1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No: 16-00135 ) ) Applicant for Security Clearance ) For Government: Caroline E. Heintzelman, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ DAM, Shari, Administrative Judge: Applicant has a long history of failing to file federal and state income tax returns and resolving delinquent debts. He did not mitigate the resulting financial security concerns. National security eligibility for access to classified information is denied. Statement of the Case On June 8, 2016, the Department of Defense (DOD) issued to Applicant a Statement of Reasons (SOR) 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 for Determining Eligibility 2 for Access to Classified Information (AG) effective within the DOD on September 1, 2006. This decision applies the new AG that became effective on June 8, 2017.1 Applicant answered the SOR in writing (Answer) on July 12, 2016, and requested a hearing before an administrative judge. On October 13, 2016, the Defense Office of Hearings and Appeals (DOHA) assigned the case to me. On May 2, 2017, DOHA issued a Notice of Hearing setting the case for May 16, 2017. The case was heard as scheduled. Department Counsel offered Government Exhibits (GE) 1 through 7 into evidence. Applicant testified and offered Applicant Exhibits (AE) 1 through 11 into evidence. All exhibits were admitted without objections. DOHA received the hearing transcript (Tr.) on May 25, 2017. The record remained open until June 9, 2017, to give Applicant an opportunity to submit additional evidence. He timely submitted AE 12, to which Department Counsel had no objection. Procedural Rulings While testifying, Applicant disclosed that he had not filed federal or state tax returns from 2001 through 2015. Based on that testimony, Department Counsel moved to amend the SOR to read as follows: ¶ 1.a You failed to file your Federal tax returns for tax years 2001 through 2015. As of the date of this Statement of Reasons, your tax returns have not been filed. ¶ 1.b You failed to file your Alabama, Mississippi, Michigan, Wisconsin, California and Pennsylvania state tax returns for tax years 2001 through 2015. As of the date of this Statement of Reasons, your tax returns have not been filed. ¶ 1.c. Withdrawn Applicant did not object to the amendments. Department Counsel’s motion to amend was granted. (Tr. 29-34.) Findings of Fact Applicant admitted all allegations contained in the SOR, with explanations. Those admissions are incorporated into these findings of fact. Applicant is 47 years old and divorced since 2000. He has no children. He served in the military from 1993 until 1998. He was an O-3 at the time, and he received a general under honorable conditions discharge. He attended a service academy and received a degree. After leaving the military he began working for defense contractors. He has worked for his current employer since November 2012. (Tr. 23-27; GE 2.) 1I considered the previous AG, effective September 1, 2006, as well as the new AG, effective June 8, 2017. This Decision would be the same if the case was decided under the previous AG. 3 On March 19, 2015, Applicant submitted a security clearance application (SF-86). In response to questions related to his financial record, he disclosed that he failed to file federal tax returns for years 2008 through 2013. He also disclosed that he failed to file state tax returns from 2009 through 2011. (Tr. 29; GE 1.) He filed both federal and state tax returns for 2016. (Tr. 42, 52.) Applicant explained that the reason he has not filed his returns is because he has not lived in one place very long, and has owned property in different states, making it difficult for him to file. He also lost all of his paperwork in a 2004 hurricane, which exacerbated his situation. He does not always have the supporting documents he needs. He said that he always makes certain that he paid his tax obligations, even though he has not filed returns. He used a software program to calculate his taxes for the individual tax years and routinely determined that he was owed a refund. He admitted that he was lazy and indifferent about filing the returns and receiving the refunds. (Tr. 34-37.) He has prepared many tax returns but not filed them. (Answer.) He intends to file the returns in the future. (Tr. 41.) In addition to alleging tax matters, the SOR alleged a tax lien and five debts that total $3,040 and were reported delinquent between 2010 and 2015. The status of each of those six debts is as follows: 1. (1.d for $2,974) This state tax lien for 2010 remains unpaid. (AE 12.) 2. (1.e for $477) Applicant disputed this charged-off debt from 2014 on the basis that he never had a credit card with the account number listed on the debt documents. (Tr. 46; AE 1 and 2.). 3. (1.f for $280) Applicant paid it in December 2015. (Tr. 47; AE 3.) 4. (1.g for $1,890) Applicant paid it in October 2015. (Tr. 47; AE 4.) 5. (1.h for $29) Applicant paid it in June 2016. (Tr. 47; AE 5.) 6. (1.i for $445) Applicant paid it in June 2016. (Tr. 47; AE 6.) Applicant’s annual salary is $106,000. He does not have a written budget. He has not participated in credit counseling or sought tax assistance for his tax problems. (Tr. 27- 28.) He acknowledged he was embarrassed about the situation. (Tr. 53.) Policies When evaluating an applicant’s suitability for national security eligibility, the administrative judge must consider the AG. In addition to brief introductory explanations for each guideline, the AG list potentially disqualifying and mitigating conditions, which are useful in evaluating an applicant’s eligibility for access to classified information. 