1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) [Redacted] ) ISCR Case No. 16-01831 ) Applicant for Security Clearance ) Appearances For Government: Nicole A. Smith, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ FOREMAN, LeRoy F., Administrative Judge: This case involves security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is granted. Statement of the Case Applicant submitted a security clearance application (SCA) on August 26, 2015. On November 9, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) sent him a Statement of Reasons (SOR) alleging security concerns under Guideline F. The DOD CAF acted under Executive Order (Exec. Or.) 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) implemented by the DOD on September 1, 2006.1 1 Security Executive Agent Directive 4 (SEAD 4), was issued on December 10, 2016, revising the 2006 adjudicative guidelines. The SEAD 4 guidelines apply to all adjudicative decisions issued on or after June 8, 2017. My decision is based on the guidelines in SEAD 4, hereinafter referred to as “AG.” The changes resulting from issuance of SEAD 4 did not affect my decision in this case. 2 Applicant answered the SOR on November 30, 2016, and requested a hearing before an administrative judge. Department Counsel was ready to proceed on January 31, 2017, and the case was assigned to me on March 2, 2017. On March 3, 2017, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for March 23, 2017. I convened the hearing as scheduled. Government Exhibits (GX) 1 through 5 were admitted in evidence without objection. Applicant testified and submitted Applicant’s Exhibits (AX) A through E, which were admitted without objection. Department Counsel’s letter to Applicant dated January 31, 2017, complying with the discovery requirement of Directive ¶ E3.1.13, is attached to the record as Hearing Exhibit (HX) I. I kept the record open until April 21, 2017, to enable Applicant to submit additional documentary evidence. He timely submitted AX F and G, which were admitted without objection. Department Counsel’s comments regarding AX F and G are attached to the record as HX II and III. DOHA received the transcript (Tr.) on April 4, 2017. Findings of Fact2 In Applicant’s answer to the SOR, he admitted SOR ¶¶ 1.a-1.d and 1.f. He denied SOR ¶ 1.e. His admissions in his answer and at the hearing are incorporated in my findings of fact. Applicant is a 42-year-old electronics technician employed by a defense contractor since August 2015. He served on active duty in the U.S. Navy from December 2003 to October 2013 and received an honorable discharge. He attended a university from September 2013 to May 2015 but did not receive a degree. He held a security clearance while in the Navy. Applicant married in February 2007 and divorced in April 2010 because of his wife’s infidelity. He has a nine-year-old son born during the marriage. Applicant filed a Chapter 7 bankruptcy petition in July 2001 and received a discharge in October 2001. The bankruptcy was triggered by his loss of employment at a microchip-manufacturing business that failed. (Tr. 36-37.) Notwithstanding the bankruptcy, he was granted a security clearance in 2003. The bankruptcy was alleged in SOR ¶ 1.a. Applicant testified that his current financial problems began with his divorce in 2010, which left him responsible for $40,000 in marital debts, including a home mortgage payment, and obligations to pay alimony and child support. The home went into foreclosure, but there is no outstanding deficiency on the loan. His wife remarried shortly after the divorce, and Applicant no longer is obligated to pay alimony, but he is paying $180 per two-week pay period in child support. After paying all his bills and living expenses, he has a net monthly remainder of $200 to $300. (Tr. 36.) 2 Applicant’s personal information is extracted from his security clearance application (GX 1) unless otherwise indicated by a parenthetical citation to the record. 3 In an effort to pay his debts, Applicant made two $10,000 withdrawals from his retirement account in 2013. He neglected to have federal income tax deducted from the first withdrawal, resulting in a large federal tax debt. (Tr. 28-30.) In his SCA, he indicated that he failed to timely file his federal income tax return for 2013, but his disclosure was inaccurate. He timely filed his income tax return, but he failed to request that income taxes be withheld on a withdrawal from his retirement account, and he did not report the withdrawal as income on his 2013 tax return. (GX 1 at 29-30; GX 3 at 4-5; Tr. 29-30.) He testified that he originally owed the IRS about $10,000, but the amount has been reduced by the diversion of his federal income tax refunds. (Tr.49.) The SOR alleges five delinquent debts, which are reflected in his credit bureau reports (CBRs) from September 2015 and May 2016 (GX4 and 5). The evidence concerning the debts alleged in the SOR is summarized below. SOR ¶ 1.b: debt to men’s clothing store charged off for $1,184 in August 2015. Applicant settled this debt for $800 and made the final payment on the agreed amount in January 2017. (AX A.) SOR ¶ 1.c: credit card account charged off for $705 in May 2015. Applicant received a settlement offer of $423 and paid it in March 2017. (AX D; AX G.) SOR ¶ 1.d: judgment for $1,295 in rent and damage to apartment filed in August 2015. The judgment was satisfied in March 2017. (AX B.) SOR ¶ 1.e: collection account for $12,762, closed in March 2012. Applicant presented evidence that this debt was included in his 2001 Chapter 7 bankruptcy. The account number on the bankruptcy list of unsecured creditors matches the CBR entry on the September 2015 CBR. (GX 4 at 9; AX F at 11.) SOR ¶ 1.f: federal tax debt of $7,798 for tax year 2013. Applicant testified that he sent four $100 checks to the IRS in 2015, and each time he received a $100 check from the U.S. Treasury. (Tr. 49, 54.) When he submitted a personal financial statement to DOHA in response to financial interrogatories in July 2016, he listed a monthly $150 payment to the IRS. (GX 3 at 11.) After the hearing, Applicant contacted the IRS and made a payment agreement providing for monthly $140 payments beginning in April 2017. (GX 3 at 10.) Applicant has been making regular payments on two credit-card accounts not alleged in the SOR. One has a credit limit of $500 and the payments are current. (AX C.) The second account was “maxed out” during his divorce and has a balance of about $9,900, and he has been making regular monthly payments of $200 to keep this account current. (AX E.) 4 Policies “[N]o 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 applicants 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 § 2. 