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ISCR Case 16-02832.h1 — CASE

ISCR Case 16-02832.h1denied

Case Headnote

ISCR Case No. 16-02832.h1

deniedOct 18, 2017· Hon. Michael H. Leonard· hearing

Summary

A 44-year-old senior quality-assurance engineer was denied a security clearance under Guideline F, Financial Considerations, due to significant financial issues. The Statement of Reasons specifically cited a charged-off automobile loan with a balance of nearly $11,000, for which the applicant was a cosigner. This raised disqualifying conditions related to financial irresponsibility and an unwillingness to meet financial obligations.

While mitigating condition AG ¶ 20(b) was considered, the judge ultimately found it insufficient. The applicant failed to provide adequate evidence to mitigate the security concern, particularly regarding the charged-off loan. A key factor in the denial was the applicant's refusal to acknowledge responsibility for the debt, which was interpreted as a lack of judgment and reliability.

Consequently, the applicant did not meet the burden of persuasion required for a favorable clearance decision. The security clearance was denied.

Why the Applicant Was Denied

The applicant did not provide sufficient evidence to mitigate the security concern stemming from a charged-off automobile loan.
The applicant's refusal to acknowledge responsibility for the debt indicated a lack of judgment and reliability.

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(b)rejectedConditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlThe applicant did not demonstrate that the financial issues were beyond his control.

Key Rule Quoted

“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 or sensitive information.”

Procedural Posture

SOR issuedOct 31, 2016
Answer filedDec 6, 2016Applicant requested a decision based on the written record.
Hearing held—No in-person hearing requested.
Decision dateOct 18, 2017

Cite For

Financial Irresponsibility Under Guideline F
Burden of Persuasion in Security Clearance Cases
Impact of Cosigning on Financial Responsibility

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 a problematic financial history, particularly due to a charged-off automobile loan for which he cosigned, resulting in a balance of nearly $11,000. While some medical debts were considered mitigated, the applicant's unwillingness to address the charged-off account led to a decision against him under Guideline F.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a–1.f	6 sub-charges — specific text not stated in this decision (for the applicant).	For Applicant			—	—	—
1.g	charged-off account balance of nearly $11,000 $10,980	Against Applicant	Auto Loan Debt	Denied	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.h–1.j	3 sub-charges — specific text not stated in this decision (for the applicant).	For Applicant			—	—	—

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

Full decision

The complete, official text — footnotes and signatures included — is in the original PDF.

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ----------------------------------------- ) ISCR Case No. 16-02832 ) ) Applicant for Security Clearance

For Government: Robert J. Kilmartin, Esq., Department Counsel For Applicant: Pro se

10/18/2017 ______________

STATEMENT OF CASE

______________

LEONARD, Michael H., Administrative Judge:

Applicant contests the Defense Department’s intent to deny or revoke his eligibility for access to classified information. He did not present sufficient evidence to explain, extenuate, or mitigate the security concern stemming from an automobile loan, for which he cosigned, that ended with a repossession of the vehicle and a charged-off account balance of nearly $11,000. Accordingly, this case is decided against Applicant.

Statement of the Case

Applicant completed and submitted a Questionnaire for National Security Positions (SF 86 format) on September 28, 2015.1 This document is commonly known as a security clearance application. Thereafter, on October 31, 2016, after reviewing the application and the information gathered during a background investigation, the Department of Defense Consolidated Adjudications Facility, Fort Meade, Maryland, sent Applicant a statement of reasons (SOR), explaining it was unable to find that it was clearly consistent with the national interest to grant him eligibility for access to classified information. The SOR is similar to a complaint. It detailed the factual reasons for the action under the security guideline known as Guideline F for financial considerations.

Applicant answered the SOR on December 6, 2016. He requested a decision based on the written record in lieu of a hearing. His response consisted of a two-page memorandum without enclosures or attachments.

On December 29, 2016, Department Counsel submitted all relevant and material information that could be adduced at a hearing. The file of relevant material (FORM) consists of Department Counsel’s written brief and supporting documentation. The FORM was mailed to Applicant, who received it February 7, 2017. He replied to the FORM with a four-page memorandum with three enclosures, which are made part of the record as Exhibit A. The case was assigned to me October 1, 2017.

PROCEDURAL MATTERS

Upon review of Applicant’s answer to the SOR, I was concerned that he may in fact want an in-person hearing to present his case, to include witnesses. Given that concern, on October 10, 2017, I contacted Applicant via his work e-mail address and gave him an opportunity to change his mind and request a hearing.2 He replied on October 16, 2017;3 he did not request an in-person hearing; and he submitted additional written matters, including a character reference from a co-worker and a character reference from an officer in a state veterans’ organization, which are made part of the record, collectively, as Exhibit B.

