DEPARTMENT OF DEFENSE
    DEFENSE OFFICE OF HEARINGS AND APPEALS
In the matter of: )
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 ---------------------------------         )       ISCR  Case No.  16-03600     
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Applicant for Security Clearance )
Appearances
For Government: David Hayes, Esq., Department Counsel
For Applicant: Chase Dearman, Esq.   
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 Decision
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WESLEY, Roger C., Administrative Judge:
Based upon a review of the pleadings and exhibits, I conclude that Applicant 
failed to mitigate the security concerns regarding his financial considerations. Eligibility
for access to classified information is denied.
Statement of Case
On December 21, 2016, the Department of Defense (DOD) Consolidated
Adjudications Facility (CAF) issued a Statement of Reasons (SOR) detailing reasons
why DOD adjudicators could not make the affirmative determination of eligibility for a
security clearance, and recommended referral to an administrative judge to determine
whether a security clearance should be granted, denied, or revoked. The action was
taken under Executive Order (Exec. Or.) 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 (AGs) implemented by the DOD
on September 1, 2006. 
01/17/2019
The Director of National Intelligence, by Security Executive Agent, Directive 4,
App. A, National security Adjudicative Guidelines (SEAD 4), dated December 10, 2016,
superceded and replaced the September 2006 adjudicative guidelines (AGs).  They apply
to all covered individuals who require initial or continued eligibility for access to classified
information or eligibility to hold a sensitive position. Procedures for administrative due
process for contractor personnel continue to be governed by DOD Directive 5220.6,
subject to the updated substantive changes in the AGs, effective June 8, 2017.
Application of the AGs that were in effect when the SOR was issued would not affect my
decision in this case.
Applicant responded to the SOR on January 23, 2018, and requested a hearing. 
The case was assigned to me on May 20, 2018, and scheduled for hearing on June 6,
2018. The Government’s case consisted of four exhibits  (GEs 1-4) that were admitted
without objection. Applicant relied on one witness (himself) and three exhibits that were
admitted without objection as AEs A-C. The transcript was received on June 14, 2018.
Procedural Issues
Before the close of the hearing, Applicant requested the record be kept open to
permit him the opportunity to supplement the record with documented installment
agreements with the Internal Revenue Service (IRS) and resident state taxing authority,
together with federal and state transcripts for tax years 1999-2015. 
For good cause shown, Applicant was granted 30 days to supplement the record.
Department Counsel was afforded seven days to respond. Applicant did not supplement
the record. 
Summary of Pleadings
Under Guideline F, Applicant allegedly (a) is indebted on a judgment filed against
him in August 2016 in the approximate amount of $2,401; (b) is indebted to the IRS for a
tax lien entered against him in May 2011 for $453,709; (c) is indebted to his state of
residence for a tax lien entered against him in November 2010 in the approximate amount
of $7,724; (d) is indebted to his state of residence for a tax lien entered against him in
June 2007 in the approximate amount of $27,238; (e) is indebted to his state of residence
for a tax lien entered against him in May 2007 in the approximate amount of $12,453; (f)
in indebted to a consumer creditor for an amount placed in collection in the approximate
amount of $1,943; (g) failed to file his federal tax returns for tax years 1999 through 2015;
and (h) failed to file his state tax returns for tax years 1999 through 2015.
In his response to the SOR, Applicant denied all of the allegations in the SOR. He
claimed no knowledge of the judgment covered by SOR ¶ 1.a. He claimed he engaged
counsel and a certified public accountant (CPA) to prepare his tax returns, file them, and
to negotiate a payment plan to repay any unpaid taxes.  And he claimed no knowledge of
the alleged delinquent debt covered by SOR ¶ 1.f.
.
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Finding   s   of Fact
Applicant is a 54-year-old project coordinator for a defense contractor who seeks a
security clearance. The allegations covered in the SOR were not admitted by Applicant
and are reserved for fact-finding based on the developed evidence at hearing. 
Background
Applicant married in April 1988 and has three children from this marriage. H
earned a high school diploma in May 2003, but did not report any post-high school
education credits. (GE 1) Applicant reported no military service.
Since August 2015, Applicant has been employed by his current defense
contractor. (GEs 1-2) Between January 1994 and August 2010, he was self-employed.
