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ISCR Case 16-02724.h1 — CASE

ISCR Case 16-02724.h1denied

Case Headnote

ISCR Case No. 16-02724.h1

deniedJun 7, 2017· Hon. Erin C. Hogan· hearing

Summary

A Department of Defense contractor's security clearance was denied under Guideline F (Financial Considerations) due to significant and unresolved financial issues. The Statement of Reasons detailed 15 delinquent accounts, including a $50,542 charged-off home equity loan, a $6,561 charged-off account, and a $2,972 charged-off account. Other debts included collection accounts for cell phone services, medical bills, and apartment rent, along with two judgments and two $100 debts owed to local governments. The total amount of these alleged delinquencies was approximately $76,412.

Disqualifying conditions under Guideline F were raised, specifically concerning a history of not meeting financial obligations and an inability or unwillingness to satisfy debts. While mitigating conditions were considered, the applicant admitted to the multiple delinquent debts but failed to provide sufficient evidence of a good-faith effort to resolve them.

Ultimately, the applicant's financial problems were deemed ongoing and not adequately mitigated by his actions, despite some efforts to dispute certain debts through a credit repair firm. Consequently, the security clearance was denied.

Why the Applicant Was Denied

The applicant admitted to multiple delinquent debts totaling over $76,000.
The applicant failed to provide evidence of a good-faith effort to resolve his debts.
The applicant's financial problems were ongoing and not sufficiently mitigated by his actions.

Conditions Referenced

Disqualifying

AG ¶ 19(a)appliedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)appliedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond the Person's ControlThe applicant's financial problems were partially caused by his divorce.
AG ¶ 20(e)appliedReasonable Basis to Dispute Legitimacy of DebtThe applicant successfully disputed some debts with a credit repair firm.

Key Rule Quoted

“An applicant is not required to be debt free, but is required to manage his finances in such a way as to meet his financial obligations.”

Procedural Posture

SOR issuedOct 24, 2016
Answer filedNov 29, 2016
Hearing heldJun 7, 2017
Decision dateJul 6, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Obligations
Impact of Ongoing Financial Issues on Security Clearance Eligibility
Importance of Providing Evidence of Debt Resolution Efforts in Financial Cases

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 multiple financial concerns under Guideline F, including a charged-off home equity loan and various other delinquent accounts totaling approximately $76,412. The judge ruled against the applicant on most allegations, citing insufficient evidence of financial responsibility and failure to resolve debts, while finding two specific debts mitigated due to successful disputes.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	$50,542 charged-off home equity loan $50,542	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	$2,751 cell phone account placed for collection $2,751	For Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(e) reasonable, documented basis to dispute the debt	Documented Debt Disputed with Creditor
1.b	$6,561 charged-off account $6,561	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	$2,972 charged-off account $2,972	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	$850 medical collection account $850	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	$699 collection account $699	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	$501 collection account owed to an apartment $501	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	$492 medical collection account $492	Against Applicant	Medical Debt	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i	$292 cell phone collection account $292	For Applicant	Utility or Phone Debt	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(e) reasonable, documented basis to dispute the debt	Documented Debt Disputed with Creditor
1.j	$599 medical judgment $599	Against Applicant	Judgment Against Applicant	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.k	$3,208 judgment $3,208	Against Applicant	Judgment Against Applicant	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.l	$3,432 collection account $3,432	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.m	$3,313 credit card collection account $3,313	Against Applicant	Credit Card Debt	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.n	$100 debt owed to a local government $100	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.o	$100 debt owed to a local government $100	Against Applicant	Unspecified Financial	Unknown	(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: ) ) [Name Redacted] ) ISCR Case No. 16-02724 ) ) Applicant for Security Clearance )

For Government: Philip J. Katauskas, Esquire, Department Counsel For Applicant: Pro se

06/07/2017 ______________

STATEMENT OF CASE

______________

HOGAN, Erin C., Administrative Judge:

On October 24, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, Financial Considerations. The action was taken under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the Department of Defense after September 1, 2006.

