1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-03320 ) Applicant for Security Clearance ) Appearances For Government: Nicole A. Smith, Esq., Department Counsel For Applicant: Pro Se ______________ Decision ______________ MURPHY, Braden M., Administrative Judge: Applicant owes a significant amount in delinquent federal and state income taxes. She is currently in Chapter 13 bankruptcy, but her tax debt remains significant and unresolved. She did not mitigate the financial considerations security concerns. Eligibility for access to classified information is denied. Statement of the Case On December 3, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, financial considerations. The action was taken under Executive Order (Exec. Ord.) 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 implemented by the DOD on September 1, 2006. Applicant answered the SOR on December 20, 2016, and requested a decision on the written record, in lieu of a hearing. On February 24, 2017, Department Counsel exercised the Government’s right to request a hearing, and informed Applicant by mail 2 the same day. The case was assigned to me on May 12, 2017. The hearing convened on July 31, 2017, as scheduled. At the hearing, Department Counsel offered documents marked as Government Exhibits (GE) 1 through 4. GE 1, GE 2 and GE 3 were admitted without objection. GE 4 was not admitted. Applicant testified but did not offer any documentary evidence. I held the record open until August 28, 2017, to enable Applicant the opportunity to submit additional documents.1 Applicant timely submitted 11 documents, which were marked as Applicant Exhibits (AE) A through AE K and admitted without objection. DOHA received the transcript (Tr.) on August 8, 2017. On December 10, 2016, the Director of National Intelligence (DNI) issued Security Executive Agent Directive 4, National Security Adjudicative Guidelines (AG). The AGs became effective on June 8, 2017, for all adjudicative decisions on or after that date, including this one. Any changes resulting from the implementation of the new AGs did not affect my decision in this case. Findings of Fact Applicant admitted SOR ¶¶ 1.a-1.c, and ¶¶ 1.e-1.n. She denied SOR ¶ 1.d. Her admissions and other comments are incorporated into the findings of fact. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact. Applicant is 59 years old. She has been married and divorced twice, and she has four adult children. One of her sons currently lives with her, along with her grandson. She has a general education degree. She has worked as a defense contractor since January 2001, either for her current employer or its predecessor. She has never held a security clearance. (Tr. 12, 26, 42-46, 59) Applicant submitted a security clearance application (SCA) in October 2014. She disclosed several past-due medical debts. (GE 1) The SOR alleged that Applicant had incurred delinquent debts totaling about $36,000. They included: $23,000 in past-due federal income taxes, from tax years 2009-2014 (SOR ¶ 1.a); a $5,300 state tax lien being paid through garnishment (SOR ¶ 1.b); another garnishment, for $978 (SOR ¶1.d);2 a charged-off private loan, for $4,397 (SOR ¶ 1.e); a charged-off $305 debt to an on-line retailer (SOR ¶ 1.f); a $268 cable bill in collection (SOR ¶ 1.g); and seven medical debts totaling about $750. (SOR ¶¶ 1.h through 1.n) Applicant also failed to timely file her 2015 federal income tax return. (SOR ¶ 1.c) For several years, beginning in about 2009, Applicant’s tax returns were completed by a friend. Applicant testified that she usually received a tax refund. In about 2014, Applicant was audited by the Internal Revenue Service (IRS). The IRS notified 1 Hearing Exhibit II. The Government’s discovery letter is Hearing Exhibit I. 2 The garnishment at SOR ¶ 1.d is alleged as a state tax lien, but it is actually for a payday loan. (AE H) 3 her that she had been claiming too many exemptions on her tax returns. The IRS determined that she owed about $20,000 in past-due taxes from 2009-2014. Applicant testified that she was initially able to meet the IRS’s proposed payment plan of $100 a week. She was unable to meet the payment plan when it increased to $350 a week, so she stopped making tax payments. (Tr. 28-36) Applicant testified that her other debts are attributable to several circumstances. She acknowledged overspending by applying for credit cards that she did not need, and taking out loans to catch up on payments. When she is out of work for any reason she only gets a small