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ISCR 20-03146: Guideline F security clearance appeal, denied (2022) · CASE

ISCR Case 20-03146denied

Case headnote

ISCR Case No. 20-03146

Jun 6, 2022· Hon. Moira D. Modzelewski· appeal

Summary

A man in his sixties was denied a U.S. security clearance under Guideline F (Financial Considerations) due to 16 delinquent debts totaling approximately $160,000. The appeal board upheld the denial, citing the applicant's failure to demonstrate personal responsibility for these financial obligations.

Specifically, the applicant claimed the debts were the responsibility of an LLC, but did not provide sufficient documentation to support this assertion. Despite possessing adequate financial resources, he also failed to resolve the outstanding debts.

The board concluded that the applicant did not adequately mitigate the security concerns associated with his financial situation, leading to the denial of his security clearance.

Conditions referenced

Disqualifying

19(b)appliedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
19(c)appliedA History of Not Meeting Financial Obligations

Key rule quoted

“It is well settled that adverse information from a credit report can normally meet the substantial evidence standard and the government’s obligations under [Directive] ¶ E3.1.14 for pertinent allegations.”
ISCR Case No. 08-12184 at 7 (App. Bd. Jan. 7, 2010)

Procedural posture

SOR issuedDec 11, 2020
Answer filed—
Hearing heldMar 16, 2022
Decision dateJun 6, 2022Decision affirmed on appeal.

Cite for

Failure to Demonstrate Personal Responsibility for Debts Under Guideline F
Insufficient Evidence to Mitigate Financial Concerns
Adverse Information From Credit Reports as Substantial Evidence for Security Clearance Decisions

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Appeal at a glance· Full written decision

Affirmed

The appeal involved a denial of a security clearance based on financial considerations. The applicant argued that the Judge's decision was arbitrary and capricious, claiming he was not personally responsible for the debts. The Board affirmed the decision, finding no harmful error in the Judge's analysis and determination.

Appealed bythe applicant

Applicant representationAttorney

Judge belowMark Harvey denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Decision arbitrary, capricious, or contrary to law, raised by the applicantRejected
Applicant argued that the Judge's adverse decision was arbitrary, capricious, or contrary to law.

Why the Board ruled this way

The Board found no harmful error in the Judge's decision, which was supported by substantial evidence and articulated a satisfactory explanation for the outcome.

Standard of review applied

Harmful-error gatekeeperSubstantial-evidence reviewArbitrary-and-capricious reviewProcedural complianceNo de-novo re-decisionNo new evidence on appealDeference to the judge’s credibility calls

Appeal Board panel

James F. Duffy (Chair)
James E. Moody
Moira Modzelewski

Descriptive structured reading of this decided, public Appeal Board decision: what the case says, not a prediction or advice.

Full decision

The complete, official text, footnotes and signatures included, is in the original PDF.

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

APPEAL

APPEARANCES

_______________________________________________ ) In the matter of: )

)

------- )

ISCR Case No. 20-03146

)

) Applicant for Security Clearance ) _______________________________________) DEPARTMENT OF DEFENSE DEFENSE LEGAL SERVICES AGENCY DEFENSE OFFICE OF HEARINGS AND APPEALS APPEAL BOARD POST OFFICE BOX 3656 ARLINGTON, VIRGINIA 22203 (703) 696-4759 Date: June 6, 2022

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Alan V. Edmunds, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On December 11, 2020, DoD issued a statement of reasons (SOR) advising Applicant of the basis of that decision―security concerns raised under Guideline F (Financial Considerations) of DoD Directive 5220.6 (January 2, 1992, as amended) (Directive). Applicant requested a hearing. On March 16, 2022, after the hearing, Defense Office of Hearings and Appeals (DOHA) Administrative Judge Mark Harvey denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raised the following issue on appeal: whether the Judge’s adverse decision was arbitrary, capricious, or contrary to law. Consistent with the following, we affirm.

The Judge’s Findings of Fact and Analysis The SOR alleged that Applicant had 16 delinquent debts totaling about $160,000. The Judge found against him on 11 of those debts totaling about $145,000. Applicant, who is in his sixties, and his spouse operated a limited liability corporation (LLC) as partners for about 16 years. They used multiple credit cards to fund business operations. The business began experiencing financial problems in about 2012 and closed in 2018. “Applicant contended the debts were the responsibility of the LLC and not his personal responsibility. (Tr. 56) He did not provide the contracts used to obtain the credit or other documentation showing the LLC was responsible for the debts, or that he was not responsible for the debts. (Tr. 58-59).” Decision at 2. Applicant took steps to resolve some LLC debts, others fell off his credit report due to the passage of time, and others remain in a charge-off status. At least one creditor sued the LLC, and Applicant settled and paid the debt without litigating the merits of his liability. A court document listed “[Applicant by name], et. al.,” as defendants. Decision at 3. After a credit counseling service informed Applicant of state’s three-year statute of limitations, he waited until the statute of limitations ran to improve his negotiating position with creditors, but they were not interested in settlements. Even though the 11 debts in question may be beyond the statute of limitations, they remain relevant for evaluating security clearance eligibility. Applicant is current on his other financial obligations. Over the past five years, he had adequate financial resources to resolve the 11 debts. His net worth is about $2.5 million, and he estimated his 2021 income after taxes to be about $250,000. There is no evidence the 11 debts are being resolved. He presented insufficient evidence to mitigate the alleged security concerns.

