Case No. VSA-0061, 25 DOE ¶ 83,015 (OHA June 12, 1996)

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* The original of this document contains information which is subject to withholding from disclosure under 5 U.S.C. 552. Such material has been deleted from this copy and replaced with XXXXX's.

DECISION AND ORDER

OF THE DEPARTMENT OF ENERGY

Opinion of the Director

Case Name: Personnel Security Review

Date Filed: March 21, 1996

Case Number: VSA-0061

This Opinion concerns a Request for Review filed by XXXXX (the "Respondent") concerning his eligibility to hold a level "Q" access authorization under the regulations set forth at 10 C.F.R. Part 710, entitled "Criteria and Procedures for Determining Eligibility for Access to Classified Matter or Special Nuclear Material." On February 13, 1996, a Hearing Officer from the Office of Hearings and Appeals of the Department of Energy (DOE) issued an opinion recommending against restoring the Respondent's access authorization. In this Opinion, I will consider the appropriate disposition of the Respondent's access authorization, based on the regulations and the record before me.

I. Background

The Respondent has been employed with the XXXXX since August 1, 1980. Since that time, the Respondent has performed services for the DOE which require him to have an access authorization. In March 1993, the Respondent notified his employer's Payroll Department that he did not want income taxes withheld from his salary check and submitted a substitute form W-8. This substitute form, entitled " Certificate of Foreign status for an American, Non-Resident Alien Outside the District of Columbia", states that "the signer is immune from any withholding of funds due him or her." See U.S.C. 26 § 7701 (a)(9). The statements made by the Respondent on this form raised concerns with XXXXXXXXXXXXX personnel, who referred the matter to the Department of Energy's XXXXX Operations Office (DOE/XXXXX). The DOE/XXXXX conducted two personnel security interviews in which the Respondent provided information which indicated that he had not filed federal income tax returns for 1992 and 1993 tax years or permitted correct tax withholding by his employer for the 1993 tax year. As a consequence, the DOE/XXXXX found that the Respondent's actions were in conflict with well-established sections of the Internal Revenue Code (IRC). The DOE/XXXXX's Manager suspended the Respondent's level "Q" access authorization and

obtained authority from the Director of the Office of Safeguards and Security to initiate an administrative review proceeding.

The DOE/XXXXX commenced the administrative review proceeding on August 29, 1995 by issuing a Notification Letter to the Respondent advising him that the DOE possessed information which created a substantial doubt concerning his eligibility to maintain a security clearance. Specifically, the Notification Letter states that the DOE uncovered derogatory information which indicated that the Respondent has engaged in unusual conduct tending to show that he is not honest, reliable, or trustworthy. See 10 C.F.R. § 710.8(l) (Criterion L). According to the Notification Letter, the DOE/XXXXX reached this determination based on the following information: (i) the Respondent did not file federal income tax returns for tax years 1992 and 1993 because of his belief that he is not required to do so and the Respondent's intent was not to file a 1994 income tax return as well; (ii) the Respondent maintained that he was not required to submit a Form W-4 or pay federal or state income taxes; and (iii) the Respondent submitted a substitute form W-8, Certificate of Foreign status for an American, Non-Resident Alien Outside the District of Columbia, in lieu of the required Form W-4. In addition, the DOE/XXXXX found that the Respondent's actions may constitute the felony of tax evasion under the IRC Section 7201, "Attempt to Evade or Defeat Tax," or may constitute a misdemeanor under IRC Section 7203, "Willful Failure to File a Return." The DOE/XXXXX also found that the Respondent may have violated IRC Section 7205 by supplying false or fraudulent information to an employer required to withhold money from wages for the purpose of paying taxes under IRC Section 3402. See Notification Letter Enclosure 1, "Information Creating a Substantial Doubt Regarding Eligibility for Access Authorization." The DOE/XXXXX concluded that the Respondent's actions are in conflict with well-known sections of the IRC and may constitute criminal behavior. Id.