4 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 AG ¶ 2 describing 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 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. Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states that 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 an adverse decision 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 Executive Order 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information.) Analysis Guideline F, Financial Considerations The security concerns relating to the guideline for financial considerations are 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 5 questions about an individual’s reliability, trustworthiness and ability to protect classified information. Financial distress can also be caused by 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 risk of having to engage in illegal 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 three disqualifying conditions that could potentially raise security concerns in this case: (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. Applicant has a long history of unwillingness to file federal and state tax returns, beginning in 2001 and continuing through 2015. He also failed to resolve five delinquent debts and a tax lien. The evidence is sufficient to raise the above disqualifying condition. After the Government produced substantial evidence of the disqualifying condition, the burden shifted to Applicant to produce evidence and prove mitigation of the security concerns. AG ¶ 20 sets out four conditions that could potentially mitigate financial security concerns under this guideline: (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, 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 and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; and 6 (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’s failure to file federal and state income tax returns from 2001 through 2015 is ongoing and casts doubt on his judgment. He also has an outstanding 2010 state tax lien, filed in 2015. AG ¶ 20(a) does not apply. Applicant admitted that he has been lazy and indifferent about filing his taxes, which is clearly a situation within his control. AG ¶ 20(b) does not apply. Applicant has not participated in credit counseling or sought tax assistance. There is no evidence that his unfiled tax returns or tax lien are under control. AG ¶ 20(c) does not apply. Applicant has not made a good-faith effort to file the returns or resolve the tax lien. AG ¶ 20(d) does not provide mitigation for the allegations in SOR ¶¶ 1.a, 1.b, and 1.d. Applicant provided proof that he paid the debts in SOR ¶¶ 1.f, 1.g, 1.h, and 1.i, which established mitigation under AG ¶ 20(d) as to those debts. Applicant stated he disputed the debt in SOR ¶ 1.e because he never had a credit card with the account number listed on the debt documents. His explanation is credible and establishes some mitigation under AG ¶ 20(e) as to that debt. 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) 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 national security eligibility must include 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. Applicant is an educated and articulate 47-year-old man, who served in the military for about five years. He has subsequently worked for defense contractors since about 1998 and his current employer since 2012. Throughout this proceeding, he forthrightly disclosed and discussed his unfiled taxes, and 7 expressed his embarrassment about the situation. He paid four debts and sufficiently mitigated the debt he disputes. He has yet to resolve a 2010 tax lien. He stated that he intended to file all delinquent tax returns in the future, and produced copies of returns he had prepared for numerous years, but has not filed. Applicant was aware of his duty to file, determined how much tax he owed, and then chose not to file. His intentional failure to comply with federal and state tax rules is a serious concern. At this time, he has not established a record of following tax laws and managing financial obligations. His actions to date are not sufficient to outweigh a long history of non-compliance with a fundamental legal obligation to file and pay taxes. The DOHA Appeal Board has held that: Failure to file tax returns suggests that an applicant has a problem with complying with well-established government rules and systems. Voluntary compliance with these things is essential for protecting classified information. ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016). Someone 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).2 The record evidence leaves me with doubt as to Applicant’s judgment and suitability for a security clearance. Applicant failed to mitigate the security concerns 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 ¶ E3.1.25 of Enclosure 3 of the Directive, are: Paragraph 1, Guideline F: AGAINST APPLICANT Subparagraphs 1.a and 1.b: Against Applicant Subparagraph 1.c: Withdrawn Subparagraph 1.d: Against Applicant Subparagraphs 1.e through 1.i: For Applicant 2 ISCR Case No. 12-10933 at 3 (App. Bd. June 29, 2016). 8 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. National security eligibility for access to classified information is denied. _________________ SHARI DAM Administrative Judge