stipend of $250 to $300 a week, which is barely enough to live on, and is not enough to catch up on debt payments. (Tr. 62) Applicant filed for Chapter 13 bankruptcy in January 2017. Her liabilities total about $78,000. (AE E) She testified that she declared $34,600 in liabilities, but this is actually the amount she is expected to pay into her bankruptcy plan over the next five years. She pays about $133 a month. As of late July 2017, she had paid about $3,500. (Tr. 24, 59-61; AE E) Applicant testified that SOR debts ¶¶ 1.e and 1.f are listed in her bankruptcy, but SOR ¶ 1.g is not. (Tr. 37-38, 57) Applicant also failed to file her federal tax returns for 2014 and 2015. (Only 2015 was alleged, at SOR ¶ 1.b). She testified that before then, she always filed her tax returns on time. (Tr. 32-36) She testified that she filed those returns in January 2017, during the bankruptcy petition process. She also participated in pre-bankruptcy credit counseling, as required. (Tr. 33, 59, 62; AE K) Applicant also owes $3,277 in past-due state taxes. (SOR ¶ 1.c) Applicant was paying $65 a week in garnished wages before her payments were stayed by the bankruptcy. (AE E, AE G) An earlier garnishment resolved SOR ¶ 1.d in mid-2016, before the SOR was issued. (AE H) After the hearing, Applicant provided several years of IRS tax account transcripts. She initially owed $3,096 for 2009. She set up an installment plan in June 2010, and no longer owes for that tax year. (AE A) For tax year 2010, she initially owed $1,243, but after recalculation, penalties, and interest, she still owes $5,367. (AE B) Applicant initially got a refund for tax year 2011, but now owes $2,317. (AE C) She filed her 2012 tax return late (in 2014). She still owes $6,177. (AE D) She provided no documents for tax year 2013. She owes $6,238 for tax year 2014. (AE F) As of July 31. 2017, she owes a total of $28,136 to the IRS. However, her tax payments have been stayed by the bankruptcy. (AE E, AE F) Applicant testified that her medical debts related to treatment for allergies, other medical conditions, and injuries after a 2015 auto accident. Due to these medical issues, and occasional work slowdowns at the shipyard, Applicant is typically away from work about 30 days a year. (Tr. 38-49) 4 Applicant earns $1,083 a week, and about $56,000 a year. She owns her own home, and pays a mortgage of about $1,483. She testified that her finances have improved since she filed bankruptcy. However, with the money being taken out for her bankruptcy payments, she is living paycheck-to-paycheck and has few savings. (Tr. 43, 63-64) Policies It is well established that no one has a right to a security clearance.3 As the Supreme Court noted in Department of the Navy v. Egan, “the clearly consistent standard indicates that security determinations should err, if they must, on the side of denials.”4 The AGs 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 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 ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under ¶ 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. 3 Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”). 4 484 U.S. at 531. 5 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. . . The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following are potentially applicable in this case: (a) inability to satisfy debts; (c) a history of not meeting financial obligations; and (f) failure to file or fraudulently filing annual Federal state, or local tax returns or failure to pay annual Federal, state, or local income tax as required. Applicant’s accumulation of delinquent debt implicates the financial considerations security concern. AG ¶¶ 19(a) and 19(c) apply. Applicant owes about $28,000 in past-due federal taxes and about $3,000 in past-due state taxes. She failed to timely file her 2015 federal income tax return, as required. AG ¶ 19(f) applies. Applicant therefore bears a heavy burden in mitigating the financial considerations security concern.5 Applicant paid SOR debt ¶ 1.d through garnishment before the SOR was issued. SOR ¶ 1.b is resolved, because Applicant brought her tax filings current during the bankruptcy process. The medical debts are due to a circumstance beyond her control and are mitigated. The non-tax debts are being resolved through the bankruptcy. This leaves the state and federal taxes, which are too large at this point to mitigate. The payment plans are stayed due to the bankruptcy, but Applicant did not establish that those debts will be discharged in that process. Even if so, a discharge will not occur until 2022. Conditions that could mitigate financial considerations security concerns are provided under AG ¶ 20. The following are potentially applicable: 5 See generally, ISCR Case No. 14-03358 at 3 (App. Bd. Oct. 9, 2015) (“A security clearance represents an obligation to the Federal Government for the protection of national secrets. Accordingly failure to honor other obligations to the Government has a direct bearing on an applicant’s reliability, trustworthiness, and ability to protect classified information.”). 