) SOR ¶ 1.d alleges a collection debt for $78, and SOR ¶ 1.e alleges a telecommunications collection debt for $308. Applicant has not investigated or verified any of these debts, and they may not be paid. (Tr. 47-51) Applicant did not present any correspondence to or from the creditors for these four debts. SOR ¶ 1.c alleges a $382,000 mortgage debt past due in the amount of $28,213. Applicant said this debt was the mortgage from his rental property. (Tr. 48) He decided to stop making most of his payments on the mortgage, and it is now more than $28,000 past due. (Tr. 69-70) He is receiving $1,450 in monthly rental income from a tenant. (Tr. 49) The current monthly mortgage payment is $1,600, and he pays $90 monthly for a property management fee. (Tr. 49) Applicant is trying to get a loan modification that will add the delinquent interest onto the principal of the mortgage. (Tr. 50) He plans to sell the rental property. (Tr. 64) He did not include the mortgage debt in his bankruptcy. (Tr. 70-71) He is keeping the rent and not paying the mortgage. (Tr. 71) SOR ¶ 1.f alleges that Appellant filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code on November 7, 2014. This bankruptcy plan required him to pay $470 monthly for 18 months, $1,200 monthly for 12 months, and then $1,920 monthly thereafter for a total of 60 months. (Tr. 43, 68) In March 2016, Applicant received notice that he paid the trustee $6,313, resulting in a $1,207 default through March 31, 2016, even though his payments were only $470 monthly. (Tr. 44, 69; GE 5) The most recent docket entry for the bankruptcy court shows on July 7, 2016, “BNC Certificate of Mailing” and “Request for Notice.” (GE 5) Applicant said he was able to convince the court to reduce the amount of his bankruptcy payments. (Tr. 45) He said he is current on his $470 monthly bankruptcy payments for the Chapter 13. (Tr. 22, 45) He planned to ask the bankruptcy court to delay a planned increase in his monthly payments. (Tr. 46) Applicant received financial counseling as part of the bankruptcy process. (Tr. 56) The budget filed with the bankruptcy court shows a negative monthly disposable income of $363. (GE 5) In 2009, the Internal Revenue Service (IRS) filed a tax lien against Applicant for $10,298, and it was released in 2010. (Tr. 54; GE 2) Applicant conceded there were times when he was late filing his tax returns. (Tr. 54) He currently has an installment payment plan with the IRS. (Tr. 54) He is paying $339 monthly to address an IRS debt from tax year 2012 of about $19,000. (Tr. 55, 72)3 Applicant listed four delinquent student loan debts totaling $24,192 on Schedule F of his November 7, 2014 bankruptcy filing. (GE 5) Two debts were last active on May 1, 3Section 26 of Applicant’s March 6, 2015 Questionnaire for National Security Positions (SF 86) or security clearance application (SCA), asked “In the past seven (7) years have you failed to file or pay Federal, state, or other taxes when required by law or ordinance?” (Government Exhibit (GE) 1) Applicant answered, “No.” (GE 1) Applicant disclosed his bankruptcies and largest delinquent debts on his SCA and the government was well aware of his financial problems. Applicant was not confronted with his failure to disclose information on his SCA about his taxes at his hearing, and this issue will not be used against him for any purpose in this decision. 5 2012, and the other two student loan debts were last active on September 1, 2014. (GE 5) Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicant’s eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended. Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable. The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk 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. Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See Exec. Or. 10865 § 7. Thus, nothing should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination about applicant’s allegiance, loyalty, or patriotism. It is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). 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. 95-0611 at 2 (App. Bd. May 2, 1996). 6 Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his or her security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of disproving a mitigating condition never shifts to the Government. See ISCR Case No. 02- 31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b). Analysis Financial Considerations AG ¶ 18 articulates the security concern relating to financial problems: 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. Applicant’s history of delinquent debt is documented in his credit reports, bankruptcy records, SOR response, and hearing record. AG ¶ 19 provides two disqualifying conditions that could raise a security concern and may be disqualifying in this case: “(a) inability or unwillingness to satisfy debts;” and “(c) a history of not meeting financial obligations.” The record established the disqualifying conditions in AG ¶¶ 19(a) and 19(c) requiring additional inquiry about the possible applicability of mitigating conditions. Five mitigating conditions under AG ¶ 20 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; 7 (d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts;4 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 Appeal Board concisely explained Applicant’s responsibility for proving the applicability of mitigating conditions as follows: Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong presumption against the grant or maintenance of a security clearance. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991). After the Government presents evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those concerns. See Directive ¶ E3.1.15. The standard applicable in security clearance decisions is that articulated in Egan, supra. “Any doubt concerning personnel being considered for access to classified information will be resolved in favor of the national security.” Directive, Enclosure 2 ¶ 2(b). ISCR Case No. 10-04641 at 4 (App. Bd. Sept. 24, 2013). No mitigating conditions fully apply; however, Applicant presented some important positive financial information. Applicant had significant medical problems, and he was unemployed and underemployed. He lost money when his security companies were going out of business. He suffered from cancer, back, and heart problems. While receiving cancer treatments and recovering from surgery, he was unable to work, and he generated medical bills. He acknowledged his delinquent debts, and he said he intends to pay his debts. The decline in real estate prices reduced his ability to resolve his mortgage debt on his rental property. 