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DEPARTMENT OF DEFENSE 
DEFENSE OFFICE OF HEARINGS AND APPEALS 
In the matter of: ) 
)
[Redacted] ) ISCR Case No. 18-00635 
)
Applicant for Security Clearance ) 
Appearances 
For Government: Nicole A. Smith, Esq., Department Counsel 
For Applicant: Alan V. Edmunds, Esq. 
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Decision 
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FOREMAN, LeRoy F., Administrative Judge: 
This case involves security concerns raised under Guideline F (Financial 
Considerations) by Applicant’s repeated failures to timely file federal and state income 
tax returns. Eligibility for access to classified information is denied. 
Statement of the Case 
Applicant submitted a security clearance application (SCA) on March 1, 2017. On 
March 27, 2018, the Department of Defense Consolidated Adjudications Facility (DOD 
CAF) sent him a Statement of Reasons (SOR) alleging security concerns under Guideline 
F, based on his failure to timely file federal and state income tax returns. The DOD CAF 
acted 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), and the 
adjudicative guidelines (AG) promulgated in Security Executive Agent Directive 4, 
National Security Adjudicative Guidelines (December 10, 2016). 
Applicant answered the SOR on June 15, 2018, and requested a hearing before 
an administrative judge. The case was assigned to an administrative judge on September 
01/09/2019
 
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27, 2018. On September 28, 2018, the Defense Office of Hearings and Appeals (DOHA) 
notified Applicant that the hearing was scheduled for November 7, 2018. The case was 
reassigned to me on October 31, 2018, and I convened the hearing as scheduled. 
Government Exhibits (GX) 1 through 4 were admitted in evidence without objection. 
Applicant testified and submitted Applicant’s Exhibits (AX) A through T,1 which were 
admitted without objection. DOHA received the transcript (Tr.) on November 16, 2018. 
 
Findings of Fact2 
 
 In Applicant’s answer to the SOR, he admitted all the allegations. His admissions 
in his answer and at the hearing are incorporated in my findings of fact.  
 
 Applicant is a 60-year-old engineer employed by a defense contractor. He was 
employed by defense contractors from June 1981 to February 2002. He worked as a 
civilian employee of the U.S. Navy from February 2002 to March 2008. He has worked as 
a program manager for a defense contractor from April 2008 until the present. He has 
held a security clearance since 1981.  
 
 Applicant graduated from college with a bachelor’s degree in May 1981. He has 
completed graduate course work in metallurgical engineering but has not received a 
graduate degree. He married in October 1981. He and his wife have four adult children.  
 
 Applicant did not timely file his federal and state income tax returns from 2008 
through 2016. He relied on his concept of a “three-year rule,” under which he could file a 
return and receive a refund without penalty within three years of the due date for a tax 
return. His understanding of the “three-year-rule” was based on his own research and not 
on advice from a tax professional. His plan was to delay filing each year’s return until he 
was certain that his refund from a previous year was sufficient to cover any taxes due. 
(Tr. 18-19, 28.) 
 
 When Applicant filed an SCA in April 2012, seeking to continue his clearance, he 
disclosed that he had not timely filed his federal and state income tax returns for 2008, 
2009, and 2010, and that he owed a total of about $18,361 for 2008; $12,828 for 2009; 
and $6,061 for 2010. He explained that, due to “unorganized business accounting,” he 
did not have the required forms to support filing his returns on time. He also explained 
that he paid estimated taxes but had miscalculated the amount of taxes due. (GX 2 at 32-
33.) During a personal subject interview (PSI) in April 2012, he told an investigator that 
he was concerned about the impact of the tax issues on his security clearance, that he 
had retained a tax consultant and a bookkeeper to assist him with his tax and returns, 
and that he expected to file all past-due returns by the end of May 2012. (GX 4 at 6.) He 
                                                          
1 Applicant submitted AX A through Q with his answer to the SOR. He resubmitted them at the hearing, 
along with AX R, S, and T. (Tr. 8.) 
 
