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ISCR Case 16-03502.h1 — CASE

ISCR Case 16-03502.h1denied

Case Headnote

ISCR Case No. 16-03502.h1

deniedOct 6, 2017· Hon. Robert Robinson Gales· hearing

Summary

A 56-year-old defense contractor employee was denied a security clearance under Guideline F, Financial Considerations, due to an outstanding financial judgment. The judgment, totaling $73,758.66, originated in 2012 from a loan guarantee the applicant provided for his nephew's failed business.

The Statement of Reasons specifically cited this 2012 judgment as the basis for concern. Disqualifying conditions under Guideline F were raised because the applicant admitted to the judgment but provided no evidence of any efforts to resolve the debt.

The denial was based on the applicant's failure to take positive action to address the unpaid judgment. There was no demonstration of financial counseling or a concrete plan to resolve the debt, which ultimately led to doubts about the applicant's reliability and trustworthiness.

Why the Applicant Was Denied

The applicant failed to take any positive action to address the unpaid judgment.
There was no evidence of financial counseling or a plan to resolve the debt.
The applicant's lack of action raised doubts about his reliability and trustworthiness.

Conditions Referenced

Disqualifying

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

Key Rule Quoted

“A person who seeks access to classified information enters into a fiduciary relationship with the Government predicated upon trust and confidence.”
— Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedDec 23, 2016
Answer filedJan 19, 2017Applicant elected to proceed without a hearing.
Hearing held—Written record decision.
Decision dateOct 6, 2017

Cite For

Failure to Mitigate Financial Concerns Under Guideline F
Importance of Demonstrating Efforts to Resolve Financial Obligations
Impact of Unpaid Judgments on Security Clearance Eligibility

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 against the applicant on financial considerations due to an unresolved judgment of $73,758.66 stemming from a loan guarantee for a failed business. The applicant failed to demonstrate any efforts to address the judgment or mitigate the financial concerns, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	In 2012, a judgment was filed against Applicant in the amount of $73,758.66. $73,758	Against Applicant	Judgment Against Applicant	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. 16-03502 ) Applicant for Security Clearance )

For Government: Tovah Minster, Esquire, Department Counsel For Applicant: Pro se

10/06/2017 ______________

STATEMENT OF CASE

______________

GALES, Robert Robinson, Administrative Judge:

Applicant failed to mitigate the security concerns regarding financial considerations. Eligibility for a security clearance and access to classified information is denied.

Statement of the Case

On November 18, 2015, Applicant applied for a security clearance and submitted an Electronic Questionnaire for Investigations Processing (e-QIP) version of a Security Clearance Application.1 On December 23, 2016, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) to him, under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended and modified; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended and modified (Directive); and the Adjudicative Guidelines for Determining Eligibility For Access to Classified Information (December 29, 2005) applicable to all adjudications and other determinations made under the Directive, effective September 1, 2006.2 The SOR alleged security concerns under Guideline F (Financial Considerations), and detailed reasons why the DOD adjudicators were unable to find that it is clearly consistent with the interests of national security to grant or continue a security clearance for Applicant. The SOR recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked.

It is unclear when Applicant received the SOR as there is no receipt in the case file. In a sworn statement, dated January 19, 2017, Applicant responded to the SOR and elected to have his case decided on the written record in lieu of a hearing. A complete copy of the Government’s file of relevant material (FORM) was mailed to Applicant by the Defense Office of Hearings and Appeals (DOHA) on February 24, 2017, and he was afforded an opportunity, within a period of 30 days after receipt of the FORM, to file objections and submit material in refutation, extenuation, or mitigation. In addition to the FORM, Applicant was furnished a copy of the Directive as well as the previous Adjudicative Guidelines applicable to his case. Applicant received the FORM on March 12, 2017. Applicant’s response was due on April 11, 2017. As of October 1, 2017, Applicant had not submitted any response to the FORM. The case was assigned to me on October 1, 2017.

