1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-02103 ) Applicant for Security Clearance ) Appearances For Government: Alison O’Connell, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ LOUGHRAN, Edward W., Administrative Judge: Applicant refuted the personal conduct security concerns, but he did not mitigate the financial considerations security concerns. Eligibility for access to classified information is denied. Statement of the Case On August 20, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guidelines E (personal conduct) and F (financial considerations). Applicant responded to the SOR on September 17, 2016, and November 14, 2016, and requested a hearing before an administrative judge. Department Counsel amended the SOR on December 15, 2016, adding an allegation under Guideline E. Applicant responded to the amended SOR on December 26, 2016. The case was assigned to me on June 8, 2017. After coordinating with the parties, the Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on June 14, 2017, scheduling the hearing for July 6, 2017. The hearing was convened as scheduled. Government Exhibits (GE) 1 through 4 were admitted in evidence without 2 objection. Applicant testified and submitted Applicant’s Exhibit (AE) 1 through 11, which were admitted without objection. The record was held open for Applicant to submit additional information. He submitted AE 12 through 15, which were admitted without objection. DOHA received the hearing transcript (Tr.) on July 14, 2017. Findings of Fact Applicant is 60 years old. He served in the U.S. military for almost 25 years until he retired with an honorable discharge in 2000. He has a bachelor’s degree and a master’s degree, and he completed the course work for a PhD, except for the dissertation. He married for the second time in 1993 and divorced in 2015. He has seven children.1 Applicant served as a highly regarded senior official in one part of the Department of Defense from 2003 to 2006 and in another part from 2008 to 2009. He was recognized and awarded for his exceptional and distinguished service on both occasions.2 Applicant’s second wife handled the finances during their marriage. In 2012, while Applicant was on a short trip, she emptied their bank accounts and moved with the children to another state. He realized that she had not been paying many of their debts, including the mortgage loan. He later learned that his ex-wife had a medical condition that may have contributed to her actions. Applicant incurred significant legal fees to force her to move back to their state of residence with their children.3 Applicant filed a Chapter 7 bankruptcy case in March 2014. Under Schedule D, Creditors Holding Secured Claims, the petition listed a $20,193 auto loan and a $255,291 mortgage loan with the value of the property listed as $322,684. Under Schedule E, Creditors Holding Unsecured Priority Claims, the petition listed $20,920 owed to the IRS for tax years 2011 and 2012; $39,406 owed in state taxes for tax years 2006 to 2012; and $1,642 in personal property taxes for tax years 2010 to 2012. There were $197,034 in total claims under Schedule F, Creditors Holding Unsecured Nonpriority Claims, including $169,239 in student loans. Applicant’s dischargeable debts were discharged in June 2014. The taxes and student loans were not discharged.4 The bankruptcy petition incorrectly listed that Applicant was unemployed, with his military retirement pay and Department of Veterans Affairs (VA) disability payments reported as his only income. Applicant admitted he was working at the time as an 1 Tr. at 18, 45, 50-53; GE 1; AE 11. 2 Tr. at 53; GE 1; AE 7-9. 3 Tr. at 17-18, 51, 56-58; Applicant’s response to SOR; AE 3, 12, 15. 4 Tr. at 19; Applicant’s response to SOR; AE 3. 3 independent contractor. He stated that he did not realize the bankruptcy petition was incorrect.5 Applicant testified that he believed his student loans were paid by the U.S. Government when he accepted his first position as a senior official, and that his student loans were already paid by the time he accepted his second position. In his response to the SOR, he wrote that “on two separate occasions [he] was hired and told the same thing. It appears that both times [the] government did not uphold it[s] debt forgiveness promise.” He also admitted that he obtained student loans through 2006, which is several years after he was hired by the DOD in 2003. He thought his ex-wife paid those loans, but he admitted that he did nothing after his ex-wife left to verify whether they were paid.6 The credit reports are consistent with Applicant’s bankruptcy petition and list that he owes in excess of $170,000 in defaulted student loans. Applicant testified that he was unaware that the bankruptcy petition listed numerous student loans. He stated that his bankruptcy attorney prepared the petition. Applicant reviewed the petition with his attorney, but he does not recall student loans ever being mentioned. He testified that he attempted but was unable to obtain paperwork from the DOD indicating that his student loans should have been paid. He testified that he still hopes the DOD will find the paperwork and pay his student loans.7 Applicant did not file his tax returns as required for multiple years before his second wife left him. He stated that he filed the returns in about 2013. He stated that after filing the returns, he owed about $35,000 to the IRS and $14,000 to his state. When questioned about the amount of $39,406 owed to the state in his bankruptcy petition, he stated that $14,000 was the amount the state accepted in settlement.8 The IRS imposed a $35,755 tax lien against Applicant in March 2013. His military retirement pay has been levied $2,192 per month for his delinquent taxes since July 2015. His June 2017 retiree account statement showed the balance of the levy as $2,851. Applicant testified that the levy would be completed and the taxes paid by September 2017. He initially stated that the state taxes were being paid through the same levy. He later stated that he paid the state taxes through three payments in about 2014. Post-hearing, Applicant wrote, without supporting documentation, that “state tax obligations have been negotiated.”9 5 Tr. at 54-55, 68-69. 6 Tr. at 22-29, 45-50, 72-73, 80-83; Applicant’s response to SOR; AE 3. 7 Tr. at 22-29, 40; GE 2-4. 