1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-01871 ) Applicant for Security Clearance ) Appearances For Government: Chris Morin, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ RICCIARDELLO, Carol G., Administrative Judge: Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Applicant’s eligibility for a security clearance is denied. Statement of the Case On July 18, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued to Applicant a Statement of Reasons (SOR) detailing security concerns under Guidelines F, financial considerations. The action was taken 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 (AG) effective within the DOD on September 1, 2006. Applicant answered the SOR on October 12, 2016, and requested a hearing before an administrative judge. The case was assigned to me on January 24, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on February 23, 2017. I convened the hearing as scheduled on April 20, 2017. DOHA received the hearing transcript on April 28, 2017. 2 Procedural Matters The Government offered exhibits (GE) 1 through 4. Applicant Exhibits (AE) A and B were offered. There were no objections and all exhibits were admitted into evidence.1 At the hearing, Department Counsel provided a copy of an Appeal Board Decision that was marked as HE III. In addition, he requested I take Administrative Notice of United States Code Title 26 § 6012, 6013, 6017, 6072, and 6651. He also requested Administrative Notice be taken of Internal Revenue Service (IRS) publications for requirements to file tax returns for years 2011 through 2014. Facts administratively noticed are limited to matters of general knowledge and matters not subject to reasonable dispute. I granted the Government’s request for Administrative Notice as requested and some of those facts are set out in the findings of facts, below.2 The record was held open until May 3, 2017, to permit Applicant an opportunity to provide additional documents, which he did, and they are marked as AE C through I. Department Counsel did not object to the exhibits, but he provided comments regarding the accuracy of Applicant’s interpretation of the law that Applicant articulated in AE C. Department Counsel’s disputes Applicant’s interpretation and requested Administrative Notice be taken of U.S. Code Title 26 § 7203. I have granted the Government’s request for Administrative Notice of this section of the law.3 AE C through I were admitted into evidence and the record closed. Findings of Fact Applicant did not admit or deny any of the allegations in the SOR, but provided comments about each. I have considered his responses as denials. After a thorough and careful review of the pleadings, exhibits, and testimony, I make the following findings of fact. Applicant is 51 years old. He served in the military for eight years and was honorably discharged in 1996. He married in 1988 and divorced in 1995. He has a grown child from the marriage. He remarried in 2002. His wife has grown children who live on their own. Applicant has worked for his current employer, a federal contractor, since 2014 and has been steadily employed by different federal contractors since 2004.4 1 Hearing Exhibit (HE) I is Department Counsel’s discovery letter. HE II is the exhibit list. 2 HE IV is a copy of the pertinent sections of the U.S. Code. HE V are copies of the IRS publications. 3 HE VI is Department Counsel’s email response to AE C. HE VII is Department Counsel’s email response that there was no objection to Applicant’s additional exhibits. HE VIII is a copy of the pertinent section of the U.S. Code. 4 Tr. 25-31. 3 Applicant failed to timely file his 2011, 2012 and 2013 state income tax returns. He failed to file his 2011, 2012, 2013, and 2014 Federal tax returns. Applicant’s explanation was that he was unable to file the tax returns because he had a dispute with his mortgage company believing it was overcharging him and adding amounts to his payments that could not be explained. He stated that there was a discrepancy between what he believe he paid in taxes on his home and what the mortgage company reported. Applicant testified that he did not receive an IRS Form 1099 from the mortgage creditor for his 2011 taxes. He moved out of the house in September 2012. He hired a lawyer to litigate the matter and said the matter was in litigation for three years. He stated he stopped paying his mortgage in June 2011, when the matter was in litigation.5 During his May 2015 interview with a government investigator he explained that he got behind in paying his mortgage when his wife lost her job in 2011, and he did not have the money. He could not recall how long he was delinquent, the amount he owed, or the date the home was foreclosed. He explained to the investigator that he last spoke with the lawyer in January 2015, but intended to contact him for the status of the case. He testified that he contacted his attorney in June 2015.6 At his hearing, Applicant testified that he was not behind with his mortgage payments, but he was being overcharged by the mortgage company. He stated he was told by his attorney to stop paying his mortgage. He provided a copy of a postcard he received in January 2016, for a class action lawsuit against the mortgage company. He completed it, but has not heard back on it. The class action lawsuit is unrelated to Applicant’s mortgage and has to do with robot calls made to people about mortgage loans and using cellphones without the consumer’s consent.7 Applicant testified: Part of the issue with the house and why we ultimately left, prior to – while we were still in litigation was the incident that we were having with a neighbor that lived behind us. That go to the point of, I felt it was unsafe for my wife to be there while I was on the road for five weeks at a time, on the job because he was, we had a restraining and everything else, through [] county.8 Applicant testified that he was told by his attorney who was representing him against his mortgage company that he did not have to file his tax returns for seven years. The record was held open for Applicant to provide a letter from the attorney 5 Tr. 34-37, 56-75. 6 Tr. 73; GE 3. 7 Tr. 48-49, 70-72; Answer to the SOR. 8 Tr. 83. 4 verifying this advice. None was provided. He also testified that he read online that he did not have to file for seven years, and since the Government did not contact him about his taxes, he believed this information was accurate.9 Applicant testified that the mortgage foreclosure is still on his credit bureau report from April 2017, but he has never been contacted regarding a deficiency owed. The mortgage debt in SOR ¶ 1.c is listed in this credit report with the notation “account status-closed” and “credit grantor reclaimed collateral to settle defaulted mortgage.”10 In March 2015, Applicant completed a security clearance application (SCA). In it he stated: I currently have not filed my 2011, 2012, or 2013 taxes. This is due to the issues with my home, but I should not have owed on any of these years. By law, I have up to seven years to file these and now that I have a resolution with my previous home that I owned, this will all be taken care of when filing taxes for the 2014 year.11 In May 2015, Applicant told the government investigator that he had not filed his 2011, 2012, and 2013 Federal or state tax returns because he had seven years to do so. At that time, he was going to contact a tax preparer to file his past tax returns and to file his 2014 tax returns.12 Credit bureau reports from March 2015 and May 2016 substantiate the debts alleged in the SOR. Applicant also told the investigator that he had no knowledge of any other delinquent debts because his wife handled all of their finances. He was confronted by the investigator with the debts alleged in SOR ¶¶ 1.d, 1.e, and 1.f. He told the investigator he would contact the creditors and if it was determined the debts belonged to him, he would pay them. Applicant testified that he challenged each debt in June 2015. Applicant provided documents to show he paid the debts in SOR ¶¶ 1.d and 1.f on September 20, 2016. He also provided a document in reference to the debt in SOR ¶ 1.e, but it does not substantiate a payment was made to resolve this debt.13 In his October 2016 answer to SOR ¶¶ 1.a and 1.b, Applicant stated: My 2011 taxes could not be filed by April 15 due to litigation with [mortgage company]. My attorney implied that we could go as far as seven years without filing if we didn’t owe the IRS. Since that time, we have had 9 Tr. 34-37, 42-44, 59-63, 78-80; GE 3. 10 Tr. 51-53; AE B. 11 Tr. 64; GE 1 at page 42. 12Tr. 64 GE 3. 13 Tr. 53-56; GE 2 and 4; Answer to SOR, attachments A, B, and C. 5 several family emergencies, to include my wife’s heart attack and stroke, as well as both of our fathers’ deaths. We have not received so much a letter or notice from the IRS. As of this date my wife is gathering and preparing all documents needed to file the taxes for all years mentioned.14 Applicant testified that he believed he had seven years to file both his Federal and state tax returns. He stated he believed he was receiving a refund each year. He was aware that he was required to file and he intended to file. He acknowledged he might be penalized, but was firm that he had seven years to file. He explained he was not trying to get out of paying taxes.15 At his hearing, Applicant acknowledged that when he spoke to the investigator almost two years ago, he said he would contact the IRS. He testified that he contacted the IRS about two months ago. He explained his father passed away in September 2015 and his father-in-law passed away in January 2016.16 In Applicant’s post-hearing documents, he provided a letter dated May 1, 2017, from a tax preparer that stated: [Applicant’s wife] brought documentation into my office so that I could start working on the tax preparation for Federal 1040 tax preparation for the years 2011 thru (sic) 2016. [Applicant’s wife] still needs to provide further documentation to complete these returns and has expressed to me that she will provide the additional documentation as soon as possible.17 Applicant testified that prior to 2011 he prepared his tax returns. He stated that he “ran the numbers”18 in 2011 and thought he would receive a refund. He did not make calculations for tax years 2012 through 2015. He assumed he would receive a refund. He stated he thought he could file all of the returns at one time and at that time would pay any penalties that were owed. He stated his wife contacted the IRS recently and was advised it would get back with her. No evidence was provided to show that Applicant’s 2011 through 2015 Federal and state tax returns have been filed.19 14 Tr. 65; Answer to SOR. 15 Tr. 37-40. 16 Tr. 44-47, 75-78. 17 AE I. 18 Tr. 38. 19 Tr. 66-67. Applicant’s failure to file his 2015 Federal and state tax returns were not alleged and will not be considered for disqualifying purposes. They may be considered when making a credibility determination and in the application of mitigating conditions and analysis of the whole-person. AE C is Applicant’s statement that he disputes the failure to timely file Federal income tax returns is a criminal offense. This matter is undisputed in the law. See: U.S. Code Title 26 § 7203. AE D and F are IRS “Wage and Income Transcripts” for tax years 2011 and 2013. AE E is an IRS “account transcript” for tax year 2012. It indicated the IRS made an inquiry for non-filing of a tax return on March 25, 2014, and a notice was issued on April 14, 2014. 6 Policies When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision. The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for access to classified information will be resolved in favor of national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Likewise, I have not drawn inferences grounded on mere speculation or conjecture. Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel and 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 the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of 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). 