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ISCR Case 19-00054 — CASE

ISCR Case 19-00054denied

Case Headnote

ISCR Case No. 19-00054

Nov 28, 2022· Hon. Moira D. Modzelewski· appeal

Summary

A security clearance applicant, represented by counsel, was denied a clearance under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The denial was based on multiple bankruptcies and a fraud judgment related to unemployment benefits.

Specifically, the applicant had several Chapter 7 discharges and dismissed Chapter 13 bankruptcies. A judgment was also issued against the applicant for fraudulently obtaining unemployment benefits, which raised concerns under Disqualifying Condition F3 (failure to meet financial obligations) and E2 (deliberate misrepresentation or omission).

The appeal board affirmed the denial, finding substantial evidence to support the adverse findings, particularly concerning the fraud allegations. The board underscored the critical role of national security in all clearance determinations.

Conditions Referenced

Disqualifying

F3raisedInability or Unwillingness to Satisfy Debts
E2raisedDeliberate Misrepresentation of Relevant Facts

Key Rule Quoted

“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)

Procedural Posture

SOR issuedMar 26, 2021
Answer filed—
Hearing heldSep 19, 2022Applicant requested a decision on the written record.
Decision dateNov 28, 2022Appeal decision affirmed.

Cite For

Substantial Evidence Supporting Adverse Findings in Financial Misconduct Cases
Importance of National Security in Clearance Determinations
Limitations on New Evidence During Appeal Process

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 security clearance based on financial considerations and personal conduct. Applicant contested the Judge's findings regarding fraud allegations and claimed the decision was arbitrary and capricious. The Board affirmed the decision, finding no harmful error and substantial evidence supporting the Judge's conclusions.

Appealed bythe applicant

Applicant representationAttorney

Judge belowJohn Bayard Glendon — denied the clearance (split findings)

Decided onthe written record

Guidelines belowGuideline EGuideline F

What the Board reviewed

Judge mis-weighed or ignored evidence — raised by the applicantRejected
Applicant argued that the Judge erred in finding against her on the fraud allegations.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant contended that the Judge's decision was arbitrary, capricious, or contrary to law.

Why the Board ruled this way

The Board found substantial evidence supporting the Judge's adverse findings against Applicant on the fraud allegation and determined that the Judge's decision was not arbitrary or capricious. Applicant's arguments were insufficient to demonstrate harmful error.

Standard of review applied

Harmful-error gatekeeperSubstantial-evidence reviewArbitrary-and-capricious reviewNo de-novo re-decisionNo new evidence on appeal

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. 19-00054

)

) 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: November 28, 2022

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Daniel Conway, Esq. The Department of Defense (DoD) declined to grant Applicant a security clearance. On March 26, 2021, DoD issued a statement of reasons (SOR) advising Applicant of the basis for that decision—security concerns raised under Guideline F (Financial Considerations) and Guideline E (Personal Conduct) of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive). Applicant requested a decision on the written record. On September 19, 2022, after considering the record, Administrative Judge John Bayard Glendon denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30. Applicant raised the following issues on appeal: whether the Judge erred in finding against Applicant on the fraud allegations and whether the Judge’s decision was arbitrary, capricious, or contrary to law. Consistent with the following, we affirm. The SOR contains nine Guideline F allegations. These assert that Applicant received Chapter 7 bankruptcy discharges in 1991, 2010, and 2019; that she had Chapter 13 bankruptcies

dismissed in 2015 and 2016; that she was indebted to the United States for about $14,000 in unpaid taxes; that she was indebted to a state for about $8,400 in unpaid taxes; that she had a state tax lien entered against her for about $7,600; and that she had a judgment of about $14,700 entered against her for fraudulently obtaining unemployment benefits. The last allegation was cross-alleged under Guideline E. In responding to the SOR, Applicant denied the fraud allegation and admitted the other Guideline F allegations. The Judge found in favor of Applicant on the state tax allegations and against her on the others. Applicant’s appeal brief contains documents and assertions that were not presented to the Judge for consideration. Those documents and assertions constitute new evidence that the Appeal Board is prohibited from receiving or considering. Directive ¶ E3.1.29. Applicant contends the cross-alleged fraud allegation lacks basis because she was unemployed during the period in question, which entitled her to unemployment benefits. During Applicant’s 2015 Chapter 13 bankruptcy proceeding, a state agency filed a complaint against her challenging the dischargeability of a debt. File of Relevant Material (FORM) Item 6 at 3 (bankruptcy docket) and Item 12 (Complaint to Determine Dischargebility of a Debt). The complaint alleged that, while receiving unemployment benefits, Applicant made representations that she remained unemployed or underemployed and was entitled to receive those benefits when she knew those representations were false and made with the intent to deceive. FORM Item 12 at 3. The complaint identifies the name of Applicant’s employer and the dates of her employment when she was receiving unemployment benefits. In response to this complaint, the Bankruptcy Court entered a judgment against Applicant in total amount of $14,770, including interest and fees. FORM Item 11 at 1. Based on our review of the record, there is substantial evidence to support the Judge’s adverse findings against Applicant on the cross-alleged fraud allegation. The balance of Applicant’s arguments amounts to a disagreement with the Judge’s weighing of the evidence. However, none of her arguments are sufficient to demonstrate the Judge weighed the evidence in a manner that was arbitrary, capricious, or contrary to law. See, e.g., ISCR Case No. 15-08684 at 2 (App. Bd. Nov. 22, 2017). Applicant failed to establish the Judge committed any harmful error. 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.”

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