After receiving the Notification Letter, the Respondent requested a hearing to respond to the DOE's allegations. The DOE/XXXXX transmitted the Respondent's Request for a Hearing to the Office of Hearings and Appeals (OHA) on October 6, 1995. I appointed Kent S. Woods as Hearing Officer in this case. Mr. Woods convened a hearing on this matter on XXXXXXXXXXXXXXXXX in XXXXXXXXXXXXXXXXXXXXX.

In his September 18, 1995 Response and during the hearing, the Respondent denied that he had committed any crimes related to the non-filing of income tax returns and the non-payment of income tax. See Response at 1. He argued that he has not committed a "willful" violation of IRC Section 7201 because he is not required by the IRC to file a tax return. Id. at 3. The Respondent further contended that his action in not filing tax returns is based "on the lack of requirements imposed upon me by the statutes and regulations with respect to filing a tax return of any kind." Id. at 4. He demanded that DOE provide the statute or regulation that he violated to be subject to the penalties of Sections 7201 and 7203 of the IRC.

II. The Hearing Officer Opinion

After considering all the relevant information, the Hearing Officer issued an Opinion on February 13, 1996, in which he found that the Respondent's actions regarding his tax obligations constitute unusual conduct, showing that he is not honest, reliable or trustworthy, and that his statements and recent actions fail to mitigate the security concerns raised by this conduct. Personnel Security Hearing, 25 DOE ¶ 82,791 at 85,773 (1996). The Hearing Officer found no merit in the Respondent's assertion that he cannot file federal income tax returns because he lacks precise information regarding the legal requirements of the IRC and the statutory basis for the requirement that he file a tax return. In addition, the Hearing Officer stated that the Respondent's actions regarding his federal income tax withholding require the IRS to initiate enforcement actions to bring him into compliance with the federal tax laws and that the willingness and ability to follow laws and regulations is essential to maintaining the security of classified documents. Id. He found that the Respondent's actions are in conflict with well-established sections of the IRC and may constitute criminal violations. Id. The Hearing Officer concluded that restoring the Respondent's access authorization would endanger the common defense and security and would be inconsistent with the national interest. Id.

III. The Request for Review

On March 21, 1996, the Respondent filed his Request for Review with this Office. The Respondent submitted a statement on April 2, 1996 providing the Office with information which he considers to be new information that was not considered at his hearing. On April 11, 1996, the Office of Security Affairs informed me that it concurred with the opinion of the Hearing Officer and would not be submitting additional information. On April 29, 1996, I closed the administrative record in this proceeding.

IV. Analysis

Under 10 C.F.R. § 710.28(a), either the Office of Security Affairs or the individual involved may file a request for review of a Hearing Officer's opinion with the Director of the Office of Hearings and Appeals. The regulations provide that (i) the party seeking review must file a statement with the OHA identifying the particular issues on which it wishes me to focus my review and (ii) the other party may file a response to that statement. 10 C.F.R. §§ 710.28(a) and (b). The regulations also permit me to accept submissions that are relevant to my review from either the individual or the Office of Security Affairs. 10 C.F.R. § 710.28(c).

In considering requests for review, I will generally confine my inquiry to those issues raised in the statement or response. The regulations provide that I may consider additional information which was not before the Hearing Officer. 10 C.F.R. § 710.28(c); 10 C.F.R. § 710.29(2). In the present case, the Respondent has provided me with a statement raising three issues. The Respondent argues that: (A) the OHA has no authority to enforce or administer laws under Title 26 of the United States Code; (B) OHA is in violation of its own Part 710 regulations; and (C) OHA is attempting to "convict" the Respondent of charges in violation of a taxing statute. In addition, the Respondent encloses with his statement documents he considers to be new information. These documents from the United States District Court for the XXXXXXXXXXXXXXXXXXXXXXXXXXX, inter alia, of an Order denying a motion to show cause as moot and dismissing a case against the Respondent's wife.<1>

A. Whether DOE Has the Authority to Enforce or Administer Laws Under Title 26 of the

United States Code

In his statement, the Respondent specifically asks that the DOE "issue a declaratory order to terminate a controversy or remove uncertainty that the Secretary of the Department of Energy or the Director of the Office of Hearings and Appeals has the authority to enforce and/or administer the laws under Title 26 of the U.S.C. (the Internal Revenue Code) and where that authority was issued to them under the requirements of the law." See Statement at 1. I find this request to be both confused and misguided. The OHA is not seeking to enforce or administer laws under the IRC. The Part 710 regulations allow the OHA to afford individuals the opportunity to support their eligibility for access authorization. Pursuant to these regulations, the OHA is only seeking to ensure that the restoration of the respondent's access authorization "would not endanger the common defense and security and would be clearly consistent with the national interest." 10 C.F.R. § 710.27(d).

