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ISCR Case 16-02224.h1 — CASE

ISCR Case 16-02224.h1granted

Case Headnote

ISCR Case No. 16-02224.h1

grantedAug 29, 2017· Hon. LeRoy F. Foreman· hearing

Summary

This case concerns a 30-year-old software support manager, holding a security clearance since 2010, whose eligibility was reviewed under Guideline F (Financial Considerations). The Statement of Reasons alleged that the applicant had incurred three delinquent student loans totaling approximately $61,948, along with an unpaid medical bill of $184. These allegations raised disqualifying conditions under Adjudicative Guidelines ¶ 19(a), ¶ 19(b), and ¶ 19(c).

However, the judge applied mitigating conditions under Adjudicative Guidelines ¶ 20(a), ¶ 20(b), ¶ 20(c), and ¶ 20(d). It was determined that the applicant was a victim of predatory lending practices concerning his student loans. Furthermore, he demonstrated responsible efforts to address his financial obligations by obtaining deferments and seeking professional assistance for his debts.

The applicant also paid the $184 medical debt in full, which was viewed as a good-faith effort to resolve his financial issues. Based on these mitigating factors, the judge concluded that the security clearance should be GRANTED.

Why the Applicant Prevailed

The applicant was a victim of predatory lending practices related to his student loans.
He acted responsibly by obtaining deferments and seeking professional assistance for his debts.
The medical debt was paid in full, demonstrating a good-faith effort to resolve financial obligations.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(b)raisedUnwillingness to Satisfy Debts Regardless of the Ability to Do So
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(a)rejectedBehavior Happened so Long Ago, Was so Infrequent, or Occurred Under Such Circumstances That It Is Unlikely to Recur
AG ¶ 20(b)appliedConditions That Resulted in the Financial Problem Were Largely Beyond the Person's Control
AG ¶ 20(c)rejectedReceived or Is Receiving Financial Counseling From a Legitimate Source
AG ¶ 20(d)appliedInitiated and Is Adhering to a Good-faith Effort to Repay Overdue Creditors

Key Rule Quoted

“Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines.”

Procedural Posture

SOR issuedOct 13, 2016
Answer filedNov 18, 2016
Hearing heldJun 6, 2017
Decision dateAug 29, 2017

Cite For

Mitigating Conditions Under Guideline F Due to Predatory Lending
Good-faith Efforts to Resolve Financial Obligations
Whole-person Analysis in Security Clearance Determinations

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 student loans and an unpaid medical bill, which raised security concerns under Guideline F. However, the applicant successfully mitigated these concerns by demonstrating that the student loans were the result of predatory lending practices and that he had paid the medical bill in full, leading to a decision to grant his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant incurred three delinquent student loans totaling about $61,948. $61,948	For Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Claimed Other
1.b	Applicant incurred three delinquent student loans totaling about $61,948. $61,948	For Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Claimed Other
1.c	Applicant incurred three delinquent student loans totaling about $61,948. $61,948	For Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Claimed Other
1.d	Applicant incurred an unpaid medical bill of $184. $184	For Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	(d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full

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. 16-02224 ) Applicant for Security Clearance )

For Government: Robert B. Blazewick, Esq., Department Counsel For Applicant: Pro se

08/29/2017 ______________

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 granted.

Statement of the Case

Applicant submitted a security clearance application on December 17, 2014. On October 13, 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, 2006.1 Applicant answered the SOR on November 18, 2016, and requested a hearing before an administrative judge. Department Counsel was ready to proceed on March 23, 2017, and the case was assigned to an administrative judge on May 12, 2017. It was reassigned to me on May 24, 2017, to consolidate the docket. On May 25, 2017, the Defense Office of Hearings and Appeals (DOHA) notified Applicant that the hearing was scheduled for June 6, 2017. I convened the hearing as scheduled. Government Exhibits (GX) 1 through 3 were admitted in evidence without objection. Applicant testified, presented the testimony of two witnesses, and submitted Applicant’s Exhibits (AX) A and B, which were admitted without objection. I kept the record open until July 10, 2017, to enable both parties to submit additional documentary evidence on an issue of predatory lending. Department Counsel submitted GX 4 and Applicant submitted AX C through H. All post-hearing exhibits were timely submitted and admitted without objection. DOHA received the transcript (Tr.) on June 15, 2017.