Department Counsel’s FORM includes Exhibit 3, which is a report of investigation (ROI) summarizing Applicant’s interview that took place during the April 2016 background investigation. The ROI is not authenticated by a witness, as required under ¶ E3.1.20 of the Directive.4 Likewise, Section 5(a) of Executive Order 10865 prohibits receipt and consideration of “investigative reports” without authenticating witnesses. The Directive provides no exception to the authentication requirement. Indeed, the authentication requirement is the exception to the general rule that prohibits consideration of an ROI.

Department Counsel’s written brief includes a footnote advising Applicant that the ROI was not authenticated and that failure to object may constitute a “waiver” of the authentication requirement. Although Applicant did not address the ROI in his reply to the FORM, his two-page memorandum is a detailed document. It contains an “Argument” section wherein Applicant challenges the basis for the action as “economic and financial profiling” and persecution for crimes he did not commit. Given his detailed reply to the FORM, as well as the tone and tenor of the reply, I am persuaded that Applicant thoroughly reviewed the contents of the FORM, and he elected not to raise an objection to the ROI. Accordingly, the ROI is admitted and I have considered it in reaching my decision.

FINDINGS OF FACT

Applicant is a 44-year-old employee who requires a security clearance for his job as a senior quality-assurance engineer for a federal contractor. He has worked for the same federal contractor in the defense industry since 2002. His educational background includes a bachelor’s degree awarded in 2004. He has never married. He has two children, both young adults, who reside with him.

The SOR alleges a history of financial problems or difficulties consisting of ten delinquent accounts ranging in amounts from $25 to $10,980 for a total of about $12,582. Nine of the ten debts are medical collection accounts for a total of about $1,602. The remaining debt is a $10,980 charged-off account, which is discussed further below. The delinquent accounts are established by credit reports from October 2015 and August 2016.5

During the April 2016 background investigation, Applicant explained the following about the $10,980 charged-off account:

[Applicant] stated he had cosigned (date unknown) for his niece, [name omitted] to purchase a 2004 or 2006 (year not recalled) Malibu car in [city, state]. [His niece] had allowed the car to be repossessed 3 or 4 months after purchase. [He] does not know if [his niece] made any payments or was past due on any payments during this time. After the repossession (date unknown), [he] was contacted about the $10,980 balance and informed it needed repayment. [He] did not respond to the letter because he did not believe it was his responsibility to repay the debt, despite cosigning the car note. [He] received a letter in 2015 (exact date not recalled) and was informed that the statute of limitations on the balance was due and he was no longer required to pay the balance. Therefore, [he] declined to sign a release for this account due to the contents of the last letter regarding a time limitation from the lender. [He] does not want to begin receiving any other demands for repayment as he has no intent to repay this balance. [He] could not provide any other details regarding this account as he does not know them. The car belonged to [his niece] and [he] did not know the details of her payment schedule to the lender.6 In his answer to the SOR, Applicant indicated that he had tried to work with the creditor early in the process, but he was unsuccessful in making a payment arrangement. He also indicated that since the account was charged off, he had dismissed it as well.7

Applicant’s reply to the FORM included a January 2017 credit report, which reflects the charged-off account.8 His credit report shows a joint account was opened in May 2008 and closed in January 2011; the account had a high balance of $24,593; the terms of repayment called for a $410 monthly payment for 60 months; the account went into collection and was then charged off as a bad debt in the amount of $10,980. His credit report also shows a payment history rated at 94.8%, which reflects the percentage of payments he had made on time. There is no documentation in the written record to establish that the debt was paid, settled or compromised, in a payment arrangement, cancelled, forgiven, or otherwise resolved.

A co-worker believes that Applicant is an honest, dependable, and hard-working employee who is an asset to their team, and has no concerns about Applicant’s security suitability.9 The officer in the state veterans’ organization believes Applicant is trustworthy, loyal, and honest, and has no reservations vouching for his character.10 Outside of work, Applicant is extensively involved in youth sports leagues in which he is trusted to handle money and has done so without incident.11

Law and Policies

This case is adjudicated under Executive Order (E.O.) 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 National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), effective June 8, 2017.12 It is well-established law that no one has a right to a security clearance.13 As noted by the Supreme Court in Department of the Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.”14 Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security. In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of evidence.15 The Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.16

A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information.17 An unfavorable clearance decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.18

There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information.19 The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted.20 An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven.21 In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision.22

DISCUSSION

Under Guideline F for financial considerations, the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern is: 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 or sensitive information.23

The concern is broader than the possibility that a person might knowingly compromise classified or sensitive information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities. A person who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified or sensitive information.

