DATE: July 17, 2006

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SSN: ------------

Applicant for Security Clearance

DECISION OF ADMINISTRATIVE JUDGE

ELIZABETH M. MATCHINSKI

APPEARANCES

FOR GOVERNMENT

Eric H. Borgstrom, Esq., Department Counsel

FOR APPLICANT

Thomas Albin, Esq.

SYNOPSIS

Applicant owes about $12,482 in delinquent debt incurred largely due to his spouse's failure to pay their bills on time. She also did not timely file their federal income tax returns for tax years 2000 and 2001. Applicant assumed they had been filed and neglected to ensure their compliance. Timely filing of federal tax returns for subsequent years confirms the failure to file was isolated to a period of marital discord and family tragedy (untimely death of their young son) and is not likely to be repeated. Recent good faith efforts to resolve the delinquent debt are viewed favorably, but financial considerations persist where Applicant and his spouse are behind in paying their cellular phone bill, owe a delinquent towing bill in collection since June 2005, and have little in cash reserve. Clearance is denied.

On July 12, 2005, the Defense Office of Hearings and Appeals (DOHA) issued a Statement of Reasons (SOR) to the Applicant. The SOR detailed reasons under Guideline F, financial considerations, and Guideline J, criminal conduct, why DOHA could not make the preliminary affirmative finding under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for the Applicant. ⁽¹⁾

On July 27, 2005, Applicant answered the SOR and requested a hearing before a DOHA administrative judge. The case was assigned to me on December 28, 2005. On February 10, 2006, I convened a hearing pursuant to formal notice dated January 9, 2006. Ten government exhibits and two Applicant exhibits were admitted, and testimony was taken from Applicant and his spouse, as reflected in a transcript received February 28, 2006.

The record was held open for three weeks to give Applicant's counsel the opportunity to consult with his client and obtain additional financial records. On March 7, 2006, Applicant submitted through counsel copies of his federal income tax returns for tax years 2000, 2001, and 2005 (App. Exhibits C, D, E), and his 2005 state income tax return (App. Exhibit F). Copies of the documents were forwarded by Order dated March 14, 2006, giving Department Counsel until March 24, 2006 to respond. On March 31, 2006, Department Counsel indicated the government had no objection. The documents were marked and entered into the record accordingly.

DOHA alleged under Guideline F that Applicant owed delinquent debt totaling $15,143.21 on 17 accounts, $12,864.21 of which was owed to three creditors ($4,158.21 ¶ 1.f., $1,154 ¶ 1.m. and $7,552 ¶ 1.n.). Under Guideline J, Applicant was alleged to have willfully failed to timely file his federal income tax returns for tax years 2000 and 2001. Applicant denied the debts alleged in ¶¶ 1.a., 1.e. (paid), 1.k., 1.l., and 1.o. He acknowledged the $7,552 charged off debt owed a retailer but indicated it was incurred by his spouse before their marriage. He denied any willful failure to file his federal returns for the two years listed (2000 and 2001) and indicated the returns had been filed. Applicant's admissions to delinquent indebtedness are accepted and incorporated as findings of fact.

After a thorough review and consideration of the evidence of record, I make the following additional findings:

Applicant is a 30-year-old carpenter who has been employed by a defense contractor since mid-October 2002. He is currently in a four-year apprenticeship program and seeks a secret-level security clearance for his duties.

Applicant married his spouse in January 1997 while he was on active duty in the U.S. military. In mid-August 1998, they had their first son. After his discharge from active duty into the Naval Reserve in October 1998, Applicant was unemployed for one year. He stayed home to care for their son while his spouse worked. The family relocated from the Pacific Northwest to the South in September 1999. Over the next few years, Applicant held a succession of jobs (associate for an Internet merchandiser, unloader for a retailer, roofer, grocery associate, dishwasher).

