1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-00953 ) ) Applicant for Security Clearance ) Appearances For Government: Adrienne Driskill, Esq., Department Counsel For Applicant: Jeffrey T. Wilson, Esq. July 6, 2017 ______________ Decision ______________ GOLDSTEIN, Jennifer I., Administrative Judge: Applicant was delinquent on Federal tax debts for tax years 2008, 2010, 2011, 2013, and 2014, in a total exceeding $32,000. He failed to file his state and Federal taxes for at least 2012 through 2014, as required. He has resolved all of his Federal tax debt and filed all delinquent state and Federal tax returns. Eligibility for access to classified information is granted. Statement of the Case On February 8, 2015, Applicant submitted his Electronic Questionnaire for Investigations Processing (e-QIP). On October 11, 2016, in accordance with DoD Directive 5220.6, as amended (Directive), the Department of Defense issued Applicant a Statement of Reasons (SOR) alleging facts that raise security concerns under Guideline F.1 The SOR further informed Applicant that, based on information available 1 I considered the previous Adjudicative Guidelines, effective September 1, 2006, as well as the new Adjudicative Guidelines, effective June 8, 2017. My decision would be the same if the case was decided under the previous Adjudicative Guidelines, effective September 1, 2006. 2 to the government, DoD adjudicators could not make the preliminary affirmative finding it is clearly consistent with the national interest to grant or continue Applicant’s security clearance. Applicant answered the SOR (Answer) on November 3, 2016, and requested a hearing before an administrative judge. The case was assigned to me on December 16, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on December 20, 2016, scheduling the hearing for February 9, 2017. The hearing was convened as scheduled. The Government offered Exhibits (GE) 1 and 2, which were admitted without objections. Applicant testified on his own behalf and presented eight documents, which I marked Applicant’s Exhibits (AE) A through H. The record was left open until February 16, 2017, for receipt of additional documentation. On February 16, 2017, Applicant presented one exhibit, marked AE I. Department Counsel had no objection to AE I, and it was admitted. The record then closed. DOHA received the transcript of the hearing (Tr.) on February 21, 2017. Findings of Fact The SOR alleged that Applicant failed to file his state and Federal taxes for at least 2012 through 2014, as required (subparagraph 1.a); and owed the Federal government a total of $22,610.88 for tax years 2008, 2010, 2011, 2013, and 2014 (subparagraphs 1.b through 1.f). Applicant denied all of the allegations in SOR ¶¶ 1.a, through 1.f. After a thorough and careful review of the pleadings, exhibits, and testimony, I make the following findings of fact. Applicant is a 38-year-old employee of a defense contractor. He has been employed by a defense contractor since September 2016.2 He previously held a security clearance in connection with another job. He is married to a Canadian citizen, and has one minor child and one stepchild. (GE 1; Tr. 22-40, 49, 76.) Applicant disclosed on his 2015 e-QIP that he owed Federal income taxes for tax years 2008, 2010, 2011, and 2013, due to a lack of cash flow for his business.3 Applicant noted that he had an installment agreement with the Internal Revenue Service (IRS) and had been making regular payments on his tax debt since 2009. The IRS compiled future years’ tax debts into that agreement. (GE 1; GE 2; Tr. 49.) On October 28, 2016, Applicant took a debt consolidation loan from a credit union and paid off his IRS debt in full.4 He provided documentation from the IRS that shows his “account is paid in full at this time.” Applicant’s delinquent tax debts identified in SOR subparagraphs 1.b through 1.f are resolved. (AE A; Tr. 42-49, 78, 97-104.) Applicant also disclosed on his e-QIP that he failed to file his tax year 2012 and 2013 Federal and state income tax returns in a timely manner. Applicant suffered a 2 He previously worked as a contractor for the same defense contractor, beginning September 2015. (AE G; Tr. 109-111.) 3 Applicant’s state income taxes from the same time period are paid and was not alleged as delinquent. (Answer; GE 2.) 4 Applicant testified that he is current on his debt consolidation loan. (Tr. 125) 3 business downturn in approximately 2012. He also lost some paperwork, partially as a result of a separation with his fiancée and subsequent move. He testified that his Certified Public Accountant (CPA), had requested extensions to file his Federal and state income tax returns in 2012 and 2013. He thought his CPA had filed those returns prior to the extensions lapsing, but the CPA had not because he lacked the proper documentation from Applicant. Applicant contacted the IRS in approximately February 2015, when completing his e-QIP, to ascertain the exact amounts due to the IRS and properly disclose it on his e-QIP. At that time, he learned that his 2012 and 2013 Federal and state income tax returns were still outstanding. When Applicant learned that they were outstanding, he contacted his CPA and filed the outstanding state and Federal returns in February 2015, as documented in IRS and state tax transcripts. His 2014 Federal and state income tax returns were filed in a timely manner, after receiving a valid extension from both the Federal and state governments. He testified that all tax returns since then have been filed as required by law. (GE 2; AE A; Tr. 39-45, 108-125.) He had been in “constant communication with the IRS making sure [he] wasn’t ignoring them, even before applying for a clearance. [He] never intended to walk away from any tax obligations.” (Tr. 45.) Applicant attended and completed a Peace University personal financial management course. (AE I.) In that course, he learned “how to create a better budget and do things the right way essentially.” (Tr. 61.) Applicant has successfully completed numerous courses relating to his specialty and received certificates documenting those achievements. (AE B; AE C; AE D.) He has participated as a volunteer mentor for youth in a competition. (AE E; Tr. 81-82.) His 2016 performance evaluation reflects he is a valued employee. (AE F; Tr. 84-87.) His managers indicate that Applicant has proven to be a dependable, dedicated and trustworthy team member. (AE G; AE H.) 