2 Applicant’s personal information is extracted from his security clearance application (GX 1), his personal 
biography (AX B), and his personal resume (AX C), unless otherwise indicated by a parenthetical citation 
to the record. 
 
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testified at the hearing that all past-due returns were filed by the end of 2012, but he 
admitted that he did not hire someone to help him with his taxes. (Tr. 30.)  
 
When Applicant responded to financial interrogatories from the DOD CAF in June 
2014, he provided federal and state tax transcripts for 2008 through 2011. The transcripts 
reflected that he filed his state return for 2008 in April 2012 and federal return for 2008 in 
June 2012. (GX 4 at 16, 24.) He filed his state return for 2009 in July 2012 and his federal 
return for 2009 in August 2012. (GX 4 at 18, 29-30.) He filed his state return for 2010 in 
July 2012 and his federal return for 2010 in August 2012. (GX 4 at 19, 33-37.) He filed his 
state return for 2011 in February 2013 and his federal return for 2011 in June 2014. (GX 
4 at 22, 45.) At the end of the interrogatories, he commented: 
 
I would like to emphasize that while my returns were late, it is because I 
assumed I had a refund coming and there are no penalties for late personal 
returns. . . However, it is clear to me now that the late filings are poorly 
regarded from an investigation standpoint. I have hired a new tax advisor to 
help me keep up with the process.  
 
(GX 4 at 8.) Notwithstanding his failures to timely file his federal and state tax returns, his 
security clearance was never suspended or revoked. (Tr. 36.) 
 
 When Applicant submitted his most recent SCA in March 2017, he disclosed that 
he had failed to timely file his federal and state income tax returns for 2010 through 2015. 
(GX 1 at 35-38.) In response to interrogatories from the DOD CAF in February 2018, he 
submitted tax transcripts reflecting that he filed his federal return for 2012 in June 2016, 
his federal return for 2013 in August 2016, and his federal return for 2014 in August 2016. 
(GX 3 at 5-8.) He submitted an account history from the state tax authority reflecting that 
his state returns for 2011 through 2014 had been filed. (GX 3 at 15.) He submitted copies 
of his federal and state returns for 2015 and 2016, along with evidence that the federal 
returns for 2015 and 2016 were mailed in June 2018 and the state returns for 2015 and 
2016 were personally delivered to the state revenue authority in January 2018. (GX 3 at 
9-14, 16-19.) At the end of these interrogatories, he commented, 
 
Regarding reasons for my late filing, in the past since I knew I had a refund 
coming I would wait to file my return to make sure the following year was 
adequately covered with withholding, estimated taxes, or prior tax year carry 
over. I only offer this as my rationale as to why there were late. I did not fully 
appreciate the impact of delinquent returns on my clearance eligibility. It is 
clear to me now that the late filings are poorly regarded from a clearance 
standpoint. [To] help ensure timely returns going forward, I am now working 
with a tax preparation company in my town to help with the process. I have 
already met with the [name redacted] tax preparation service and discussed 
preparation plans for my 2017 return, which I am currently preparing and 
will file on time. 
 
 
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(GX 3 at 4.) He received an extension of time to file his federal income tax return for 2017 
and filed it in July 2018. (AX T.) He filed his state income tax return, which was due on 
May 1, 2018, on June 9, 2018. (AX I.) The record does not reflect whether he requested 
and received an extension of time to file his state return for 2017. 
 
 In October 2018, Applicant executed a “Statement of Intent,” declaring his intent 
to never again fail to untimely file his federal and state income tax returns, and agreeing 
that any future failures to time file or pay taxes would be grounds to revoke his national 
security eligibility. (AX S.) In November 2018, Applicant hired a business-advising 
company to help him with tax planning and compliance. (AX R.)  
 
