1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) --------------------------------- ) ISCR Case No. 15-08860 ) Applicant for Security Clearance ) Appearances For Government: Mary Margaret Foreman, Esq., Department Counsel For Applicant: Pro se 03/29/2017 ______________ Decision ______________ LEONARD, Michael H., Administrative Judge: Applicant contests the Defense Department’s intent to revoke her eligibility for access to classified information. She failed to file federal individual income tax returns on a timely basis for tax years 2009-2014. She also became indebted to the IRS in the amount of $7,510 for tax years 2009 and 2010, which she paid off in February 2016 via an installment agreement. Her tax problems are too much, went on too long, and are too recent to justify a favorable clearance decision. Accordingly, this case is decided against Applicant. Statement of the Case Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on May 15, 2013. This document is commonly known as a security clearance application. About three years later on May 16, 2016, after reviewing the application and the information gathered during a background investigation, the Department of Defense Consolidated Adjudications Facility, Fort Meade, Maryland, sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the national interest to grant her eligibility for access to classified 2 information.1 The SOR is similar to a complaint. It detailed the factual reasons for the action under the security guideline known as Guideline F for financial considerations. Applicant answered the SOR on June 15, 2016, and she requested a hearing. The case was assigned to me on August 23, 2016. The hearing was held as scheduled on November 10, 2016. Department Counsel offered Exhibits 1-4, and they were admitted. Applicant testified on her own behalf and offered Exhibits A-C, and they were admitted. The transcript of hearing (Tr.) was received on November 18, 2016. The record was kept open until December 9, 2016, to allow Applicant to present additional documentation. On November 25, 2016, she submitted two additional documentary matters, which are admitted as Exhibits D and E. Findings of Fact Applicant is a 52-year-old employee who requires a security clearance for her job as a data analyst for a company doing business in the defense industry. She has worked for this company since 2003. She married for the third time in 2012. She has four children and five stepchildren via her current marriage. Her household includes three teenage children, while the other six children range in age from 21 to 31. Her husband owns and operates a limousine/transportation service business. Under Guideline F for financial considerations, the SOR allegations concern three primary matters: (1) an indebtedness of more than $7,000 to the IRS for back taxes for tax years 2009 and 2010; (2) failure to file tax returns on a timely basis for tax years 2009 through 2014; and (3) eight relatively small collection accounts for a total of $2,187. In her answer to the SOR, she admitted the tax problems, but noted she had paid off the back taxes to the IRS by February 2016, which was before the SOR was issued to her. She denied seven of the eight collection accounts and provided short explanations for each, although the collection accounts are established by a May 2013 credit report.2 Applicant attributes her 2009-2010 tax problems to the demands of being a single parent who lacked the money to pay the IRS what she owed at the time. She attributes her subsequent tax problems to filing a joint return with her husband whose business activities made the income-tax process more complicated. She further explained that she and her husband have retained the services of an accountant and 1 This action was taken under Executive Order (E.O.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended, as well as Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on September 1, 2006, apply here. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). 2 Exhibit 3. 3 they are now current with the income tax obligations. A review of tax records3 provided by Applicant follows below. For tax year 2009, she had an adjusted gross income (AGI) of $112,710 and taxable income of $97,060. Her federal income tax return was filed late on about August 27, 2012, after receiving an extension to October 15, 2010. The IRS imposed a penalty for filing the tax return after the due date and for late payment of tax, and charged interest for the late payment. She had an account balance due of $7,075. For tax year 2010, she had an AGI of $90,969 and taxable income of $71,619. Her tax return was filed late on or about August 27, 2012, after receiving an extension to October 15, 2011. The IRS imposed a penalty for filing the tax return after the due date and for late payment of tax, and charged interest for the late payment. She had an account balance due of $435. For tax year 2011, she had an AGI of $95,710 and taxable income of $76,110. She filed her tax return on or about August 27, 2012. There is no indication that the return was filed timely or late. She was issued a refund of $653 on October 1, 2012. Applicant’s filing status for the 2009-2011 returns was head of household. After filing those returns in August 2012, she then entered into an installment agreement with the IRS to repay $7,510 due for 2009 and 2010. The agreement was established on September 24, 2012, and thereafter she made monthly payments during 2012, 2013, 2015, and 2016. The installment agreement was satisfied in February 2016. For tax year 2012, based on her 2012 marriage, Applicant’s filing status changed to married filing joint. She and her husband had an AGI of $135,019 and taxable income of $100,079. The joint return was filed late on or about December 23, 2013, after receiving an extension to October 15, 2013. A payment of $3,075 was made with the return. The IRS imposed a penalty for filing the return after the due date and for late payment of tax, and charged interest for the late payment. After application of a credit from tax year 2011, a refund was issued in the amount of $11.44. For tax year 2013, she and her husband had an AGI of $95,846, a business loss per Schedule C of $10,058, and taxable income of $59,547. The joint return appears to have been filed late on December 31, 2015. A refund was issued in the amount of $10,120. For tax year 2014, she and her husband had an AGI of $63,979, a business loss per Schedule C of $41,824, and taxable income of $29,160. The joint return appears to have been filed late on March 22, 2016. A refund was issued in the amount of $15,688. Turning next to the eight collection accounts, Applicant did not produce any supporting documentation for the collection accounts. The $978 collection account stems from attorney’s fees for a custody dispute Applicant had in about 2005. She 3 Exhibits 4, A, D, and E. 4 