Applicant's spouse handled the family's finances and the filing of their joint income tax returns. She had been delinquent off and on in paying for charges incurred on a revolving charge with a retailer opened by her in February 1986 (¶ 1.n.), ⁽²⁾ on which Applicant became an authorized user, and she fell behind in paying other obligations after their marriage. Her retail charge account (¶ 1.n.) was charged off in September 2000 with $7,552 past due. Another of her credit card accounts, opened by her in March 2000 with Applicant an authorized user, was reportedly 120 days past due as of September 2000 with a $470 balance (¶ 1.c.). Applicant had his own account with the same lender that he opened in April 2000. A $1,005 past due balance was charged off in January 2001 (¶ 1.m.). A $75 medical debt placed for collection had an unpaid balance of $89 as of September 2000 (¶ 1.b.). Some $93 in telephone service costs were placed for collection in May 2001 (¶ 1.d.) and were transferred to another assignee in about August 2002 (¶ 1.p.). A second debt of $106 was placed for collection by the telephone company at the same time (¶¶ 1.h. and 1.q., same debt). In October 2001, a local animal hospital referred a $53 debt for collection (¶ 1.e.).

In 1999, Applicant's spouse cashed in stock options she had received from her employer from which she did not have taxes withheld. Consequently, they underpaid their federal income taxes for 1999 by $5,577. In February 2001, the Internal Revenue Service (IRS) issued a notice of federal tax levy to collect the 1999 delinquent taxes.

In about late October 2000, Applicant and his spouse separated and he moved out of the family home. Busy with work and raising their son, she did not file their federal income tax return for 2000 when it was due in April 2001. In May 2001, their son (then only two years old) drowned. Applicant and his spouse reconciled, and in August 2001, they relocated to their present locale where they moved in with her elderly parents for a few months until they found a place of their own. Their rental obligation was $650 per month plus utilities. Applicant found work as a manager of a lube shop. Applicant's spouse did not file their federal income tax returns for tax year 2001 when it was due in April 2002. She was pregnant at the time and grieving the loss of their first son. She did not inform Applicant of her failure to file either the 2000 or 2001 returns, and he made no effort to ensure that they were timely filed. ⁽³⁾

In or before January 2002, Applicant was sued by the automobile insurer following an accident. Applicant lacked valid automobile insurance on his vehicle at the time and a default judgment of about $4,500 was entered against him. After his driving privileges were suspended in the state where the accident occurred, Applicant arranged to repay the debt at $100 per month. He made no payments himself and did not followup with his spouse to ensure that she was making payments. As of June 2004, he owed $4,158.21 on the debt (¶ 1.f.).

In July and November 2002, a hospital placed for collection two unpaid debts of $99 (¶ g.) and $75 (¶ 1.i.), respectively. The debts were incurred by Applicant's spouse when she miscarried twins the year before and by their son that died. She submits they should have been paid by her medical insurer. In August 2002, Applicant and his spouse had another son. That October, Applicant started his present employment with the defense contractor at $10.65 an hour. Their landlord raised the rent to $800 per month in early 2003. In March 2003, Applicant, his spouse, and son, moved back in with her parents to care for them. Applicant and his spouse paid no rent. In April 2003, an ambulance service debt of $95 incurred by his spouse was sent for collection (¶ 1.j.).

On June 13, 2003, the IRS filed a federal tax lien to recover taxes owed for 1999. ⁽⁴⁾ On July 15, 2003, Applicant executed a security clearance application (SF 86) for a secret-level security clearance. Applicant denied any federal tax liens had been filed against him, but he listed those delinquent debts alleged in SOR ¶¶ 1.d., 1.m. (as $203 owed), and 1.n. He disclosed under civil court actions (question 40) the civil judgment alleged in ¶ f., but claimed it had been paid off. Applicant was granted an interim secret-level clearance. A subsequent check of Applicant's credit on July 22, 2003, listed a charge off balance of $1,005 on ¶ 1.m., and two telephone debts (¶¶ 1.d. and 1.h.), several outstanding medical debts (¶¶ 1.b., 1.g., 1.i., 1.j.) and one veterinary bill (¶ 1.e.) in collection.

