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ISCR Case 09-06771.a1 — CASE

ISCR Case 09-06771.a1denied

Case Headnote

ISCR Case No. 09-06771.a1

Jan 4, 2011· Hon. Michael Y. Ra'anan· appeal

Summary

A security clearance was denied to an applicant, a company vice-president, under Guideline F (Financial Considerations). The denial stemmed from significant delinquent debts, including a $150,000 deficiency from a failed real estate investment and a $46,429 mortgage payment. These issues raised concerns about the applicant's financial responsibility, aligning with Disqualifying Condition AG ¶ 20(a).

While some recent financial improvements were noted, the judge determined these efforts were insufficient to mitigate the concerns, despite considering Mitigating Condition AG ¶ 20(d). Specifically, the applicant had not negotiated a repayment plan for the substantial real estate debt.

Ultimately, the judge concluded that the applicant's history of risky financial decisions demonstrated poor judgment and reliability, leading to the denial of the security clearance.

Conditions Referenced

Disqualifying

AG ¶ 20(a)raisedFinancial Considerations

Mitigating

AG ¶ 20(d)rejectedFinancial ConsiderationsThe applicant's recent financial improvements were insufficient to mitigate the concerns raised.

Key Rule Quoted

“A Judge is not limited to considering only those debts alleged in the SOR.”

Procedural Posture

SOR issuedMay 10, 2010
Answer filed—
Hearing heldOct 6, 2010
Decision dateJan 4, 2011

Cite For

Consideration of Non-sor Debts in Evaluating Financial Responsibility
Insufficient Mitigation Efforts in Financial Cases
Impact of Poor Judgment on 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 under Guideline F. The Applicant raised multiple issues regarding due process and the sufficiency of evidence. The Board affirmed the Judge's decision, finding no harmful errors and that the Judge's conclusions were supported by the record.

Appealed bythe applicant

Applicant representationPro se (self-represented)

Judge belowArthur E. Marshall, Jr. — denied the clearance

Decided ona hearing

Guidelines belowGuideline F

What the Board reviewed

Due-process / fairness — raised by the applicantRejected
Applicant contended that the Judge denied him due process by considering non-SOR debts.
Judge mis-weighed or ignored evidence — raised by the applicantRejected
Applicant argued that the Judge's decision was not supported by record evidence.
Judge mis-weighed or ignored evidence — raised by the applicantRejected
Applicant claimed that the Judge failed to consider all of the record evidence.
Decision arbitrary, capricious, or contrary to law — raised by the applicantRejected
Applicant asserted that the Judge's adverse security clearance decision was arbitrary, capricious, or contrary to law.

Why the Board ruled this way

The Board found that the Judge did not err in considering non-SOR debts and that the decision was supported by substantial evidence. The Judge's analysis of the Applicant's financial situation and credibility was deemed appropriate and consistent with the law.

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

Michael Y. Ra’anan — Chair
Jean E. Smallin
James E. Moody

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

SYNOPSIS

KEYWORD: Guideline F DIGEST: A Judge is not limited to considering only those debts alleged in the SOR. Non-SOR debts may also be considered on other issues, such as extenuation, mitigation, and credibility. Adverse decision affirmed. CASE NO: 09-06771.a1 DATE: 01/04/2011 DATE: January 4, 2011 In Re: -----------------

Applicant for Security Clearance ) ) ) ) ) ) ) ) ISCR Case No. 09-06771

APPEAL BOARD DECISION

APPEARANCES

FOR GOVERNMENT James B. Norman, Esq., Chief Department Counsel FOR APPLICANT Pro se The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security clearance. On May 10, 2010, DOHA issued a statement of reasons (SOR) advising Applicant of the basis for that decision–security concerns raised under Guideline F (Financial Considerations) of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive). Applicant requested a hearing. On October 6, 2010, after the hearing, Administrative Judge Arthur E. Marshall, Jr., denied Applicant’s request for a security clearance. Applicant appealed pursuant to Directive ¶¶ E3.1.28 and E3.1.30.

