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ISCR Case 16-03236.h1 — CASE

ISCR Case 16-03236.h1denied

Case Headnote

ISCR Case No. 16-03236.h1

deniedOct 12, 2017· Hon. Roger C. Wesley· hearing

Summary

A 58-year-old senior business analyst was denied a security clearance due to concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The denial stemmed primarily from delinquent time-share debts totaling over $7,000 and a prior foreclosure. The applicant also omitted two time-share debts from his e-QIP financial disclosures.

The judge determined there was insufficient evidence of responsible financial management, raising doubts about the applicant's reliability and trustworthiness. Specifically, the applicant failed to demonstrate responsible handling of his financial obligations, particularly the delinquent time-share debts.

The denial was further supported by the applicant's strategic decision to abandon his time-share units without fully exploring all resolution options, which was seen as poor judgment. Additionally, the applicant did not provide adequate evidence of financial counseling or concrete efforts to mitigate his debts. Mitigating Condition 20(b) was applied, but Disqualifying Conditions 19(a), 19(b), and 19(c) were also raised.

Why the Applicant Was Denied

The applicant failed to demonstrate responsible management of his financial obligations, particularly regarding delinquent time-share debts.
The applicant's strategic decision to abandon his time-share units without exploring all resolution options reflected poor judgment.
The applicant did not provide sufficient evidence of financial counseling or efforts to mitigate his debts.

Conditions Referenced

Disqualifying

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

Mitigating

MC ¶ 20(b)appliedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlPartial application due to some extenuating circumstances, but insufficient to mitigate overall concerns.

Key Rule Quoted

“Eligibility for access to classified information is denied.”

Procedural Posture

SOR issuedDec 2, 2016
Answer filedJan 9, 2017
Hearing heldApr 24, 2017Applicant requested to keep the record open for 14 days.
Decision dateOct 12, 2017

Cite For

Financial Responsibility and Reliability Under Guideline F
Impact of Strategic Defaults on Security Clearance Eligibility
Credibility of Applicant's Explanations Regarding Financial Omissions in E-qip

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 E (Personal Conduct) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found that the applicant did not falsify his e-QIP regarding his time-share debts, ruling in favor of the applicant under Guideline E. However, the overall security clearance was denied due to unresolved financial concerns under Guideline F.

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	Applicant omitted the two timeshare debts covered by SOR ¶¶ 1.a-1.b when he responded to the financial questions posed in Section 26 of the e-QIP.	For Applicant	Omission or Failure to DiscloseNOT DELIBERATESELF-CORRECTED	Financial	Denied	—	(b) omission/refusal followed advice of counsel; later cooperated fully	Credited Explanation of Omission Credible

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

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 accumulated delinquent time-share debts exceeding $7,000, with one account resulting in a foreclosure and a deficiency balance of $40,719. The applicant's financial difficulties were not sufficiently mitigated, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant incurred a past due balance of $7,013 on a time-share account. $7,013	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.b	Applicant incurred a past due balance of $352 on another time-share account. $352	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (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: ) ) ) ------------------------------------- ) ISCR Case No. 16-03236 ) ) ) Applicant for Security Clearance )

For Government: Robert Blazewick, Esq., Department Counsel For Applicant: Pro se 10/12/2017 _____________

STATEMENT OF CASE

______________

WESLEY, Roger C., Administrative Judge:

Based upon a review of the pleadings, exhibits, and testimony, I conclude that Applicant did not mitigate security concerns regarding his financial considerations. Eligibility for access to classified information is denied.

On December 2, 2016, the Department of Defense (DoD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) detailing reasons why DoD adjudicators could not make the affirmative determination of eligibility for a security clearance, and recommended referral to an administrative judge to determine whether a security clearance should be granted, continued, denied, or revoked. The action was taken 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 recently amended (Directive); and the Adjudicative Guidelines (AGs) implemented by DoD on September 1, 2006.1

Applicant responded to the SOR on January 9, 2017, and requested a hearing. The case was assigned to me on March 13, 2017, and scheduled for hearing on April 24, 2017. At the hearing, the Government's case consisted of four exhibits (GEs 1-4). Applicant relied on one witness (himself) and two exhibits (AEs A-B). The transcript (Tr.) was received on May 2, 2017.

