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ISCR Case 16-01788.h1 — CASE

ISCR Case 16-01788.h1denied

Case Headnote

ISCR Case No. 16-01788.h1

deniedFeb 21, 2017· Hon. LeRoy F. Foreman· hearing

Summary

A 49-year-old welder with 22 years of security clearance history was denied a security clearance under Guideline F (Financial Considerations) due to multiple delinquent debts totaling over $110,000. The Statement of Reasons detailed a charged-off second mortgage loan for $108,242, two credit card accounts referred for collection totaling $1,582, and two additional credit card accounts referred for collection totaling $1,510. Additionally, five sets of delinquent medical bills were cited, amounting to $69, $55, $32, $461, and $299 respectively.

Disqualifying conditions under Adjudicative Guidelines (AG) ¶ 19(a) and AG ¶ 19(c) were raised. While mitigating conditions AG ¶ 20(a), AG ¶ 20(b), AG ¶ 20(c), and AG ¶ 20(d) were considered, they were not sufficient to overcome the security concerns.

The denial was based on the applicant's failure to demonstrate a good-faith effort to resolve his debts, with bankruptcy protection only sought when his clearance was in jeopardy. His claims of attempting to contact creditors were deemed vague and unsupported. The recent and numerous nature of his financial issues indicated a lack of self-control and judgment, leading to the denial of his security clearance.

Why the Applicant Was Denied

The applicant failed to demonstrate a good-faith effort to resolve his delinquent debts, only seeking bankruptcy protection when faced with security clearance jeopardy.
The applicant's vague and unsupported claims of attempting to contact creditors were deemed unconvincing.
The applicant's financial issues were recent and numerous, indicating a lack of self-control and judgment.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(a)rejectedBehavior Happened so Long Ago, Was Infrequent, or Unlikely to Recur
AG ¶ 20(b)notedConditions Largely Beyond the Person's Control
AG ¶ 20(c)notedReceived Counseling for the Problem
AG ¶ 20(d)rejectedInitiated a Good-faith Effort to Repay Creditors

Key Rule Quoted

“Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG.”
— Exec. Or. 10865 § 2.

Procedural Posture

SOR issuedSep 1, 2016
Answer filedSep 24, 2016
Hearing heldDec 5, 2016
Decision dateFeb 21, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations Under Guideline F
Insufficient Evidence of Good-faith Efforts to Address Delinquent Debts
Impact of Personal Circumstances on Financial Responsibility Assessments

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: denied

The judge found that the applicant had multiple delinquent debts, including a charged-off second mortgage and several credit card and medical debts, which raised significant financial concerns under Guideline F. Despite the applicant's claims of financial difficulties stemming from a contentious divorce, the judge ruled against the applicant, concluding that he had not sufficiently mitigated the security concerns related to his financial irresponsibility.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	delinquent second mortgage loan, charged off for $108,242 $108,242	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	two credit-card accounts referred for collection of $1,582 $1,582	Against Applicant	Credit Card Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	two credit-card accounts referred for collection of $1,510 $1,510	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	five delinquent medical bills for $69 $69	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	five delinquent medical bills for $55 $55	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	five delinquent medical bills for $32 $32	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	five delinquent medical bills for $461 $461	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	five delinquent medical bills for $299 $299	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

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: ) ) [Redacted] ) ISCR Case No. 16-01788 ) Applicant for Security Clearance )

For Government: Benjamin R. Dorsey, Esq., Department Counsel For Applicant: Richard L. Morris, Esq.

02/21/2017 ______________

STATEMENT OF CASE

______________

FOREMAN, LeRoy F., Administrative Judge:

This case involves security concerns raised under Guideline F (Financial Considerations). Eligibility for access to classified information is denied.

Statement of the Case

Applicant submitted a security clearance application (SCA) on August 21, 2015. On September 1, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) sent him a Statement of Reasons (SOR) alleging security concerns under Guideline F. The DOD CAF acted under Executive Order (Exec. Or.) 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 the adjudicative guidelines (AG) implemented by the DOD on September 1, 2006. The adjudicative guidelines are codified in 32 C.F.R. § 154, Appendix H (2006), and they replace the guidelines in Enclosure 2 to the Directive.

Applicant received the SOR on September 7, 2015; answered it on September 24, 2016; and requested a hearing before an administrative judge. Department Counsel was ready to proceed on October 20, 2016, and the case was assigned to me on November 10, 2016. On November 18, 2016, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for December 5, 2016. I convened the hearing as scheduled. Government Exhibits (GX) 1 through 4 were admitted in evidence without objection. Applicant testified, presented the testimony of two witnesses, and submitted Applicant’s Exhibits (AX) A through S, which were admitted without objection. I kept the record open until January 6, 2017, to enable Applicant to submit additional documentary evidence. He timely submitted AX T and U, which were admitted without objection. DOHA received the transcript (Tr.) on December 13, 2016.

Findings of Fact1

In his answer to the SOR, Applicant admitted the allegations in SOR ¶¶ 1.a and 1.c-1.h. He denied SOR ¶ 1.b. His admissions in his answer and at the hearing are incorporated in my findings of fact.

