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ISCR Case 19-00214 — CASE

ISCR Case 19-00214granted

Case Headnote

ISCR Case No. 19-00214

grantedSep 23, 2019· Hon. John Grattan Metz, Jr.· hearing

Summary

A 28-year-old diplomatic security officer was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons (SOR) alleged six delinquent debts totaling over $10,000 and noted a dismissed Chapter 7 bankruptcy petition from August 2018. The applicant attributed these financial problems to irresponsible behavior during college and admitted to filing for bankruptcy based on a lawyer's advice, unaware her income was too high to qualify.

Following the new year, the applicant began actively addressing her delinquent debts. For instance, she reached an agreement with a collection agent for one debt in early March 2019, with payment confirmed later that month. Another debt was settled in late February 2019 for 75% of the amount due, with final payment documented in March 2019.

The clearance was granted because the applicant demonstrated significant mitigating factors. She took proactive steps to settle her debts, sought financial counseling, and by the time of the hearing, all alleged debts were either resolved or actively being resolved. The adjudicators concluded that her financial difficulties were unlikely to recur due to her demonstrated commitment to financial responsibility.

Why the Applicant Prevailed

The applicant took proactive steps to settle debts and sought financial counseling after a bankruptcy attempt.
All debts alleged in the SOR were either resolved or in the process of resolution by the time of the hearing.
The applicant's financial difficulties were deemed unlikely to recur due to her demonstrated commitment to financial responsibility.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(b)raisedUnwillingness to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(a)appliedBehavior Unlikely to Recur
AG ¶ 20(b)rejectedConditions Largely Beyond ControlThe applicant's financial problems were not due to circumstances beyond her control.
AG ¶ 20(c)appliedReceived Financial Counseling
AG ¶ 20(d)appliedGood-faith Effort to Repay Creditors

Key Rule Quoted

“The Government must prove, by substantial evidence, controverted facts alleged in the SOR.”
— Department of the Navy v. Egan, 484 U.S. 518 (1988)

Procedural Posture

SOR issuedFeb 8, 2019
Answer filed—
Hearing heldJun 11, 2019
Decision dateSep 23, 2019

Cite For

Mitigation of Financial Issues Under Guideline F
Importance of Demonstrating a Credible Plan to Resolve Debts
Consideration of Good-faith Efforts in Financial Matters

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

Standardized Decision Profile

SEAD-4 Guideline F · descriptive summary of a decided case

Posture: Decision on RecordDecided: granted

The judge found that the applicant had several delinquent debts totaling over $10,000 and had previously filed for Chapter 7 bankruptcy, which was dismissed. However, the applicant took steps to address her financial issues, including negotiating settlements for her debts, leading to a decision to grant her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	The SOR alleges, and GE 2-6 substantiate, six delinquent debts totaling over $10,000. $10,000	For Applicant	Unspecified Financial	Unknown	—	—	—
1.b	Applicant admitted filing a Chapter 7 bankruptcy petition in August 2018, a petition that was dismissed in November 2018 for abuse.	For Applicant	Bankruptcy Filing	Admitted	—	—	Claimed Chapter 7 Bankruptcy
1.c	Applicant frankly attributed her financial problems to her irresponsible financial behavior while in college.	For Applicant	Unspecified Financial	Unknown	—	—	—
1.d	She consulted a bankruptcy attorney who recommended filing for bankruptcy protection without telling her that her income was too high to qualify to discharge her consumer debt.	For Applicant	Unspecified Financial	Unknown	—	—	—
1.e	After the new year, Applicant began addressing her delinquent debts.	For Applicant	Unspecified Financial	Unknown	—	—	Claimed Financial Counseling
1.f	Similarly, the collection agent for SOR debt 1.b reached out to Applicant in early March 2019, she reached an unstated agreement, and received confirmation of payment from both the collection agent and the creditor in late March 2019.	For Applicant	Unspecified Financial	Unknown	—	—	—
1.g	So too, the SOR 1.c collection agent settled the debt in late February 2019, for 75% of the amount due, and documented final payment in March 2019.	For Applicant	Unspecified Financial	Unknown	—	—	—

Descriptive standardized rendering of a decided public case (Guideline F). The verbatim source decision is shown in full below.