 Applicant’s annual salary is about $94,000. (Tr. 16.) He testified that between 2008 
and 2016, he usually received a tax refund. (Tr. 22.) He is financially secure. At the time 
of the hearing, he had $2,400 in his checking account. (AX N.) In June 2018, he 
completed an online credit-counseling course, a budget analysis, and a financial action 
plan. (AX O; AX P.) As part of the budget analysis, he indicated that he has monthly 
income of about $10,312; expenses of about $9,855; and a net remainder of about $457. 
(AX P.) This information was generally consistent with a personal financial statement that 
he submitted with his answer to the SOR. (AX M.) A credit report from June 2018 reflects 
no negative information. (AX Q.) 
 
 Four former and current coworkers submitted letters on Applicant’s behalf. They 
describe him as an outstanding mentor; a skilled, personable, dedicated, and respected 
engineer; and a dedicated spouse and parent. They consider him a person of high 
integrity and honesty, who is truthful and forthright, even under difficult or stressful 
conditions. (AX A.) 
 
Policies 
 
 “[N]o one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 
484 U.S. 518, 528 (1988). 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.” Id. at 527. The 
President has authorized the Secretary of Defense or his designee to grant applicants 
eligibility for access to classified information “only upon a finding that it is clearly 
consistent with the national interest to do so.” Exec. Or. 10865 § 2.  
 
Eligibility for a security clearance is predicated upon the applicant meeting the 
criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules 
of law. Instead, recognizing the complexities of human behavior, an administrative judge 
applies these guidelines in conjunction with an evaluation of the whole person. An 
administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense 
decision. An administrative judge must consider all available and reliable information 
about the person, past and present, favorable and unfavorable. 
 
 
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 The Government reposes a high degree of trust and confidence in persons with 
access to classified information. This relationship transcends normal duty hours and 
endures throughout off-duty hours. Decisions include, by necessity, consideration of the 
possible risk that the applicant may deliberately or inadvertently fail to safeguard 
classified information. Such decisions entail a certain degree of legally permissible 
extrapolation about potential, rather than actual, risk of compromise of classified 
information. 
 
Clearance decisions must be made “in terms of the national interest and shall in 
no sense be a determination as to the loyalty of the applicant concerned.” Exec. Or. 10865 
§ 7. Thus, a decision to deny a security clearance is merely an indication the applicant 
has not met the strict guidelines the President and the Secretary of Defense have 
established for issuing a clearance. 
 
 Initially, the Government must establish, by substantial evidence, conditions in the 
personal or professional history of the applicant that may disqualify the applicant from 
being eligible for access to classified information. The Government has the burden of 
establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. 
“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). The guidelines 
presume a nexus or rational connection between proven conduct under any of the criteria 
listed therein and an applicant’s security suitability. See ISCR Case No. 15-01253 at 3 
(App. Bd. Apr.20, 2016).   
 
 Once the Government establishes a disqualifying condition by substantial 
evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the 
facts. Directive ¶ E3.1.15. An applicant has the burden of proving a mitigating condition, 
and the burden of disproving it never shifts to the Government. See ISCR Case No. 02-
31154 at 5 (App. Bd. Sep. 22, 2005).  
 
An applicant “has the ultimate burden of demonstrating that it is clearly consistent 
with the national interest to grant or continue his security clearance.” ISCR Case No. 01-
20700 at 3 (App. Bd. Dec. 19, 2002). “[S]ecurity clearance determinations should err, if 
they must, on the side of denials.” Egan, 484 U.S. at 531.  
 
Analysis 
 
Guideline F, Financial Considerations  
 
The security concern under this guideline 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. . . . An individual who is financially 
 
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overextended is at greater risk of having to engage in illegal or otherwise 
questionable acts to generate funds. . . .  
 
 This concern is broader than the possibility that a person might knowingly 
compromise classified information to raise money. It encompasses concerns about a 
person’s self-control, judgment, and other qualities essential to protecting classified 
information. A person who is financially irresponsible may also be irresponsible, 
unconcerned, or negligent in handling and safeguarding classified information. See ISCR 
Case No. 11-05365 at 3 (App. Bd. May 1, 2012). 
 