Applicant is a 49-year-old welder who has worked for a defense contractor since April 2002. He has held a security clearance for about 22 years. (Tr. 7.)

Applicant married in December 1994 and divorced in November 2000. He married again August 2002, separated in January 2010, and divorced in July 2015. He has lived with a cohabitant since May 2012. He has no children.

Applicant graduated from high school in June 1985, completed an apprentice program in December 1989 and was certified as a journeyman welder. He progressed to higher skill levels and became a nuclear pipe welder. He taught welding at a shipyard and received several promotions to supervisory positions. In 2008 he became a welding program manager, his current position. He has worked on a “tiger team,” whose members are “the best in their trade” and travel around the world to repair submarines and special operations equipment. (Tr. 30-33.) He has been recognized frequently for his proficiency, dedication, leadership, and workplace safety practices. (AX J-L; R, S.)

A professional colleague, who is also Applicant’s landlord and a personal friend, testified that he has known Applicant for about ten years. He considers Applicant to be honest, reliable, and trustworthy. He testified, “I trust him with my back.” (Tr. 17-21.) A co-worker, who has known Applicant since the late 1980s, considers him financially responsible, honest, trustworthy, and reliable. (Tr. 28-30.)

When Applicant submitted his SCA, he disclosed several delinquent debts. His credit bureau reports (CBRs) from August 2015 (GX 2) and May 2016 (GX 3) reflect a delinquent second mortgage loan, charged off for $108,242 (SOR ¶ 1.a); two credit-card accounts referred for collection of $1,582 and $1,510 (SOR ¶¶ 1.b-1.c); and five delinquent medical bills for $69, $55, $32, $461, and $299 (SOR ¶¶ 1.d-1.h).

Applicant and his wife separated in January 2010, and he moved out of the house. The separation and subsequent divorce were contentious and took five years to complete. On the advice of a lawyer, he paid his wife $1,300 per month while the divorce was pending. (Tr. 35-36.) He was unable to afford the payments to his wife and the payments on the first and second mortgages on the marital home. The lender foreclosed on the first mortgage in October 2010. (Tr. 35-37.) Applicant continued to make payments on the second mortgage until sometime in 2011. The debt was charged off for $108,242 in March 2015. (GX 2 at 3.)

Applicant testified that he attempted to contact the lender for the second mortgage loan but he “didn’t know if they went out of business, or what.” (Tr. 37.) He did not state when, how often, or by what means he attempted to contact the lender, and he provided no documentation of his efforts. The August 2015 CBR lists a mailing address for the original lender, but the May 2016 CBR does not list any contact information for the lender who purchased the debt and is alleged in SOR ¶ 1.a. (GX 3 at 1.)

Applicant testified that he was unaware of the delinquent debts alleged in the SOR until a security investigator interviewed him in February and April 2016 and showed him his August 2015 CBR. (Tr. 40; GX 4 at 2.) He testified that, when he learned during these interviews that the delinquent second mortgage loan was charged off, he believed that the debt was cancelled and not required to be paid. (Tr. 44, 47.)

All the debts alleged in the SOR became delinquent after Applicant’s marital breakup. He erroneously believed that his ex-wife had paid the credit card bills alleged in SOR ¶¶ 1.band 1.c. He was unaware of the medical bills alleged in SOR ¶¶ 1.d-1.h, but he knew that his wife was covered by his medical insurance, and the bills were probably copayments for care she received. After the security investigator showed him the CBR reflecting the credit-card debts and medical bills, he still made no effort to pay or otherwise resolve them.

Applicant hired a bankruptcy attorney in November 2016, completed the financial counseling required by the bankruptcy court, and filed a bankruptcy petition on December 27, 2016. Applicant testified that all the debts alleged in the SOR are included in the bankruptcy. (Tr. 38.) The record does not include the list of creditors included in the bankruptcy, and there is no evidence in the record reflecting that the case has progressed beyond the initial filing. (AX A; AX T.)

Applicant has about $74,500 in his retirement account, but only about $20 in savings. (Tr. 46; AX C.) He recently began receiving copies of his credit reports regularly. He has no credit cards and no debts other than those listed in the SOR. (Tr. 47.) His November 2016 CBR reflects no new debts or adverse information. (AX D.) He has a clean driving record and no criminal record. (AX F; AX U.) He is current on his federal and state income taxes. (AX G-I.) His net monthly income is about $4,650, and his monthly expenses are about $3,447, leaving a net monthly remainder of about $1,202. (AX S.)

POLICIES

“[N]o one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to “control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicants eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865 § 2.

Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the AG. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, an administrative judge applies these guidelines in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available and reliable information about the person, past and present, favorable and unfavorable.

The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk that the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information.

Clearance decisions must be made “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” Exec. Or. 10865 § 7. Thus, a decision to deny a security clearance is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance.

Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability. See ISCR Case No. 92-1106 at 3, 1993 WL 545051 at *3 (App. Bd. Oct. 7, 1993). Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government. See ISCR Case No. 02- 31154 at 5 (App. Bd. Sep. 22, 2005).