On November 29, 2016, Applicant answered the SOR and requested a decision on the record. Department Counsel issued a File of Relevant Material (FORM) on January 13, 2017. On April 4, 2017, Applicant responded to the FORM and provided additional documents. His response to the FORM and attached documents are admitted as Item 9. Department Counsel indicated no objection to Applicant’s Response to FORM on April 20, 2017. (Item 10) On April 20, 2017, the FORM was forwarded to the Hearing Office and assigned to me on June 2, 2017. Based upon a review of the pleadings, exhibits, and testimony, eligibility for access to classified information is denied.

FINDINGS OF FACT

In his response to the SOR, Applicant denies the allegations in SOR ¶¶ 1.f, 1.g, 1.i, 1.n, and 1.o. He is researching the debts alleged in SOR ¶¶ 1.c, 1,h, 1.jand 1.l. He admits the debts alleged in SOR ¶¶ 1.a, 1.b, 1.d, 1.e, 1.k, and 1.m. (Item 4)

Applicant is an employee of a DOD contractor seeking to maintain his security clearance. He has worked for his current employer since April 2010. He is a high school graduate and has some college credit. He is divorced and has three children, ages 18, 14 and 9. (Item 5)

On July 2, 2015, Applicant submitted an Electronic Questionnaire for Investigation Processing (e-QIP). In response to Section 26 – Delinquency Involving Routine Accounts, Applicant did not indicate that he had any delinquent accounts. (Item 5 section 26) A subsequent background investigation revealed that Applicant had 15 delinquent accounts, an approximate total of $76,412. The accounts include a $50,542 home equity loan that was charged off in January 2011 (SOR ¶ 1.a: Item 7 at 4; Item 8 at 1); a $6,561 account that was charged off in May 2015 (SOR ¶ 1.b: Item 7 at 4; Item 8 at 2); a $2,972 account that was charged off in May 2016 (SOR ¶ 1.c: Item 8 at 2): a $2,751 cell phone account placed for collection in September 2015 (SOR ¶ 1.d: Item 8 at 2); an $850 medical account placed for collection in May 2015 (SOR ¶ 1.e: Item 8 at 2); and a $699 account placed for collection in April 2015. (SOR ¶ 1.f: Item 8 at 2).

Additional delinquent accounts include: a $501 debt owed to an apartment complex placed for collection in May 2015 (SOR ¶ 1.g: Item 8 at 2); a $492 medical account placed for collection in September 2015 (SOR ¶ 1.h: Item 8 at 2); a $292 cell phone account placed for collection in December 2014 (SOR ¶ 1.i: Item 8 at 2): a $599 medical judgment entered against Applicant in May 2014 (SOR ¶ 1.j: Item 7 at 4); a $3,208 judgment entered against Applicant in August 2012 (SOR ¶ 1.k: Item 7 at 4); a $3,432 account placed for collection in May 2015 (SOR ¶ 1.l: Item 7 at 10); a $3,313 credit card account placed for collection in May 2015 (SOR ¶ 1.m: Item 7 at 10); a $100 debt owed to a local government placed for collection in March 2011 (SOR ¶ 1.n: Item 7 at 10): and a $100 debt owed to a local government placed for collection in March 2011 (SOR ¶ 1.o: Item 7 at 10).

The current status of the delinquent debts are:

SOR ¶ 1.a: $50,542 charged-off home equity loan: Applicant indicates this debt was a home equity loan taken out by his ex-wife for a business that failed. He indicates the loan was charged off. Applicant has not taken additional action to resolve this account. (Item 4)

SOR ¶ 1.b: $6,561 charged-off account: Applicant states this was a debt consolidation loan. He stopped making payments on the account when he encountered financial difficulties. As of his answer to the SOR, he intended to pay this debt off within 90 days. At the close of the record, he provided no receipts verifying that he paid or was paying this debt. (Item 4; Item 9)

SOR ¶ 1.c: $2,972 charged-off account: Applicant was not aware of this debt. He believes the debt belonged to his ex-wife. He was researching the debt when he responded to the SOR. He provided no updates in his response to the FORM. (Item 4; Item 9)