FINDINGS OF FACT

In his Answer to the SOR, Applicant admitted, with comments, the sole factual allegation pertaining to financial considerations (¶ 1.a.) of the SOR. Applicant’s admissions and comments are incorporated herein as findings of fact. After a complete and thorough review of the evidence in the record, and upon due consideration of same, I make the following additional findings of fact:

Applicant is a 56-year-old employee of a defense contractor. He has served as a part-time asbestos abatement supervisor for two separate employers since April and August 2010. He has also been self-employed as a painting contractor and handyman, and he previously held a variety of full-time and part-time positions with other employers. He received a bachelor’s degree in 1983 and a master’s degree in 1988. Applicant has never served in the U.S. military. He was granted a top-secret security clearance in September 1998. Applicant was married in 1988. He has two daughters, born in 1993 and 1995, and one son, born in 1999. Financial Considerations

A review of Applicant’s recent credit reports reflect no delinquent accounts or past- due balances.3 However, on April 16, 2012, a judgment in the amount of $73,758.66 was filed against him in a state court.4 It appears that the issues that resulted in the judgment commenced sometime in 2007 when Applicant’s nephew by marriage wanted to open a tractor and equipment business, but did not have sufficient means to qualify for loans to start the business. Applicant agreed to sign a loan note guaranteeing repayment of a particular loan. Applicant received no financial interest in the company and owned no stock. He took a position with the new company from September 2007 until September 2008 as the treasurer and chief financial officer. The business subsequently failed, and Applicant’s nephew filed for bankruptcy, leaving Applicant responsible for the deficiency between the value of the repossessed equipment collateral and the balance of the note. Applicant’s nephew failed to appear as a witness on Applicant’s behalf. Applicant candidly reported the financial issue in his November 2015 e-QIP. He acknowledged that he had not made any payments on the judgment, and he stated he was exploring legal options.5

During his interview with an investigator from the U.S. Office of Personnel Management (OPM) in June 2016, Applicant claimed he had not heard from the judgment-holder since the judgment was filed, and there were no efforts to garnish his wages. He expressed “mixed feelings of whether or not to obtain counsel again to resolve the issue. If [his] failure to resolve the issue adversely affects his security clearance [he] will seek counsel to clear the matter up.”6 That statement does not reach the level of a promise to pay the debt.7 In his Answer to the SOR, Applicant again admitted that the judgment remains unpaid.

The SOR identified only the unpaid judgment. There is no evidence to indicate that Applicant has recently made any efforts to contact the judgment-holder to resolve the judgment, or what specific legal options he may have explored. The judgment has not been resolved.

It is not known what Applicant’s financial resources may be because he did not submit a Personal Financial Statement to reflect his net monthly income; monthly expenses; and any monthly remainder that might be available for discretionary spending or savings. There is no evidence of a budget; any financial counseling; or that Applicant ever contacted the judgment-holder to arrange a repayment plan. Applicant offered no evidence to indicate that, despite the judgment, his financial situation is under control.

POLICIES

The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.”8 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. The President has authorized the Secretary of Defense or his designee to grant an applicant eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.”9

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the guidelines in SEAD 4. In addition to brief introductory explanations for each guideline, the guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information.

An administrative judge need not view the guidelines as inflexible, ironclad rules of law. Instead, acknowledging 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. 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 meaningful decision.

In the decision-making process, facts must be established by “substantial evidence.”10 The Government initially has the burden of producing evidence to establish a potentially disqualifying condition under the Directive, and has the burden of establishing controverted facts alleged in the SOR. Once the Government has produced substantial evidence of a disqualifying condition, under Directive ¶ E3.1.15, the applicant has the burden of persuasion to present evidence in refutation, explanation, extenuation or mitigation, sufficient to overcome the doubts raised by the Government’s case. The burden of disproving a mitigating condition never shifts to the Government.11 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 as well. It is because of this special relationship that the Government must be able to repose a high degree of trust and confidence in those individuals to whom it grants access to classified information. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information. Furthermore, “security clearance determinations should err, if they must, on the side of denials.”12

Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”13 Thus, nothing in this decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination as to Applicant’s allegiance, loyalty, or patriotism. It is merely an indication the Applicant has or has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture.

ANALYSIS

Guideline F, Financial Considerations

The security concern relating to the guideline for Financial Considerations is set out in AG ¶ 18:

Failure to live within one's means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual's reliability, trustworthiness, and ability to protect classified or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling, mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage. The guideline notes several conditions that could raise security concerns. Under AG ¶ 19(a), an “inability to satisfy debts” is potentially disqualifying. In addition, AG ¶ 19(b) may apply if there is an “unwillingness to satisfy debts regardless of the ability to do so.” Similarly, under AG ¶ 19(c), “a history of not meeting financial obligations” may raise concerns. In 2012, a judgment was filed against Applicant in the amount of $73,758.66. Because of his failure to take any positive action to address the judgment, it appears that he is unwilling to do so. Applicant admitted that the judgment remains unresolved. AG ¶¶ 19(a), 19(b), and 19(c) apply.

