1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) [REDACTED] ) ISCR Case No. 16-02440 ) Applicant for Security Clearance ) Appearances For Government: Rhett E. Petcher, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ MARINE, Gina L., Administrative Judge: This case involves security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is denied. Statement of the Case Applicant submitted a security clearance application (SCA) on January 14, 2015. On September 28, 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 (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) implemented by DOD on September 1, 2006. Applicant answered the SOR on November 2, 2016, and requested a hearing before an administrative judge. Department Counsel was ready to proceed on December 20, 2016, and the case was assigned to me on January 25, 2017. On February 27, 2017, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for March 28, 2017. I convened the hearing as scheduled. 2 Government Exhibits (GE) 1 through 4 were admitted into evidence, without objection. I appended to the record a letter the Government sent to Applicant as Hearing Exhibit (HE) I, and the Government’s exhibit list as HE II. At the hearing, Applicant testified and submitted Applicant’s Exhibits (AE) A through C, which were admitted into evidence, without objection. At Applicant’s request, I left the record open to April 12, 2017. Applicant timely provided additional documents that I admitted into evidence as AE D through H, without objection. I appended the associated post-hearing email exchanges to the record as Hearing Exhibit (HE) III. DOHA received the transcript (Tr.) on April 5, 2017. On June 8, 2017, the DOD implemented new AG.1 Accordingly, I have applied the June 2017 AG.2 However, because the September 2006 AG were in effect on the date of the hearing, I have also considered the September 2006 AG. Having considered both versions of the AG, I conclude that my decision would have been the same had I applied the September 2006 AG. Findings of Fact3 Applicant, age 62, has been separated from his wife of 30 years since approximately 2010 or 2011. He has two adult children. He received his high school diploma in 1976. Applicant has been employed with the same defense contractor since 1986, during which time he has held and currently maintains a security clearance.4 In 2007, Applicant applied for a $40,000 home-improvement loan for his home that “needed extensive renovations,” which he planned to complete himself with his brother’s help. His lender assured him that he would be approved for a loan of that amount. While he waited for the loan, Applicant borrowed $20,000 from his employee retirement plan (SSIP) in order to begin the work while there was still “good weather.” He intended to repay the SSIP loan from the proceeds of the $40,000 loan. However, the bank only approved a $20,000 loan. At that point, he had used the entire $20,000 SSIP loan to replace his roof and windows, rebuild a deck, and build a walk-out. The payments for his SSIP loan and the $20,000 home-improvement loan extended his 1 On December 10, 2016, the Security Executive Agent issued Directive 4 (SEAD-4), establishing a “single, common adjudicative criteria for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position.” (SEAD-4 ¶ B, Purpose). The SEAD-4 became effective on June 8, 2017 (SEAD-4 ¶ F, Effective Date). The National Security Adjudicative Guidelines (AG), which are found at Appendix A to SEAD-4, apply to determine eligibility for initial or continued access to classified national security information. (SEAD-4 ¶ C, Applicability). 2 ISCR Case No. 02-00305 at 3 (App. Bd. Feb. 12, 2003) (security clearance decisions must be based on current DoD policy and standards). 3 Unless otherwise indicated by citation to another part of the record, I extracted these facts from Applicant’s SOR answer, SCA (GE 1), and the summary of his subject interview (GE 4). 4 See also Tr. at 7-8, and 30-32. 3 finances to the point where he eventually fell behind with his mortgage loan payments and other bills.5 To avoid foreclosure on his mortgage loan, he made several hardship withdrawals from his SSIP. His efforts were unsuccessful and he lost his home when the bank foreclosed in approximately 2010 or 2011. There is no evidence in the record that any mortgage loan deficiency exists, nor was one alleged in the SOR.6 Applicant failed to timely file his federal income tax returns and pay his federal income taxes, as required, for the years 2008 through 2012 (SOR ¶ 1.a), because he believed that he did not have the money to pay the taxes. On a date not specified in the record, but sometime before June 2014, Applicant filed his delinquent returns. Applicant mailed his 2008 and 2009 returns to a different mailing address from the address to which he mailed the other returns. Since then, he has timely filed his returns. He now understands that his obligation to file is separate from his obligation to pay.7 As of March 2017, Applicant owed the IRS $36,044 for unpaid taxes, including a $32,495 tax lien entered against him in 2013 for tax years 2008 and 2009 (SOR ¶1.f), and the remaining balance of an approximately $20,000 debt owed for tax years 2010, 2011, and 2013. Applicant has been paying the IRS $160 per week pursuant to a June 2014 installment agreement for tax years 2010, 2011, and 2013, the remaining balance of which was $3,549 as of March 2017 (SOR ¶ 1.a). As of April 2017, the IRS had not released the tax lien.8 At the hearing, Applicant claimed that he had never received any notice from the IRS of the tax lien. He acknowledged that he never investigated the details about the tax lien or its status, after being confronted, because he assumed that it was related to his 2010, 2011, and 2013 tax debt, which he believed was the only debt that he owed to the IRS. After the hearing, Applicant obtained a copy of the tax lien, which revealed that it related to tax years 2008 and 2009. Despite that revelation and without providing corroborating documentation, Applicant continued to claim that the tax lien was being resolved via his 2014 installment agreement.9 Applicant paid the debt alleged in SOR ¶ 1.b (a $1,912 phone bill in collection status) in June 2016.10 He resolved the debt alleged in SOR ¶ 1.c (a $3,476 electric bill in collection status) on a date not specified in the record, sometime between January 5 Tr. at 36-40, 91-94. 6 Tr. at 31, 36-39. 7 Tr. at 39-47, 86-89, 97. 8 AE H, GE 2 at 2, GE 3 at 1, and Tr. at 40-47. 9 AE H, Tr. at 53-57; 89-91. 10 AE B and G, GE 2 at 6, and Tr. at 27-28, 59-61. 4 2015 and December 2016.11 Applicant resolved the debts alleged in SOR ¶ 1.d (four hospital bills totaling $1,360, incurred in 2010, in collection status) by paying $183 in October 2016 and the remaining balance in April 2017.12 Despite having earlier disputed the debt alleged in SOR ¶ 1.e (a $589 car insurance bill in collection status) on the basis that he was erroneously billed for a policy that he never renewed, Applicant planned to pay it after he received a billing statement that he requested from the creditor in April 2017.13 In 2015, Applicant withdrew funds from his SSIP, for which he was taxed, to pay his son’s college tuition. As a result, he incurred state taxes of $2,600 that year, which he did not pay because he believed that he did not have the money to do so. In March 2017, the state issued a notice of wage garnishment against Applicant. He planned to pay it sometime the week following his hearing with funds from his SSIP. The Government did not allege either this 2015 state tax debt or a $777 satellite television account that Applicant’s January 2015 credit report reported was in collection status.14 I will consider these unalleged debts only to evaluate mitigation and whole person. Applicant attributes his financial indebtedness primarily to his failure to be approved for a $40,000 home-improvement loan, despite the assurances of his lender. He also mentioned several other contributing factors: 1) he was taxed for his SSIP withdrawals; 2) he allowed his wife to take the tuition credit for the college expenses that he paid for his son; and 3) he was out of work due to a non-work injury for five weeks in approximately 2010 or 2011. While he was not paid during those five weeks, he received back pay for that time once he returned to work.15 Applicant has not had any financial counseling. However, he maintains a record of his income and expenses in a binder that he references to pay his bills.16 Between April 2016 and March 2017, his monthly gross income increased from $5,657 to $6,413.17 By the end of March 2017, he had balances totaling approximately $78 in checking; and $1,513 to $2,012 in savings (including his SSIP, which he uses like a savings account). He has not incurred any new delinquent debt since the 2015 state tax debt and currently lives modestly and within his means.18 11 GE 2 at 7, GE 3 at 2, AE F, and Tr. at 61-65. I considered that Applicant may not have paid this debt or that his wife may have paid it. However, because the credit report reports a $0 balance, I consider it resolved. 12 AE E, GE 2 at 3-4, and Tr. at 22, 65-69. 13 AE D, GE 2 at 8, and Tr. at 69-72. 14 GE 2 at 5, Tr. at 47-52, 75, 79-80, and 86-87. 15 Tr. at 31, 36, 38-40, 52, 76, 85-86, 92-95. 16 Tr. at 96-97. 17 Tr. at 32-35, 52, AE A. 18 Tr. at 47-52, 73-74, 87-88, 95-96. 5 Policies “[N]o one has a ‘right’ to a security clearance.”19 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.”20 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.”21 Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG. 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.”22 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.23 “Substantial evidence” is “more than a scintilla but less than a preponderance.”24 The guidelines presume a nexus or 19 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 20 Egan at 527. 21 EO 10865 § 2. 22 EO 10865 § 7. 23 See Egan, 484 U.S. at 531. 24 See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). 6 rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability.25 Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts.26 An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government.27 An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.”28 “[S]ecurity clearance determinations should err, if they must, on the side of denials.”29 Analysis Guideline F (Financial Considerations) The 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. 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 . . . . 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 indebtedness and his failure to timely file his federal income tax returns and pay his federal income taxes (as required), establish three disqualifying conditions under this guideline: AG ¶ 19(a) (“inability to satisfy debts”), AG ¶ 19(c) (“a 25 See ISCR Case No. 92-1106 at 3, 1993 WL 545051 at *3 (App. Bd. Oct. 7, 1993). 26 Directive ¶ E3.1.15. 