And between August 2010 and August 2015, he was employed by various non-DOD
contractors in various job assignments, interspersed with periods of unemployment. (GEs
1-2)
Applicant’s finances
Between 1999 and 2015, Applicant failed to file his federal and state of residence
income tax returns, as required by law. (GEs 1-2) He attributed his filing failures to
national disasters, filing delays by his lawyers, poor cash flow from his self-employed
business, and caring for a relative stricken with cancer. (Tr. 23-27, 69) While he claims to
have filed his federal and state returns for tax years 1999-2015 in 2017 (AE C; Tr. 36), he
provided no independent corroboration and substantiation of his filing claims, despite
afforded post-hearing opportunities to do so.
For years 1999-2015, Applicant accrued delinquent federal and state taxes.
Accrued federal taxes for these years are covered by a federal tax lien filed in May 2011
for $453,709. (GEs 2-4 and AE C; Tr. 37-38) While Applicant claims to have resolved this
tax lien through a combination of payments and refunds, to date, he has provided no
documentation to verify his claims, and it remains unresolved and outstanding. (AE C; Tr.
36)  Credit reports also document state tax liens entered against Applicant in November
2010 for $7,724 and in May 2007 for $12,453. (GEs 2-4 and AE C; Tr. 19, 22)
Besides his tax debts, credit reports document Applicant’s accruing a judgment
against him in August 2016 for $2,401, as well as a delinquent insurance debt in the
amount of $1,943. (GEs 2-4) To date, these no-tax debts remain unresolved and
outstanding. 
In an effort to address his delinquent tax and consumer debts, Applicant petitioned
for Chapter 13 bankruptcy relief in March 2018. (AEs A-C) In his petition, he listed assets
of $91,801 and liabilities of $584,835. (AE C; Tr. 40) He listed several claims in his
petition as follows: a priority unsecured IRS tax lien of $453,709 filed in May 2011 and an
unsecured priority vendor’s lien of $175,000 filed in March 2015. (AE C) Applicant listed
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unsecured non-priority state tax liens in his petition totaling $10,125. (AE C; Tr. 40) He 
listed unsecured non-priority state tax liens in his petition totaling $10,125, an aggregate
of tax liens at odds with the $47,415 figure reported in his credit reports. (AE C)
Conceivably, the lower figure represents a reduction of state taxes owed due to payments
made and refund offsets. (AE C; Tr. 22) Without state tax transcripts or other reliable data
summaries to track his payments and credits, no reliable inferences can be drawn as to
the state of his account balance with this state.
In April 2018, the presiding bankruptcy court in Applicant’s state of residence,
confirmed Applicant’s Chapter 13 plan. (AE A; Tr. 42) Under the terms of Applicant’s plan,
the court imposed payment conditions of $2,396 monthly payments to the trustee for the
remaining term of the plan. (AE A) Scheduled monthly payments were to commence 30
days from the date of Applicant’s March 2018 petition filing and continue for the duration
of the plan. (AEs A-C) Payment allocations were set as follows: $1,250 to the vendor lien
holder; $300 to the IRS; and $1,026 to the tax lien holder of Applicant’s state of
residence. (AEs A-C)
Whether Applicant has maintained compliance with his Chapter 13 payment terms
is unclear, for he has not provided any payment documentation, either at hearing, or
during the time reserved for post-hearing updates. (AEs A-C; Tr. 43, 58-60) Further, his
claims of additional payments to the IRS on its $453,709 tax lien, in addition to his
payments to the chapter 13 trustee, are neither corroborated nor substantiated. (Tr. 39-
40, 49-50)
To date, Applicant has not provided any federal or state transcripts to verify his tax
filings, dates thereof, and evidence of any past payments made (voluntarily or
involuntarily) for tax years 1999-2015.  Because Applicant has not provided any federal or
state tax transcripts, tax returns, or payment history for tax years 1999-2015, his filing and
payment claims cannot be validated. And, without IRS and state taxing  agency approvals
of his tax filings and payment plans, his Chapter 13 payment plan cannot be determined
to meet federal and state filing and payment requirements for Chapter 13 discharge.
Currently, Applicant nets $5,633 a month on average; while his wife nets
approximately $2,730 a month. (AE C; Tr. 43-45) Payroll deductions total $4,088 for
himself and $1,985 for his wife. (AE C) Reported monthly expenses are $3,466 for both of
them. (AE C) 
Applicant reported a monthly remainder of $2,607. (AE C; Tr. 45-46).  He has an
IRA retirement account with approximately $12,000 in the account. (Tr. 47) He reported
exempt property of $18,000. (AE C)
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Policies
                
       The SEAD 4, App. A lists guidelines to be used by administrative judges in the
decision-making process covering security clearance cases. These guidelines take into
account factors that could create a potential conflict of interest for the individual applicant,
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as well as considerations that could affect the individual’s reliability, trustworthiness, and
ability to protect classified information. These guidelines include conditions that could
raise a security concern and may be disqualifying (disqualifying conditions), if any, and
many of the conditions that could mitigate security concerns.
