1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-03485 ) ) Applicant for Security Clearance ) Appearances For Government: Jeff Nagel, Department Counsel For Applicant: Pro se August 14, 2017 ______________ Decision ______________ LOKEY ANDERSON, Darlene D, Administrative Judge: Statement of Case On December 10, 2015, Applicant submitted a security clearance application (SF-86). On January 6, 2017, the Department of Defense Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of Reasons (SOR), detailing security concerns under Guidelines F, Financial Considerations. (Item 1.) 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 for Access to Classified Information, effective within the DoD after September 1, 2006. Applicant answered the SOR on February 22, 2017, and requested a hearing before an administrative judge. The case was assigned to me on March 30, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing that same day, scheduling the hearing for April 14, 2017. The hearing was convened as scheduled. The Government offered four exhibits, referred to as Government Exhibits 1 2 through 4, which were admitted without objection. Applicant presented nine exhibits, referred to as Applicant’s Exhibits A thorough I, which were admitted without objection. He also testified on his own behalf. The record remained open until close of business on May 14, 2017, to allow the Applicant to submit additional supporting documentation. Applicant submitted one Post-Hearing Exhibit, marked as A, which was admitted without objection. DOHA received the transcript of the hearing (Tr.) on May 1, 2017. The SOR in this case was issued under the adjudicative guidelines that came into effect within the DoD on September 1, 2006. Security Executive Agent Directive (SEAD) 4, National Security Adjudicative Guidelines, implements new adjudicative guidelines, effective June 8, 2017. All national security eligibility decisions issued on or after June 8, 2017, are to be decided using the new National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), as implemented by SEAD 4. I considered the previous adjudicative guidelines, effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s national security eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG. Findings of Fact Applicant is 38 years old. He is unmarried with a young son. He has a high school diploma and one semester of college. He is employed with a defense contractor as a Facilities Maintenance Technician. He is seeking to obtain a security clearance in connection with his employment. Guideline F - Financial Considerations The Government alleged that Applicant is ineligible for a clearance because he made financial decisions that indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which raise questions about his reliability, trustworthiness, and ability to protect classified information. The SOR identified the fact that Applicant failed to file his Federal and state income tax returns for tax years 2006 through 2012, and there are four Federal tax liens entered against him totaling approximately $59,000. Applicant admits each of the allegations in the SOR. (Applicant’s Answer to SOR.) Prior to becoming a professional surfer, Applicant worked a regular job and paid taxes and filed his income tax returns. (Tr. p. 46.) In 2006, Applicant was sponsored by surfing companies to become a professional surfer, surfing for a team, and competing in Pro Am surfing tournaments. He was told that he would receive a travel fund to pay his expenses. (Tr. p. 43.) He did not understand that his travel fund was income for tax purposes. He did not understand what his tax responsibilities were as it related to his independent contractor status. He contends that he did not receive the proper instruction nor did he have the understanding or knowledge required on how to report his income or expense or how to pay self-employment taxes. Furthermore, he claims 3 that he never received a W-2 and so he was not aware that he owed anything. Applicant continued working full time as a sponsored surfer until 2012. As a result, Applicant failed to file his Federal and state income tax returns for tax year 2006 through 2012 as required by law. Applicant contends that he did not realize that he was required to pay taxes on the money he received, as he thought it was a travel fund. He states that he averaged about $30,000 a year. (Tr. p. 42.) Applicant also became indebted to the Federal Government for a tax lien entered against him in the approximate amount of $16,255.70 for back taxes owed for 2006; a tax lien entered against him in the approximate amount of $13,409.31 for tax year 2008; and a tax lien entered against him in the approximate amount of $13,036.34 for tax year 2009. All of this debt remains owing. (Tr. pp. 54-65.) In 2015, Applicant learned from the Internal Revenue Service (IRS) that the travel fund he had been receiving all along as a professional surfer was in fact his salary that he was required to pay taxes on. Applicant had initially tried to prepare his returns himself but upon the advice of the IRS was told that he needed to hire a tax professional to help him. Since November 2016, Applicant has been working closely with a specific IRS agent to resolve his tax problems. A letter from the IRS agent dated April 13, 2017 indicates that he anticipates Applicant’s case to be resolved quickly once the returns are received. (Applicant’s Exhibit H.) He is filing his tax returns, going back and refiling others, to include the proper deductions such as monies spent on expenses, including