Procedural Issues

Before the close of the hearing, Applicant requested permission to keep the record open to permit him the opportunity to supplement the record with updated information regarding the status of his time-share foreclosure. For good cause shown, Applicant was granted 14 days to supplement the record. Department Counsel was afforded two days to respond. Within the time permitted, Applicant supplemented the record with a deed of foreclosure of the time-share covered by SOR debt ¶ 1.a. Applicant’s submission was admitted without objection as AE C.

Summary of Pleadings

Under Guideline F, Applicant allegedly incurred past due balances on two time- share accounts. One for $7,013 (SOR debt ¶ 1.a) and another for $352 (SOR debt ¶ 1.b). Under Guideline E, Applicant allegedly falsified the electronic questionnaires for electronic processing (e-QIP) by omitting his two delinquent time-share debts.

In his response to the SOR, Applicant admitted each of the allegations covered by Guideline F with explanations. He claimed he could not sell back his time share units to the timeshare owners covered by SOR debts ¶¶ 1.a-bafter concerted efforts to do so.

Addressing SOR debt ¶ 2.a, Applicant denied falsifying the e-QIP he completed in May 2015. He claimed he had limited information about the foreclosure of the time-share unit covered by SOR ¶ 1.a at the time he completed the e-QIP in May 2015, and did not know at the time that his time-share units were either foreclosed or defaulted.

Applicant claimed to be a reliable, trustworthy person with children and grandchildren, and with a successful career in the private sector. He claimed he made an embarrassing mistake with timeshares.

the updated substantive changes in the guidelines, effective June 8, 2017. Application of the AGs that were

FINDINGS OF FACT

Applicant is a 58-year-old senior business analyst for a defense contractor who seeks a security clearance. The allegations covered in the SOR and admitted by Applicant are incorporated and adopted as relevant and material findings. Additional findings follow.

Background

Applicant married in July 1985 and has four adult children from his marriage. (GEs 1-2) Applicant completed his high school education in June 1977. (GE 1) He earned a bachelor’s degree in May 1981. (GE 1) Applicant reported no military service. (GEs 1-2)

Since May 2015, Applicant has worked for his current employer. Between January 2000 and May 2015, he worked for other defense contractors. (GE 1; Tr. 23-25) He reported brief periods of unemployment in 2012 and 2008. (GE 1)

Applicant’s finances

Applicant presented with some history of financial difficulties. Credit reports reveal that he purchased two time share units: one in August 2012 for approximately $63,954 (SOR debt ¶ 1.a) and another in 2011 (SOR debt ¶ 1.b) for an undisclosed amount that carried monthly payments of $352. (GEs 2-4 and AEs A-B; Tr. 29, 40-41) Applicant became delinquent with his time-share accounts in 2015 and ceased making monthly payments on both of them. Before receiving any foreclosure notices from SOR creditor ¶ 1.a, Applicant tried to return the units to the creditor, but was declined by the creditor. He was unsuccessful, too, in enlisting the SOR ¶ 1.a creditor’s assistance in refinancing the units. (Tr. 27-29, 32-33, 50-52) In May 2014, Applicant received a notice of foreclosure from creditor ¶ 1.a that confirmed Applicant’s default of his agreed monthly installments and the creditor’s decision to accelerate of the balance due on the promissory note and initiate foreclosure proceedings. (AE A)

Records document that his SOR debt ¶ 1.a time share unit was foreclosed by the owner in June 2014 and sold to the owner at a public auction sale in June 2014 for $23,235. (AEs A-C) After crediting the sale proceeds to the time-share owner, Applicant was left with a deficiency balance of $40,719. (AE C) This deficiency balance has not been paid by Applicant and remains outstanding.