These guidelines must be considered before deciding whether or not a security
clearance should be granted, continued, or denied. The guidelines do not require
administrative judges to place exclusive reliance on the enumerated disqualifying and
mitigating conditions in the guidelines in arriving at a decision. Each of the guidelines is to
be evaluated in the context of the whole person in accordance with App. A. AG ¶ 2(c).
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in App. A, AG
¶ 2(d) of the AGs, which are intended to assist the judges in reaching a fair and impartial
commonsense decision based upon a careful consideration of the pertinent guidelines
within the context of the whole person. 
The adjudicative process is designed to examine a sufficient period of an
applicant’s life to enable predictive judgments to be made about whether the applicant is
an acceptable security risk. The following App A, AG ¶ 2(d) factors are pertinent: (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 chances; (7) the motivation for the conduct; (8) the potential for
pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
 Viewing the issues raised and evidence as a whole, the following individual
guidelines are pertinent in this case:
Financial Considerations
       The Concern: Failure or inability 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 of
dependence. An individual who is financially overextended is at greater
risk of having to engage in illegal acts or otherwise questionable acts to
generate funds. . . .  AG ¶ 18.
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Burden of Proof
By virtue of the principles and policies framed by the AGs, a decision to grant or
continue an applicant's security clearance may be made only upon a threshold finding
that to do so is clearly consistent with the national interest.  Because the Directive
requires administrative judges to make a commonsense appraisal of the evidence
accumulated in the record, the ultimate determination of an applicant's eligibility for a
security clearance depends, in large part, on the relevance and materiality of that
evidence. See United States, v. Gaudin, 515 U.S. 506, 509-511 (1995).  
As with all adversarial proceedings, the judge may draw only those inferences
which have a reasonable and logical basis from the evidence of record.  Conversely, the
judge cannot draw factual inferences that are grounded on speculation or conjecture.
The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that
the facts proven have a material bearing to the applicant's eligibility to obtain or maintain
a security clearance. The required materiality showing, however, does not require the
Government to affirmatively demonstrate that the applicant has actually mishandled or
abused classified information before it can deny or revoke a security clearance. Rather,
the judge must consider and weigh the cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the evidentiary burden shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation,
or mitigation.  Based on the requirement of  Exec. Or. 10865 that all security clearances
be clearly consistent with the national interest, the applicant has the ultimate burden of
demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations
should err, if they must, on the side of denials.” See Department of the Navy v. Egan,
484 U.S. 518, 531 (1988). 
Analysis  
Security concerns are raised over Applicant’s failure to timely file his federal and
state tax returns for tax years 1999-2015, accrual of federal and state tax liens covering
delinquent taxes exceeding $500,000, and two delinquent non-tax debts (a judgment
entered in August 2016 for $2,401) and an insurance debts for $1,943). These concerns
over tax filing and debt delinquencies raise questions about Applicant’s judgment and
reliability to safely and prudently manage his finances. 
Financial Concerns
      Applicant’s failure to timely file federal and state income tax returns for multiple
years (1999-2015) and his incurring of delinquent federal and state tax liens and non-
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tax debts for the years at issue warrant the application of four disqualifying conditions
(DC) of the Guidelines: DC ¶¶ 19(a), “inability to satisfy debts”; 19(b); unwillingness to
satisfy debts regardless of the ability to do so”; 19(c), “a history of not meeting financial
obligations”; and 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.”
Financial stability in a person cleared to protect classified information is required
precisely to inspire trust and confidence in the holder of a security clearance that
entitles him to access classified information. While the principal concern of a security
clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in cases involving debt
delinquencies.  
Historically, the timing of filing federal tax returns and resolving federal and state
tax delinquencies are critical to an assessment of an applicant’s trustworthiness,
reliability, and good judgment in following rules and guidelines necessary for those
seeking access to classified information or to holding a sensitive position. See ISCR
Case No. 14-06808 at 3 (App. Bd. Nov. 23, 2016); ISCR Case No. 14-01894 at 5 (App.
Bd. Aug. 18, 2015). Applicant’s cited extenuating circumstances (i.e., national disasters,
poor cash flow, caring for a relative with diagnosed cancer, and lawyer delays) and
insufficient income to pay his accrued federal and state taxes and other non-tax debts
when due and payable. His claims without more probative evidence to corroborate and
substantiate them are not enough to credit him with justifiable extenuation and 
mitigation.  