food, travel, surfboards, etc. Even before receiving the SOR, Applicant had been working with the IRS to clear up his tax issues since he found out about the problem in 2015. Applicant has been working with his tax preparer on filing 2010, 2011 and 2012 income tax returns. He recently filed his 2016 income tax return. He understands from the IRS agent that any refund he gets will be automatically applied to his back tax liability, or credited toward his tax liens. (Tr. p. 51.) Applicant states that he was also told by the IRS agent he is working with that before the tax liens can be addressed, he must file his income tax returns for 2010, 2011, and 2012, and that the totals for the Federal taxes on those returns must be amended. (Tr. p. 55.) Applicant then plans to start an installment plan to resolve the remaining taxes owed. He continues to work toward resolving his tax issues. A letter from the Applicant submitted after the hearing indicates that he has finalized his tax returns for tax years 2010, 2011, 2012 and 2013 and has faxed them to his IRS agent. Applicant now working on his tax returns for tax years 2006, 2007, 2008 and 2009 so he can amend what was owed. (Applicant’s Exhibit A.) From 2014 to 2015, Applicant worked as a surf instructor. During that time he was paying taxes on his income and filing taxes. A letter from Applicant’s employer indicates that he is performing his duties in a very satisfactory manner. He has demonstrated good initiative for learning all aspects of the job and gets along well with fellow employees. (Applicant’s Exhibit E.) 4 Applicant enjoys his current job. (Tr. p. 53.) He is well respected in the community and is involved in charity and volunteer work. He is a new father of a son and understands that he must always be responsible going forward. Letters from close friends, known as family, who have known the Applicant since he was young attest to his reliability, trustworthiness and good judgment. Applicant is described as very polite, soft-spoken, helpful and humble. He is said to be a great role model for the younger children and is an asset to the community. (Applicant’s Exhibits D and E.) A letter of recommendation submitted on Applicant’s behalf from a past co- worker who has known him for over ten years, shows her great respect and admiration for the Applicant. He is considered to be a remarkable person, first to volunteer and always dependable and willing to do more than expected. (Applicant’s Exhibit A.) Applicant has been actively involved in his community providing volunteer services for the Women and Children’s Medical Center, the Make a Wish Foundation, the Wounded Warriors and the local schools. (Applicant’s Exhibit A.) 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 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 AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. 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 access to classified information 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. 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 5 applicant has the ultimate burden of persuasion to obtain 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 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 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 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. Four are potentially applicable in this case: (a) inability or unwillingness to satisfy debts; (b) unwillingness to satisfy debts regardless of the ability to do so; and (c) a history of not meeting financial obligations. 6 (g) failure to file annual Federal, state, or local income tax returns as required or the fraudulent filing of the same. Applicant failed to file his Federal and state income tax returns for tax year 2006 through 2012. There are four Federal tax liens entered against the Applicant for tax years 2006, 2007, 2008, and 2009, totaling approximately $59,000 that remain outstanding. The evidence is sufficient to raise the above disqualifying conditions. AG ¶ 17 provides conditions that could mitigate security concerns. Three are potentially applicable here. 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; 20(c) the person has received or is receiving counseling for the problem and/there are clear indications that the problem is being resolved or is under control; 20(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts. Although these mitigating conditions partially apply, they do not fully mitigate the fact that Applicant not as of yet filed any of the tax returns at issue, nor has he begun to resolve the debt owed on the four Federal tax liens. Accordingly, this guideline must be found against him. 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. 7 Applicant must continue to work with the IRS to resolve his back tax issues and pay the taxes that he owes. Assuming he does this, he may very well be eligible for a security clearance in the future, but not at this time. I considered the potentially disqualifying and mitigating conditions in light of all relevant facts and circumstances surrounding this case. I conclude Applicant has not mitigated the Financial Consideration 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.: Against Applicant Subparagraphs 1.b.: Against Applicant Subparagraphs 1.c.: Against Applicant Subparagraphs 1.d.: Against Applicant Subparagraphs 1.e.: Against Applicant Subparagraphs 1.f.: Against Applicant 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 or continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied. Darlene Lokey Anderson Administrative Judge