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Warning to Federal Employees and Those With Security Clearance: CBD Use Puts Jobs in Jeopardy

CBD has exploded on the market, with people using it for relaxation, pain relief — even better sleep. But though it is legal to use, the News4 I-Team found it could still cost you your job.

“I didn’t worry about it a bit — never gave it a second thought,” said one former federal law enforcement officer who purchased CBD oil over the counter to treat severe back pain.

He said the store clerk told him the product contained no THC and was perfectly safe. He placed the liquid CBD under his tongue as instructed. Three days later, he was randomly selected for a drug test at work.

“And then boom, I was told that I had tested positive for THC,” he said. “It’s horrible. It’s a horrible feeling.”

THC is the psychoactive compound in marijuana, which is prohibited for use by all federal employees. CBD also comes from the cannabis plant but is a different cannabinoid that does not make users high. Federal law allows hemp-derived CBD to contain trace amounts of THC.

“I’m like, ‘It wasn’t marijuana, guys.’ But I’m caught between a rock and hard place,” he said. “They can’t prove that I smoked marijuana, and I can’t prove that I didn’t.”

He asked the I-Team to conceal his identity, fearing that speaking publicly could jeopardize his retirement benefits. He chose to retire earlier this year after his boss revoked his security clearance and suspended him indefinitely.

“It just makes you feel like you’re a bad person, you wasted your career,” said the agent, who had worked in law enforcement for nearly three decades.

“It is an eye opener for a lot of people,” said Don Mihalek, executive director of the Federal Law Enforcement Officers Association.

Dozens of his members around the country have found themselves in similar situations, Mihalek said.

“It’s a new thing that’s out there, and I don’t think a lot of agencies have really gotten to the point of addressing how they’re going to handle that,” Mihalek said.

Neither has the drug testing industry, said Dr. Michael Kosnett, a medical toxicologist at the University of Colorado.

“The issue right now is the panel of testing,” he said. “Even with the sophisticated confirmatory testing, it doesn’t look for the metabolite of CBD. It only looks for the metabolite of THC.”

The testing industry likely will evolve over time to better deal with the rise in use of CBD, Kosnett said. Employers have no way to tell whether the THC in someone’s body originated from CBD or marijuana.

“It may not at all be enough to cause the person to feel high or intoxicated but it’s enough to have the metabolite of THC appear in their urine,” Kosnett said.

Plus, the CBD industry is largely unregulated, so users have no way to know what’s really in the products they’re buying. One study found nearly 70 percent were inconsistent with their labeling, including some with hidden THC, which can accumulate in your body over time.

“Unless a person really knows and has confidence in the purity of that particular brand they have, they could have an unfortunate surprise on a urine drug test,” Kosnett said.

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This summer, the federal division that oversees drug testing for federal employees sent a memo directing agencies “to inform applicants and employees of the risk that using such products may result in a positive marijuana test.” The memo reminded employers “there is no legitimate medical explanation for a marijuana-positive test result other than a verified prescription” for a few FDA-approved drugs.

The Department of Defense has specifically prohibited CBD use — even though Congress passed a law approving it for everyone else.

“It’s not fair. It’s completely unfair,” said Nina French, managing partner of Current Consulting Group, a firm that specializes in all areas of substance abuse testing.

Public and private employers are frustrated and unsure of how to adapt, French said.

“The problem is the times have changed before the tests have. And so now everybody’s going to be caught in the middle until technology and law catches up,” French said.

Employers use drug tests to limit liability and lower insurance costs for workplace accidents, French said. There are roughly 40 million lab-based drug tests in the U.S. each year.

“I can honestly not think of anything in our history that we have managed to botch to this degree,” French said.

The federal agent said he has never used illegal drugs but has no way to prove that. He could have spent years and drained his savings fighting to save his job but decided to retire instead.

“If it were me and this was a person who came into my office, I would look into challenging it,” said Suzanne Summerlin, general counsel for the National Federation of Federal Employees.

Summerlin thinks CBD users could argue there was no intent to break the rules. She worries the federal policy could keep agencies from hiring good candidates or cause them to lose good employees who were just misinformed.

“Certainly, moving forward, we are going to be letting folks know that these situations are happening,” Summerlin told the I-Team.

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Both unions say if your job is one that drug tests randomly — after an accident, for security clearance or any other reason — it’s best to avoid CBD products all together.

“Our advice is if you’re going to do anything medicinal, make sure you get a doctor’s prescription,” Mihalek said.