In addition, according to his statement, the Respondent believes that the Hearing Officer's authority to carry out the Part 710 regulations is found in the Administrative Procedure Act (APA), 5 U.S.C. § 554. The Respondent is not correct. OHA hearings are neither governed by nor subject to the APA. The requirements of the APA apply only to "every case of adjudication required by statute to be determined on the record after opportunity for an agency hearing." 5 U.S.C. § 554. Part 710 administrative review hearings are not required by statute to be determined "on the record" after opportunity for an agency hearing. Accordingly, the APA does not apply to Part 710 administrative review hearings. See Ardestani v. I.N.S., 112 S. Ct. 515 (1991).<2>

B. Whether the OHA Has Violated the Part 710 Regulations

The Respondent maintains that he is exercising his constitutional rights of citizenship by refusing to pay his taxes and by not allowing the proper withholding of taxes. Statement at 2. Specifically, he argues that OHA has violated the Part 710 regulations by attempting to coerce, restrain, threaten, intimidate and retaliate against him for exercising his constitutional rights. Id. I find this argument to be misplaced.

The OHA is not violating the Part 710 regulations. As stated above, the OHA is only concerned with whether the restoration of the Respondent's access authorization would pose a security risk. The Part 710 regulations allow the OHA to make a determination on the issues of access authorization by reviewing conduct which is considered as derogatory information. In the present case, the Hearing Officer properly reviewed the Respondent's actions regarding his tax obligations and determined that these actions constitute unusual conduct under Criterion L.

The section of the Part 710 regulations that the Respondent relies on in advancing his argument is § 710.4. That section states as follows:

It is also the policy of DOE that none of the procedures established by DOE for determining eligibility for access authorization shall be used for an improper purpose, including any attempt to coerce, restrain, threaten, intimidate, or retaliate against individuals for exercising their rights under any statute, regulation or DOE directive. Any DOE officer or employee violating, or causing the violation of this policy, shall be subject to appropriate disciplinary action.

10 C.F.R. § 710.4.

This provision was specifically added to the Part 710 regulations to protect "whistleblowers," as part of the Secretary of Energy's policy to ensure that both DOE Federal and contractor employees are free to voice their concerns about health, safety, environmental matters, waste, fraud, abuse and mismanagement, without fear of reprisal. See Preamble to Part 710, 59 FR at 35180 (July 8, 1994). As stated in the legislative history of these regulations, whistleblowing activities do not constitute legitimate grounds for the suspension, revocation or denial of a DOE access authorization. 10 C.F.R. § 710.4(b). In the present case, the Respondent is not a whistleblower who would be protected by this provision, since he does not claim to have made protected disclosures about concerns enumerated in the preamble to § 710.4(b). Rather, he is an individual who is utilizing the Part 710 administrative review process to seek restoration of his "Q" access authorization, which was suspended on the basis of legitimate security concerns about his failure to pay Federal Income Tax, under 10 C.F.R. § 710.8(l). Therefore, I find no merit in the Respondent's argument.

C.Whether the OHA Is Attempting to "Convict" the Respondent of Charges in Violation of a Taxing Statute

The Respondent also argues that the Hearing Officer's recommendation that his level "Q" access authorization should not be restored is an attempt to convict him of violating a taxing statute. As stated above, during the hearing the Respondent argued that he cannot file an income tax return because the IRS has not provided him with specific information regarding the legal requirements of the IRC and the statutory basis for the requirement that he file a tax return. Transcript of Hearing at 168-172 (hereinafter cited as Tr.).