27 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 28 ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). 29 Egan, 484 U.S. at 531; See also AG ¶ 2(b). 7 history of not meeting financial obligations”), and 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 security concerns raised in the SOR may be mitigated by any of the following potentially applicable factors: 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; AG ¶ 20(c): the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control; 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. Because he believed that he did not have the money to pay his taxes, Applicant failed to timely file his federal returns and pay his federal taxes for tax years 2008 through 2012, and timely pay his state taxes in 2015. His substantial federal tax debt for tax years 2008 and 2009 remains unresolved. AG ¶ 20(b) is not established. I do not find that the circumstances to which Applicant attributed his financial problems were largely beyond his control. I considered that he lost income while he was out of work in approximately 2010 or 2011 for his non- work injury. However, he received back pay upon his return to work. AC ¶ 20(c) is not established. While Applicant has not received financial counseling, I credit him with maintaining a budget. I find that Applicant believed his 2008 and 2009 tax debts were being resolved through his 2014 installment agreement. However, without corroborating documents to establish his stated belief as fact, I find that the tax lien remains unresolved. 8 AG ¶ 20(d) is not fully established. I credit Applicant with filing his overdue federal tax returns and with initiating action to resolve his unpaid 2010, 2011, and 2013 federal taxes, well before either issue became the subject of his current security clearance investigation. I also credit him with resolving the debts alleged in SOR ¶¶ 1.b through 1.d, and with initiating a reasonable plan to resolve the debt alleged in SOR ¶ 1.e. However, Applicant did not meet his burden to prove that he initiated action to resolve his tax lien. Moreover, he initiated action to resolve his state tax debt only after receiving a notice of wage garnishment in March 2017. AG ¶ 20(g) is not fully established. I credit Applicant with complying with the installment agreement for tax years 2010, 2011, and 2013 that he arranged with the IRS in 2014. However, because his claim was unsupported by corroborating documentation, I cannot find that Applicant has either arranged or complied with an agreement as to tax years 2008 and 2009. Accordingly, I find in favor of Applicant as to the allegations in SOR ¶¶ 1.b through 1.e. Despite the fact that the debt alleged in SOR ¶ 1.e remains unresolved, I find that his actions with respect to the debts alleged in SOR ¶ 1.b through 1.d sufficiently demonstrate that he is both willing and able to follow through with his plan to resolve it. Whether or not Applicant could afford to pay his taxes, he was required to timely file his tax returns. Applicant’s failure to timely file his tax returns, over a five-year period and without a compelling excuse or reason, reveals a deficiency in the judgment, reliability, and trustworthiness required of persons handling classified information. A person who fails repeatedly to fulfill his or her legal obligations, such as filing income tax returns when due, does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information.30 “Failure to file income tax returns suggests that an applicant has a problem with complying with well- established government rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information.”31 I am unable to conclude that Applicant has mitigated his failure to timely pay his 2008 and 2009 taxes because he did not present sufficient evidence to demonstrate that his tax lien was resolved or being resolved, and because he recently failed to timely pay his state taxes. For these reasons, I conclude that Applicant has not met his burden to overcome the Guideline F concerns at this time. Whole-Person Concept 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. In applying the whole- person concept, an administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant 30 See, e.g.,ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). 31 ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002). 9 circumstances. An 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. I have incorporated my comments under Guideline F in my whole-person analysis, and I have considered the factors AG ¶ 2(a). After weighing the disqualifying and mitigating conditions under Guideline F, and evaluating all the evidence in the context of the whole person, I conclude that Applicant has not mitigated the security concerns raised by his failure to timely file federal tax returns and pay federal taxes. Accordingly, Applicant has not carried his burden of showing that it is clearly consistent with the national interest to grant him eligibility for access to classified information. Formal Findings I make the following formal findings on the allegations in the SOR: Paragraph 1, Guideline F (Financial Considerations): AGAINST APPLICANT Subparagraph 1.a: Against Applicant Subparagraphs 1.b – 1.e: For Applicant Subparagraph 1.f: Against Applicant Conclusion I conclude that it is not clearly consistent with the national interest to grant Applicant eligibility for access to classified information. Clearance is denied. Gina L. Marine Administrative Judge