Federal agencies mulling threat of tax debtors holding security clearances

The officials who are responsible for safeguarding the nation's intelligence secrets are trying to figure out how to better vet millions of employees and contractors with security clearances, after auditors found that some of those workers owed more than three-quarters of a billion dollars in unpaid taxes.

About 83,000 employees and contractors at the Department of Defense owed more than $730 million in unpaid taxes, the Government Accountability Office reported last month. Last year, the agency reported that 8,400 executive-branch civilian employees and contractors owed $85 million.


Debt is a threat when it is held by those handling classified information, government officials say, because it could make them vulnerable to pressure of bribery from foreign intelligence services or other entities willing to pay for it.

Officials are working on a system that would allow agencies to check the IRS standing of applicants for security clearances, a process currently hampered by technological gaps and restricted by privacy protections.


Agencies that offer security clearances now rely largely on credit reports and applicants self-reporting their tax debts, GAO auditors found.

The effort to address such debt isn't new. Nor is the threat to national security. In the 1980s, several people were convicted of selling secrets after falling into debt, including NSA analyst Ronald W. Pelton and retired Navy officer John A. Walker Jr.

Now, officials are focusing more attention on threats posed by insiders, following the leak of classified documents by former National Security Agency contractor Edward Snowden.

Snowden appears to have been motivated by ideological, rather than financial, issues.

"Over the past year, the buzz phrase that everyone kept talking about was 'insider threat,'" said Evan Lesser, managing director of the career matchmaking site "After Edward Snowden, I think people in government really took notice and understood that it's not necessarily external sources trying to hack into our classified systems that are the biggest threats. It's the people that we have that are accessing them every day and have some type of privileged access."

After the Snowden leaks, President Barack Obama and Congress ordered more funding to address insider threats. That included $75 million for a new computer monitoring program intended to catch an employee who was downloading information improperly.

"I hope we can continue to identify employees who are facing financial hardships before further problems arise," said Rep. C.A. Dutch Ruppersberger of Baltimore County, the top Democrat on the House Intelligence Committee. "Everyone must pay their taxes, including government workers who could become potential vulnerabilities when it comes to our national security."

The GAO raised concerns about tax debt last year when it reported on $85 million owed by civilian workers. Federal law doesn't prohibit people with debt from getting security clearances, but debt must be considered when clearance applications are decided.


Concerns grew last month when the GAO reported the $730 million in unpaid taxes owed by defense workers.

"It makes it all inherently vulnerable," said Seto Bagdoyan, acting director of the GAO's forensic audits and investigative service. "It's an indicator of vulnerability if a person carries a debt of any kind, especially after they get their clearance."

Sen. Tom Coburn of Oklahoma, the top Republican on the Senate Committee on Homeland Security and Government Affairs, expressed concern about that debt in light of rapid growth in the number of security clearances approved since the attacks of Sept. 11, 2001.

"It is vital that the Administration and Congress work diligently to eliminate potential threats that compromise the integrity of the federal workforce and the privileged information they safeguard," Coburn, one of the lawmakers who requested the GAO study, said last month. "Giving security clearances to individuals who fail to follow the law is unwise and risky. Federal tax cheats with security clearances jeopardize both our national and economic security, and could unnecessarily put our nation's classified information at risk."

Coburn said the country "must take prudent precautions not only to enhance our security, but also to encourage federal employees to pay their share of taxes and live by the same rules that so many hard working Americans do."

A Pentagon spokeswoman said the Defense Department supported the GAO audit and efforts to improve its awareness of tax debt among clearance holders.


But she also said that tax debt is and will continue to be just one of many factors considered in security clearance application reviews, which she said function around "whole person" assessments.

"All available, reliable information about the person, past and present, favorable and unfavorable, is considered in reaching a determination" as to whether the granting of a clearance is "consistent with the interests of national security," Navy Cmdr. Amy Derrick-Frost said. "Each case must be judged on its own merits."

It remains unclear what policy changes might occur in response to the GAO reports.

The GAO recommended last year that the Office of the Director of National Intelligence, the Office of Personnel Management and the Treasury Department work together to "evaluate the feasibility of federal agencies routinely obtaining federal debt information" for "the purposes of investigating and adjudicating clearance applicants, as well as for ongoing monitoring of current clearance holders' tax-debt status."

The GAO did not issue new recommendations with its second report last month because that first evaluation is still underway, Bagdoyan said. But he said the substantially larger number of Defense Department workers with tax debt identified in the second report has served as a "re-enforcing factor in those deliberations."

Some among the 83,000 indebted clearance holders identified by the most recent GAO report owed as little as $100. The median debt was $2,700.


But the top debt reached into the millions of dollars, the GAO found.

The number of indebted defense workers identified in the new report is nearly 10 times the 8,400 non-Defense clearance holders with tax debt identified in the first GAO study in 2013. The new data were culled from the most available information, current as of June 2012. Individual employees and contractors were not identified.

Those found to have unpaid federal taxes included employees and contractors who held or had been approved for secret, top secret and "sensitive compartmented information" clearances. Those with top secret or SCI clearances represented about 25 percent of the debtors.

About 40 percent were in a repayment plan with the IRS, the GAO found. About half were federal employees, half contractors.

Of those with debt, about 63,000 — or 75 percent — accrued their debt after being granted a clearance. The number of applicants who have been denied clearances due to tax debt was not available, the GAO said.

Lesser, of, called the GAO's findings a "slap in the face" for the federal government, and said it was "playing with fire" to give classified access to so many contractors and employees with debt.


While studies of trends in American espionage have shown that cash payments and other financial incentives have dropped on the list of motivators for people who leak government secrets, Lesser said, financial concerns remain a concern, and the top reason why security clearance applicants are denied.

Major debt owed to the government by applicants should not only be known to applicant reviewers, he said, but should be considered seriously. Federal tax debt should be monitored regularly, he said, and not checked only when employees and contractors are applying for clearances.

"Continuous surveillance of clearance holders has been a popular topic of conversation" in recent months, he said. "I think it needs to happen. This GAO report is the icing on the cake."

Baltimore Sun reporter Jamie Smith Hopkins contributed to this article.