To date, Applicant has provided no persuasive justification for his failure to timely
file his federal and state tax returns, address his federal and state taxes due for the tax
years 1999-2015, and provide evidence of his addressing his reported judgment and
insurance debts with documented payments and payment plans.  Based on Applicant’s 
cited circumstances, Applicant’s failure or inability to corroborate and substantiate his 
tax filing and payment claims and demonstrate a good track record of compliance with
the terms of his Chapter 13 petition and any payment arrangements he may have with
the IRS and state taxing agency of his state and non-tax creditors listed in the SOR
preclude him from fully availing himself of the benefits of either MC ¶ 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, or a death, divorce or separation), and the individual acted responsibly
under the circumstances”: MC  ¶ 20(d), “the individual initiated and is adhering to a
good-faith effort to repay overdue creditors or otherwise resolve debts”; or MC  ¶ 20(c)
“the individual has received or is receiving financial counseling for the problem from a
legitimate and credible source, such as a non-profit counseling service, and there are
clear indications that the problem is being resolved or is under control.” See ISCR Case
No. 15-06440 at 3-5 (App. Bd. Dec. 26, 2017); ISCR Case No. 05-11366 at 4 n.9 (App.
Bd. Jan. 12, 2007) (citing ISCR Case No. 99-0462 at 4 (App. Bd. Nov. 29, 2005). 
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And, because Applicant’s tax filing and debt issues continue to be considered
recent for so long as they remain unresolved, he may not avail himself of the mitigating
benefits of MC ¶ 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.” See 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). 
Whether Applicant is entitled to the full mitigating benefits of MC ¶ 20(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,” is unclear at this point.
See ISCR Case No. 16-02246, at 2 (App. Bd. Dec. 8, 2017). Applicant provided no
documentation at hearing or in permitted post-hearing submissions of any completed
installment agreements with the IRS and state taxing agency, much less evidence of
compliance with those agreements.
In evaluating Guideline F cases, the Appeal Board has stressed the importance
of a “meaningful track record” that includes evidence of actual debt reduction through
voluntary payment of debts, and implicitly where applicable the timely filing of tax
returns. ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) And, in a consistent
line of decisions, the Appeal Board has questioned the value of bankruptcy petitions
initiated after the issuance of an SOR to demonstrate restored financial responsibility
and sound judgment. See ADP Case No. 17-00263 at 4 (App. Bd. Dec. 19, 1918 (citing
ISCR Case No. 15-00682 at 3 (App. Bd. July 13, 2016)).
In Applicant’s case, his failure or inability to provide documentary proof of his
filing federal and state income tax returns for tax years 1999-2015, addressing his owed
federal and state taxes, and paying or otherwise resolving his two delinquent non-tax-
related debts of record before the initiation of the security clearance process precludes
him from meeting his evidentiary burden with respect to raised security concerns about
the condition of his finances. More effort and results could be reasonably expected of
Applicant in taking the necessary steps to restore his finances to stable levels
consistent with eligibility criteria for holding a security clearance.
Whole-Person Assessment
Whole-person assessment is unfavorable to Applicant. He has shown insufficient 
progress to date in filing his federal and state income tax returns over a period of
multiple years and addressing his delinquent federal and state tax liens and non-tax
debts. While Applicant’s general contributions to the U.S. defense effort through his
current employer are recognized and merit respect and appreciation, his credits are
insufficient o surmount historical trust and judgment issues associated with his failure to
timely file his federal and state income tax returns over the course of many years  and
failure to better address his major tax and non-tax delinquencies.
Overall, Applicant’s actions to date in addressing his finances reflect too little
evidence of restored financial responsibility and judgment to overcome reasonable
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doubts about his trustworthiness, reliability, and ability to protect classified information
or occupy a sensitive position. See AG ¶ 18. Conclusions are warranted that his
finances are insufficiently stabilized at this time to meet minimum eligibility requirements
for holding a security clearance.  Unfavorable conclusions are entered with respect to
the allegations covered by SOR ¶¶ 1.a-1.h. Eligibility to hold a security clearance under
the facts and circumstances of this case is inconsistent with the national interest.
Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F (FINANCIAL CONSIDERATIONS): AGAINST APPLICANT
   
             Subparagraphs 1.a-1.h:                          Against Applicant
 
Conclusions
In light of all 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 to
hold a security clearance. Clearance is denied.
                                          
Roger C. Wesley
Administrative Judge 
                                        
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