In December 2015, SOR creditor ¶ 1.bserved Applicant with a notice of default. (AEs A-B) After consulting with others, he made a strategic decision to “leave the two shares as outstanding debt.” (Tr. 27, 31-32) To date, Applicant has not paid any of the past-due time-share payments on this indebtedness and refuses to do any more on the account. (GE 4) His efforts to obtain information from the creditor about the unit dues before returning the unit to the creditor in February 2014 were not successful. Applicant disputed this debt but provided no documentation covering the substance of the dispute. (Tr. 39-40) Currently, Applicant lives within his means and has no other reported delinquent debts. His credit reports reveal no other delinquent debts. (GEs 2-4) Applicant provided no evidence of financial counseling or budgeting. Nor did he furnish any character references, performance evaluations, or evidence of community and civic contributions for consideration.

e-QIP Omissions

Asked to complete an e-QIP in May 2015, Applicant omitted the two timeshare debts covered by SOR ¶¶ 1.a-1.bwhen he responded to the financial questions posed in Section 26 of the e-QIP. (GE 1) He claimed he misread the question and did not intentionally omit the information. (GE 1; Tr. 25)

Questioned by the OPM investigator who interviewed him in October 2016 (three months after completing his e-QIP), Applicant acknowledged his time-share debts without any evidence of confrontation by the OPM investigator who interviewed him. (GE 4) At the time, he had not received a notice of default from creditor 1.band did not consider either of his time shares to be in default. (Tr. 26)

Applicant’s claimed honest mistakes in reading the financial questions covered by Section 26 of his e-QIP are reinforced by his prompt, good-faith corrections of his delinquent time-share omissions when first asked about the information in his OPM interview. Considering all of the circumstances surrounding Applicant’s delinquent time- share omissions in his e-QIP, inferences are warranted that his omissions were the result of mistaken understandings and were not made intentionally.

P o l i c i e s

The SEAD 4, App. A lists new AGs to be used by administrative judges in the decision-making process covering security clearance cases. These guidelines take into account factors that could create a potential conflict of interest for the individual applicant, as well as considerations that could affect the individual’s reliability, trustworthiness, and ability to protect classified information.

These AGs include conditions that could raise a security concern and may be disqualifying” (disqualifying conditions), if any, and many of the conditions that could mitigate security concerns. These guidelines must be considered before deciding whether or not a security clearance should be granted, continued, or denied. The guidelines do not require administrative judges to place exclusive reliance on the enumerated disqualifying and mitigating conditions in the guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the context of the whole person in accordance with SEAD 4, App. A, ¶ (2)(c).

In addition to the relevant AGs, administrative judges must take into account the pertinent considerations for assessing extenuation and mitigation set forth in SEAD 4, App. A, ¶ 2(a) of the AGs. These AGs are intended to assist the judges in reaching a fair and impartial commonsense decision based upon a careful consideration of the pertinent guidelines within the context of the whole person.

The adjudicative process is designed to examine a sufficient period of an applicant’s life to enable predictive judgments to be made about whether the applicant is an acceptable security risk. See SEAD 4, App. A, ¶ 2(d) The following AG ¶ 2(d) factors are pertinent: (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 chances; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

Viewing the issues raised and evidence as a whole, the following individual guidelines are pertinent in this case:

Financial Considerations

The Concern: 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 information . . . An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds . . . AG ¶ 18.

Burden of Proof

By virtue of the principles and policies framed by the guidelines, a decision to grant or continue an applicant's security clearance may be made only upon a threshold finding that to do so is clearly consistent with the national interest. Because the Directive requires administrative judges to make a commonsense appraisal of the evidence accumulated in the record, the ultimate determination of an applicant's eligibility for a security clearance depends, in large part, on the relevance and materiality of that evidence. See United States, v. Gaudin, 515 U.S. 506, 509-511 (1995).

As with all adversarial proceedings, the judge may draw only those inferences which have a reasonable and logical basis from the evidence of record. Conversely, the judge cannot draw factual inferences that are grounded on speculation or conjecture.

The Government's initial burden is twofold: (1) it must prove by substantial evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the facts proven have a material bearing to the applicant's eligibility to obtain or maintain a security clearance. The required materiality showing, however, does not require the Government to affirmatively demonstrate that the applicant has actually mishandled or abused classified information before it can deny or revoke a security clearance. Rather, the judge must consider and weigh the cognizable risks that an applicant may deliberately or inadvertently fail to safeguard classified information.

Once the Government meets its initial burden of proof of establishing admitted or controverted facts, the evidentiary burden shifts to the applicant for the purpose of establishing his or her security worthiness through evidence of refutation, extenuation, or mitigation. Based on the requirement of Exec. Or. 10865 that all security clearances be clearly consistent with the national interest, the applicant has the ultimate burden of demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations should err, if they must, on the side of denials.” See Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).

