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ISCR 16-02025.h1: Guideline F security clearance hearing, granted (2017) · CASE

ISCR Case 16-02025.h1granted

Case headnote

ISCR Case No. 16-02025.h1

grantedAug 23, 2017· Hon. Edward W. Loughran· hearing

Summary

A 40-year-old defense contractor and veteran was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons cited five allegations of delinquent consumer debt, totaling $78,944, which raised disqualifying conditions F.19(a) and F.19(c).

However, the judge determined that the applicant had successfully mitigated these concerns. Key factors included the applicant's demonstration of sound current finances, with all other accounts being current. Crucially, the applicant had not accrued any new delinquent debt since May 2010.

Furthermore, the creditors involved had deemed the outstanding debts unenforceable and showed no interest in pursuing them. Based on these mitigating conditions, specifically F.20(a), F.20(b), and F.20(c), the judge concluded that the applicant's financial issues no longer posed a security risk, and her eligibility for a security clearance was granted.

Why the applicant prevailed

Applicant has not accrued any new delinquent debt since May 2010.
Applicant's current finances are sound, with all other accounts current.
Debts were deemed unenforceable by creditors, who showed no interest in pursuing them.

Conditions referenced

Disqualifying

F.19(a)raisedInability to Satisfy Debts
F.19(c)raisedHistory of Not Meeting Financial Obligations

Mitigating

F.20(a)appliedBehavior Happened Long Ago or Infrequently
F.20(b)appliedConditions Largely Beyond the Person's Control
F.20(c)appliedReceived Financial Counseling

Key rule quoted

“The protection of the national security is the paramount consideration.”

Procedural posture

SOR issuedSep 8, 2016
Answer filedOct 3, 2016
Hearing heldApr 6, 2017
Decision dateAug 23, 2017

Cite for

Mitigation of Financial Considerations Under Guideline F
Impact of Unenforceable Debts on Security Clearance Eligibility
Importance of Financial Counseling in Resolving Debts

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

From the decision

Facts this decision states, each with the exact sentence it comes from. Descriptive of the record, not an assessment.

Age at decision: 40: “Applicant is a 40-year-old employee of a defense contractor.”
Delinquent debt cited: $78,944 (on a payment plan): “The SOR alleges five delinquent consumer debts totaling $78,944.”

Standardized Decision Profile

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

Posture: Decision on RecordDecided: granted

The judge found that the applicant mitigated the financial considerations security concerns under Guideline F. All five subparagraphs related to delinquent debts were ruled in favor of the applicant, indicating that her financial issues were resolved or being resolved, and did not reflect questionable reliability or judgment.

The sub-allegation breakdown is part of the Professional plan. See what it includes.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation

Descriptive standardized rendering of a decided public case. 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. 16-02025 ) Applicant for Security Clearance )

For Government: Bryan J. Olmos, Esq., Department Counsel For Applicant: Pro se

08/23/2017 ______________

STATEMENT OF CASE

______________

LOUGHRAN, Edward W., Administrative Judge:

Applicant mitigated the financial considerations security concerns. Eligibility for access to classified information is granted.

Statement of the Case

On September 8, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, financial considerations. Applicant responded to the SOR on October 3, 2016, and requested a hearing before an administrative judge.

The case was assigned to me on January 18, 2017. After coordinating with the parties, the Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on February 28, 2017, scheduling the hearing for April 6, 2017. The hearing was convened as scheduled. Government Exhibits (GE) 1, 3, and 4 were admitted in evidence without objection. The objection to GE 2 was sustained. Applicant testified and called a witness, but she did not submit documentary evidence. The record was held open for Applicant to submit additional information. She submitted documents that I have marked Applicant’s Exhibits (AE) 1, 2, 3A through 3D, and 4, and admitted without objection. Department Counsel’s comments on the additional documents is marked Hearing Exhibit (HE) I. DOHA received the hearing transcript (Tr.) on April 21, 2017.

FINDINGS OF FACT

Applicant is a 40-year-old employee of a defense contractor. She served on active duty in the U.S. military from 1997 until she was honorably discharged in 2005. She has associate’s degrees, which were awarded in 2002 and 2012, and a bachelor’s degree, which was awarded in 2004. She has never married, and she has no children.1

Applicant was unemployed from about October 2005 through May 2006. She worked for a defense contractor from June 2006 through March 2007. In April 2007, she and a partner started two real estate businesses. The real estate market collapsed. Applicant used her personal credit in an unsuccessful attempt to keep the companies afloat. They closed the businesses in 2010. She was advised to file a bankruptcy case, but she did not have the money to pay an attorney, and she could not find a job.2

Applicant decided her best option was to attend culinary school with the assistance of the GI Bill. After graduating in 2012, she worked several jobs in various states with periods of unemployment. She realized the food services industry was not stable and did not pay that well, and she moved to another state to work in the defense industry in August 2015. She worked as an independent contractor for a subcontractor to her current employer before being hired by the parent company in January 2017 as a full-time employee.3

The SOR alleges five delinquent consumer debts totaling $78,944. Applicant admitted all of the allegations. The debts were listed by all three credit reporting agencies on the combined credit report from November 2015. All of the debts were accrued in the 2000s, and the date of last activity on all of the debts was May 2010 or earlier. Four of the debts were reported as charged off, and one was sold to a collection company. None of the debts were listed on the March 2017 Equifax credit report submitted by the Government or the June 2017 Equifax credit report submitted by Applicant.4