A check of Applicant's credit in May 2004 disclosed the balance of the debt in ¶ 1.m. to be $866. The $7,552 balance of ¶ 1.n. and several collection debts (¶¶ 1.b., 1.d., 1.e., 1.g., 1.h., and 1.i.) previously reported were still outstanding. In addition, it was reported that Applicant owed $321 on four accounts placed for collection between October 1997 and April 1998 by a municipality in the area he had lived before his discharge from active duty, $970 to a former landlord, and $362 on a joint account placed for collection in June 2001.

On June 23, 2004, Applicant was interviewed by a Defense Security Service (DSS) special agent about his delinquent credit obligations. He averred that he and his spouse had charge accounts with the creditor in ¶¶ 1.c. and m., only one of which had a past due balance. He acknowledged the $7,552 delinquent balance on the retail charge in ¶ 1.n., most of which had been accrued by his spouse before their marriage, and indicated his spouse may not have paid the medical debts in ¶¶ 1.b. and 1.j., the vet bill in ¶ 1.e., or the telephone service bills in ¶¶ 1.d. and 1.h. He disputed the medical debts in ¶¶ 1.g. and 1.i., as they should have been covered by insurance. Applicant addressed the 1999 federal income tax debt, due to his spouse not having taxes withheld when she cashed in her stock options. He asserted he and his spouse were "up to date" in filing their federal income tax returns, and he had claimed zero dependents to increase the tax withholdings that could be applied to his past due balance for 1999. As for the judgment filed against him as a result of the automobile accident (¶ 1.f.), Applicant indicated he arranged to repay the judgment of about $4,500 at $100 per month, but was unaware whether his spouse was making the payments. In the Navy Reserve and working all overtime available to him, Applicant expressed his intent to resolve his debts and become more involved in handling the family's finances.

As of June 2004, Applicant and his spouse and child were living with her father rent-free in exchange for caring for him. They were contributing financially to pay the household expenses. His spouse was not working outside of the home as she was caring for their son and her father.

After tax refunds for 2002 and 2003 were intercepted for the 1999 federal tax delinquency, the IRS filed a notice of levy against Applicant's wages in July 2004 to collect the $6,698.47 balance ($3,789.43 in unpaid taxes and $2,901.04 in penalties and interest). In response to financial interrogatories from DOHA, Applicant admitted on November 18, 2004, that he had made no payments on the debts in ¶¶ 1.b., 1.c., 1.d., 1.e., 1.g., 1.h., 1.i., 1.j., 1.m., and 1.n. because his wages had been attached to repay his 1999 tax debt at $800 per month. He promised to take sole responsibility for repayment of these debts once the IRS had ended the wage garnishment. As for his failure to file their federal returns for tax years 2000 and 2001, Applicant related he was tying to locate the W-2 forms for those years. On December 17, 2004, Applicant informed DOHA that the debt to the IRS had been paid in full for 1999 and he was waiting for the IRS to "catch up with records to end the wage garnishment." He also indicated he had acquired the wage information to file the 2000 and 2001 federal tax returns; and would be filing them "in the upcoming tax year."

In March 2005, Applicant got a raise at work to about $20.31 per hour. Applicant's credit report of June 8, 2005, listed unpaid collection debts (¶¶ 1.b., 1.d., 1.h., a newly reported charged off balance of $153.52 owed a bank (¶ 1.k. and ¶ 1.l., same debt) and outstanding revolving charge balances of $1,154 (¶ 1.m.), $7,552 (¶1.n.), and $503 (¶ 1.c.). ⁽⁵⁾ In July 2005, Applicant and his spouse paid the $53 veterinary debt in collection (¶ 1.e.). In August 2005, they paid those debts in ¶¶ 1.b., 1.d. (1.p. duplicate), 1.h. (1.q. duplicate), and 1.l. (1.k. duplicate). A subsequent check of Applicant's credit on December 27, 2005, confirmed those debts as paid, but the credit card delinquency of $7,552 (¶ 1.n.) was still owed and the balance of the debt in ¶1.m. had risen to $1,240. Applicant had also incurred a $543 towing bill that was in collection with a balance owed of $557.