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

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No.19-00214 ) Applicant for Security Clearance ) Appearances For Government: Eric C. Price, Esquire, Department Counsel For Applicant: Pro Se 09/23/2019 ______________ Decision ______________ METZ, John Grattan, Jr., Administrative Judge: Based on the record in this case,1 I grant Applicant's clearance. On 8 February 2019, the Department of Defense (DoD) sent Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, Financial Considerations.2 Applicant timely answered the SOR, requesting a hearing before the Defense Office of Hearings and Appeals (DOHA). DOHA assigned the case to me 7 May 2019 and I convened a hearing 11 June 2019. DOHA received the transcript 20 June 2019.

FINDINGS OF FACT

Applicant denied the SOR financial allegations, except SOR 1.b. and 1.g She denied the remainder of the allegations on the grounds that they had been settled, or were in repayment. Applicant is a 28-year-old diplomatic security officer employed by a defense contractor since September 2017. She has never married and has no children. She claims to have previously had a background investigation by another Government agency, but was unable to provide a date. This is her first application for an industrial clearance (GE 1).

The SOR alleges, and GE 2-6 substantiate, six delinquent debts totaling over $10,000. While the SOR alleges that all six accounts were charged off, Applicant's January 2019 report (GE 4)Cupon which the SOR is based, shows that SOR debts 1.a and 1.cwere closed, but not charged off. All six debts had last activity dates of June or July 2018. Applicant admitted filing a Chapter 7 bankruptcy petition in August 2018, a petition that was dismissed in November 2018 for abuse. She also admitted SOR debt 1.bbecause she had not yet been able to settle the account. The creditor would not agree to a settlement amount while the account still appeared on Applicant's credit report as being in bankruptcy.

Applicant frankly attributed her financial problems to her irresponsible financial behavior while in college. Like her mother before her, she used credit cards to pay living expenses, and then just made the minimum payments on the accounts. However, her September 2017 credit report (GE 3) shows no delinquent debt, including several debts that were later alleged in the SOR. After Applicant obtained her job as a security officer, and began to discuss her finances with her sensible older brother, she was feeling overwhelmed about her consumer debt and her education loan debt. She consulted a bankruptcy attorney who recommended filing for bankruptcy protection without telling her that her income was too high to qualify to discharge her consumer debt. She filed her Chapter 7 petition in August 2018. She discussed the bankruptcy with a Government agent in September 2018 (GE2). The petition was dismissed in November 2018 for abuseCthe statutory term for ineligibility. However, even the bankruptcy judge noted that she might have been eligible for bankruptcy under another chapter, perhaps a Chapter 13 wage earner plan (GE 6). Applicant's attorney later told her the petition was dismissed because she lived at home, not on her own.

After the new year, Applicant began addressing her delinquent debts. Operating from a January 2019 dunning letter from the collection agent for SOR debt 1.a, which invited settlement discussions, Applicant negotiated a settlement of 50% of the debt. Applicant annotated the letter to show that the payment was due in February 2019. She produced a February letter from the collection agent confirming resolution of the account (AE A). Similarly, the collection agent for SOR debt 1.breached out to Applicant in early March 2019, she reached an unstated agreement, and received confirmation of payment from both the collection agent and the creditor in late March 2019 (AE B). So too, the SOR 1.ccollection agent settled the debt in late February 2019, for 75% of the amount

due, and documented final payment in March 2019 (AE C). Working from a late November 2018 credit card statement, Applicant entered into a 12-month repayment plan in December 2018, which required her to make a large deposit payment in late December 2018, then lower monthly payments through November 2019 (AE D). Applicant made the first three payments as required, and paid the last nine installments in a lump sum in March 2019 (AE H, I), In early February 2019, the collection agent for both the SOR 1.e and 1.fcreditor (a bank whose principal business is issuing store credit cards) sent Applicant two dunning letters. Later that month, Applicant settled each account for about 45% of the amount due. She received confirmation of payment in mid-April 2019 (AE E, F).

Applicant received the financial counseling required to file a bankruptcy petition. She submitted no budget. However, she submitted a detailed report chronicling the status, not only of the SOR debts, but of several other debts that were never delinquent to the Government's knowledge, along with documentation of her efforts to deal with the creditors on those debts. She did not present any evidence from coworkers, character references, or community groups.