FOOTNOTES

1 The Judge’s decision discusses two deficiency amounts, $150,000 and $250,000. The $150,000 appears to be owed by Applicant based on the first mortgage on the property. Applicant testified that his mother owes a $100,000 deficiency arising from the second mortgage on the property. Tr. at 38-39. Applicant raised the following issues on appeal: whether the Judge denied Applicant due process; whether the Judge’s decision was not supported by record evidence; whether the Judge failed to consider all of the record evidence; and whether the Judge’s adverse security clearance decision was arbitrary, capricious, or contrary to law. Consistent with the following discussion, we affirm the decision of the Judge. The Judge found that Applicant is a vice-president of a company which he founded along with his sister. The SOR alleged two delinquent debts, one for $46,429 past due on mortgage payments and the other for $985 for a telecommunications bill. The real estate debt was the result of Applicant’s having purchased a house in a resort city for the purposes of “flipping” it and making a profit. The purchase price was about $490,000. Applicant was not able to lease it for a rent sufficient to enable him to cover his mortgage payments. Other factors affected Applicant’s financial condition: the real estate market collapsed, and his business suffered a downturn, resulting in Applicant’s annual income diminishing by more than half. Applicant discovered that he could not make the monthly mortgage payments plus the maintenance dues for the property. Eventually, the bank sold the property. Applicant was left with a $150,000 deficiency.1 The past due mortgage payments were unpaid at the close of the record, as was the smaller one to the telecommunications company. The Judge noted that Applicant’s finances had improved recently. Applicant’s annual salary is now over $100,000. He has paid down debts not alleged in the SOR, for example reducing a credit card debt from $80,000 to $35,000. However, Applicant has not negotiated a repayment plan for his real estate debt, because the lender will not work with him before a Form 1099 is issued. Also, Applicant has not demonstrated any effort to challenge or address the other SOR debt. In the Analysis portion of the decision, the Judge acknowledged that Applicant’s financial problems were affected by the recent economic downturn and collapse of the real estate market. However, the Judge also noted that Applicant was an experienced businessman who entered into a risky real estate venture without adequate financial resources to protect him in case of a business downturn. While Applicant may not have foreseen the specific economic circumstances of the past few years, he should have been aware of the cyclical nature of business and factored that into his decision of buy the property. All in all, the Judge concluded that the circumstances of Applicant’s purchase of the rental house, and his apparent neglect of the telecommunications bill, raised questions about his judgment and reliability which Applicant’s presentation at the hearing was not sufficient to mitigate. Applicant contends that the Judge denied him due process by considering non-SOR debts, such as the credit card debt. However, a judge is not limited to considering only those debts alleged in a SOR. In developing a full and complete record, he must take into account not only the conduct specifically alleged in the SOR, but it must also evaluate an applicant’s case for mitigation of the security concerns which the allegations may raise. To that end, conduct not alleged may be relevant to evaluating an applicant’s evidence for extenuation or mitigation and for assessing his credibility. See, e.g., ISCR Case No. 09-06770 at 3 (App. Bd. Nov. 8, 2010). In this case, the Judge evaluated Applicant’s non-SOR debt in the context of Applicant’s case for mitigation. Accordingly, he considered it in its proper context. There is no error in his having considered this particular debt in the manner in which he did. Applicant also contended that the Judge erred in not holding the record open enough time for him to obtain a Form 1099. However, the Judge held the record open for over two weeks after the hearing for Applicant to submit additional evidence. He submitted his income tax forms and other documents. In any event, although the Judge discussed the absence of a Form 1099, it is not clear what such a document would report or that it would necessarily be mitigating. Applicant testified that he was told that the creditor “will most likely forgive the debt and issue you a 1099.” Tr. at 42. Such testimony indicates only a probability of resolution down the road rather than a fact awaiting documentary corroboration. Moreover, it is not clear why Applicant apparently has not paid off the debt arising from his failure to make mortgage payments. Applicant’s own evidence, Exhibit B, a credit report, shows this past due amount to be $52,573. This is a sum certain, apparently provided to the credit reporting agency from the lender. There is a paucity of evidence in the record to demonstrate what efforts Applicant has made to address this aspect of his financial record. Additionally, there is little evidence to explain why a Form 1099 is a condition precedent to resolution of the deficiency judgment. As the Judge noted, doubts arising from Applicant’s security concerns must be resolved against him. See Directive, Enclosure 2 ¶ 2(b). All in all, there is no reason to believe that Applicant was denied an opportunity to present his case for mitigation or that he was otherwise denied due process. Applicant’s appeal presentation is not sufficient to rebut the presumption that the Judge considered all of the record evidence. See, e.g., ISCR Case No. 09-01735 at 2 (App. Bd. Aug. 31, 2010). The record supports a conclusion that the Judge examined the relevant data and articulated a satisfactory explanation for the decision, “including a ‘rational connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)(quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)). The record evidence, viewed as a whole, supports the Judge’s decision. Accordingly, the decision is sustainable. “The general standard is that a clearance may be granted only when ‘clearly consistent with the interests of the national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). Order The Judge’s adverse security clearance decision is AFFIRMED. Signed: Michael Y. Ra’anan Michael Y. Ra’anan Administrative Judge Chairperson, Appeal Board Signed: Jean E. Smallin Jean E. Smallin Administrative Judge Member, Appeal Board Signed: James E. Moody James E. Moody Administrative Judge Member, Appeal Board