Applicant submitted a Questionnaire for National Security Positions (SF 86) in October 2015. She reported her delinquent accounts, which she estimated at $60,000.5 Applicant consulted with an attorney in 2016 about filing bankruptcy. They discussed Chapter 7 and Chapter 13 and decided, because of her income, a Chapter 13 was her only option. Applicant’s bankruptcy attorney testified that he recommended that Applicant delay filing the Chapter 13 case until at least July 2017 because of how her income would be computed by the bankruptcy court.6

With the exception of the debts alleged in the SOR, Applicant’s current finances are sound. She has not accrued any new delinquent debt since May 2010. She is current on four student loans totaling about $20,000, a car loan, and a credit card with a $273 balance. There are no other accounts with balances on her most recent credit report.7

Post-hearing, Applicant’s attorney contacted her creditors and learned the debts were unenforceable. All of the creditors indicated they had no intention of initiating legal action, and all but one stated that they had no interest in Applicant’s debts. The attorney realized that there was no reason for Applicant to file bankruptcy. Applicant followed her attorney’s advice and did not file a bankruptcy case. She has received financial counseling.8

Applicant is no longer represented by the attorney. She decided to take it upon herself to attempt to resolve any of the debts that the creditors would discuss with her. She was only successful in contacting one creditor, who asked for payments of $1,000 per month. She cannot afford that amount. She agreed to make $50 monthly payments, or “donations” as the creditor called it, until she can pay the remainder in full. She will continue her efforts to make arrangements with the other creditors.9

POLICIES

This case is adjudicated under Executive Order (EO) 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), which became effective on June 8, 2017.

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be used in evaluating an applicant’s eligibility for access to classified information. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, administrative judges apply the guidelines in conjunction with the factors listed in the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), the entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision.

The protection of the national security is the paramount consideration. AG ¶ 2(b) requires that “[a]ny doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.”

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel.” The applicant has the ultimate burden of persuasion to obtain a favorable security decision.

A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence. This relationship transcends normal duty hours and endures throughout off-duty hours. The Government reposes a high degree of trust and confidence in individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information.

Section 7 of EO 10865 provides that adverse decisions shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information).

ANALYSIS

Guideline F, Financial Considerations

The security concern for financial considerations is set out in AG ¶ 18:

Failure 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 or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds.

The guideline notes several conditions that could raise security concerns under AG ¶ 19. The following are potentially applicable in this case:

(a) inability to satisfy debts; and

Applicant had financial problems and delinquent debts. The evidence is sufficient to raise the above disqualifying conditions.

Conditions that could mitigate the financial considerations security concerns are provided under AG ¶ 20. The following are potentially applicable:

(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;

(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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; and

(c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control.

Applicant opened real estate businesses shortly before the real estate market collapsed. She used her personal credit in an unsuccessful attempt to keep the businesses afloat. The five debts in the SOR were all accrued during this period. She was advised after her businesses failed that she should file bankruptcy, but she could not afford an attorney. To her credit, despite attending school, moving several times, and suffering through periods of unemployment and underemployment, she was able to keep all her other accounts current. She has accrued no new delinquent debts since 2010.

Applicant worked with a bankruptcy attorney since 2016 to figure the best resolution of her financial problems. The original plan was to file a Chapter 13 bankruptcy case. Her attorney contacted her creditors and learned the debts were unenforceable. The creditors indicated they had no intention of initiating legal action. All but one stated that they had no interest in Applicant’s debts. The attorney realized that there was no reason for Applicant to file bankruptcy. A Chapter 13 bankruptcy case would likely accomplish little but to take the court’s time. Creditors do not get paid unless they file a claim with the court,10 and the creditors do not appear to be inclined to press their cases. Applicant has received financial counseling, and her finances are otherwise sound.

No longer represented and with bankruptcy not a practical option, Applicant took it upon herself to attempt to resolve any of the debts that the creditors would discuss with her. She was only successful in contacting one creditor, who asked for payments of $1,000 per month. She cannot afford that amount. She agreed to make $50 monthly “donations” until she can pay the remainder in full. She will continue her efforts to make arrangements with the other creditors.

Applicant does not present a perfect case in mitigation. Delinquent debts are a continuing concern until they are resolved. However, at some point, debts become old, unenforceable, charged off, fall off credit reports, and no longer of interest even to the creditors. Despite all those factors, Applicant still wants to resolve her debts and is willing to resort to “donations” instead of payments. Her financial decisions no longer reflect questionable reliability, trustworthiness, and judgment. Her financial problems are resolved or being resolved. AG ¶¶ 20(a) and 20(c) are applicable. AG ¶ 20(b) is partially applicable.

WHOLE PERSON CONCEPT

Under the whole-person concept, the 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. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(d):

(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.

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.

I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. I also considered Applicant’s honorable military service.

Overall, the record evidence leaves me without questions or doubts about Applicant’s eligibility and suitability for a security clearance. I conclude Applicant mitigated the financial considerations security concerns.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: For Applicant

Subparagraphs 1.a-1.e: For Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted.

________________________ Edward W. Loughran Administrative Judge

FOOTNOTES

1 Tr. at 15, 37; GE 1. 2 Tr. at 15-19, 25-27; Applicant’s response to SOR; GE 1. 3 Tr. at 19-22, 27, 40-41, 53-54; Applicant’s response to SOR; GE 1. 4 Applicant’s response to SOR; GE 3, 4; AE 3A.2. 5 GE 1. 6 Tr. at 22-25, 29-31, 46-59; AE 2. 7 Tr. at 31-37; GE 4; AE 3A.1, 3A.2. 8 Tr. at 24; AE 2, 3A.1, 3A.2, 3.A.3, 3B, 3B.1, 3C, 3D. 9 AE 4. 10 http://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-13-bankruptcy-basics.