After a thorough review of the record, I find no merit in this argument. The Respondent is completely wrong in stating that the OHA is attempting to "convict" him of charges in violation of a taxing statute. Again, the OHA is not enforcing the IRC. Rather, the Hearing Officer properly provided a hearing to the Respondent to challenge assertions that he is a security risk and determined that the Respondent's actions constitute unusual conduct in light of the factors and circumstances set forth in 10 C.F.R. § 710(c).

The Respondent has deliberately decided not to file an income tax return for tax years 1992, 1993 and 1994 as well as to not permit the withholding of taxes. This decision has led the IRS to initiate enforcement actions against the Respondent. The fact that the Respondent has taken conscious actions that violate well-established federal tax requirements underscores the DOE/XXXXX's concerns about the Respondent's honesty, reliability and trustworthiness under Criterion L. I must concur with the Hearing Officer that the Respondent has clearly taken actions which violate commonly understood federal tax requirements. Since the willingness and ability to follow laws and regulations is imperative to maintaining the security of classified documents and special nuclear material, these actions clearly raise security concerns. As stated by the Hearing Officer, it is clearly understood by the vast majority of Americans that individuals meeting certain requirements of income are required to submit an annual tax return. Personnel Security Hearing, 25 DOE ¶ 82,791 at 85,776 (1996), citing Personnel Security Hearing, Case No. VSO-0048, 25 DOE ¶ 82,776 at 85, 677.

The record reflects that during the hearing, the Respondent did not dispute that he had taken deliberate actions which resulted in the non-filing of federal income tax returns in 1992, 1993, and 1994, and in the non-withholding of federal taxes since April 1993. Rather, he demanded that the IRS provide him with the statutory basis for its authority to require him to file an income tax return and he stated that he will continue to contest the IRS and will only file an income tax return when he is required to do so by a court. Tr. at 85. This position is unacceptable for an individual holding a security clearance. Individuals holding access authorization status must demonstrate that they can be trusted to conform to the requirements of the federal laws without the need for constant police action. Personnel Security Hearing, 25 DOE ¶ 82,791 at 85, 779 (1996). Based on a review of the issues raised in the Respondent's statement, it is evident that the Respondent has not changed his position or offered any new evidence which would mitigate the security concerns raised by his actions with respect to his tax obligations.<3>

IV.Conclusion

I have carefully considered the record of this proceeding, the Opinion of the Hearing Officer and the matters raised by the Respondent in his Request for Review. In resolving the question of the individual's eligibility for access authorization, I have been guided by the applicable factors prescribed in 10 C.F.R. § 710.7(c). I find that the Opinion reflects "a comprehensive common-sense judgment made after consideration of all relevant information" and accordingly should not be disturbed. I find further that the issues presented in the Respondent's statement do not mitigate the DOE's security concerns set forth in the Notification Letter. After due deliberation, it is my opinion that the individual's access authorization should not be restored since I am unable to conclude that such restoration would not endanger the common defense and security and would be clearly consistent with the national interest.

George B. Breznay

Director

Office of Hearings and Appeals

Date:

[On July 29, 1996, a final determination was made by the Director, Office of Security Affairs, to revoke the individual's Department of Energy access authorization.]

<1> The subject matter of the Motion to Show Cause was an Internal Revenue Summons issued to the Respondent's wife on January 5, 1996. The IRS informed the Respondent's wife that it was no longer seeking to enforce the summons.

<2> The preamble to Part 710 also cited the Supreme Court's opinion in the Ardestani case to explain why the APA did not apply to administrative review proceedings. 59 FR 35183 (July 8, 1994).

<3> In his statement, the Respondent encloses documents from the United States District Court for the XXXXXXXXXXXXXXXXXXXXXXXXXXXX. These documents indicate that the Government is no longer seeking to enforce a disputed summons against the Respondent's wife. I cannot find that these documents mitigate the security concerns attached to the Respondent's actions in defiance of his tax obligations. His wife's conduct is not at issue here. The Respondent has offered no evidence to suggest that he will file his income tax returns or permit the withholding of taxes on his income without being required to do so by an enforcement action.