In or before late July 2005, a professional tax service prepared Applicant and his spouse's joint federal income tax returns for 2000 and 2001. With an estimated tax penalty of $258, they owed the IRS $5,357 for 2000 on adjusted joint gross income of $69,683. On adjusted gross income of $36,957 for 2001, they expected a refund of $138 in federal taxes. Applicant and his spouse started repaying the IRS at $200 per month, but by January 2006, had reduced their monthly payment to $100 with the IRS' agreement. In February 2006, the balance of their debt to the IRS for 2000 was $4,367.39.

On January 25, 2006, the creditor owed the debt in ¶ 1.m. agreed to settle the $1,265.88 balance for $500 payable in a lump sum by February 25, 2006. Applicant paid the sum by check dated February 6, 2006, to settle the debt. Applicant had contacted the creditor owed the $4,158.21 judgment debt (¶ 1.f.) but was still negotiating terms of repayment.

On March 3, 2006, a professional tax preparer completed Applicant and his spouse's joint federal and state income tax returns for 2005, which they filed electronically. They expected a refund of $5,249 in federal income tax and $590 (after $5 to a designated charity) in state taxes for 2005 on adjusted gross income of $48,883.

As of February 10, 2006, Applicant was making $170 monthly from his military reserve duty in addition to his earnings for his work with the defense contractor. His spouse was not working outside of the home. They were living paycheck to paycheck despite not having to pay rent to her father, and they had about $589 on deposit in checking and one cent in savings. They use debit cards to pay their obligations. They have no active credit cards. He intends to pay his remaining debt as soon as he is financially able to do so. They were behind in their cellular phone payments as of his security clearance hearing based on a text message he received a week before. His spouse was still handling the bills, because he didn't trust himself well enough to take them over. (Tr. 105) Applicant was taking a more active role in requesting proof from her that their obligations were being paid. Applicant and his spouse have not had any financial counseling since they married.

"[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 occupy a position . . . that will give that person 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, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960). Eligibility for a security clearance is predicated upon the applicant meeting the security guidelines contained in the Directive. 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.

Enclosure 2 of the Directive sets forth personnel security guidelines, as well as the disqualifying conditions (DC) and mitigating conditions (MC) under each guideline. In evaluating the security worthiness of an applicant, the administrative judge must also assess the adjudicative process factors listed in ¶ 6.3 of the Directive. The decision to deny an individual a security clearance is not necessarily a determination as to the loyalty of the applicant. See Exec. Or. 10865 § 7. It is merely an indication that the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance.

Concerning the evidence as a whole, the following adjudicative guidelines are most pertinent to this case:

Financial Considerations. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Unexplained affluence is often linked to proceeds from financially profitable criminal acts. (¶ E2.A6.1.1.)

Criminal Conduct. A history or pattern of criminal activity creates doubt about a person's judgment, reliability, and trustworthiness. (¶ E2.A10.1.1.)