Findings of Fact2

In his answer to the SOR, Applicant admitted that he incurred the four debts alleged, but he stated that he disputed them. His admissions in his answer and at the hearing are incorporated in my findings of fact.

Applicant is a 30-year-old software support manager employed by a defense contractor since June 2010. He has held a security clearance since January 2010.

Applicant has never married, but he lives with his fiancée, and they have an eight-year-old daughter and a six-year-old daughter. His fiancée also has a 13-year-old daughter from a previous relationship. (Tr. 56.)

Applicant attended a university from August 2005 to April 2006 and a technical for-profit institute from September 2006 to September 2010, and he earned a bachelor’s degree. His attendance at the institute resulted in the delinquent student loans alleged in SOR ¶¶ 1.a-1.c, totaling about $61,948. The student loans are reflected in credit reports from September 2015 and August 2016. (GX 2; GX 3.)

The credit reports also reflect the $184 medical bill alleged in SOR 1.d. In Applicant’s answer to the SOR and at the hearing, he contended that the medical bill was for an x-ray that was unnecessary and unauthorized. He later decided that the amount involved did not justify pursuing the dispute, and he paid the bill. (AX H.)

In Applicant’s answer to the SOR and at the hearing, he contended that the student loans were the product of predatory lending. He testified that he was 19 years old when he began attending the technical institute. He and his classmates found that they were pulled out of class, presented with a stack of papers, and told that they would be expelled from school if they did not sign them. This process was repeated several times. When Applicant completed all the requirements for graduation, he was told that he would not receive his degree if he did not apply for another $3,000 loan. (Tr. 43-44.)

When the student loan payments became due six months after his graduation, he realized for the first time how much he had borrowed. His private loans totaled about $65,000 and his Department of Education loans totaled about $50,000. The interest rate on the private loans were more than ten percent. He talked to former classmates, who also were surprised at the amount of their indebtedness. He was able to have payments on the loans deferred for a year. In 2013, he began hearing news about a governmental study of predatory lending tactics directed at student loans, and he started looking for professional assistance in resolving his student loans. (AX F; Tr. 44-47.)

In November 2015, Applicant signed a contract with a “risk management” company, assigning his debts to the company. (AX G.) The company advised Applicant to not make any payments on the student loan debts. (Tr. 48.) Applicant’s answer to the SOR includes a letter from the company, stating that they are negotiating a resolution of the disputed debts.

Applicant’s contract with the company specifically states that the company is not a law firm and does not provide legal representation. It also expressly states that it is not a credit counseling service. The contract states, “Company is in the business of risk management. Client assigns its rights arising out of alleged debts to Company and Company assumes all or a portion of Client’s liabilities as to the valid debts in exchange for a payment from Client.” The first page of the contract states, in bold print, “Company is not an attorney-at-law and does not give legal advice to Clients.” (AX G at 1, 25.) In the event that litigation is necessary, Applicant will be referred to a network of participating attorneys, from which he may select an attorney to represent him. The contract required Applicant to become a member of the company’s “legal club” or another organization that provides substantially similar services and pricing. (AX G at 3, 6.) The “legal club” provides for a flat fee of $300 if the services of an attorney are required. (AX G, Legal Club Member Agreement.)

Applicant submitted a copy of his contract after the hearing, precluding any questions about his understanding of it. It is unclear whether he believes that the company is a law firm or whether he has hired an attorney from the company’s network of participating attorneys. It is likely that he believes that the company is acting as his lawyer. In Applicant’s testimony at the hearing, he referred to “my lawyer’s retainer fees” and “my attorney’s office.” His list of monthly expenses submitted at the hearing includes monthly payments of $244 for “lawyer fees.” (AX B.) This amount corresponds to paragraph 5(f) of his contract with the company, which provides for a fee totaling $16,560, payable at $240 per month. (AX G at 5.)