The federal law enforcement officer told the I-Team he contacted his agency’s director in Washington but was told there was nothing he could do.

“If I had known I was going to test positive for this stuff, I would’ve never taken it,” he said. “I mean, look what I’ve had to go through.”

Reported by Jodie Fleischer, produced by Katie Leslie, and shot and edited by Steve Jones.

Investment and Finance Rules for Security Clearance Holders

The Department of Defense (DoD) may deny or revoke security clearances for many reasons, including heedless investing and other financial missteps. Clearance holders should use caution when considering some financial opportunities, including marijuana or cannabis investments, cryptocurrency and foreign investments.

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If you’re a military member, federal employee or a member of the intelligence community, your security clearance may be your most important asset.

Your clearance determines your access to sensitive national security information. Losing your clearance could mean losing your job – not to mention future employment prospects in the same field.

However, a security clearance is a privilege, not a right. The government holds people with security clearances to higher standards of personal conduct than ordinary citizens. Maintaining your clearance means following the rules.

If you hold a clearance or are applying for one, you probably already know that alcohol or drug abuse, steep debt and criminal activity can all jeopardize your career. But what about your investments?

The Department of Defense (DoD) may deny or revoke security clearances for many reasons, including heedless investing and other financial missteps.

Here are some financial areas that military investors and others with clearances should approach with caution.

Can Military Members Invest in Marijuana?

Broad marijuana decriminalization and booming industrialization have created attractive opportunities for many investors. Despite the legalization of marijuana in municipalities and states across the country, it remains federally illegal.

Military members and cleared civilians know they can’t use marijuana or cannabis products, but what are the rules about investing in it?

Clearance holders can’t intentionally invest in any stock or company that is violating federal law, according to a December 2021 memorandum from the Director of National Intelligence (DNI), Avril Haines.

But, not all investment situations are created equal. Direct investment in marijuana companies or index funds isn’t the same as a broadly diversified portfolio that happens to include a few medical marijuana companies.

Clearance adjudicators apply the “whole-person concept” when evaluating clearance holders, according to DNI Spokesman Dean Boyd.

What is the “Whole-Person Concept?”

Clearance investigators look at multiple factors within an applicant’s personal history to determine if granting them a clearance is an acceptable security risk.

Under the whole-person concept, a few mistakes here and there don’t automatically disqualify you if you’ve addressed and disclosed them. But, if enough of this derogatory information accumulates, or if an individual piece of “derog” is particularly significant, the DoD may deny your clearance in the interest of national security.

Investing in Individual Marijuana Stocks

If you have a security clearance, you can’t invest in individual cannabis or marijuana stocks, according to the memorandum.

Marijuana companies on the stock market fall into three categories:

  1. Marijuana growers and retailers that provide recreational marijuana
  2. Ancillary providers that sell services and equipment to the marijuana industry, like hydroponics gear or consulting services
  3. Pharmaceutical and biotechnology companies that develop or sell medical or therapeutic cannabidiol products

The DNI memo explicitly prohibits investing in companies that violate federal law, so recreational marijuana companies shouldn’t be in your investment portfolio.

The DNI memo doesn’t specifically address ancillary providers or pharmaceutical marijuana and biotech companies. But, it does warn against investments in “marijuana-related businesses” and “stocks or business ventures that specifically pertain to marijuana growers.”

In an email, Boyd said that such investments “would typically be reviewed during the investigative process and adjudicated along with any other relevant information under the ‘whole-person concept’ in order to render a final decision.”

The safest play for security clearance holders is to avoid investing in any stock –even a legitimate biotechnology company – that has the perception of being a “pot stock.” Such investments might make it look like you’re trying to find a backdoor to investing in marijuana.

What About CBD products?

Security clearance applicants and clearance holders should be similarly wary of investing in companies that sell products with non-pharmaceutical grade cannabidiol or “CBD.” CBD oils, capsules, gummies and other food products are federally legal if they contain less than 0.3% THC.

But, “the percentage of THC can not be guaranteed,” Haines said in the DNI memo.

The Federal Drug Administration does not certify levels of THC in CBD products. Many CBD products advertised to contain less than 0.3% THC exceed the threshold, causing some users to test positive for marijuana, Haines said.

A 2017 National Center for Biotechnology Information study showed that more than one-fifth of CBD product samples in the study contained detectable amounts of THC.

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The DNI discourages using CBD products for this reason, so you should also be careful about investing in these companies. Casting your lot with any company that may be violating federal laws risks your clearance eligibility.