DISCUSSION

In his appeal brief, Applicant again argues that he is not personally responsible for the 11 debts at issue, contending they are the responsibility of the LLC. He asserts that there is no evidence that he personally guaranteed these debts, that “[a] credit report is not substantial evidence that [Applicant] is personally liable for a debt[,]” and that the Government has not met its burden of proving that Applicant was personally responsible for these debts. Appeal Brief at 18. He also contends the Judge based his decision on Appeal Board precedent that is distinguishable from his case because those cases dealt with applicants who were personally responsible for alleged debts. These arguments are not persuasive. In the decision, the Judge correctly cited ISCR Case No. 08-12184 at 7 (App. Bd. Jan. 7, 2010) for the proposition: It is well settled that adverse information from a credit report can normally meet the substantial evidence standard and the government’s obligations under [Directive] ¶ E3.1.14 for pertinent allegations. At that point, the burden shifts to applicant to establish either that [he or] she is not responsible for the debt or that matters in mitigation apply. [Decision at 6.]

In this case, Government Exhibits (GE) 2, a three-in-one credit report from March 2020, lists the 11 delinquent debts at issue. Some of those debts are listed in later credit reports in the record. The credit reports in the record are sufficient to establish by substantial evidence that Applicant was personally responsible for these debts. Once the debts were proven, Applicant had the burden of presenting evidence to refute, explain, extenuate, or mitigate the security concerns arising from those debts. Directive ¶ E3.1.15. Put differently, Applicant had the burden of establishing that he had no personal responsibility for the debts. It also merits noting that the Board has previously stated that business-related debts can have a bearing upon the judgement and reliability of company officials who incurred them. See, e.g., DISCR Case No. 93-1096 at 4 (App. Bd. Mar. 7, 1995), ISCR Case No. 14-01231 at 4 (App. Bd. Feb. 10, 2015), and ISCR Case No. ISCR Case No. 12-10335 at 5 (App. Bd. Dec. 29, 2017). From our review of the record, we find no error in the Judge’s determination that Applicant failed to meet his burden of production on this issue. Applicant notes the Judge concluded Disqualifying Conditions 19(b), “unwillingness to satisfy debts regardless of the ability to do so;” and 19(c), “a history of not meeting financial obligation;” applied in this case. See Directive, Encl. 2, App. A ¶¶ 19(b) and 19(c). Applicant points out the Judge later noted in the decision that Disqualifying Conditions “19(a) and 19(c)” were established without explaining why the former disqualifying condition applied.1 Decision at 6. The Judge’s reference to Disqualifying Condition 19(a) appears to have been a harmless typographical error that had no bearing on the outcome of the case. Applicant further argues the Judge failed to consider all of the evidence, mis-weighed the evidence, and erred in his analysis of the mitigating conditions and whole-person factors. He contends, for example, that the debts at issue occurred due to circumstances beyond his control and that he acted reasonably under the circumstances, e.g., following the advice of the credit counseling service on how to handle the debts; that he adequately disputed the debts by providing evidence to substantiate he took action to resolve the debts; and that he is financially stable and not a security risk. None of his arguments are enough to rebut the presumption that the Judge considered all of the record evidence or to demonstrate the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 21-01169 at 5 (App. Bd. May 13, 2022). Applicant failed to establish that the Judge committed any harmful error or that he should be granted any relief on appeal. The Judge examined the relevant evidence and articulated a satisfactory explanation for the decision. The decision is sustainable on the record. “The general standard is that a clearance may be granted only when ‘clearly consistent with national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). See also, Directive, Encl. 2, App. A ¶ 2(b): “Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of national security.” 1 Directive, Encl. 2, App. A ¶ 19(a), “inability to satisfy debts[.]”

ORDER

The decision is AFFIRMED. Signed: James F. Duffy James F. Duffy Administrative Judge Chairperson, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board Signed: Moira Modzelewski Moira Modzelewski Administrative Judge Member, Appeal Board