Having considered the evidence of record in light of the appropriate legal precepts and factors, and having assessed the credibility of those who testified, I conclude the following with respect to Guidelines F and J:

Under Guideline F, financial considerations, the security eligibility of an applicant is placed into question when the applicant is shown to have a history of excessive indebtedness, recurring financial difficulties, or a history of not meeting his financial obligations. The government must consider whether individuals granted access to classified information are, because of financial irresponsibility, in a position where they may be more susceptible to mishandling or compromising classified information. While his spouse handled the family's finances, Applicant was not totally ignorant of their financial situation. He knew that at least three accounts (¶¶ 1.d., 1.m., 1.n.) had been delinquent more than 180 days at one point, although he reported on his SF 86 that the debts in ¶¶ 1.m. and 1.n. had been satisfied in 2001. Applicant had ample reason to question any assurances of debt satisfaction from his spouse (if such assurances were in fact made), given $7,552 was owed on ¶ 1.n., their income had decreased that year to $36,957, and they had costs associated with maintaining separate residences to at least May 2001. His failure to take a more proactive approach to their finances at that time reflects financial irresponsibility on his part, and he bears some responsibility for the $14,131.21 in financially delinquent debt as of June 2005. Disqualifying conditions (DC) ¶ E2.A6.1.2.1. A history of not meeting financial obligations, and ¶ E2.A6.1.2.3. Inability or unwillingness to satisfy debts, apply.

Although Applicant was unemployed for about a year after his discharge from active duty, mitigating condition (MC) ¶ E2.A6.1.3.3. The conditions that resulted in the behavior were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce, or separation) does not apply with respect to incurring of the debt. The largest of the delinquencies (¶¶ 1.c., 1.m., and 1.n.) were charged off between July 2000 and September 2000 before they separated and when their federal adjusted gross income for the year was $69,683. The decrease in their adjusted gross income to $36,957, the marital separation, and the untimely death of their young son, compromised their ability to address the delinquent debt in 2001, however, and Applicant cannot be faulted for failing to address debt that he did not know about. Yet, during his June 2004 interview, if not before, he was made aware of several outstanding delinquencies, and can reasonably be held accountable for any deliberate disregard of the debts thereafter. Applicant's failure to make any payments toward his old debts while the IRS garnished his wages from August 2004 to December 2004 is understandable. Not so easily excused is his failure to address his debts during the first half of 2005, after he had promised that he would "personally and solely . . . take on the financial responsibilities of the household and make arrangements to pay off these debts." (Ex. 4)

To his credit, Applicant and his spouse started addressing the debts when it became clear on receipt of the SOR that he could lose his job. In July 2005, Applicant and his spouse paid the $53 outstanding veterinary debt in collection (¶ 1.e.). In August 2005, they paid those debts in ¶¶ 1.b., 1.d. (1.p. duplicate), 1.h. (1.q. duplicate), and 1.l. (1.k. duplicate). In February 2006, they settled the debt in ¶ 1.m. for less than the full balance owed, and they have been making payments to the IRS for taxes owed for 2000. Their 2005 income tax refund is likely to be intercepted by the IRS, and will be more than enough to satisfy their outstanding tax obligation. MC ¶ E2.A6.1.3.6. The individual initiated a good faith effort to repay overdue creditors or otherwise resolve debts, applies.

However, as of February 2006, $12,482 of the $14,154 in delinquent debt had not been resolved. Neither Applicant nor his spouse had made any payments on those cards opened by her on which Applicant was an authorized user (¶ 1.c. $503 and ¶ 1.n. $7,552). Applicant has not had success in dealing directly with the creditors on these accounts since they were his spouse's, but he acknowledges that he will have to pay them. Three medical debts totaling $269 (¶¶ 1.g., 1.i., 1.j.) are unpaid, as is the $4,158.21 judgment debt (¶ 1.f.). The Directive does not require that an applicant be debt free, but there must be adequate assurances that the financial problems are being resolved and are not likely to recur. His December 2005 credit report shows one new debt, an unpaid towing bill of $542 in collection since June 2005. Applicant testified to having received a text message about a week before his hearing that he was behind in his cellular phone bill. They had no car payments and were paying only for food, car insurance, cell phone, and miscellaneous costs, yet had to reduce the IRS repayment from $200 to $100 per month on a take-home pay of about $1,200 monthly. As of February 2006, they had one cent in savings and only $589 in checking to draw on in the case of an emergency. Applicant's financial situation does not permit a quick resolution of the remaining debt.