The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. Under AG ¶ 20(a), the disqualifying condition may be mitigated where “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.” Also, under AG ¶ 20(b), financial security concerns may be mitigated where “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.” Evidence that “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” is potentially mitigating under AG ¶ 20(c). Similarly, AG ¶ 20(d) applies where the evidence shows “the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts.”14 In addition, AG ¶ 20(e) may apply if “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.”

I have concluded that none of the AGs apply. Applicant guaranteed payment on a note for a loan for his nephew’s business. When that business collapsed, and his nephew went through bankruptcy, the creditor went after Applicant to seek payment on the loan. When no resolution was reached, the creditor obtained a judgment against Applicant. The judgment remains unsatisfied, five years later. Applicant failed to explain what legal options he explored to either address the judgment, or which led to his decision to ignore it. Applicant argued that AG ¶ 20(a) should apply because the issue occurred close to ten years earlier; it was infrequent; and it occurred under such circumstances that it is unlikely to recur. That position has little merit under the AGs.15

Clearance decisions are aimed at evaluating an applicant’s judgment, reliability, and trustworthiness. They are not a debt-collection procedure. The guidelines do not require an applicant to establish resolution of each and every debt alleged in the SOR. An applicant needs only to establish a plan to resolve financial problems and take significant actions to implement the plan. There is no requirement that an applicant immediately resolve or make payments on all delinquent debts simultaneously, nor is there a requirement that the debts alleged in an SOR be paid first. Rather, a reasonable plan and concomitant conduct may provide for the payment of such debts one at a time. Mere promises to pay debts in the future, without further action, are insufficient.

There is no evidence of a good-faith effort to contact the judgment-holder to resolve the judgment.16 There is little evidence that the conditions that may have resulted in the financial issues were largely beyond Applicant's control. He signed the note as a guarantor should the primary borrower falter, knowing that he had the legal and moral responsibility to honor the note in the event of a default. Generally referring to legal options without further information does not equate to a plan. Applicant offered no evidence to indicate that his financial situation is now under control. There is no evidence of financial counseling, a budget, or any dispute. Equally as important, there is no evidence that Applicant acted responsibly under the circumstances, and that failure to do so continues to cast doubt on his current reliability, trustworthiness, and good judgment.17

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 SEAD 4, App. A, ¶ 2(d):

(1) the nature, extent, and seriousness of the conduct; (2) the circumstances surrounding the conduct, to include knowledgeable participation; (3) the frequency and recency of the conduct; (4) the individual’s age and maturity at the time of the conduct; (5) the extent to which participation is voluntary; (6) the presence or absence of rehabilitation and other permanent behavioral changes; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

Under SEAD 4, App. A, ¶ 2(c), the ultimate determination of whether to grant a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. Moreover, I have evaluated the various aspects of this case in light of the totality of the record evidence and have not merely performed a piecemeal analysis.18

There is some evidence mitigating Applicant’s conduct. There is no evidence of misuse of information technology systems, or mishandling protected information. He is a well-educated individual. He took on substantial financial responsibilities when he signed the loan as a guarantor for his nephew. He has held a top-secret security clearance since 1998. He candidly admitted the judgment in his e-QIP and was open in his discussions regarding the judgment when he was interviewed by the OPM investigator.

The disqualifying evidence under the whole-person concept is simply more substantial. There is a 2012 judgment against Applicant for $73,758.66. Although Applicant was aware of his delinquent debt since that time, and years before he received the SOR, he made no efforts since 2012 to address the delinquent judgment. He supposedly searched for legal options, but never took any positive action to resolve the judgment. It appears that he simply ignored the judgment. Considering the lack of evidence regarding his current finances, and the absence of character evidence regarding Applicant’s honesty, integrity, and trustworthiness, I am unable to reach a positive conclusion pertaining to Applicant’s eligibility for a security clearance.

