1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) --- ) ISCR Case No. 18-00417 ) Applicant for Security Clearance ) Appearances For Government: Rhett Petcher, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ GALES, Robert Robinson, Administrative Judge: Applicant failed to mitigate the security concerns regarding financial considerations and personal conduct. Eligibility for a security clearance is denied. Statement of the Case On August 22, 2013, and again on July 26, 2017, Applicant applied for a security clearance and submitted Electronic Questionnaires for Investigations Processing (e-QIP) versions of a Security Clearance Application. On an unspecified date, the Defense Office of Hearings and Appeals (DOHA) issued him a set of interrogatories. He responded to those interrogatories on May 3, 2018. On May 21, 2018, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) to him, under Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended and modified; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended and modified (Directive); and Directive 4 of the Security Executive Agent (SEAD 4), (December 10, 2016), National Security Adjudicative Guidelines (AG) for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position, effective June 8, 2017. 2 The SOR alleged security concerns under Guideline F (Financial Considerations) and detailed reasons why the DOD adjudicators were unable to find that it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. The SOR recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked. It is unclear when Applicant received the SOR as there is no receipt in the case file. In a sworn statement, dated June 11, 2018, Applicant responded to the SOR and elected to have his case decided on the written record in lieu of a hearing. A complete copy of the Government’s file of relevant material (FORM) was mailed to Applicant by DOHA on August 2, 2018, and he was afforded an opportunity after receipt of the FORM to file objections and submit material in refutation, extenuation, or mitigation. In addition to the FORM, Applicant was furnished a copy of the Directive as well as the Adjudicative Guidelines applicable to his case. Applicant received the FORM on August 13, 2018. Applicant’s response was due on September 27, 2018. Applicant apparently chose not to respond to the FORM, for as of December 14, 2018, he has not done so. The case was assigned to me on December 13, 2018. Findings of Fact In his Answer to the SOR, Applicant admitted, without comments, all of the factual allegations pertaining to financial considerations in the SOR (SOR ¶¶ 1.a. through 1.q.). Applicant’s admissions are incorporated herein as findings of fact. After a complete and thorough review of the evidence in the record, and upon due consideration of same, I make the following additional findings of fact: Applicant is a 59-year-old employee of a defense contractor. He has been serving as test technician with his current employer since March 2013. A 1977 high school graduate, Applicant received a non-credited certificate in electronics in 1986. He has never served in the U.S. military. He was granted a secret clearance in 1987, held it until 1990, and was granted it again in 2013. Applicant was married in 1987, and divorced in 2002. He has been cohabiting since 2013. He has two children, born in 1989 and 1993. Financial Considerations Applicant began experiencing financial difficulties in about 2009 when he was ordered to pay $1,000 per month in child support. That amount was automatically garnished from his paycheck. In 2010, and 2011, because of the child support obligation and the reduction in his overtime hours, Applicant had insufficient funds to cover all of his monthly bills and his residence periodically went into a foreclosure status. He was laid off in October 2012, and he remained unemployed until March 2013. His finances improved when he obtained his present position, and the house is no longer in a foreclosure status. Because of limited funds, although he was aware that he might owe the Internal Revenue Service (IRS) approximately $1,000 in federal income taxes each year, an amount that he did not have, Applicant decided not to file federal income tax returns over a number of years. He failed to timely file federal income tax returns for the tax years 3 2008 through 2014, and he had not done so as of June 2018 when he answered the SOR.1 As a result of his non-filings, Applicant owes the IRS substantial back taxes, although the balance has been stabilized by income tax refunds for more recent years being applied by the IRS to those unpaid taxes, while penalties and interest continue to accrue.2 During his interview with an investigator from the U.S. Office of Personnel Management (OPM) in November 2017, Applicant stated that he would meet with his accountant in early 2018 to file those missing income tax returns. During the ensuing year, Applicant has offered no evidence to indicate that he has done so, and his Answer to the SOR supports the conclusion that he has not done what he promised to do.3 In addition to his problems with the IRS, Applicant also failed to timely file his state income tax returns for the tax years 2008 through 2014, and he had not done so as of June 2018 when he answered