8 Tr. at 61-65. 9 Tr. at 19-22, 65-67, 74, 77-78; Applicant’s response to SOR; AE 3, 10, 12. 4 Applicant wrote in his post-hearing submission as follows: While the Hearing brought back some of the divorce emotions it opened my eyes to areas I need to be more conscious of going forward. While I have always been proactive in my roles and responsibilities as a guardian of the public trust I now know that I must be more deliberate of my personal responsibilities and hopefully, with the actions already taken and future steps my road will be smoother. Applicant submitted results of a polygraph taken for his divorce proceedings. He hoped the results would show that he has been truthful about his finances. One of the questions asked if he did all of his banking exclusively with a specific credit union. While the report noted no deception indicated to Applicant’s positive response, the truth, as verified by credit reports and Applicant’s bankruptcy petition, is the answer should have been a negative response because he had accounts with another credit union. Applicant testified that he did not think of the second credit union, and he thought he had answered the question correctly.10 Applicant submitted a Questionnaire for National Security Positions (SF 86) in January 2015. He answered “No” to all the financial questions under Section 26, including the following: In the past seven (7) years, have you filed a petition under any chapter of the bankruptcy code? In the past seven (7) years, have been failed to file or pay Federal, state, or other taxes when required by law or ordnance?11 In the past seven (7) years, you had a lien placed against your property for failing to pay taxes or other debts? (Include financial obligations for which you were the sole debtor, as well as those for which you were a cosigner or guarantor). You are currently delinquent on any Federal debt? (Include financial obligations for which you were the sole debtor, as well as those for which you were a cosignor or guarantor) In the past seven (7) years, you had bills or debts turned over to a collection agency? (Include financial obligations for which you were the sole debtor, as well as those for which you were a cosignor or guarantor). In the past seven (7) years, you have been over 120 days delinquent on any debt not previously entered? (Include financial obligations for which 10 Tr. at 30, 83-86; AE 6. 11 The SOR did not allege that Applicant falsified this question. 5 you were the sole debtor, as well as those for which you were a cosignor or guarantor)12 You are currently over 120 days delinquent on any debt? (Include financial obligations for which you were the sole debtor, as well as those for which you were a cosignor or guarantor)13 Applicant denied intentionally falsifying the SF 86. He stated that he did not list his defaulted student loans because he thought they had been paid by the DOD; he did not list his unpaid taxes because he was in the process of paying them; and he attempted to report his bankruptcy petition but the computer locked up and would not permit him to do so. He contacted security personnel, and he was told to annotate the bankruptcy in the comments section, which he thought he did. There are no additional comments in the SF 86. Applicant provided statements from his facility security officer (FSO) and from a military security officer who Applicant contacted for advice on filling out the SF 86. Both individuals stated that Applicant was open and honest about the adverse financial consequences of his separation and divorce.14 Policies This case is adjudicated 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), which became effective on June 8, 2017.15 When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be used 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 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 12 The SOR did not allege that Applicant falsified this question. 13 The SOR did not allege that Applicant falsified this question. 14 Tr. at 31-39, 44, 73-80; Applicant’s response to SOR; AE 1, 2, 12-14. 15 The SOR was issued under the previous adjudicative guidelines. I have utilized the current adjudicative guidelines as required. However, my ultimate decision would be the same under either set of guidelines. 6 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.” Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the 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.” The applicant has the ultimate burden of persuasion to obtain a favorable security 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 safeguard 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 EO 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 E, Personal Conduct The security concern for personal conduct is set out in AG ¶ 15, as follows: Conduct involving questionable judgment, lack of candor, dishonesty, or unwillingness to comply with rules and regulations can raise questions about an individual’s reliability, trustworthiness and ability to protect classified information. Of special interest is any failure to provide truthful and candid answers during the security clearance process or any other failure to cooperate with the security clearance process. AG ¶ 16 describes conditions that could raise a security concern and may be disqualifying. The following disqualifying condition is potentially applicable: (a) deliberate omission, concealment, or falsification of relevant facts from any personnel security questionnaire, personal history statement, or similar form used to conduct investigations, determine employment 7 qualifications, award benefits or status, determine security clearance eligibility or trustworthiness, or award fiduciary responsibilities. SOR ¶ 2.a alleges that Applicant intentionally falsified his SF 86 when he failed to report that his student loans were turned over to a collection company and that his student loans were “suspended, charged off, or cancelled.” I am unconvinced the loans were turned over to a collection company or were “suspended, charged off, or cancelled.” The defaulted student loans had to be reported under at least one other question, but not the specific questions alleged in the SOR. SOR ¶ 2.a is concluded for Applicant. SOR ¶ 2.b alleges that Applicant intentionally falsified his SF 86 when he failed to report the