The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating:19

In evaluating Guideline F cases, the Board has previously noted that the concept of “meaningful track record” necessarily includes evidence of actual debt reduction through payment of debts. However, an applicant is not required, as a matter of law, to establish that he [or she] has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he [or she] has “. . . established a plan to resolve his [or her] financial problems and taken significant actions to implement that plan.” The Judge can reasonably consider the entirety of an applicant’s financial situation and his [or her] actions in evaluating the extent to which that applicant’s plan for the reduction of his outstanding indebtedness is credible and realistic. See Directive ¶ E2.2(a) (“Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.”) There is no requirement that a plan provide for payments on all outstanding debts simultaneously. Rather, a reasonable plan (and concomitant conduct) may provide for the payment of such debts one at a time. Likewise, there is no requirement that the first debts actually paid in furtherance of a reasonable debt plan be the ones listed in the SOR.

Applicant has demonstrated a very poor track record of debt reduction and elimination efforts, avoiding the judgment in his name, and failing to take any corrective actions. Overall, the evidence leaves me with substantial questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all of these reasons, I conclude Applicant has failed to mitigate the security concerns arising from his financial considerations. See SEAD 4, App. A, ¶¶ 2(d)(1) through AG 2(d)(9).

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

Subparagraph 1.a.: Against Applicant

CONCLUSION

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

________________________ ROBERT ROBINSON GALES Administrative Judge

FOOTNOTES

1 Item 3 (e-QIP, dated November 18, 2015). 2 Effective June 8, 2017, by Directive 4 of the Security Executive Agent (SEAD 4), dated December 10, 2016, National Security Adjudicative Guidelines (AG) 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 supersede all previously issued national security adjudicative criteria or guidelines. Accordingly, those guidelines previously implemented on September 1, 2006, under which this security clearance review case was initiated, no longer apply. In comparing the two versions, there is no substantial difference that might have a negative effect on Applicant in this case. 3 See Item 5 (Equifax Credit Report, dated February 22, 2017); Item 6 (Combined Experian, TransUnion, and Equifax Credit Report, dated November 28, 2015).

4 Item 7 (Final Judgment, dated April 16, 2012); Item 7 (Judgment Information, released August 19, 2016).

5 Item 4 (Personal Subject Interview, dated June 15, 2016); Item 2 (Applicant’s Answer to the SOR, dated January 19, 2017).

6 Item 4, supra note 5.

7 The Appeal Board has indicated that promises to pay off delinquent debts in the future are not a substitute for a track record of paying debts in a timely manner and otherwise acting in a financially responsible manner. ISCR Case No. 07-13041 at 4 (App. Bd. Sep. 19, 2008) (citing ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999)). 8 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988).

9 Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified.

10 “Substantial evidence [is] such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all contrary evidence in the record.” ISCR Case No. 04-11463 at 2 (App. Bd. Aug. 4, 2006) (citing Directive ¶ E3.1.32.1). “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).

11 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 12 Egan, 484 U.S. at 531.

13 See Exec. Or. 10865 § 7. 14 The Appeal Board has previously explained what constitutes a good-faith effort to repay overdue creditors or otherwise resolve debts:

In order to qualify for application of [the “good-faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term ‘good-faith.’ However, the Board has indicated that the concept of good-faith ‘requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.’ Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy [or statute of limitations]) in order to claim the benefit of [the “good-faith” mitigating condition].

(internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 15 A debt that became delinquent several years ago is still considered recent because “an applicant’s ongoing, unpaid debts evidence a continuing course of conduct and, therefore, can be viewed as recent for purposes of the Guideline F mitigating conditions.” ISCR Case No. 15-06532 at 3 (App. Bd. February 16, 2017) (citing ISCR Case No. 15-01690 at 2 (App. Bd. Sep. 13, 2016)).

16 “Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances outside his [or her] control, the Judge could still consider whether Applicant has since acted in a reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99- 0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03-13096 at 4 (App. Bd. Nov. 29, 2005)). A component is whether he or she maintained contact with creditors and attempted to negotiate partial payments to keep debts current.

17 See ISCR Case No. 09-08533 at 3-4 (App. Bd. Oct. 6, 2010). 18 See U.S. v. Bottone, 365 F.2d 389, 392 (2d Cir. 1966); See also ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006).

19 ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted).