1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) [Name Redacted] ) ISCR Case No. 16-00556 ) ) Applicant for Security Clearance ) Appearances For Government: Robert J. Kilmartin, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ HOGAN, Erin C., Administrative Judge: On May 23, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, Financial Considerations. The action was taken under Executive Order 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 after September 1, 2006. The AGs implemented on September 1, 2006, have been superceded by AGs implemented by DOD on June 8, 2017. The June 8, 2017 AGs will be used to decide this case. If the September 1, 2006 AGs were applied, the outcome of this case would be the same. On June 1, 2016, Applicant answered the SOR and requested a decision on the record. Department Counsel issued a File of Relevant Material (FORM) on July 27, 2016. Applicant received the FORM on August 9, 2016. Applicant had 30 days to submit a response to the FORM. He timely submitted a response to the FORM. (Item 5) Department Counsel did not object to his submission. (Item 6) On September 12, 2016, the FORM was forwarded to the Hearing Office and assigned to me on June 22, 2017. 2 Based upon a review of the pleadings, exhibits, and testimony, eligibility for access to classified information is denied. Findings of Fact In his response to the SOR, Applicant admits all allegations in SOR. (Item 1 at 3) Applicant is an employee of a DOD contractor seeking to maintain his security clearance. He has been employed full time since November 2014. He had two periods of unemployment: from August 2013 to October 2014 and from September 2008 to January 2009. He has a high school diploma. He served in the U.S. Army National Guard from September 2001 to September 2008. He is single and has one child. (Item 2; Item 5) On November 7, 2014, Applicant submitted an Electronic Questionnaire for Investigation Processing (e-QIP). In response to Section 26 – Financial Records - Taxes, Applicant listed that he failed to file or pay his taxes for tax year 2010. The record copy is semi-legible, but it appears Applicant stated he was working to take care of the tax debt since 2014. (Item 2, section 26) A subsequent background investigation revealed Applicant encountered tax issues from 2011 to 2014. Applicant did not file his federal income tax returns for tax years 2011 and 2012, until July 2013. (SOR ¶¶ 1.d, 1.f); Applicant did not file his federal income tax returns for tax years 2013 and 2014 until February 2016. (SOR ¶¶ 1.a, 1.b). Applicant owes the Internal Revenue Service (IRS) the following amounts: $19,541 for tax year 2011 (SOR ¶ 1.g); $19,652 for tax year 2012 (SOR ¶ 1.e); and $12,631 for tax year 2013 (SOR ¶ 1.c) The total amount of the tax debt is $51,824. In response to the SOR, Applicant admitted that he owed all of the tax debts. For a number of years Applicant worked overseas as a contractor. He claims his problems began when he was laid off after his company lost their contract. He admits that he was making a lot of money while working overseas. After he was laid off, he returned to the United States and filed for unemployment. He claims his company was not taking federal taxes out of his checks. (Item 5 at 3) On February 6, 2016, Applicant submitted proposed payment plans to the IRS for tax years 2011 and 2012. The plan was to have $250 taken out of his paycheck on the 1st and 15th of each month for each tax year. In other words, he would be paying $1,000 a month towards his federal tax debt. He was still waiting on a payment plan for the 2013 tax debt. (Item 1 at 6-13) Applicant also mentioned in his response to the FORM that the IRS was in the process of reviewing his payment plans because Applicant could not afford to pay a lump sum payment. (Item 5 at 3) Applicant’s current job does not pay as well as his overseas position. He did not provide information on his monthly income or monthly expenses. His employer has positions overseas. Applicant could clear up this tax issue if he was granted a security 3 clearance so that he can work overseas in a more lucrative position. He would be able to pay the tax debts in one lump sum. Applicant states that he just wants to be a good father and provide for his family. (Item 5 at 3) Policies When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are useful 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 over arching adjudicative goal is a fair, impartial and commonsense decision. According to AG ¶ 2(a), 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 for national security eligibility will be resolved in favor of the national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The applicant has the ultimate burden of persuasion as to obtaining a favorable security decision. A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk that the applicant may deliberately or inadvertently fail to protect or safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information. Section 7 of Executive Order (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 4 of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information). Analysis GUIDELINE F: Financial Considerations The security concern relating to the guideline for Financial Considerations is set out in AG & 18: Failure 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 or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage. AG ¶ 19 notes several disqualifying conditions that could raise security concerns. The disqualifying conditions that