4The Appeal Board has previously explained what constitutes a “good faith” effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term “good-faith.” However, the Board has indicated that the concept of good-faith “requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.” Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy) in order to claim the benefit of [the “good faith” mitigating condition]. (internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 8 Applicant had problems paying his federal income taxes, and the IRS filed a tax lien for $10,298 in 2009. He is currently making payments to the IRS to address a tax debt from tax year 2012 for $19,000. The Appeal Board has commented in the context of federal income taxes: A person who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). See ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016) (citing ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002)). ISCR Case No. 14-01894 at 4-5 (App. Bd. Aug. 18, 2015). The Appeal Board clarified that even in instances where an “[a]pplicant has purportedly corrected [the applicant’s] federal tax problem, and the fact that [applicant] is now motivated to prevent such problems in the future, does not preclude careful consideration of [a]pplicant’s security worthiness in light of [applicant’s] longstanding prior behavior evidencing irresponsibility.” See ISCR Case No. 15-01031 at 3 and note 3 (App. Bd. June 15, 2016) (characterizing “no harm, no foul” approach to an Applicant’s course of conduct and employed an “all’s well that ends well” analysis as inadequate to support approval of access to classified information). The negative financial and judgment information in Applicant’s case is significant. The record established that Applicant has owed federal taxes since 2012. He collected rent from a tenant and did not pay the mortgage accruing more than $28,000 in past due interest. His 2012 Chapter 13 bankruptcy was dismissed, and in March 2016, he was warned about the possible dismissal of his 2014 Chapter 13 bankruptcy because he had not made the required payments under his bankruptcy payment plan. His Chapter 13 payments are scheduled to significantly increase, and there is insufficient assurance he will make the necessary payments. His explanations are insufficient to fully mitigate financial considerations security concerns. 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; 9 (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 have incorporated my comments under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(a) were addressed under Guideline F, but some warrant additional comment. Applicant is 55 years old, and he plans to work for the government contractor as a background investigator. In 1981, he received an associate’s degree in an electronics- related area. Applicant and his partner have five minor children living in their residence. Applicant worked in law enforcement since 1999. He has performed background investigations since 2000; however, he is not currently employed in law enforcement or conducting background investigations. In 2015, he retired from his police-department employment after 14 years. His monthly income from his retirement is $4,500, and he receives about $2,500 monthly from two part-time jobs. There is no evidence of criminal conduct, abuse of alcohol, or use of illegal drugs. Circumstances beyond his control adversely affected his finances including: medical problems; unemployment; underemployment; loss of his security businesses; and medical bills. Applicant described himself as a person of good character, who is patriotic, loyal, and reliable. Applicant’s SOR alleges five delinquent debts totaling $28,978, and he filed for bankruptcy protection under Chapter 13 of the Bankruptcy Code on November 7, 2014. He is accepting rent from a tenant and not paying the mortgage on his rental property. I have doubts that Applicant will successfully complete his Chapter 13 bankruptcy because the payments are scheduled to significantly increase, and he has had difficulty making the payments in the past. His Chapter 13 bankruptcy filed in 2012 was dismissed in 2014. The IRS filed a tax lien against Applicant for $10,298 in 2009. He is currently making payments to the IRS to address a tax debt from tax year 2012 for $19,000. When a tax issue is involved, an administrative judge is required to consider how long an applicant waits to file their tax returns, whether the IRS generates the tax returns, and how long the applicant waits after a tax debt arises to begin and complete making payments.5 The primary tax problem here is that Applicant has owed substantial federal tax debts since 2012. 5The recent emphasis of the Appeal Board on security concerns arising from tax cases is instructive. See ISCR Case No. 14-05794 at 7 (App. Bd. July 7, 2016) (reversing grant of security clearance and stating, “His delay in taking action to resolve his tax deficiency for years and then taking action only after his security clearance was in jeopardy undercuts a determination that Applicant has rehabilitated himself and does not reflect the voluntary compliance of rules and regulations expected of someone entrusted with the nation’s secrets.”); ISCR Case No. 14-01894 at 2-6 (App. Bd. Aug. 18, 2015) (reversing grant of a security clearance, discussing lack of detailed corroboration of circumstances beyond applicant’s control adversely affecting finances, noting two tax liens totaling $175,000 and garnishment of Applicant’s wages, and emphasizing the applicant’s failure to timely file and pay taxes); ISCR Case No. 12-05053 at 4 10 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, 913 F. 2d at 1401. Unmitigated financial considerations concerns lead me to conclude that grant of a security clearance to Applicant is not warranted at this time. This decision should not be construed as a determination that Applicant cannot or will not attain the state of reform necessary for award of a security clearance in the future. With a track record of behavior consistent with his obligations, he may well be able to demonstrate persuasive evidence of his security clearance worthiness. I have carefully applied the law, as set forth in Egan, Exec. Or. 10865, the Directive, and the AGs, to the facts and circumstances in the context of the whole person. Financial considerations concerns are not mitigated. 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 Subparagraphs 1.a through 1.f: 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 or continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied. _________________________ MARK HARVEY Administrative Judge (App. Bd. Oct. 30, 2014) (reversing grant of a security clearance, noting not all tax returns filed, and insufficient discussion of Applicant’s efforts to resolve tax liens).