An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b).

ANALYSIS

Guideline F, Financial Considerations

The concern under this guideline is set out in AG ¶ 18:

Failure or inability to live within one's means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual's reliability, trustworthiness and ability to protect classified information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds.

This concern is broader than the possibility that a person might knowingly compromise classified information to raise money. It encompasses concerns about a person’s self-control, judgment, and other qualities essential to protecting classified information. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012).

Applicant’s admissions, corroborated by his CBRs, establish two disqualifying conditions under this guideline: AG ¶ 19(a) (“inability or unwillingness to satisfy debts”) and AG ¶ 19(c) (“a history of not meeting financial obligations”). The following mitigating conditions under this guideline are potentially applicable:

AG ¶ 20(a): the behavior happened so long ago, was so infrequent, or occurred under such circumstances that it is unlikely to recur and does not cast doubt on the individual's current reliability, trustworthiness, or good judgment;

AG ¶ 20(b): the conditions that resulted in the financial problem were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation), and the individual acted responsibly under the circumstances; AG ¶ 20(c): the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control; and

AG ¶ 20(d): the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.

AG ¶ 20(a) is not established. Applicant’s delinquent debts are recent, numerous, and were not incurred under circumstances making them unlikely to recur.

AG ¶ 20(b) is not fully established. Applicant’s separation and divorce and the credit-card debts and medical bills incurred by his ex-wife after the separation were conditions largely beyond his control. There is no evidence in the record reflecting whether Applicant depended on his ex-wife’s income to cover the debts related to the marital home or their living expenses. However, he has not acted responsibly. He stopped paying the second mortgage loan in 2011. He testified that he was unable to contact the lender, but his testimony about his attempts to contact the lender was vague, unspecific, unsupported by documentary evidence, and unconvincing. He plausibly and credibly testified that he believed that a charged-off debt was cancelled. However, he has not credibly explained why he took no significant action to resolve the delinquent mortgage loan between 2011 and the security interviews in 2016, when he first learned that the debt was charged off. He also has not explained his failure to address the other debts alleged in the SOR after he learned about them during his interviews with the security investigator in February and April 2016. His eventual contact with a bankruptcy attorney did not occur until he received the SOR and his hearing was imminent.

AG ¶ 20(c) is not fully established. Applicant recently completed the counseling required by the bankruptcy court, but his recent bankruptcy petition falls short of “clear indications” that his financial problems are being resolved.

AG ¶ 20(d) is not established. This mitigating condition requires a showing of good faith. Good faith means acting in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation. ISCR Case No. 99-0201, 1999 WL 1442346 at *4 (App. Bd. Oct. 12, 1999). Evidence of past irresponsibility is not mitigated by payment of debts only under pressure of qualifying for a security clearance. Although Applicant was alerted in February 2016 that his delinquent debts raised security concerns, he took no significant action to resolve his delinquent debts until his hearing was imminent. While bankruptcy is a lawful and sometimes prudent course of action, it does not constitute a “good-faith” effort to resolve delinquent debts. See ISCR Case No. 03-20327 (App. Bd. Oct. 26, 2006). Furthermore, Applicant’s bankruptcy is in its infancy, and Applicant has not had sufficient time to establish a track record of compliance with a Chapter 13 payment plan.

WHOLE PERSON CONCEPT

Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility for a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. In applying the whole- person concept, an administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all relevant circumstances. An administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a):

(1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

I have incorporated my comments under Guideline F* in my whole-person analysis. Some of the factors in AG ¶ 2(a) were addressed under that guideline, but some warrant additional comment.

Applicant has held a security clearance for 22 years. He is highly skilled, respected, and has made significant contributions to national security. His acrimonious separation and divorce triggered his financial problems. However, he paid little attention to his financial situation after 2011 and did not exercise due diligence to resolve his financial problems until he realized that his security clearance was in jeopardy. While his recent bankruptcy filing offers him a route to financial stability, insufficient time has passed to determine whether he will be able to obtain a confirmed Chapter 13 payment plan and establish a track record of compliance with that plan.

After weighing the disqualifying and mitigating conditions under Guideline F, and evaluating all the evidence in the context of the whole person, I conclude Applicant has not mitigated the security concerns raised by his delinquent debts. Accordingly, I conclude he has not carried his burden of showing that it is clearly consistent with the national interest to continue his eligibility for access to classified information.

FORMAL FINDINGS

I make the following formal findings on the allegations in the SOR:

Paragraph 1, Guideline F (Financial Considerations): AGAINST APPLICANT

Subparagraphs 1.a-1.h: Against Applicant

CONCLUSION

I conclude that it is not clearly consistent with the national interest to continue Applicant’s eligibility for access to classified information. Clearance is denied.

LeRoy F. Foreman Administrative Judge

FOOTNOTES

1 Applicant’s personal information is extracted from his security clearance application (GX 1) unless otherwise indicated by a parenthetical citation to the record.