are relevant to Applicant’s case include: (a) inability to satisfy debts; (b) unwillingness to satisfy debts regardless of the ability to do so; (c) a history of not meeting financial obligations; and (f) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required. All of the above disqualifying conditions apply because Applicant failed to file and pay his federal income tax returns from 2011 to 2014. At some point, he was earning sufficient money to pay his federal taxes. He did not look into filing and paying his federal tax returns until several years after they were due. An individual who is financially irresponsible may also be irresponsible, unconcerned, or careless in his obligations to protect classified information. Behaving irresponsibly in one aspect of life provides an indication of how a person may behave in other aspects of life. A person’s relationship with his creditors is a private matter until 5 evidence is uncovered demonstrating an inability or unwillingness to pay debts under agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an applicant with a history of serious or recurring financial difficulties is in a situation of risk inconsistent with the holding of a security clearance. An applicant is not required to be debt free, but is required to manage his finances in such a way as to meet his financial obligations. The Government’s substantial evidence and Applicant’s admissions raised security concerns under Guideline F. The burden shifted to Applicant to produce evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive ¶ E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government. (See ISCR Case No. 02-31154 at 5 (App. Bd. Sept. 22, 2005)) AG ¶ 20 includes examples of conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions potentially apply: (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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; (d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and (g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements. AG & 20(a) does not apply because Applicant’s tax issue has not been resolved. The issue is ongoing and involved four tax years. It was not an isolated issue. AG & 20(b) partially applies because Applicant had several periods of unemployment, however, his neglect of his duties to file and pay his Federal income taxes occurred between 2011 to 2014. He filed his tax returns several years late and the taxes owed remain outstanding. For this reason, AG ¶ 20(b) is given less weight. He did not behave responsibly under the circumstances. AG & 20(d) partially applies because Applicant demonstrated that he made a good-faith effort to resolve his delinquent accounts by offering to enter a payment 6 agreement with the IRS. However, it is not clear if the payment agreement is active. The record evidence is not clear as to whether Applicant is making payments to the IRS. I cannot conclude an active payment agreement is in effect and Applicant is making regular payments under the terms of the payment agreement. For this reason, AG ¶ 20(d) is given less weight. AG & 20(g) partially applies in the Applicant was in the process of making arrangements to pay his delinquent federal taxes to the IRS. However, it is unclear whether the Applicant and the IRS came to an agreement and that Applicant was making regular payments under the agreement, if an agreement was approved. For this reason, AG ¶ 20(g) is given less weight. The record establishes that Applicant failed to timely file his federal tax returns for tax years 2011 through 2014. The DOHA Appeal Board has commented: Failure to file tax returns suggests that an applicant 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. 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, 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” including a failure to timely file federal income tax returns. 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 with focus on timing of filing of tax returns after receipt of the SOR). 7 The negative financial and judgment information in Applicant’s case is significant. The record established that Applicant did not file his federal returns on a timely basis from 2011 to 2014 and he has a significant delinquent tax debt. His attempts to enter into a repayment agreement with the IRS is 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(d): (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 Applicant’s service in the Army National Guard and his employment history with DOD contractors. However, I remain concerned regarding the number of years Applicant did not file and or pay his federal tax returns. While Applicant is attempting to enter in a payment agreement with the IRS, there is no evidence an agreement had been reached at the close of the record. It appears Applicant did not file his 2013 and 2014 federal tax returns until 2016, several years after he submitted his security clearance application. His tax issues were ignored for years, even though he admits earning a good income in his overseas positions. It is unclear that Applicant would be able to meet the terms of a repayment agreement because he provided no information on his finances. The security concerns raised under financial considerations 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 – 1.g: Against Applicant 8 Conclusion In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the interests of national security to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. _________________ ERIN C. HOGAN Administrative Judge