SOR ¶ 1.d: $2,751 cell phone account placed for collection: Applicant claimed his 14-year-old son went beyond the plan’s data limits. In his answer to the SOR, Applicant claimed he was working on a settlement and the matter will be closed in 90 days. In response to the FORM, Applicant provided proof that an account owed to Verizon was successfully disputed with the credit reporting agencies. (Item 4; Item 9)

SOR ¶ 1.e: $850 medical collection account: Applicant said this debt was created after he spent a couple days in the hospital. He said he contacted the hospital and the debt will be resolved in 90 days. In his response to the FORM, he provided no documentation on the progress towards resolving this debt. (Item 4; Item 9)

SOR ¶ 1.f: $699 collection account: Applicant did not recognize this debt. He was attempting to determine what the debt was at the time he answered to SOR. He did not provide an update on the status of the debt in his response to the FORM. (Item 4; Item 9)

SOR ¶ 1.g: $501 collection account owed to an apartment: Applicant disputes this debt. He states he paid his rent in full and the apartment kept his security deposit because of a stain on the carpet. He expected a court disposition in the matter, which he intended to provide. In his response to the FORM, Applicant did not provide any information on the status of this debt. (Item 4; Item 9)

SOR ¶ 1.h: $492 medical collection account: Applicant was attempting to identify this account. Once identified, he intends to resolve the matter within 60 days. He did not provide an update on the status of this account in his response to the FORM. (Item 4; Item 9

SOR ¶ 1.i: $292 cell phone collection account: Applicant claimed the debt has been cleared and the bill is current. In his response to the FORM, Applicant provided proof that this account was successfully disputed. (Item 4; Item 9)

SOR ¶ 1.j: $599 medical judgment: In his answer to the SOR, Applicant stated he is researching this account. If he is liable for the bill, he will pay it in a timely manner. Applicant did not provide an update of the account in his response to the FORM. (Item 4; Item 9)

SOR ¶ 1.k: $3,208 judgment: Applicant claimed that this debt was incurred by his ex-wife. He stated in his answer to the SOR that he was negotiating a settlement with the creditor. He did not provide an update on the status of the debt in his response to the FORM. (Item 4; Item 9)

SOR ¶ 1.l: $3,432 collection account: Applicant mentioned he was still investigating this debt in his answer to the SOR. He did not provide an update on the status of the debt in his response to the FORM. (Item 4; Item 9)

SOR ¶ 1.m: $3,313 credit card collection account: In his answer to the SOR, Applicant mentioned that he was negotiating a settlement on this account. He did not provide an update on the status of the debt in his response to the FORM. (Item 4; Item 9)

SOR ¶¶ 1.nand 1.o: two $100 debts owed to a local government placed for collection: Applicant claimed that these two debts were settled in full. He indicated a receipt would be provided. He did not provide a receipt in his response to the FORM. (Item 4; Item 9)

In his response to the FORM, Applicant mentions that he hired a credit repair law firm. He provided a weekly report from the firm indicating the number of accounts that were removed from Applicant’s credit report, apparently as a result of a formal dispute. The report indicates six accounts were removed from his credit reports. Only one debt can be identified as a creditor in his SOR – the cell phone account alleged at SOR ¶¶ 1.dand 1.i. The other five accounts may be related to debts alleged in the SOR that were purchased by another collection agency. Applicant did not provide sufficient information to connect the debts removed from his credit report to any of the debts alleged in the SOR. No account numbers, debt balances, or the original creditor’s name were listed in the weekly report. (Item 9)

Applicant hopes that the efforts he took to hire the credit repair law firm is sufficient to give him a security clearance. He hopes to be able to continue in his job and to serve with loyalty and professionalism. (Item 9)

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which must be considered when determining an applicant’s eligibility for access to classified information.

These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied 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 access to classified information will be resolved in favor of national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record.

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 applicant or proven by Department Counsel. . . .” The applicant has the ultimate burden of persuasion as to obtaining 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 protect or safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information.