believes the attorney misrepresented himself to her, did not communicate with her, and she was unsatisfied with the legal services he provided. She does not feel that she owes the attorney any money, and she does not intend to pay the debt. The $384 collection account stems from an account Applicant had with a tanning salon for herself and her daughter. After the one-year contract period had lapsed, she completed the necessary paperwork to cancel the contract and was told no further action was required on her part. She was subsequently called by a collection agency, explained the circumstances, and was told not to worry about it. She does not intend to pay this debt. The $237 and $119 collection accounts are discussed together because Applicant believes they related to the same television-service provider. She was unware of the basis for these two accounts and has heard nothing from the creditors. The $174, $76, and $75 medical collection accounts are also discussed together. She believes the $174 medical collection was paid, but knows nothing about the other two accounts. The $144 collection account stems from a ticket issued by a city government. Applicant believes she paid the account via electronic payment. Applicant presented an Equifax credit report and a TransUnion credit report, both from November 2016.4 None of the eight collection accounts in the SOR are reflected in the November 2016 credit reports. Law and Policies It is well-established law that no one has a right to a security clearance.5 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.”6 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security. A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.7 An 4 Exhibits B and C. 5 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance). 6 484 U.S. at 531. 7 Directive, ¶ 3.2. 5 unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.8 There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.9 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.10 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.11 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.12 In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.13 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.14 Discussion Under Guideline F for financial considerations,15 the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is: 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 a [person’s] reliability, trustworthiness, and ability to protect classified information.16 The concern is broader than the possibility that a person might knowingly compromise classified information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. 8 Directive, ¶ 3.2. 9 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). 10 Directive, Enclosure 3, ¶ E3.1.14. 11 Directive, Enclosure 3, ¶ E3.1.15. 12 Directive, Enclosure 3, ¶ E3.1.15. 13 Egan, 484 U.S. at 531. 14 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). 15 AG ¶¶ 18, 19, and 20 (setting forth the concern and the disqualifying and mitigating conditions). 16 AG ¶ 18. 6 In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions: AG ¶ 19(a) inability or unwillingness to satisfy debts; AG ¶ 19(c) a history of not meeting financial obligations; AG ¶ 19(g) failure to file annual federal, state, or local income tax returns as required or the fraudulent filing of the same; 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; and AG ¶ 20(d) the [person] initiated a good-faith effort to repay overdue creditors or otherwise resolve debts. The evidence here supports a conclusion that Applicant has a problematic financial history sufficient to raise a security concern under Guideline F. With that said, I have given little weight to the eight collection accounts for a total of $2,187. To begin, viewed cumulatively or individually, the collection accounts do not involve a significant or sizeable amount of money. Indeed, several of the accounts are for less than $200. Second, three accounts are medical collection accounts, which are presumed to have been incurred for necessary medical care as opposed to frivolous or irresponsible spending. Third, most of the accounts were incurred years ago and do not appear on the more recent November 2016 credit reports. And fourth, Applicant has provided sufficient explanations for the accounts even considering the absence of documentation. The same cannot be said for Applicant’s history of tax problems. The repeated failure to file tax returns bears close examination and is a matter of serious concern to the federal government.17 The evidence shows she failed to file returns on a timely basis for tax years 2009, 2010, 2012, 2013, and 2014; I am unable to determine if her return for tax year 2011 was also late. This pattern of conduct is indicative of poor judgment and unreliability. This pattern of conduct also suggests that she has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. An applicant who has a history of not fulfilling their tax obligations may be said not to have demonstrated the high degree of judgment and reliability required for access to classified information. I have considered Applicant’s efforts to fix her tax problems, and her efforts are not insubstantial. She repaid the back taxes for tax years 2009 and 2010 via an 17 The General Accountability Office (GAO) expressed serious concern over the relationship between tax delinquents and clearance holders in its July 28, 2014 report, Security Clearances: Tax Debts Owed by DOD Employees and Contractors, http://www.gao.gov/assets/670/665052.pdf. 7 installment agreement that commenced in 2012 and concluded in early 2016, she has filed the required returns, and she now appears to be in good standing with the IRS. She and her husband have retained the services of an accountant to assist them with their tax obligations. I also considered Applicant’s motivation, and I have no concerns that she is a tax protestor, is tax defiant, or is otherwise opposed to meeting her lawful tax obligations. Nevertheless, the favorable matters are outweighed by the nature, extent, and seriousness of the conduct. To sum up, Applicant’s tax problems are too much, went on too long, and are too recent to justify a favorable clearance decision. Applicant’s history of tax problems creates doubt about her reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. In doing so, I gave substantial weight to Applicant’s many years of work in the defense industry. Accordingly, I conclude that she did not meet her ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant her eligibility for access to classified information. Formal Findings The formal findings on the SOR allegations are: Paragraph 1, Guideline F: Against Applicant Subparagraphs 1.a and 1.b: Against Applicant Subparagraphs 1.c-1.j: For Applicant Conclusion In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information. Michael H. Leonard Administrative Judge