POLICIES

The adjudicative guidelines (AG) list factors for evaluating a person's suitability for access to classified information. Administrative judges must assess disqualifying and mitigating conditions under each issue fairly raised by the facts and situation presented. Each decision must also reflect a fair, impartial, and commonsense consideration of the factors listed in AG ¶ 2(a). Any one disqualifying or mitigating condition is not, by itself, conclusive. However, specific adjudicative guidelines should be followed where a case can be measured against them, as they represent policy guidance governing access to classified information. Considering the SOR allegations and the evidence as a whole, the relevant adjudicative guideline is Guideline F (Financial Considerations).

Security clearance decisions resolve whether it is clearly consistent with the national interest to grant or continue an applicant's security clearance. The Government must prove, by substantial evidence, controverted facts alleged in the SOR. If it does, the burden shifts to applicant to refute, extenuate, or mitigate the Government's case. Because no one has a right to a security clearance, the applicant bears a heavy burden of persuasion.

Persons with access to classified information enter into a fiduciary relationship with the Government based on trust and confidence. Therefore, the Government has a compelling interest in ensuring each applicant possesses the requisite judgement, reliability, and trustworthiness of those who must protect national interests as their own. The Aclearly consistent with the national interest@ standard compels resolution of any reasonable doubt about an applicant's suitability for access in favor of the Government.3

ANALYSIS

The Government established a case for disqualification under Guideline F, but Applicant mitigated the security concerns. Applicant was clearly irresponsible with her finances during her college years, having numerous consumer credit accounts that she kept going by just making the minimum payments. When she got her first real job out of college she began to realize that this course of action was not sustainable. She consulted an attorney, who gave her bad advice, and she filed for Chapter 7 bankruptcy, which she was not entitled to do because of her income level. However, by this time the damage was done Having apparently stopped making payments on the SOR accounts during the run up to her petition filing and during the pendency of the petition, the accounts fell delinquent largely as alleged in the SOR.4 However, once her bankruptcy petition was dismissed, she began to address the debts in an orderly fashion. It appears that Applicant was engaging the creditors on two debts before the SOR was issued, and dealing with the creditor on two more debts before she received the SOR. By the time Applicant answered the SOR, each of the SOR debts was resolved or heading for resolution, although some confirmations of final resolution were not received until after she answered the SOR.

However, Applicant meets the mitigating factors for financial considerations. Her financial difficulties are actually few, although recent, but may be considered unlikely to recur.5 Although her financial problems were not due to circumstances beyond her control, but once her abortive attempt to file for Chapter 7 bankruptcy was closed, she began reasonable efforts to resolve the debts.6 A similar analysis, including completion of the bankruptcy-required financial counseling, supports a conclusion that the debts have been resolved through settlement,7 and that that resolution was made in good faith.8

The Appeal Board has stated that an Applicant need not have paid every debt alleged in the SOR, need not pay the SOR debts first, and need not be paying on all debts simultaneously. Applicant need only establish that there is a credible and realistic plan to

4&&9(a) inability to satisfy debts; (b) unwillingness to satisfy debts regardless of the ability to do so; (c) a history of not meeting financial obligations; 5&20(a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur . . . 6&20(b) the conditions that resulted in the financial problem were largely beyond the person's control . . . and the individual acted responsibly under the circumstances; 7&20(c) the person has received or is receiving counseling for the problem and there are clear indications that the problem is being resolved or is under control; 8&20(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.

resolve the financial problems, accompanied by significant actions to implement the plan.9 Applicant's efforts to date constitute such a plan, and she has documented significant action to resolve her debts. Applicant seems to have learned her lesson about financial responsibility, and appears unlikely to experience financial problems under these circumstances again. Applicant has adequately addressed the security concerns raised by her past irresponsibility. I conclude Guideline F for Applicant.

FORMAL FINDINGS

Paragraph 1. Guideline F:

FOR APPLICANT

Subparagraphs a-g:

For Applicant

CONCLUSION

Under the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. Clearance granted.

JOHN GRATTAN METZ, JR. Administrative Judge

FOOTNOTES

1 Consisting of the transcript (Tr.), Government exhibits (GE) 1-6, hearing exhibit (HE) I, and Applicant exhibits (AE) A-I. AE AE H-I were timely received post hearing. The record closed 25 June 2019, when Department Counsel stated no objection to AE I.

2 DoD acted under Executive Order 10865, Safeguarding Classified Information Within Industry (February 20, 1960), as amended; DoD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and Security Executive Agent Directive 4, effective on 8 June 2017.

3 See, Department of the Navy v. Egan, 484 U.S. 518 (1988).

9 ISCR Case No. 07-06482 (App. Bd. 21 May 2008).