tax lien filed in 2013. The Government established that there was a tax lien, but not that Applicant was aware of the tax lien. SOR ¶ 2.b is concluded for Applicant. SOR ¶ 2.c alleges that Applicant intentionally falsified his SF 86 when he failed to report his bankruptcy. When considering Applicant’s state of mind in responding to this question, I have also considered his other inaccurate statements (failure to report unpaid taxes and defaulted student loans, false information about employment and income on bankruptcy petition, and false information about banking during polygraph). I also considered Applicant’s testimony, demeanor, background, character, and the information provided by the FSO and military security officer. I conclude that Applicant did not intentionally provide false information on the SF 86 or on the other false statements. I attribute the false statements to an inattention to detail and a complete disregard for the state of his finances. SOR ¶ 2.c is concluded for Applicant. That resolves the personal conduct concerns; but it heightens the financial considerations concerns, as addressed below. 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 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. The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following are potentially applicable in this case: 8 (a) inability to satisfy debts; (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 had financial problems including defaulted student loans, Chapter 7 bankruptcy, and unpaid taxes. The evidence is sufficient to raise the above disqualifying conditions. Conditions that could mitigate the financial considerations security concerns are provided under AG ¶ 20. The following are potentially applicable: (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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; (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; (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; 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, like many military people, left his finances to his spouse to handle. In 2012, she emptied their bank accounts and moved with the children to another state. 9 Applicant then realized that many bills went unpaid. Those events were beyond his control. However, Applicant went years without filing tax returns and paying taxes. He cannot attribute that completely to his ex-wife. Minimal attention to his finances would have revealed those issues. Moreover, his ex-wife had nothing to do with how his student loans were or were not addressed when he worked for the DOD. Applicant’s ex-wife left in 2012, but I am still not convinced that Applicant has a grasp on his finances. The Chapter 7 bankruptcy was a reasonable response to the sudden separation and resultant financial problems, but it was predicated on false information that Applicant was unemployed. It also did nothing to address his student loans and taxes. I believe nothing Applicant says about his finances without corroborating documentation, not because I believe he is lying, but because he does not have a grasp of the true state of his finances. In that regard, I am satisfied that his retirement pay has been levied $2,192 per month for his delinquent taxes since July 2015, and that the levy is almost complete. I have no confidence that his state taxes have been paid. Applicant claims that he thought the DOD paid his student loans when he started work there in 2003. He also admitted that he obtained student loans through 2006, which is several years after he was hired by the DOD. He thought his ex-wife paid those loans, but he admitted that he did nothing after his ex-wife left to verify whether they were paid. The bankruptcy petition listed $169,239 in student loans, which have continued to accrue interest in the more than three years since the petition was filed. Applicant responded to the SOR in September 2016. The record was left open for him to submit additional material. In spite of having all that time, Applicant has done nothing of consequence to address his student loans, or to make me believe they should have been paid by the DOD. I am unable to find that Applicant acted responsibly under the circumstances or that he made a good-faith effort to pay his debts. His financial issues are recent and ongoing. They continue to cast doubt on his current reliability, trustworthiness, and good judgment. SOR ¶ 1.c is mitigated because I am satisfied the tax lien is being resolved. I cannot find the Chapter 7 bankruptcy (SOR ¶ 1.d) mitigated when it was predicated on false information. The defaulted student loans (SOR ¶¶ 1.a and 1.b) are not mitigated. 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 10 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 the facts and circumstances surrounding this case. I have incorporated my comments under Guidelines E and F in my whole-person analysis. I considered Applicant’s honorable military service and his distinguished service as a senior official of the DOD. However, Applicant completely shirked his financial responsibilities to the point where he had no idea of their true state. He did not pay his taxes or student loans for years. It is difficult to assess the status of his taxes, but it is clear that he owes more than $170,000 in student loans. Applicant wrote post-hearing that the hearing opened his eyes. If he has truly learned from the experience, he may bring his finances in order and be suitable again at some point for a security clearance, but I would be shirking my responsibilities if I found he is suitable at this time. Overall, the record evidence leaves me with questions and doubts about Applicant’s eligibility and suitability for a security clearance. I conclude Applicant refuted the personal conduct security concerns, but he did not mitigate the financial considerations security concerns. 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: Against Applicant Subparagraphs 1.a-1.b: Against Applicant Subparagraph 1.c: For Applicant Subparagraph 1.d: Against Applicant Paragraph 2, Guideline E: For Applicant Subparagraphs 2.a-2.c: For Applicant 11 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 eligibility for a security clearance. Eligibility for access to classified information is denied. ________________________ Edward W. Loughran Administrative Judge