the SOR.4 As a result of his non-filings, Applicant owes the state substantial back taxes. In July 2017, the state department of revenue started garnishing his wages.5 In October 2017, Applicant informed the OPM investigator that his monthly net salary was $2,532, but overtime brought it to $3,132; and his monthly expenses were 1 The legal requirement to file a federal income tax return is based upon an individual’s gross income and other enumerated conditions. Once it is determined that there is an obligation to so file, the following applies: Any person required under this title to pay any estimated tax or tax, or required by this title or by regulations made under authority thereof to make a return, keep any records, or supply any information, who willfully fails to pay such estimated tax or tax, make such return, keep such records, or supply such information, at the time or times required by law or regulations, shall, in addition to other penalties provided by law, be guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than $25,000 ($100,000 in the case of a corporation), or imprisoned not more than 1 year, or both, together with the costs of prosecution. In the case of any person with respect to whom there is a failure to pay any estimated tax, this section shall not apply to such person with respect to such failure if there is no addition to tax under section 6654 or 6655 with respect to such failure. In the case of a willful violation of any provision of section 6050I, the first sentence of this section shall be applied by substituting "felony" for "misdemeanor" and "5 years" for "1 year." 26 U.S.C. § 7203, Willful failure to file return, supply information, or pay tax. 2 Item 4 (IRS Account Transcripts, various dates); Item 4 (Personal Subject Interview, dated October 16, 2017), at 5; Item 4 (Enhanced Subject Interview, dated November 29, 2017), at 7; Item 1 (Answer to the SOR, dated June 11, 2018). 3 It should be noted that the Appeal Board has indicated that promises to pay off delinquent debts in the future are not a substitute for a track record of paying debts in a timely manner and otherwise acting in a financially responsible manner. ISCR Case No. 07-13041 at 4 (App. Bd. Sep. 19, 2008) (citing ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999)). 4 Item 4 (Personal Subject Interview), supra note 2, at 5; Item 4 (Enhanced Subject Interview), supra note 2, at 7; Item 1, supra note 2. 5 Item 1, supra note 2; Item 4 (Personal Subject Interview), supra note 2, at 6. 4 $2,841, to be reduced to $2,157 once his state back taxes are paid. He anticipated being able to save funds to address his outstanding federal income taxes.6 It is not known what Applicant’s current financial resources may be because he did report his current net monthly income; monthly expenses; and any monthly remainder that might be available for discretionary spending or savings. There is no evidence of a budget. There is no evidence of any financial counseling. Applicant offered no evidence to indicate that his financial situation is now under control. Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.”7 As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information. The President has authorized the Secretary of Defense or his designee to grant an applicant eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.”8 When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the guidelines in SEAD 4. In addition to brief introductory explanations for each guideline, the guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. An administrative judge need not view the guidelines as inflexible, ironclad rules of law. Instead, acknowledging the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in 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 meaningful decision. In the decision-making process, facts must be established by “substantial evidence.”9 The Government initially has the burden of producing evidence to establish a 6 Item 4 (Personal Subject Interview), supra note 2, at 6. 7 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 8 Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified. 9 “Substantial evidence [is] such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all contrary evidence in the record.” ISCR Case No. 04-11463 at 2 (App. Bd. Aug. 4, 2006) (citing Directive ¶ E3.1.32.1). “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). 5 potentially disqualifying condition under the Directive, and has the burden of establishing controverted facts alleged in the SOR. Once the Government has produced substantial evidence of a disqualifying condition, under Directive ¶ E3.1.15, the applicant has the burden of persuasion to present evidence in refutation, explanation, extenuation or mitigation, sufficient to overcome the doubts raised by the Government’s case. The burden of disproving a mitigating condition never shifts to the Government.10 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 as well. It is because of this special relationship that the Government must be able to repose a high degree of trust and confidence in those 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. Furthermore, “security clearance determinations should err, if they must, on the side of denials.”11 Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”12 Thus, nothing in this decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination as to Applicant’s allegiance, loyalty, or patriotism. It is merely an indication the Applicant has or has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. 