1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) -------------------------------------- ) ISCR Case No. 16-01126 ) Applicant for Security Clearance ) Appearances For Government: Charles Hale, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ LEONARD, Michael H., Administrative Judge: Applicant contests the Defense Department’s intent to deny him eligibility for access to classified information. He did not present sufficient evidence to explain, extenuate, or mitigate the security concern stemming from his long-standing history of financial problems, which includes bankruptcies, noncompliance with state and federal income tax obligations, unpaid judgments, and delinquent accounts. Accordingly, this case is decided against Applicant. Statement of the Case Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on April 9, 2015. This document is commonly known as a security clearance application. Thereafter, on August 30, 2016, after reviewing the application and the information gathered during a background investigation, the U.S. Department of Defense Consolidated Adjudications Facility, Fort George G. Meade, Maryland, sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the national interest to grant him eligibility for access to classified information. The SOR is similar to a complaint. It detailed the factual 2 reasons for the action under the security guideline known as Guideline F for financial considerations. Applicant answered the SOR on September 17, 2016, in a five-page memorandum; his answers to the SOR allegations were mixed; and he requested a hearing before an administrative judge. The hearing took place as scheduled on December 7, 2016. The hearing transcript (Tr.) was received December 15, 2016. The record was kept open to allow Applicant to submit additional matters; he made a timely submission per e-mail on January 7, 2016; and the post-hearing matters are admitted without objections as Exhibits L-Q. Findings of Fact Applicant is a 66-year-old employee who is seeking to obtain a security clearance for the first time. He is employed as a driver for a trucking company doing business in the defense industry. He has worked as a driver since 2012. Before that, he was unemployed from July 2010 to February 2012. His employment history includes honorable service on active duty with the U.S. Army during 1969-1973. He has been married to the same woman for 43 years. He has three adult children and several grandchildren. In his April 2015 security clearance application, Applicant disclosed a 2009 Chapter 7 bankruptcy case, but no other financial problems within the relevant time frames.1 The subsequent background investigation revealed additional financial problems.2 For example, an April 25, 2015 credit report revealed the 2009 Chapter 7 bankruptcy case, seven judgments of which two were satisfied, and ten collection accounts of which four were paid.3 Based on the available information, the SOR alleged a history of financial problems consisting of bankruptcies, noncompliance with state and federal income tax obligations, unpaid judgments, and delinquent accounts. Those matters are discussed in further detail below. SOR ¶¶ 1.a, 1.b, 1.c, 1.d, and 1.e: failure to file state and federal income tax returns and back taxes owed to the IRS for tax years 2012, 2013, and 2014. Applicant filed his federal individual income tax returns late for tax year 2012 in December 2015, for tax year 2013 in December 2015, and for tax year 2014 in January 2016.4 He timely filed his return for tax year 2015.5 He did not present documentation showing that he filed his state individual income tax returns for the three tax years in question, but presumably he filed those returns at about the same time as the federal returns. Per his 1 Exhibit 1. 2 Exhibits 2, 3, and 4. 3 Exhibit 4. 4 Exhibits E, F, and G. 5 Exhibit H. 3 answer to the SOR, he attributed his tax problem to the 2009 bankruptcy case, which resulted in a lack of funds as he attempted to clean up his financial house while frequently away from home due to his job as a driver. Concerning the back taxes owed to the IRS, he entered into an installment agreement with the IRS beginning in July 2016 with $400 monthly payments.6 He was current with his installment payments and owed a total of $4,632 for tax years 2012-2015, which included $559 in failure-to-pay penalties, as of December 2016.7 SOR ¶¶ 1.f and 1.g: Chapter 7 bankruptcy cases in 1986 and 2009. Applicant has twice exercised his legal right to obtain relief from indebtedness through bankruptcy proceedings. There is no documentation concerning the 1986 bankruptcy case, but he admits the case ended in a discharge of debts. Per his answer to the SOR, he attributed the bankruptcy to a job loss, which resulted in an inability to meet his financial obligations. The 2009 bankruptcy also ended in a discharge of debts.8 The case involved $170,050 in assets and $503,662 in liabilities.9 The liabilities included $187,202 listed on the Schedule F for creditors holding unsecured nonpriority claims (also known as unsecured debts), of which 19 of the 26 debts were credit-card accounts for a total of $89,462. Per his answer to the SOR, he attributed the most recent bankruptcy to a job loss that resulted from a change in the industry in which he was then working, which resulted in an inability to meet his financial obligations. SOR ¶ 1.h: $3,166 collection account. This debt is resolved. Applicant settled this account for a lesser amount in June 2016.10 SOR ¶ 1.i: $759 collection account. This debt is unresolved. Applicant claims he settled this account for a lesser amount, but he presented no documentation in support of his claim.11 SOR ¶ 1.j: $2,790 unpaid judgment filed in August 2011. This debt is resolved. Applicant satisfied this debt with a payment of $3,192 in August 2016.12 SOR ¶ 1.k: $802 unpaid judgment filed in March 2013. This debt is unresolved. Applicant claims this judgment was satisfied, but he presented no documentation in support of his claim.13 6 Exhibits C, I, and Q. 7 Exhibit D. 8 Exhibit B. 9 Exhibit 5. 10 Exhibit M. 11 Tr. 71-73. 12 Exhibits A and O. 13 Tr. 75-76. 