In February 2014, the Consumer Finance Protection Bureau filed suit against the institute, alleging that it used high-pressure tactics to coerce students into high-interest private loans that were likely to end in default. (GX 4 at 2; AX D.) In August 2016, the U.S. Department of Education banned the institute from enrolling students who receive federal aid, and it doubled the surety funds the institute was required to have. In September 2016, the institute ceased operations and closed all its locations, attributing its closing to the Department of Education’s actions. (GX 4 at 3; AX C.)

In 2016, Applicant’s gross income was about $111,511. His after-tax income was about $85,876, or about $7,156. (AX A.) His monthly expenses, including payment on a Department of Education student loan and a monthly payment of $244 for “lawyer fees,” total about $4,123, leaving him a net monthly remainder of about $3,303. (AX B.)

At the hearing, Applicant’s brother-in-law (the husband of Applicant’s sister) testified that he served for more than nine years in the Navy, working as an intelligence analyst and in counterintelligence, and he has known Applicant for about seven years. He regards Applicant as a person of “stand up” character who is dedicated to his job and a “one hundred percent reliable candidate to hold a security clearance.” (Tr. 25-26.) Applicant’s supervisor since 2010 testified that he regards him as a “powerhouse for his unique skills” and a “very upstanding solid person.” (Tr. 30-33.)

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 adjudicative guidelines. 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.

ANALYSIS

Guideline F, Financial Considerations

The security concern under this guideline 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. . . .

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 and the credit reports submitted at the hearing establish the three delinquent student loans and one unpaid medical bill alleged in the SOR, and they are sufficient to establish the following disqualifying conditions under this guideline: AG ¶ 19(a) (“inability to satisfy debts”); AG ¶ 19(b) (“unwillingness to satisfy debts regardless of the ability to do so”); and AG ¶ 19(c) (“a history of not meeting financial obligations”).

The following mitigating conditions are potentially relevant:

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

AG ¶ 20(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; and

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

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

AG ¶ 20(b) is established for the three student loans. The evidence establishes that Applicant was the victim of predatory lending practices. He acted responsibly by obtaining deferments on the loan payments and then seeking professional assistance when he learned about the institute’s predatory loan practices.

AG ¶ 20(c) is not established. Applicant’s contract with the company expressly states that it is not a credit counseling service.

AG ¶ 20(d) is established for the medical debt. Although Applicant initially disputed the debt, it has been paid in full.

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 and applying the adjudicative factors in AG ¶ 2(d).3

I have incorporated my comments under Guideline F in my whole-person analysis and applied the adjudicative factors in AG ¶ 2(d). Applicant was candid, sincere, and credible at the hearing. He has a reputation for technical proficiency and personal reliability. While I am not convinced that he understands all the implications of his contract with the “risk management” company, he is determined to resolve the delinquent student loans and he has taken significant steps toward a solution. 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 mitigated the security concerns raised by his delinquent debts.

FORMAL FINDINGS

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

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

Subparagraphs 1.a-1.d: For Applicant

CONCLUSION

I conclude that it is clearly consistent with the national security interests of the United States to grant Applicant eligibility for access to classified information. Clearance is granted.

LeRoy F. Foreman Administrative Judge

FOOTNOTES

1 Security Executive Agent Directive 4 (SEAD 4), was issued on December 10, 2016, revising the 2006 adjudicative guidelines. The SEAD 4 guidelines apply to all adjudicative decisions issued on or after June 8, 2017. My decision is based on the guidelines in SEAD 4, referred to in this decision as “AG.” The changes resulting from issuance of SEAD 4 did not affect my decision in this case. 2 Applicant’s personal information is extracted from his security clearance application (GX 1) unless otherwise indicated by a parenthetical citation to the record. 3 The factors are: (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.