Section 7 of Executive Order 10865 provides that 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 relating to the guideline for Financial Considerations 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. The guideline notes several disqualifying conditions that could raise security concerns. I find AG ¶19(a) (an inability or unwillingness to satisfy debts) and AG ¶19(c) (a history of not meeting financial obligations) apply to Applicant’s case. Applicant encountered financial problems for several years now. The SOR alleges a $50,542 charged-off home equity loan and approximately $25,870 in delinquent medical and consumer debts. The total amount of the debt is $76,412. Many of these debts became delinquent several years ago and remain unresolved. Both AG ¶19(a) and AG ¶19(c) apply.

An individual who is financially irresponsible may also be irresponsible, unconcerned, or careless in their obligations to protect classified information. Behaving irresponsibly in one aspect of life provides an indication of how a person may behave in other aspects of life. A person’s relationship with her creditors is a private matter until evidence is uncovered demonstrating an inability or unwillingness to pay debts under agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an applicant with a history of serious or recurring financial difficulties is in a situation of risk inconsistent with the holding of a security clearance. An applicant is not required to be debt free, but is required to manage his finances in such a way as to meet his financial obligations.

The Government’s substantial evidence and Applicant’s admissions raise security concerns under Guideline F. The burden shifted to Applicant to produce evidence to rebut, explain, extenuate, or mitigate the security concerns. (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. Sept. 22, 2005))

The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions potentially apply:

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

AG ¶ 20(e) (the individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue).

AG ¶ 20(a) does not apply. Applicant’s financial problems are ongoing. He has encountered financial problems over the past five years. Applicant recently hired a credit repair law firm to dispute the debts alleged on his credit report. He provided no information on the steps he has taken to resolve the debts that he owes. There is insufficient information to conclude Applicant is resolving his debts.

AG ¶ 20(b) partially applies in that Applicant’s financial problems were caused, in part, by his separation and divorce from his wife. This is a condition that was beyond his control. However, I cannot conclude that he acted responsibly towards his debts. Applicant indicated that he intended to resolve his accounts. He recently hired a credit repair law firm to resolve his delinquent accounts. However, he did not provide proof of any steps that he was taking towards resolving his delinquent accounts.

AG ¶ 20(c) does not apply. Applicant provide no proof of financial counseling. It is too soon to conclude that his financial situation is under control.

AG ¶ 20(d) does not apply. Applicant provided no proof that he entered into repayment agreements with any of the creditors whose debts he admits are valid. He has not made a good-faith effort to resolve his delinquent accounts.

AG ¶ 20(e) applies with respect to the debts alleged in SOR ¶¶ 1.dand 1.i. His credit repair law firm successfully disputed the debt with this creditor. He did not provide sufficient evidence to conclude other debts that he denied were successfully disputed.

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 the circumstances. The 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.

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 requesting an administrative determination, Applicant chose to rely on the written record. However, he failed to submit sufficient information or evidence to supplement the record with relevant and material facts regarding his circumstances and facts that would mitigate financial considerations security concerns. While Applicant provided evidence that he hired a credit repair law firm, most of his delinquent debts remain unresolved. Applicant did not mitigate the concerns arising from financial considerations.

The determination of an individual’s eligibility for a security clearance is not a once in a lifetime occurrence, but is based on applying the factors, both disqualifying and mitigating to the evidence presented. Under Applicant’s current circumstances, the granting of a security clearance is not warranted. In the future, if Applicant establishes a a track record of resolving his delinquent debts and financial responsibility, he may demonstrate persuasive evidence of his security worthiness.

I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I considered Applicant’s employment record. I considered his divorce. I considered that he recently retained a credit repair law firm. It is too soon to conclude that he will successfully resolve all of his delinquent accounts and maintain financial responsibility. In the future, he may be able to demonstrate a track record of resolving his financial obligations. It is too soon to make this conclusion at this point. The security concerns raised under financial considerations are not mitigated.

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: AGAINST APPLICANT

Subparagraphs 1.a – 1.c, 1.e -1.h, 1j.-1.o: Against Applicant

Subparagraphs 1.dand 1.i: For Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied.

_________________ ERIN C. HOGAN Administrative Judge