7 Analysis Guideline F, Financial Considerations The security concern for financial considerations is set out in AG & 18: Failure or inability to live within one=s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual=s reliability, trustworthiness and ability to protect classified information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handing and safeguarding classified information.20 The guideline notes several conditions that could raise security concerns. I have considered all of the disqualifying conditions under AG & 19, and the following two are potentially applicable: (a) inability or unwillingness to satisfy debts; (c) a history of not meeting financial obligations; and (g) failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same. Applicant had delinquent debts that began in approximately 2011 that he was unwilling or unable to resolve. He failed to file Federal and state income tax returns for 2011, 2012, 2013 and 2014. The above disqualifying conditions apply. The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. The following 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; 20 See ISCR Case No. 11-05365 at 3 (App.Bd. May 1, 2012). 8 (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; (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. Applicant was delinquent in paying his mortgage when his wife became unemployed. He disputed some of the charges with the mortgage company and indicated he hired an attorney to litigate perceived unfair charges. The house was foreclosed, and there is no balance owed on the debt. The remaining debts in the SOR were brought to Applicant’s attention when he was interviewed in May 2015. He resolved two of the debts by paying them after he received the SOR in September 2016. The documentation he provided did not support that the debt in SOR ¶ 1.e was paid. Applicant failed to file his 2011 through 2014 Federal and state income tax returns. Applicant relies on the mistaken belief that he had seven years to file tax returns if he was to receive a refund. He testified he was provided this advice from his attorney, but failed to provide corroborating evidence from the attorney. Even if Applicant relied on his mistaken interpretation of the law, he has been on notice and has promised since he completed his SCA in March 2015 to file his delinquent tax returns. He repeated this promise to the government investigator in May 2015, in his October 2016 answer to the SOR, and in a post-hearing document. AG ¶ 20(a) does not apply because Applicant has not yet filed his 2011 through 2014 Federal and state tax returns and he repeated his conduct by not timely filing his 2015 tax returns. His behavior was not infrequent and did not occur under circumstances that are unlikely to recur. His conduct casts doubt on his current reliability, trustworthiness, and good judgment. Applicant began having financial problems with his mortgage when his wife was unemployed in 2011. This was beyond his control. He indicated that he was unaware of his other delinquent debts because his wife handled the finances. This was not beyond his control, but it is somewhat understandable if he relied on her to take care of these matters. Applicant’s explanation for failing to timely file his Federal and state income tax 9 returns was because he believed he had seven years to do so and was anticipating a refund. He made calculations in 2011, but did not for subsequent years. I find failing to file his tax returns was within his control. Even if he believed this misinterpretation of the law, he has not yet filed his tax returns for tax years 2011 through 2015, which supports that he has neglected to follow through with his legal responsibilities. The first part of AG ¶ 20(b) marginally applies, but the evidence supports he did not act responsibly under the circumstances. Applicant did not provide evidence of financial counseling. As indicated above, he has not filed his 2011 through 2015 Federal or state tax returns. His financial problems are not resolved or under control. AG ¶ 20(c) does not apply. Applicant was made aware of his delinquent debts when he was interviewed by a government investigator in May 2015. He failed to pay them until over a year later and after he received the SOR. This does not constitute a good-faith effort to repay overdue creditors. He has not filed his 2011 through 2015 Federal and state tax returns. AG ¶ 20(d) does not apply. Applicant did not provide evidence that he disputed debts and AG ¶ 20(e) has not been raised. 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 relevant circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a): (1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence. Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F 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 51 years old. He served honorably in the military and has been employed for many years by federal contractors. Applicant had delinquent debts that he 10 did not resolve until after he received the SOR, with one remaining outstanding. Applicant has not filed his 2011 through 2015 Federal and state income tax returns despite making promises to do so on several occasions. The DOHA Appeal Board has commented: Failure to file tax returns suggest an applicant has a problem with well- established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. ISCR Case No. 01-05340 at 3 (APP. Bd. Dec. 20, 2002). As we have noted in the past, a clearance adjudication is not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). By the same token, neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. Id. 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, 267 U.S. 886 (1961). Applicant’s conduct raises questions about his judgment, reliability, and trustworthiness. Overall, the record evidence leaves me with serious questions and doubts about Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate the security concern arising under the financial considerations guideline. 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-1.c: Against Applicant Subparagraph 1.d: For Applicant Subparagraph 1.e: Against Applicant Subparagraph 1.f: For Applicant 11 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 Applicant a security clearance. Eligibility for access to classified information is denied. _____________________________ Carol G. Ricciardello Administrative Judge