DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-01862 ) ) Applicant for Security Clearance ) Appearances For Government: Daniel F. Crowley, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ LYNCH, Noreen A., Administrative Judge: On September 6, 2015, the Department of Defense (DOD) issued Applicant a Statement of Reasons (SOR) listing security concerns arising under Guideline F (Financial Considerations). The action was taken under Executive Order (EO) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense (DoD) Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG), implemented in September 2006. 1 Applicant timely answered the SOR and requested an administrative determination. Department Counsel submitted a File of Relevant Material (FORM) In this case, the SOR was issued under Adjudicative Guidelines effective within the Defense Department 1 on September 1, 2006. Revised Adjudicative Guidelines were issued on December 10, 2016, and became effective on June 8, 2017. My decision and formal findings under the revised Guideline F would not be different under the 2006 Guidelines. 1 dated October 31, 2016. Applicant received the FORM on November 4, 2016. He2 submitted a packet of information in response to the FORM. The case was assigned to me on August 8, 2017. Based on a review of the case file, submissions, and exhibits, eligibility for access to classified information is granted. Findings of Fact In his answer to the SOR, Applicant denied both allegations in the SOR under Guideline F, with explanations for each item. His denials were based on the fact that the taxes were filed and that he owed no taxes. He received refunds in each case. (Item 2) Applicant is 65 years old. In 1975, he obtained an undergraduate degree, and subsequently a master’s degree in 1988. He served in the U.S. military from 1975 until 1996, retiring with an honorable discharge. He is married and has two children. He has worked in the defense contracting business for 20 years. He was self-employed at various times , and also worked abroad. He has worked for his current employer since3 2014. He has held a security clearance throughout his military career and his professional time as a contractor. He completed his security clearance application (SCA) in 2015. (Item 3) The SOR alleges that Applicant failed to file Federal income tax returns for the year 2013, as required; and that he failed to file state income tax returns for the tax year 2013, as required. (Item 1) Applicant denied the SOR allegations in part due to the fact that he requested an extension for that year, but he did not meet the extension deadline. The tax returns have been filed as of September 2015. Applicant files his own tax returns and does not use a professional. He explained that filing the returns for the year 2013 required reporting income from his self-employment. He used a computer program for the filing and needed another document to complete the process. He knew he would be getting a refund because he has “overpaid” his taxes. He has not failed to file or pay any tax returns in the last seven years and states that this was an anomaly. This is the first time that he failed to timely file his tax returns. (Item 5) He submitted documentation that confirmed that he filed the 2013 Federal income tax and that he received a refund check in the amount of $13,793 from the IRS. (Item 2, Attachments) During his 2015, investigative interview, Applicant also denied that he had any current delinquent debt. (Item 5) This is supported by his credit bureau reports. (Item 4) Applicant also volunteered that he was still in the process of filing the federal and tax returns. He submitted documentation that in September 2015, the tax returns were filed. (Item 2, Attachments) Applicant was candid that he needed more time to collect The Government submitted five items for the record. 2 From February 2013 to August 2014 and from November 2009 to July 2010, Applicant was self-employed 3 as a consultant. 2 supporting expense information necessary for a 1099 IRS form. He admitted that he owes no debt to the Government. (Response to FORM). Applicant obtained the 2011-2014 IRS transcripts that showed the tax returns were filed, and in each year, he received a tax refund. (Response to FORM, Attachments A-D) He also submitted tax returns for 2011-2015 (Response to FORM, Attachments E to I) Applicant received a sizeable refund for both Federal and state in each of those years. Applicant was not able to obtain all the state transcripts to verify the numbers in the tax returns. He is still in the process of collecting them. He understands and respects the rules and believes that the record clearly shows that he does not have a pattern of bad judgment or any inappropriate activity that would question his trustworthiness to hold a security clearance. In the future, Applicant will ensure that all tax returns are completed on time regardless of the refund status. (Response to FORM) Applicant emphasized that he has always paid his taxes through payroll deductions or through quarterly payment to the IRS. He has always filed tax returns, or asked for extensions of time. He had no intent to defraud or avoid payments. He was open and candid with the investigator. (Item 5) Applicant submitted documentation to support his denials of the SOR debts. He met his burden of proof in this case to mitigate the security concerns under the financial considerations guideline. Policies When evaluating an applicant’s suitability for a security clearance, an 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. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, they are applied in conjunction with the factors listed in the adjudicative process. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. Under AG ¶ 2(a), this process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” An 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. The U.S. Government must present evidence to establish controverted facts alleged in the SOR. An applicant is responsible for presenting “witnesses and other 3 evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The burden of proof is something less than a4 preponderance of evidence. The ultimate burden of persuasion is on the applicant. 5 6 A person seeking access to classified information enters into a fiduciary relationship with the Government based on 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 classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information. Section 7 of Executive Order 10865 provides that 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.” “The clearly consistent standard indicates that security clearance7 determinations should err, if they must, on the side of denials.” Any reasonable doubt8 about whether an applicant should be allowed access to sensitive information must be resolved in favor of protecting such information. The decision to deny an individual a9 security clearance does not necessarily reflect badly on an applicant’s character. It is merely an indication that the applicant has not met the strict guidelines the President and the Secretary of Defense established for issuing a clearance. Analysis Guideline F, Financial Considerations The security concern 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 judgement, or unwillingness to abide by rules and regulations, all of which can raise questions about an individuals’ reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus be a possible indicator of, other See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995). 4 Department of the Navy v. Egan, 484 U.S. 518, 531 (1988). 5 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995). 6 See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive 7 information), and EO 10865 § 7. ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995). 8 Id. 9 4 issues of personnel security concerns such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at a 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 security concern insofar as it may result from criminal activity, including espionage. The Government provided credible evidence that Applicant failed to file Federal and state tax returns timely for the tax year 2013. Consequently, Financial Considerations Disqualifying Conditions (FC DC) 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) applies. With such conditions raised, it is left to Applicant to overcome the case against him and mitigate security concerns. Financial Considerations Mitigating Condition (FC MC) 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) applies. Applicant volunteered this information to the investigator and provided documentation that the Federal and state returns were filed. In addition, (FC MC) 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) applies as Applicant had filed for extensions, volunteered the information to the investigator and never owed any taxes. The Federal tax return and the state tax return for 2013 were filed in 2015. Applicant does not owe any tax. 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 an applicant’s conduct and all the 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. As noted above, the ultimate burden of persuasion is on the applicant seeking a security clearance. 5 I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case, as well as the whole-person factors. Applicant is 65 years old. He has worked for his current employer since 2014. He is an educated man. He served in the U.S. military and retired, receiving an honorable discharge. He has held a security clearance for many years. He presented information that he has been responsible concerning his federal and state income taxes during the years. He has met his burden of proof in this case. Formal Findings Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are: Paragraph 1, Guideline F : FOR APPLICANT Subparagraphs 1.a-1.b: 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 a security clearance. Clearance is granted. NOREEN A. LYNCH Administrative Judge 6