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, an administrative judge applies these guidelines 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 and 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 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. Clearance decisions must be made “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” Exec. Or. 10865 § 7. Thus, a decision to deny a security clearance 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. 92-1106 at 3, 1993 WL 545051 at *3 (App. Bd. Oct. 7, 1993). 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 burden of proving a mitigating condition, 5 and the burden of disproving it never shifts to the Government. See ISCR Case No. 02- 31154 at 5 (App. Bd. Sep. 22, 2005). An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). “[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 Guideline F, Financial Considerations The security concern under this guideline 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. . . . This concern is broader than the possibility that a person might knowingly compromise classified information to raise money. It encompasses concerns about a person’s self-control, judgment, and other qualities essential to protecting classified information. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012). Applicant’s financial problems are reflected in his CBRs, response to the SOR, and testimony at the hearing. The evidence is sufficient to establish the disqualifying conditions in AG ¶ 19(a) (“inability to satisfy debts”) and AG ¶ 19(c) (“a history of not meeting financial obligations”). His failure to timely pay the tax due on the withdrawal from his retirement account establishes the second prong AG ¶ 19(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”). The following mitigating conditions are potentially relevant: AG ¶ 20(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; AG ¶ 20(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; 6 AG ¶ 20(d): the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and AG ¶ 20(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) is not established. Applicant’s delinquent debts were numerous, recent, and were not incurred under circumstances making them unlikely to recur. AG ¶ 20(b) is established. Applicant has encountered conditions largely beyond his control. His bankruptcy in 2001 occurred because he lost his job when his employer’s business failed. His most recent financial problems were the result of his marital breakup caused by his ex-wife’s infidelity. He has acted responsibly by maintaining contact with his creditors, making payment agreements, and resolving all the debts alleged in the SOR except for the IRS debt. AG ¶ 20(d) is established for all the debts except the IRS debt. Applicant has had insufficient time to establish a track record of compliance with the IRS payment plan. AG ¶ 20(g) is not established for the same reason. Whole-Person Concept Under AG ¶¶ 2(a), 2(c), and 2(d), 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. Applicant was candid, sincere, and credible at the hearing. He served honorably in the U.S. Navy and held a security clearance for many years. He has not yet resolved the federal tax debt, but a security clearance adjudication is not a debt-collection procedure. It is an evaluation of an individual’s judgment, reliability, and trustworthiness. It ISCR Case No. 09-02160 (App. Bd. Jun. 21, 2010.) The adjudicative guidelines do not require that an individual make payments on all delinquent debts simultaneously, pay the debts alleged in the SOR first, or establish resolution of every debt alleged in the SOR. He or she need only establish a plan to resolve financial problems and take significant actions to implement the plan. See ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008). He has a plan to resolve his tax debt and has taken a significant step toward resolving it. Based on his responsible actions to resolve his other debts, I am confident that he will comply with his newly negotiated payment plan for the IRS debt. After weighing the disqualifying and mitigating conditions under Guideline F and evaluating all the evidence in the context of the whole person, I conclude Applicant has mitigated the security concerns raised by his delinquent debts and comply with the federal tax laws. Accordingly, I conclude he has carried his burden of showing that it is clearly consistent with the national security interests of the United States to grant him eligibility for access to classified information. 7 Formal Findings I make the following formal findings on the allegations in the SOR: Paragraph 1, Guideline F (Financial Considerations): FOR APPLICANT Subparagraphs 1.a-1.f: For Applicant Conclusion I conclude that it is clearly consistent with the national security interests of the United States to grant Applicant eligibility for access to classified information. Clearance is granted. LeRoy F. Foreman Administrative Judge