Applicant deserves credit under the whole person concept for seizing the opportunities to earn extra income through overtime at work and naval reserve duty. His December 2005 credit report reflects no ongoing reliance on credit. Yet, he can be faulted for neglecting until very recently the $4,158.21 default judgment that resulted from his failure to maintain insurance on his vehicle, and for not questioning his spouse's assurances that she was paying on their accounts. While he testified to confronting his spouse about the bills and demanding proof they had been paid, the recent cellular phone delinquency raises doubts about the strength of his commitment in that regard. When asked at his hearing why he does not take over payment of the family's bills in light of his spouse's failure to pay their cellular phone obligation on time, Applicant responded:

Honestly, I don't know. I don't trust myself to do it. I have had problems in the past where I personally haven't been able to keep up on them. When I married my wife, it was to my understanding that she could. I had found out that she can't so now we're stuck in a kind of against a rock and a hard place where I'm trying to put more of a voice in, but still allow her to take care of them. (Tr. 105)

Applicant, either by himself or jointly with his spouse, has not sought financial counseling that could assist him to set up a budget and eliminate unnecessary expenditures. A sincere intent to resolve one's debts is not a substitute for a sustained track record of repayment. With Applicant still living from paycheck to paycheck, and apparently unable to pay his ongoing living expenses in a timely fashion, I am unable to conclude that his financial problems are safely of the past. Favorable findings are returned as to those debts that have been resolved as well as to ¶ 1.a. (not proven). However, adverse findings are returned as to those debts that are still outstanding (¶¶ 1.c., 1.f., 1.g., 1.i., 1.j., and 1.n.).

While financial considerations remain of security concern, the government did not establish that Applicant willfully failed to file his federal income tax returns for tax years 2000 and 2001. Applicant and his spouse credibly testified that she took over the filing of returns on their marriage, and they filed by telephone and more recently electronically. She testified she did not inform Applicant of her failure to timely file the returns at issue; 2000 because of the burdens of caring for their son and working while she and Applicant were separated, and 2001 when the understandable grief over the death of their first child led her to neglect the filing of returns and the paying of some financial obligations. Applicants failure to followup to ensure that returns had been filed with the IRS is consistent with his hands-off approach to his financial matters, rather than of a willful disregard of his tax obligations. None of the criminal conduct disqualifying conditions apply to Applicant. Timely filing of federal tax returns for subsequent years confirms the failure to file was isolated to a period of marital discord and family tragedy (untimely death of their young son) and is not likely to be repeated in any event. SOR ¶¶ 2.a. and 2.b. are resolved in his favor.

Formal findings as required by Section 3, Paragraph 7 of Enclosure 1 to the Directive are hereby rendered as follows:

Paragraph 1. Guideline F: AGAINST THE APPLICANT

Subparagraph 1.a.: For the Applicant

Subparagraph 1.b.: For the Applicant

Subparagraph 1.c.: Against the Applicant

Subparagraph 1.d.: For the Applicant

Subparagraph 1.e.: For the Applicant

Subparagraph 1.f.: Against the Applicant

Subparagraph 1.g.: Against the Applicant

Subparagraph 1.h.: For the Applicant

Subparagraph 1.i.: Against the Applicant

Subparagraph 1.j.: Against the Applicant

Subparagraph 1.k.: For the Applicant

Subparagraph 1.l.: For the Applicant

Subparagraph 1.m.: For the Applicant

Subparagraph 1.n.: Against the Applicant

Subparagraph 1.o.: For the Applicant

Subparagraph 1.p.: For the Applicant

Subparagraph 1.q.: For the Applicant

Paragraph 2. Guideline J: FOR THE APPLICANT

Subparagraph 2.a.: For the Applicant

Subparagraph 2.b.: For the Applicant

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 a security clearance for Applicant. Clearance is denied.