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. Analysis Guideline F, Financial Considerations The security concern relating to the guideline 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 10 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 11 Egan, 484 U.S. at 531. 12 See Exec. Or. 10865 § 7. 6 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. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage. The guideline notes several conditions that could raise security concerns under AG 19: (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 seven years of unfiled and unpaid federal and state income taxes covering the years 2008 through 2014. There is evidence that Applicant was unwilling to file his federal and state income tax returns solely because he felt that he did not have sufficient funds to pay his taxes. The requirement to file is separate from the requirement to pay. The failure to timely file income tax returns has security implications because:13 Failure to file tax returns suggests that an applicant has a problem with complying with well-established governmental rules and systems. Voluntary compliance with such rules and systems is essential for protecting classified information. ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002). As we have noted in the past, a clearance adjudication is not directed at collecting debts. See, e.g., ISCR Case No. 07-08049 at 5 (App. Bd. Jul. 22, 2008). By the same token, neither is it directed toward inducing an applicant to file tax returns. Rather, it is a proceeding aimed at evaluating an applicant’s judgment and reliability. Id. A person who fails repeatedly to fulfill his or her legal obligations does not demonstrate the high degree of good judgment and reliability required of those granted access to classified information. See, e.g., ISCR Case No. 14-01894 at 5 (App. Bd. Aug. 18, 2015). See Cafeteria & Restaurant Workers Union Local 473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). The Appeal Board clarified that even in instances where an “[a]pplicant has purportedly corrected [his or her] federal tax problem, and the fact that [applicant] is now 13 ISCR Case No. 14-04437 at 3 (App. Bd. Apr. 15, 2016) (emphasis in original). See ISCR Case No. 14-05476 at 5 (App. Bd. Mar. 25, 2016) (citing ISCR Case No. 01-05340 at 3 (App. Bd. Dec. 20, 2002)); ISCR Case No. 14-01894 at 4-5 (App. Bd. Aug. 18, 2015). 7 motivated to prevent such problems in the future, does not preclude careful consideration of [a]pplicant’s security worthiness in light of [his or her] longstanding prior behavior evidencing irresponsibility” including a failure to timely file federal income tax returns.14 In this instance, while Applicant may now be properly motivated, he still has not taken the appropriate actions to actually file his federal and state income tax returns for the tax years 2008 through 2014, or to voluntarily pay his back taxes. AG ¶¶ 19(a), 19(b), 19(c), and 19(f) have been established. The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties under 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;15 (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;16 14 See ISCR Case No. 15-01031 at 3 and note 3 (App. Bd. June 15, 2016) (characterizing “no harm, no foul” approach to an Applicant’s course of conduct and employing an “all’s well that ends well” analysis as inadequate to support approval of access to classified information with focus on timing of filing of tax returns after receipt of the SOR). 15 A debt that became delinquent several years ago is still considered recent because “an applicant’s ongoing, unpaid debts evidence a continuing course of conduct and, therefore, can be viewed as recent for purposes of the Guideline F mitigating conditions.” ISCR Case No. 15-06532 at 3 (App. Bd. Feb. 16, 2017) (citing ISCR Case No. 15-01690 at 2 (App. Bd. Sept. 13, 2016)). 16 The Appeal Board has previously explained what constitutes a good-faith effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good-faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term ‘good-faith.’ However, the Board has indicated that the concept of good- faith ‘requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.’ Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy [or statute of limitations]) in order to claim the benefit of [the “good-faith” mitigating condition]. 