1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) --------------------------- ) ISCR Case No. 16-03377 ) Applicant for Security Clearance ) Appearances For Government: Rhett Petcher, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ KATAUSKAS, Philip J., Administrative Judge: Applicant contests the Defense Department’s intent to deny his eligibility for access to classified information. Applicant failed to mitigate the security concern raised by his problematic financial history. Accordingly, this case is decided against Applicant. Statement of the Case Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on February 13, 2015. This document is commonly known as a security clearance application. On December 15, 2016, after reviewing the application and the information gathered during a background investigation, the Department of Defense Consolidated Adjudications Facility sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the national interest to grant his eligibility for access to classified information.1 It detailed the factual reasons for 1 This action was taken under Executive Order (E.O.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended, as well as Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), 2 the action under the security guideline known as Guideline F for financial considerations. Applicant answered the SOR on January 11, 2017, and requested a decision based on the written record without a hearing. On February 10, 2017 Department Counsel submitted a file of relevant material (FORM).2 The FORM was mailed to Applicant February 13, 2017. He was given 30 days to file objections and submit material to refute, extenuate, or mitigate the Government’s evidence. Applicant received the FORM on February 23, 2017.3 Applicant did not respond to the FORM. The case was assigned to me on October 1, 2017. Procedural Matters Included in the FORM were five items of evidence, which are marked as Government Exhibits (GE) 1 through 4.4 Exhibits 1, 3, and 4 are admitted into evidence without objection. GE 2 is a report of investigation (ROI) summarizing Applicant’s interview that took place during the March 2016 background investigation. The ROI is not authenticated, as required under ¶ E3.1.20 of the Directive.5 Department Counsel’s written brief includes a footnote advising Applicant that the summary was not authenticated and that failure to object may constitute a waiver of the authentication requirement. Nevertheless, I am not persuaded that a pro se applicant’s failure to respond to the FORM, which response is optional, equates to a knowing and voluntary waiver of the authentication requirement. The record does not demonstrate that Applicant understood the concepts of authentication, waiver, and admissibility. It also does not demonstrate that he understood the implications of waiving an objection to the admissibility of the ROI. Accordingly, Exhibit 2 is inadmissible, and I have not considered the information in the ROI. effective within the Defense Department on June 8, 2017, apply here. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2016). In this case, the SOR was issued under Adjudicative Guidelines effective within the Defense Department on September 1, 2006. My decision and formal findings under the revised Guideline F would not be different under the 2006 Guideline F. 2 The file of relevant material consists of Department Counsel’s written brief and supporting documentation, some of which are identified as evidentiary exhibits in this decision. 3 The Defense Office of Hearings and Appeals’ (DOHA) transmittal letter is dated February 13, 2017, and Applicant’s receipt is dated February 23, 2017. The DOHA transmittal letter informed Applicant that he had 30 days after receiving it to submit information. 4 The first item in the FORM is the SOR and Applicant’s Answer. Because the SOR and the Answer are the pleadings in this case, they are not marked as Exhibits. Items 2 through 5 are marked as Exhibits 1 through 4. 5 See generally ISCR Case No. 12-10933 (App. Bd. Jun. 29, 2016) (In a concurring opinion, Judge Ra’anan notes the historical concern about reports of investigation in that they were considered by some to present a heightened problem in providing due process in security clearance cases. Judge Ra’anan raises a number of pertinent questions about using an unauthenticated ROI in a non-hearing case with a pro se applicant.). 3 Findings of Fact Applicant is 27 years old and has his GED and some college credits. He has never married and has no children. He has been offered prospective employment by a defense contractor and needs a clearance to consummate that offer.6 The SOR alleged seven delinquent debts totaling $2,482. The SOR also alleged that Applicant failed to file (1) federal tax returns for a company he operated for tax years 2011 through 2015, (2) state tax returns for that same company for tax years 2011 through 2015, (3) sales tax returns for that same company for tax years 2011 through 2013, (4) federal income tax returns for tax years 2006 through 2011, and (5) state income tax returns for the tax years 2009 and 2012 through 2014.7 In his Answer to the SOR, Applicant admitted all allegations, except for SOR ¶¶ 1.c (a $204 debt), 1.d (an unquantified charge-off), 1.f (a $47 medical debt), and 1.k (failure to file federal tax returns for 2006 through 2011). There is record support for SOR ¶¶ 1.c, 1.d, and 1.f.8 In his March 2015 security clearance application, Applicant stated that he had failed to file returns and pay his federal income and sale taxes for years 2011 through 2013. That security clearance application provides record support for the year 2011, as alleged in SOR ¶ 1.k. There is, however, no evidence to support years 2006 through 2010, as alleged in SOR ¶ 1.k. Applicant stated that unbeknownst to him his former business partner was to have handled the taxes but failed to do so. Applicant also stated that he had retained a CPA to assist him in resolving his tax problem.9 In sum, I find that all allegations of delinquent debts are supported by the evidence. I also find that by virtue of Applicant’s admissions in his Answer and in his security clearance application, the tax allegations are supported by the evidence, except for the years 2006 through 2010 alleged in SOR ¶ 1.k. Law and Policies It is well-established law that no one has a right to a security clearance.10 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of 6 GE 1. 7 SOR ¶¶ 1.a-1.l. 8 GE 4, p. 2; GE 3, pp. 5, 7. 9 GE 1. 10 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”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance). 4 denials.”11 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security. A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.12 An unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.13 There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.14 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.15 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.16 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.17 In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.18 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.19 Discussion Under Guideline F for financial considerations,20 the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is: 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 11 484 U.S. at 531 12 Directive, ¶ 3.2. 13 Directive, ¶ 3.2. 14 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). 15 Directive, Enclosure 3, ¶ E3.1.14. 16 Directive, Enclosure 3, ¶ E3.1.15. 17 Directive, Enclosure 3, ¶ E3.1.15. 18 Egan, 484 U.S. at 531. 19 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). 20 AG ¶¶ 18, 19, and 20 (setting forth the concern and the disqualifying and mitigating conditions). 5 questions about an individual's reliability, trustworthiness, and ability to protect classified or sensitive information….21 The concern is broader than the possibility that a person might knowingly compromise classified information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions: AG ¶ 19(a) inability to satisfy debts; AG ¶ 19(b) unwillingness to satisfy debts regardless of the ability to do so; AG ¶ 19(c) a history of not meeting financial obligations; 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; 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; AG ¶ 20(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; AG ¶(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; and, AG ¶ 20(d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts. Although there are delinquent debts supported by the evidence, the nub of this case is Applicant’s failure to file state and federal tax returns, as required. The evidence supports a conclusion that Applicant has had a problematic tax history going back to 2011. 21 AG ¶ 18. 6 And his tax problems persisted as recently as January 2017, when he answered the SOR. This raises security concerns under AG ¶¶ 19(a), (b), (c), and (f). The next inquiry is whether any mitigating conditions apply. Because Applicant did not respond to the FORM, the record is silent as to what Applicant did to responsibly address his tax problems, other than retain a CPA. Even if I credit Applicant’s explanation that his former business partner failed, without Applicant’s knowledge, to file tax returns, as a circumstance largely beyond Applicant’s control, the record does not support full mitigation under AG ¶ 20(b). Likewise, even if I credit Applicant with seeking counseling from a CPA, AG ¶ 20(c) does not apply, because there is no evidence that Applicant’s tax problem is being resolved or is under control. Nor does AG ¶ 20(d) apply. And AG ¶ 20(a) does not apply, because Applicant’s tax problems, at least on this record, still exist unresolved today. The record raises doubts about Applicant’s reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. I also gave due consideration to the whole-person concept.22 Accordingly, I conclude that Applicant failed to meet his ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant him eligibility for access to classified information. Formal Findings As required by section E3.1.25 of Enclosure 3 of the Directive, I make the following formal findings on the SOR allegations: Paragraph 1, Guideline F: Against Applicant Subparagraphs 1.a-1.l: Against Applicant Conclusion In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information. Philip J. Katauskas Administrative Judge 22 AG ¶¶ 2(d)(1)-(9) and 2(f)(1)-(6). 7