ANALYSIS

Security concerns are raised over Applicant’s accumulation of delinquent time share debts exceeding $7,000, with one account (SOR ¶ 1.a) ending in foreclosure with a deficiency balance of $40,719 and the other account (SOR ¶ 1.b) resulting in an undetermined loss on the time share unit. Applicant’s delinquent time share debts warrant the application of three of the disqualifying conditions (DC) of the guidelines: DC ¶ 19(a), “inability to satisfy debts,” DC ¶ 19(b), “unwillingness to satisfy debts regardless of the ability to do so,” and DC ¶ 19(c), “a history of not meeting financial obligations.”

Holding a security clearance involves the exercise of important fiducial responsibilities, among which is the expectancy of consistent trust and candor. Financial stability in a person cleared to access classified information is required precisely to inspire trust and confidence in the holder of the clearance. While the principal concern of a clearance holder’s demonstrated financial difficulties is vulnerability to coercion and influence, judgment and trust concerns are also implicit in financial cases.

While extenuating circumstances account for some of Applicant’s difficulties in obtaining short sale approvals and workable loan modifications with his time-share creditors, they do not fully explain his willingness to walk away from his properties without exploring other payment and resolution alternatives. More information is needed from Applicant to assess the scope and sufficiency of his payment efforts. Taking into account all of the circumstances associated with his accumulated delinquent time-share debts, Applicant’s circumstances merit only partial application of MC ¶ 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.” To date, Applicant has made no visible efforts to save his two time-share units from default and foreclosure, or address his delinquent balances extant with both properties. His inactions reflect no material income shortfalls that could affect his financial ability to meet his creditor obligations and avoid sustained defaults. Without more definitive explanations from Applicant of his economic circumstances that contributed to his defaults on his time-share payments, he cannot avert conclusions that his actions represented strategic defaults in both instances. See ISCR Case No. 14- 06440 at 4-5 (App. Bd. Jan. 8, 2016).

Personal Conduct concerns

Applicant omitted his time-share delinquencies in the e-QIP he completed in May 2015. He attributed his omissions to insufficient information about the status of his time- share units at the time he completed his e-QIP.

Applicant’s explanations are plausible and credible under all of the circumstances considered and are reinforced by his good-faith disclosures when asked about the payment status of his time-share units by the OPM investigator who interviewed him in November 2016. Allegations of falsification of the e-QIP Applicant completed in May 2015 are unsubstantiated.

From a whole-person standpoint, Applicant’s accumulation of delinquent time- share accounts and his failure to address them before and after he defaulted in his contractual obligations with the creditors reflects poorly on his judgment and reliability in managing his finances.

Considering all of the circumstances surrounding Applicant’s accumulation of time-share debts and failure to address them in responsible ways that could have avoided material deficiency balances with both time-share creditors preclude his meeting mitigation requirements imposed by the guideline governing financial considerations. Unfavorable conclusions are warranted with respect to the allegations covered by SOR ¶¶ 1.a-1.bof Guideline F.

FORMAL FINDINGS

In reviewing the allegations of the SOR and ensuing conclusions reached in the context of the findings of fact, conclusions, conditions, and the factors listed above, I make the following formal findings:

GUIDELINE F (FINANCIAL CONSIDERATIONS): AGAINST APPLICANT

Subparas. 1.a-1.b: Against Applicant

GUIDELINE E (PERSONAL CONDUCT): FOR Applicant

Subpara. 2.a: For Applicant

CONCLUSION

In light of all the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant or continue Applicant’s security clearance. Clearance is denied.

Roger C. Wesley Administrative Judge

FOOTNOTES

1 Effective June 8, 2017, by Directive 4 of the Security Executive Agent Directive (SEAD 4), dated December 10, 2016, National Security Adjudicative Guidelines for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position were established to supercede all previously issued national security adjudicative criteria or guidelines. Procedures for administrative due process for contractor personnel continue to be governed by DoD 5220.6, subject to

in effect as of the date of issuance of the SOR would not change the decision in this case.