8 (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 compliance with those arrangements. AG ¶ 20(b) partially applies, but none of the remaining mitigating conditions apply. The nature, frequency, and recency of Applicant’s continuing financial difficulties make it difficult to conclude that it occurred “so long ago” or “was so infrequent,” or that it is “unlikely to recur.” Applicant generally attributed his financial difficulties to child support obligations, the reduction in his overtime hours, and his unemployment from October 2012 until March 2013. However, Applicant’s finances improved when he obtained his present position in 2013, but he has still not exhibited any reasonable efforts to file his income tax returns or voluntarily pay his back taxes. Although Applicant indicated that he would have an accountant complete the federal and state income tax returns by early 2018, to date, he offered no evidence that the returns were actually filed. There is no evidence of a budget. There is no evidence of any financial counseling. There is no evidence of disputes. Applicant offered no evidence to indicate that his financial situation is now under control. Applicant’s actions under the circumstances cast doubt on his current reliability, trustworthiness, and good judgment.17 Clearance decisions are aimed at evaluating an applicant’s judgment, reliability, and trustworthiness. They are not a debt-collection procedure. The guidelines do not require an applicant to establish resolution of every debt or issue alleged in the SOR. An applicant needs only to establish a plan to resolve financial problems and take significant actions to implement the plan. There is no requirement that an applicant immediately resolve issues or make payments on all delinquent debts simultaneously, nor is there a requirement that the debts or issues alleged in an SOR be resolved first. Rather, a reasonable plan and concomitant conduct may provide for the payment of such debts, or resolution of such issues, one at a time. Mere promises to pay debts in the future, without further confirmed action, are insufficient. 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 the circumstances. The administrative judge should consider the nine adjudicative process factors listed at SEAD 4, App. A, ¶ 2(d): (internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 17 See ISCR Case No. 09-08533 at 3-4 (App. Bd. Oct. 6, 2010). 9 (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 SEAD 4, App. A, ¶ 2(c), the ultimate determination of whether to grant a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. Moreover, I have evaluated the various aspects of this case in light of the totality of the record evidence and have not merely performed a piecemeal analysis.18 There is some evidence mitigating Applicant’s conduct. Applicant is a 59-year-old employee of a defense contractor, and he has been serving as test technician with his current employer since March 2013. He was granted a secret clearance in 1987, held it until 1990, and was granted it again in 2013. The disqualifying evidence under the whole-person concept is simply more substantial. Although it is now mid-December 2018, Applicant failed to prove that he had finally filed his federal and state income tax returns for the tax years 2008 through 2014, although he promised to do so by early 2018. In addition, other than having his wages garnished by the state to pay his unpaid state income taxes, Applicant has not shown any voluntary effort to pay his federal income taxes. Applicant’s current financial situation is unknown. Considering the lack of evidence regarding his current finances, I am unable to reach a positive conclusion pertaining to Applicant’s eligibility for a security clearance. The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating:19 In evaluating Guideline F cases, the Board has previously noted that the concept of “meaningful track record” necessarily includes evidence of actual debt reduction through payment of debts. However, an applicant is not required, as a matter of law, to establish that he [or she] has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he [or she] has “. . . established a plan to resolve his [or her] financial problems and taken significant actions to implement that plan.” The Judge can reasonably consider the entirety of an applicant’s financial situation and his [or her] actions in evaluating the extent to which that applicant’s plan for the reduction of his outstanding indebtedness is credible 18 See U.S. v. Bottone, 365 F.2d 389, 392 (2d Cir. 1966); See also ISCR Case No. 03-22861 at 2- 3 (App. Bd. Jun. 2, 2006). 19 ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted). 10 and realistic. See Directive ¶ E2.2(a) (“Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.”) There is no requirement that a plan provide for payments on all outstanding debts simultaneously. Rather, a reasonable plan (and concomitant conduct) may provide for the payment of such debts one at a time. Likewise, there is no requirement that the first debts actually paid in furtherance of a reasonable debt plan be the ones listed in the SOR. Applicant has demonstrated an extremely poor track record of debt reduction and elimination efforts, failing to file his late income tax returns for 2008 through 2014, and failing to take other timely corrective actions. Overall, the evidence leaves me with substantial questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all of these reasons, I conclude Applicant has failed to mitigate the security concerns arising from his financial considerations. See SEAD 4, App. A, ¶¶ 2(d)(1) through AG 2(d)(9). 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. through 1.p: Against Applicant Subparagraph 1.q.: For 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. ________________________ ROBERT ROBINSON GALES Administrative Judge