4 SOR ¶ 1.l: $293 collection account. This debt is unresolved. Applicant disputes this debt because he contends it is based on a wrongful towing of an automobile, but he presented no documentation in support of his dispute.14 SOR ¶ 1.m: $213 medical collection account. This debt is unresolved. Applicant claims that he paid the debt, but he presented no documentation in support of his claims.15 SOR ¶¶ 1.n: $193 collection account. This debt is unresolved. Applicant has no documentation on this account and has no idea about the debt.16 SOR ¶ 1.o: $139 collection account stemming from a traffic fine. This debt is unresolved. Applicant claims that he paid the debt, but he presented no documentation in support of his claim.17 In addition to the above delinquent debts, Applicant settled a $182 collection account for a lesser amount in July 2016.18 Resolving that debt, along with the two debts discussed above, occurred in 2016 when he was qualifying for a $400,000 mortgage loan via a Department of Veterans Affairs guaranteed-loan program.19 Law and Policies This case is adjudicated under Executive Order (E.O.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), effective June 8, 2017.20 It is well-established law that no one has a right to a security clearance.21 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent 14 Tr. 76-77. 15 Tr. 78-80. 16 Tr. 80-82. 17 Tr. 82-85. 18 Exhibits J and P. 19 Exhibits K, L, and N. 20 The 2017 AG are available at http://ogc.osd.mil/doha. 21 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance). 5 standard indicates that security clearance determinations should err, if they must, on the side of denials.”22 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security. A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.23 An unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.24 There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.25 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.26 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.27 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.28 In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.29 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.30 Discussion Under Guideline F for financial considerations, the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is: 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 22 484 U.S. at 531. 23 Directive, ¶ 3.2. 24 Directive, ¶ 3.2. 25 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). 26 Directive, Enclosure 3, ¶ E3.1.14. 27 Directive, Enclosure 3, ¶ E3.1.15. 28 Directive, Enclosure 3, ¶ E3.1.15. 29 Egan, 484 U.S. at 531. 30 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). 6 questions about an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information. . . .31 The concern is broader than the possibility that a person might knowingly compromise classified or sensitive information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified or sensitive information. In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions: AG ¶ 19(a) inability to satisfy debts; AG ¶ 19(c) a history of not meeting financial obligations; 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; 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(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. The evidence here supports a conclusion that Applicant has a problematic financial history sufficient to raise a security concern under Guideline F. The evidence in disqualification is quite strong. In addition to the bankruptcies and delinquent debts, Applicant’s tax problem with the IRS is both serious and unresolved. He owes more than $4,600 for tax years 2012, 2013, 2014, and 2015. His tax problem with the IRS bears close examination and is a matter of serious concern to the federal government.32 It suggests that he has a problem with complying with well-established governmental 31 AG ¶ 18. 32 The General Accountability Office (GAO) expressed serious concern over the relationship between tax delinquents and clearance holders in its July 28, 2014 report, Security Clearances: Tax Debts Owed by DOD Employees and Contractors, http://www.gao.gov/assets/670/665052.pdf. 7 rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified or sensitive information. An applicant who has a history of not fulfilling his tax obligations may be said not to have demonstrated the high degree of judgment and reliability required for access to classified or sensitive information. I considered Applicant’s evidence of mitigation, reform, and rehabilitation. It is noteworthy that Applicant is able to provide explanations for the various financial problems he has encountered over the years. I am also certain that job loss and unemployment were legitimate circumstances largely beyond his control that contributed to his financial problems. I also note Applicant was able to qualify for a mortgage loan in 2016, but I have not given that circumstance much weight because the loan was made via a guaranteed-loan program. I also considered the timing and the length of compliance with the IRS. He filed the past-due federal tax returns several months after submitting his security clearance application, and he entered into an installment agreement with the IRS about a month before the SOR was issued. Those circumstances suggest that his remedial actions were in response to the security clearance process as opposed to making a good-faith effort to meet his tax obligations. Viewing the evidence as a whole, I see a long-standing pattern or practice of failure to meet financial responsibilities, which is a security concern. Applicant’s pattern or practice dates back to the 1986 Chapter 7 bankruptcy, followed by the 2009 Chapter 7 bankruptcy, and followed by the tax issues during 2012-2015. To date, he has a number of unresolved delinquent debts and an inability to document his claims of settlement or payment. His pattern or practice of financial irresponsibility is a circumstance that militates against a favorable decision. On balance, Applicant’s favorable evidence is outweighed by the nature, extent, and seriousness of his long-standing history of financial problems, which includes his ongoing tax problem. His tax problem with the IRS does not amount to a per se rule against a favorable clearance decision. But considering the totality of facts and circumstances, I am not persuaded that Applicant is an acceptable national security risk. Following Egan and the clearly consistent standard, I have doubts or concerns about Applicant’s reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. I also considered the whole-person concept. Accordingly, I conclude that he did not meet his ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant him eligibility for access to classified information. 8 Formal Findings The formal findings on the SOR allegations are: Paragraph 1, Guideline F: Against Applicant Subparagraphs 1.a-1.o: Against Applicant Conclusion In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information. Michael H. Leonard Administrative Judge