 Applicant’s admissions and the documentary evidence submitted by the parties 
establish the following disqualifying conditions under this guideline:  
 
AG ¶ 19(c): a history of not meeting financial obligations; and 
 
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. 
 
The following mitigating conditions are potentially applicable:  
 
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(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; 
 
AG ¶ 20(d): the individual initiated and is adhering to a good-faith effort to 
repay overdue creditors or otherwise resolve debts; and 
 
AG ¶ 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. 
 
 AG ¶ 20(a) is not established. Applicant’s tax delinquencies were numerous, 
recent, and did not occur under circumstances making recurrence unlikely. Applicant’s 
repeated failures to timely file his federal and state income tax returns, after admitting in 
the 2012 PSI that he knew his delinquent returns raised security concerns, cast doubt on 
his current reliability, trustworthiness, and good judgment. 
 
 AG ¶ 20(c) is established. Applicant has received financial counseling and tax 
advice, and all past-due tax returns have been filed.  
 
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 AG ¶ 20(d) is not applicable because failure to pay taxes was not alleged in the 
SOR. However, I have noted that the delinquent taxes for tax years 2008 through 2010 
have been paid. 
 
AG ¶ 20(g) is established. Applicant has filed all past-due federal and state tax 
returns and paid all taxes due. However, his belated resolution of his tax delinquencies 
does not end the inquiry. A security clearance adjudication is not a tax-enforcement 
procedure. It is an evaluation of an individual’s judgment, reliability, and trustworthiness. 
The fact that Applicant has filed his past-due returns “does not preclude careful 
consideration of his security worthiness based on longstanding prior behavior evidencing 
irresponsibility.” ISCR Case No. 12-05053 (App. Bd. Oct. 30, 2014). Furthermore, the 
establishment of some mitigating evidence does not compel a favorable security-
clearance decision. ISCR Case No. 11-14784 (App. Bd. Jan.17, 2014). 
 
Even if Applicant honestly believed that the “three-year rule” exempted him from 
timely filing his federal and state tax returns for 2008 through 2011, he acknowledged his 
obligation to file and awareness of the security implications of failing to file in the April 
2012 PSI and his responses to DOD CAF interrogatories in June 2014. Yet he continued 
his pattern of untimely filing through tax year 2016. 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. ISCR Case No. 15-
00216 at 4 (App. Bd. Oct. 24, 2016), citing Cafeteria & Restaurant Workers Union Local 
473 v. McElroy, 284 F.2d 173, 183 (D.C. Cir. 1960), aff’d, 367 U.S. 886 (1961). His 
statement of intent to timely file his future tax returns and his timely filing of his 2017 
federal return are insufficient to overcome his long history of untimely filings. 
 
Whole-Person Concept 
 
 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. In applying the whole-
person concept, an 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 and applying the adjudicative factors in AG ¶ 2(d).3  
 
 I have incorporated my comments under Guideline F in my whole-person analysis 
and applied the adjudicative factors in AG ¶ 2(d). After weighing the disqualifying and 
mitigating conditions under Guideline F, and evaluating all the evidence in the context of 
                                                          
3 The factors are: (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.  
 
 
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the whole person, I conclude Applicant has not mitigated the security concerns raised by 
repeated failures to timely file his federal and state income tax returns. 
 
Formal Findings 
 
 I make the following formal findings on the allegations in the SOR: 
 
 Paragraph 1, Guideline F (Financial Considerations): AGAINST APPLICANT 
 
  Subparagraph 1.a:     Against Applicant 
Conclusion 
 
 I conclude that it is not clearly consistent with the national security interests of the 
United States to continue Applicant’s eligibility for access to classified information. 
Clearance is denied. 
 
 
 
 
LeRoy F. Foreman 
Administrative Judge