In analyzing the facts of this case, I considered the following disqualifying and mitigating conditions as most pertinent:

AG ¶ 19(a) inability to satisfy debts;

AG ¶ 19(b) unwillingness to satisfy debts regardless of the ability to do so;

AG ¶ 19(c) a history of not meeting financial obligations; and

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.

The evidence supports a conclusion that Applicant has a problematic financial history sufficient to raise a security concern under Guideline F. With that said, I have given little weight to the nine medical collection accounts for less than $2,000 that remain unresolved. It is presumed that those debts were incurred for necessary medical care or treatment as opposed to frivolous or irresponsible spending or otherwise living beyond one’s means. Medical debt is unlike other types of debt. It is usually unplanned, unexpected, and nondiscretionary. And it can add hundreds if not thousands of dollars in debt in a short period, which can be overwhelming for a debtor. It is my view that having less than $2,000 in unresolved medical collection accounts does not fatally undermine Applicant’s security suitability. Accordingly, those allegations are decided for Applicant.

The same cannot be said for the $10,980 charged-off account. Applicant did not produce any documented proof that this debt is being resolved in a responsible way. As noted in the findings of fact, he has no intention of doing anything to resolve this debt, as he does not think the debt is his responsibility. But as a cosigner of the loan, he assumed the same legal obligation as his niece, and he was likewise obliged to repay the deficiency balance due after the car was repossessed and sold. Although his niece had possession and use of the car, and she was the principal obligor on the loan, Applicant’s refusal or unwillingness to satisfy his legal obligation on the loan shows that he did not act responsibly under the circumstances.

Applicant’s inability or unwillingness or both to satisfy a debt stemming from a car loan for which he cosigned creates doubt about his reliability, trustworthiness, good judgment, and ability to protect classified information. In reaching this conclusion, I weighed the evidence as a whole and considered if the favorable evidence outweighed the unfavorable evidence or vice versa. His favorable evidence includes his two character references and his constructive community involvement in youth sports leagues. I also considered the whole-person concept. Accordingly, I conclude that he did not meet his ultimate burden of persuasion to show that it is clearly consistent with the national interest to grant his eligibility for access to classified information.

FORMAL FINDINGS

The formal findings on the SOR allegations are:

Paragraph 1, Guideline F: Against Applicant

Subparagraphs 1.a-1.f: For Applicant Subparagraph 1.g: Against Applicant Subparagraphs 1.h-1.j: For Applicant

CONCLUSION

In light of the record as a whole, it is not clearly consistent with the national interest to grant Applicant access to classified information.

Michael H. Leonard Administrative Judge

FOOTNOTES

1 Exhibit 2. 2 Appellate Exhibit I. 3 Appellate Exhibit II. 4 See generally ISCR Case No. 12-10933 (App. Bd. Jun. 29, 2016) (In a concurring opinion, Judge Ra’anan notes the historical concern about reports of investigation in that they were considered by some to present a heightened problem in providing due process in security clearance cases. Judge Ra’anan raises a number of pertinent questions about using an unauthenticated ROI in a non-hearing case with a pro se applicant.). 5 Exhibits 4 and 5. 6 Exhibit 3. 7 A charged-off account is simply a declaration by a creditor that the amount of the debt is unlikely to be collected. This occurs when a debtor becomes severely delinquent on the debt, normally more than 180 days past due. A charge-off is an accounting practice, taking the debt off the creditor’s balance sheet; however, the accounting move by the creditor in no way affects the debtor’s obligation to pay what is owed. In simple terms, a debt is owed until it is paid, bearing in mind that state laws provide a statute of limitations for collecting a debt. But it should be noted that security clearance decisions are not controlled or limited by statutes of limitation. Finally, a charged-off account will stay on a debtor’s credit report for seven years and then must be removed under the Fair Credit Reporting Act. 8 Exhibit A. 9 Exhibit B. 10 Exhibit B. 11 Exhibit B. 12 The 2017 AG are available at http://ogc.osd.mil/doha. 13 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10th Cir. 2002) (no right to a security clearance). 14 484 U.S. at 531. 15 484 U.S. at 531. 16 ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). 17 Directive, ¶ 3.2. 18 Directive, ¶ 3.2. 19 ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). 20 Directive, Enclosure 3, ¶ E3.1.14. 21 Directive, Enclosure 3, ¶ E3.1.15. 22 Directive, Enclosure 3, ¶ E3.1.15. 23 AG ¶ 18.