Investing in Marijuana ETFs and Mutual Funds

Investing in mutual funds or ETFs that incidentally contain a marijuana stock or two – like a broad-based index fund covering multiple sectors – shouldn’t endanger your security clearance, according to the memo.

“If the marijuana-related investment is not direct, such as an investment in a diversified mutual fund that is publicly traded on a United States exchange, adjudicators should presume that individual did not knowingly invest in a marijuana-related business. Thus, the indirect investment should not be considered relevant to adjudications.”

Director of National Intelligence

Diversification is the key to avoiding scrutiny under the guidance.

To stay on the right side of your obligations, don’t invest in marijuana or cannabis ETFs. Check the rest of your ETFs and mutual funds to ensure they don’t contain a bunch of marijuana stocks.

A complete list of your fund’s holdings should be available in the fund’s profile or prospectus.

Don’t rely on the words “cannabis” or “marijuana” being part of the fund’s name. That’s not always the case.

If a financial advisor, robo-advisor or another third-party representative manages your investment accounts, tell them you prefer to avoid investing in marijuana stocks. Try to review your portfolio with your advisor at least once per year.

Can You Invest in Cryptocurrency with a Security Clearance?

Cryptocurrency can be part of a well-hedged investment strategy, and the DNI has not yet given a reason for security clearance holders to avoid it.

“Currently, there are no reporting requirements for those possessing or seeking a security clearance specifically related to ownership of cryptocurrency,” Boyd said.

However, he said, clearance holders must adhere to financial reporting thresholds for investments.

“For those possessing or seeking a security clearance, the key rules are to not engage in illegal activity and to report foreign investments as required. There is nothing inherently illegal in owning cryptocurrency, provided one follows the law.”

It’s unclear when crypto qualifies as a foreign investment. Decentralized and peer-to-peer exchanges only muddy the waters.

There’s no official guidance on cryptocurrency or crypto exchanges yet. Boyd said it’s up to clearance holders to “conduct the necessary research up front to determine if a cryptocurrency exchange is considered foreign.”

In the absence of policy, it’s safe to assume that the rules for traditional investing also apply to cryptocurrency. That means avoiding excessive risk-taking behaviors, paying your taxes and disclosing appropriate information on your SF-86 Questionnaire for National Security Positions.

Cryptocurrency Risk

Crypto is an inherently speculative, volatile investment. Market fluctuations happen frequently and can result in significant financial losses. Many financial advisors suggest investing no more than 5% of your portfolio in cryptocurrency.

If you hold a security clearance, you should exercise more caution than other investors because significant losses can create additional problems that jeopardize your security clearance.

“An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds,” according to the Adjudicative Guidelines on clearance eligibility.

Financial behavior that causes a “significant negative cash flow” can trigger a security review.

Crypto Taxes

The IRS treats cryptocurrency like traditional investments: it’s property, not currency.

Security clearance holders must declare investments and capital gains on their tax returns to avoid tax problems that can jeopardize their clearances.

If you’re mining crypto, you must also pay self-employment income tax, according to The Military Wallet columnist and tax advisor Jerry Zeigler.

“You’re generating self-employment income in the IRS’s eyes,” he wrote in The Military Wallet’s crypto tax guide.

“That means filing individual self-employment taxes and filing a Schedule C form in your tax return to report the income and expenses from your mining efforts. If you created a business entity for the mining, then you have to file a business return.”

Foreign Stocks, Property and Other Financial Interests

You won’t necessarily lose your clearance if you, your spouse or partner has foreign financial interests.

You must disclose the following foreign assets in Block 20A of your SF-86:

  • Stocks
  • Property
  • Investments
  • Bank accounts
  • Ownership of corporate entities, corporate interests or ETFs held in specific geographic or economic sectors.

You don’t have to disclose:

  • Foreign stocks, diversified mutual funds or ETFs you purchased on U.S. exchanges.

Disclosure rules apply whether you control the investments or not.

If a financial advisor or other third party manages your investments, tell them to inform you of any assets purchased on foreign exchanges so you can disclose them.

Talk to your agency’s security manager or hiring representative to get further guidance.

Potentially Illegal Investments

According to section E of the National Security Adjudicative Guidelines – which govern security clearance eligibility – violating federal laws or demonstrating “unwillingness to comply with rules and regulations can raise questions about an individual’s reliability, trustworthiness, and ability to protect classified or sensitive information.”

If another drug like heroin becomes legal in your state, don’t expect to invest in a heroin production company and keep your federal security clearance.