6 (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, 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, 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; 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. AG ¶ 20(b) has some application. Applicant has several small medical debts. She also testified that she has missed about 30 days of work a year, and when she does, she receives a stipend that is barely enough to live on, but not enough to pay her debts. These circumstances are beyond her control. The first prong of AG ¶ 20(b) applies, and mitigates the medical debts in the SOR (¶¶ 1.h through 1.n). However, Applicant’s financial issues also occurred, in part, due to her own poor decisions, such as incurring excessive credit card debt. Most importantly, there is the matter of her taxes. Applicant testified that for several years, beginning in about 2009, she had a friend prepare her tax returns, and she took too many exemptions, leading to significant past-due tax debt. She did not establish that this circumstance was beyond her control. AG ¶ 20(b) does not apply to her tax debts. Applicant’s tax repayment plan was stayed after she filed Chapter 13 bankruptcy. Similarly, her wages were being garnished to pay her state tax debt but, that, too, has been stayed. There is no indication that she has a current plan in place to resolve those debts. AG ¶ 20(g) applies to the 2015 tax return, but not to the unpaid taxes. AG ¶ 20(c) and AG ¶ 20(d) are not fully established. While Applicant participated in credit counseling during the bankruptcy process, she has not sufficiently established that there are clear indications that her tax debt is being resolved or is under control. She still owes over $28,000 in past-due federal income taxes. She was able to keep up with the initial payment plan but stopped paying on it when it increased to $350 a month. 7 An applicant who fails to timely file or pay his or her taxes, a basic and fundamental financial obligation of all citizens, bears a heavy burden in mitigating the financial considerations security concern. An administrative judge should closely examine the circumstances giving rise to an applicant’s tax-related issues and his or her response to it. Furthermore, an applicant’s claim of financial reform must be weighed against the overriding concerns about the individual’s lack of judgment and history of not abiding by rules and regulations in failing to timely file or pay their taxes.6 Here, Applicant filed her past-due tax returns only after receiving the SOR, and only in preparation for bankruptcy. That decreases the mitigating value that can be attached to such remedial action. Her tax issues are recent, significant, and unresolved. She did not establish that her financial problems are unlikely to recur and do not cast doubt on her current reliability, trustworthiness, or good judgment. AG ¶ 20(a) does not apply. 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(c): (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. 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 Guideline F in my whole-person analysis. Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility for a security clearance. I conclude Applicant 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: 6 ISCR Case No. 14-05794 (App. Bd. July 7, 2016); ISCR Case No. 14-00221 (App. Bd. June 29, 2016); ISCR Case No. 15-01031 (App. Bd. June 15, 2016); ISCR Case No. 12-09545 (App. Bd. Dec. 21, 2015). 8 Paragraph 1, Guideline F: AGAINST APPLICANT Subparagraph 1.a: Against Applicant Subparagraph 1.b: For Applicant Subparagraph 1.c: Against Applicant Subparagraph 1.d: For Applicant Subparagraphs 1.e-1.g: For Applicant Subparagraphs 1.h-1.n: For Applicant Conclusion In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the interests of national security to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. ________________________ Braden M. Murphy Administrative Judge