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, administrative judges apply the guidelines in conjunction with the factors listed in AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching 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. 4 The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered 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. Likewise, I have avoided drawing 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 the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance 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 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 10865 provides that adverse 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). 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 5 security concern insofar as it may result from criminal activity, including espionage. The guideline notes several conditions that could raise security concerns under AG ¶ 19. Three are potentially applicable in this case: (a) inability to satisfy debts; (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. Applicant had a history of failing to file and pay his Federal income taxes since 2008. He could not afford to satisfy those Federal tax debts in full. He also failed to file his 2012 and 2013 state and Federal income tax returns in a timely manner, as required by law. The evidence is sufficient to raise these disqualifying conditions. AG ¶ 20 provides conditions that could mitigate security concerns. I considered all of the mitigating conditions under AG ¶ 20 including: (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; (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. Applicant received financial counseling from a credible source, Peace University. He has incorporated the lessons he learned in that course. AG ¶ 20(c) provides some mitigation. Additionally, he made a responsible, good-faith effort to repay his delinquent Federal taxes beginning in 2009 when he first set up installment payments. His subsequent years’ tax debts were added to that plan. He made regular payments to that plan, as required, until he was able to receive a debt consolidation loan and fully resolve his IRS debt. He is current with his payments on the debt consolidation loan. Further, he filed his delinquent Federal tax returns for 2012 and 2013, when he learned they were outstanding. While his inattention to this legal duty to file for two years was irresponsible and showed poor judgment, he addressed it in a mature and responsible manner once he learned from the IRS that those returns had not been filed. As a general rule, 6 "[f]ailure 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. 14- 05476 at 5 (App. Bd. Mar. 25, 2016).) Filing tax returns concomitantly with the filing of an e-QIP is suspect. However, in this case, Applicant contacted the IRS while completing his e-QIP in order to provide full and complete answers on the e-QIP about his debts, and learned of the delinquent filings, which he disclosed. He immediately acted upon that knowledge, hired a CPA, and filed the delinquent returns to the satisfaction of the IRS. AG ¶¶ 20(d) and 20(g) provide mitigation. 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(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 the potentially disqualifying and mitigating conditions in light of all 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(d) were addressed under those guidelines, but some warrant additional comment. Applicant is respected by his managers that wrote letters on his behalf. He performs well at his job. He fell behind on paying his Federal income tax when he started a business, but he immediately made payment arrangements with the IRS. He has now paid off his Federal tax debt through a consolidation loan. He is employed by a government contractor and no longer runs a business. He has matured, is now a parent, and is an active member of his community. He has taken financial management classes from a reputable source. There is little likelihood Applicant will allow similar incidents to occur in the future. Overall, the record evidence leaves me without questions or doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant mitigated the Financial Considerations security concerns. 7 Formal Findings Formal findings for or against Applicant on the allegations set forth in the SOR, as required by ¶ E3.1.25 of the Directive, are: Paragraph 1, Guideline F: FOR APPLICANT Subparagraph 1.a: For Applicant Subparagraph 1.b: For Applicant Subparagraph 1.c: For Applicant Subparagraph 1.d: For Applicant Subparagraph 1.e: For Applicant Subparagraph 1.f: For Applicant Conclusion In light of all of the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted. ________________________ Jennifer I. Goldstein Administrative Judge