Remember what Boyd said about crypto. The fundamental rule here is to “not engage in illegal activity.” This applies to marijuana-related investments and anything else considered illegal under federal law.

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Other Financial Considerations for Clearance Holders

Your financial situation and behaviors outside of the stock market and cryptocurrency exchanges can still impact your clearance.

For any of the financial considerations below, remember honesty is the best policy for maintaining your clearance.

Omitting or lying about financial information during the clearance application process or your clearance investigation will land you in hotter water than admitting any past mistakes, according to Adjudicative Guideline E:

“Of special interest is any failure to cooperate and provide truthful and candid answers during national security investigative or adjudicative processes.“

National Security Adjudicative Guidelines

When in doubt, disclose.

Insider Trading

Federal government employees and military members sometimes learn about things (such as pending defense contracts) before the general public.

If you trade stocks based on this “insider” information, you’ve engaged in insider training.

Federal law and security clearance guidelines expressly prohibit insider trading. You’re likely to lose your clearance if the government thinks you’re doing it.

Fraud

Knowingly committing financial fraud can also cost your clearance eligibility.

The adjudicative guidelines that govern security clearances don’t offer mitigating criteria for investigators to consider in these cases other than – possibly – the passage of time.

Financial fraud includes passing bad checks, lying on loan applications and padding or inflating charges on an employer expense account.

Under mitigating guidance in the adjudicative guidelines, you might be ok if you passed a bad check in high school, learned your lesson and applied for a security clearance 20 years later.

If you’ve done it recently or you’re actively committing a financial crime like mortgage fraud, you’re probably going to lose your clearance.

Be as honest and thorough as possible whenever you fill out mortgage applications or other financial paperwork. Such efforts show good judgment and a predisposition for rule-following: key considerations in a security clearance adjudication.

Excessive Debt

Thanks to the continuous vetting process, the government has near-real time access to your credit reports.

The DNI has not specified a threshold for “too much debt,” though individual services and agencies might have their own “soft” limits. If you have more revolving or unsecured debt (credit cards, medical bills or utility bills) than you can pay back, you might be in trouble.

Excessive debt can insinuate unfavorable characteristics – like irresponsibility – to clearance investigators, according to the adjudicative guidelines.

In the government’s view, financial woes might also pressure clearance holders to do something illegal to pay off their debts.

How long you’ve been in debt and the circumstances can mitigate scrutiny. For instance, medical debt can be unavoidable, but you should never borrow money for gambling or risky investments.

Taking responsible action – like accredited financial counseling or bringing accounts out of delinquency – can help you keep your clearance.

Bankruptcy isn’t immediately disqualifying and could even help demonstrate your efforts to gain control over your financial situation. Always disclose debt or bankruptcies on your SF-86.

Unexplained Affluence

Suppose your cleared coworkers and friends see you flaunting an expensive purchase, going on extravagant vacations or displaying other lavish spending behaviors. Security guidelines obligate them to report you to security.

Undisclosed financial affluence can make it look like you’re earning money on the side by illegal means, like espionage.

If you’ve had a sudden financial windfall, received an inexpensive gift or inherited an expensive item, report it to your agency’s security manager to avoid security concerns.

Even if you haven’t done anything wrong, the federal government may spend a lot of time and resources investigating you (and you can probably live without the stress of an investigation).

Tax Problems

Your security clearance is at risk if you don’t pay your taxes, don’t file your taxes or file your taxes fraudulently.

Ignoring your state or federal tax laws tells security clearance adjudicators that you can’t be relied upon to safeguard classified information.

However, the government understands that the tax system can be complex, and people make mistakes. If you find out you made a mistake, a tax professional can help you amend or correct your tax return before it becomes an issue.

If you owe back taxes, you can make arrangements with the IRS to pay them back on an installment plan. Entering one of these arrangements can help your case with clearance adjudicators.

Always be honest about any previous tax issues during a security clearance investigation, and make sure you tell them about your efforts to resolve them.

How to Do Your Taxes Like a Pro

Gambling Problems

For security clearance holders, gambling is only a problem when it’s a problem.

You’re jeopardizing your clearance if you’re involved in illegal gambling, borrowing money to gamble or pay off gambling debts, or your gambling has created conflict with family, friends or coworkers.

Seeking professional help is the best thing you can do for yourself and your clearance.

Note any financial issues associated with gambling – no matter how long ago they occurred – in box 26.2 of your SF-86. This block also has a section where you can record any actions you have taken to rectify financial problems caused by gambling.