1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-01057 ) Applicant for Security Clearance ) Appearances For Government: Ross Hyams, 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 June 29, 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 July 28 2016, and elected to have the case decided on the written record in lieu of a hearing. The Government’s written case was submitted on September 30, 2016. A complete copy of the file of relevant material (FORM) was provided to Applicant, who was afforded an opportunity to file objections and submit material to refute, extenuate, or mitigate the security concerns. Applicant received the FORM on November 29, 2016. He responded to the FORM with documents that I have marked as Applicant’s Exhibits (AE) A through J. The case was assigned to me on October 1, 2017. The Government 2 exhibits included in the FORM and AE A through J are admitted in evidence without objection. Findings of Fact Applicant is a 60-year-old employee of a defense contractor. He has worked for his current employer since August 2015. He served on active duty in the U.S. military from 1979 until he retired with an honorable discharge in 2004. He has a bachelor’s degree, which was awarded in 1979, and a master’s degree, which was awarded in 1998. He is married for the third time. He has two adult children.1 In August 2014, Applicant lost the job he had held since 2005. He was unemployed for six months, and when he started working again, it was at a salary that was about $50,000 less than his previous job. His current salary is commensurate with what he was earning before he lost his job in 2014. He applied for mortgage relief under the Home Affordable Modification Program (HAMP), but was denied. His attempts at a short sale were unsuccessful, and his home was lost to foreclosure in about April 2016.2 Applicant has a history of tax problems. The IRS filed a $22,952 tax lien against him in March 2008, and an $18,957 lien against him in February 2010. The $22,952 lien was released in May 2011. During his background interview in December 2015, Applicant stated that his tax problems started in about 2001 when he was audited and determined to owe an additional $12,000 to $15,000. He stated that he paid $500 per month after the audit, but he was unable to pay the taxes owed for a number of tax years, which he thought may have been 2004, 2006, 2007, 2008, and 2012. He told the investigator that the IRS placed two tax liens on his property, and that he owed about $18,000 in back taxes. He stated that he was on a $302 per month payment plan with the IRS, and the IRS withholds any refunds and applies them to his back taxes.3 In his response to the FORM, Applicant provided a copy of his installment agreement notice from the IRS, dated February 24, 2016. The notice listed $0 as the last payment amount. The scheduled monthly payment was $302. The balance owed was $22,655, which included $16,466, plus $1,480 in penalties, and $2,499 in interest for tax year 2010; and $2,702, plus $115 in penalties, and $242 in interest for tax year 2012. Applicant provided documented proof that he made $302 or $305 payments in August 2016, September 2016, and December 2016.4 1 Items 3-5; AE A, E. 2 Items 3, 5-9; AE A-E, H-J. The SOR did not allege the $22,952 tax lien. Any matter that was not alleged in the SOR will not be used for disqualification purposes. It may be considered when assessing Applicant’s overall financial situation, in the application of mitigating conditions, and during the whole- person analysis. 3 Item 3, 5, 7, 8; AE A. 4 AE F. 3 Applicant’s July 2009 credit report indicates he obtained a $31,730 auto loan in March 2005; a $39,992 auto loan in November 2006; a $22,248 auto loan in July 2007; a $69,271 auto lease in October 2008; and a $77,450 auto loan or lease in January 2009. At least one of the loans appears to have been for a motorcycle. As of the date of the 2009 credit report, Applicant was still paying all five of the loans or leases.5 Applicant’s May 2015 and March 2016 credit reports indicate he obtained a $42,746 auto loan in May 2012, with $648 monthly payments; a $40,890 auto loan in July 2012, with $654 monthly payments; and a $45,000 auto loan in October 2012, with $794 monthly payments. One or more of the loans could have been for a motorcycle. As of the date of the March 2016 credit report, Applicant was still paying all three of the loans.6 Applicant submitted a Questionnaire for National Security Positions (SF 86) in February 2015.7 He answered “No” to all of the financial questions under Section 26, which included the following: In the past seven (7) years have you failed to file or pay Federal, state, or other taxes when required by law or ordinance? 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). Applicant relies on his integrity as a retired military officer to assert that he did not intentionally falsify the SF 86. He stated that he was paying the IRS through installment agreements, and he forgot about the lien. He stated that his tax issues have gone on for years and were discussed during his previous periodic reinvestigation.8 After considering all the evidence, I find insufficient evidence for a determination that Applicant intentionally falsified the SF 86 when he failed to report his tax issues. 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. 5 Item 6. 6 Items 7, 8. 7 Item 2. 8 Items 3, 5; AE A. 4 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(a), 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 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). 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. 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: (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 has a history of financial problems including a defaulted mortgage loan, resulting in a foreclosure, and unpaid taxes, resulting in a tax lien. 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; 6 (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; 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. The foreclosure of Applicant’s home was related to his job loss and unemployment, followed by underemployment. He acted responsibly by applying for mortgage relief and attempting a short sale. The security concerns raised by Applicant’s foreclosed mortgage loan are mitigated. Applicant’s tax problems were not beyond his control. He did not pay his taxes for multiple tax years well before he lost his job. At the same time, he was obtaining and paying large auto loans and leases. As of February 2016, he owed the IRS $22,655 for tax years 2010 and 2012. In 2012 alone, he took out auto loans totaling more than $128,000, with total monthly payments of $2,096, but he did not pay the taxes he owed for that tax year. Failure to comply with tax laws suggests that an applicant has a problem with abiding by well-established government rules and systems. Voluntary compliance with rules and systems is essential for protecting classified information. A person who fails repeatedly to fulfill his or her legal obligations, such as paying taxes when due, does not demonstrate the high degree of judgment and reliability required of those granted access to classified information. See e.g., ISCR Case No. 15-05478 at 4 (App. Bd. Oct. 2, 2017). Applicant asserts that he has been in repayment plans with the IRS for years, and the IRS withholds any refunds and applies them to his back taxes. I suspect that may be true, but he only documented three payments. The Appeal Board has held that “it is reasonable for a Judge to expect applicants to present documentation about the satisfaction of specific debts.” See ISCR Case No. 09-07091 at 2 (App. Bd. Aug 11, 2010) (quoting ISCR Case No. 04-10671 at 3 (App. Bd. May 1, 2006)). There is insufficient evidence for a determination that Applicant’s financial problems will be resolved within a reasonable period. I am unable to find that he 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. AG ¶¶ 20(a), 20(b), 20(c), and 20(d) are not applicable. AG ¶ 20(g) is not applicable because Applicant did not establish that he is in compliance with his installment agreement with the IRS. I find that financial considerations concerns remain despite the presence of some mitigation. 7 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 or sensitive information. Of special interest is any failure to cooperate or provide truthful and candid answers during national security clearance investigative or adjudicative processes. 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 qualifications, award benefits or status, determine national security eligibility or trustworthiness, or award fiduciary responsibilities. There is insufficient evidence that Applicant intentionally falsified the SF 86. AG ¶ 16(a) is not applicable. SOR ¶ 2.a is concluded for Applicant. 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. 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 also considered Applicant’s 8 honorable military service. However, he shirked his tax responsibilities for years while he apparently spent lavishly on vehicles. 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 Subparagraph 1.a: For Applicant Subparagraph 1.b: Against Applicant Paragraph 2, Guideline E: Against Applicant Subparagraph 2.a: 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 Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. ________________________ Edward W. Loughran Administrative Judge