ISCR Case No. 16-03520.h1

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ISCR Case No. 16-03520 ) ) ) ) Applicant for Security Clearance

For Government: Charles C. Hale, Esq., Department Counsel For Applicant: Pro Se

10/20/2017 ______________

______________

MASON, Paul J., Administrative Judge:

Applicant’s history of financial problems begins in 2009 when she started her own company without adequate business contracts. In January 2012, she received a Chapter 7 discharge of $1,000,000 in liabilities. She incurred additional delinquent debt in 2015 and 2016. She provided no evidence to support her claims of having made payments on the six delinquent debts she still owes. Applicant failed to mitigate the disqualifying evidence raised by the guideline for financial considerations. Eligibility for access to classified information is denied.

Statement of the Case

On January 6, 2016, Applicant signed and certified an Electronic Questionnaires for Investigations Processing (e-QIP). (Item 3) She provided her primary interview (PSI) to an investigator from the Office of Personnel Management (OPM) on July 12, 2016. (Item 4) On December 23, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) detailing security concerns under financial considerations (Guideline F). The action was taken in accordance with 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) dated June 8, 2017.1

Applicant furnished her notarized answer to the SOR on February 9, 2017. A copy of the Government’s File of Relevant Material (FORM), the Government’s evidence in support of the allegations of the SOR, was sent to Applicant on March 3, 2017. She received the FORM on April 25, 2017, and was instructed to file objections or submit additional information within 30 days of receiving the FORM. Her response was due on May 25, 2017. No response was received by the Defense Office of Hearings and Appeals (DOHA). The case was assigned to me on October 1, 2017.

Evidentiary Rulings

In a footnote on the first page of the FORM, Applicant was advised she could make corrections to the July 2017 and August 2006 PSIs (Item 4; Item 8) to improve the exhibits’ clarity and accuracy. Alternatively, she was advised that since the PSIs were unauthenticated, she could object to the exhibits and they would not be admitted into evidence. Applicant did not object, and the July 2017 and August 2006 PSIs are entered into the evidence.2

The SOR alleges two bankruptcies in 2000 and one in 2012, a mortgage loan default and foreclosure, and 10 listed delinquent debts, of which two are judgments. Applicant admitted all debts except for SOR ¶ 1.i. She was working with a credit resolution firm and two of the three credit agencies to for assistance in removing inaccurate information from her credit report. She blamed her financial difficulties on her under employment that began in July 2009. (Answer to SOR)

Applicant is 40 years old and has been married to her spouse since February 2006. She has four children, ages 17 to 7. She has two stepchildren who are 20 and 17 years of age. She received an associate’s degree in May 1997, a bachelor’s degree in May 2003, and a master’s degree in April 2011. Applicant has held a security clearance for at least 10 years. (Answer to SOR; Item 3 at 6, 7, 9)

In June 2000, Applicant filed a Chapter 7 bankruptcy petition that was discharged in November 2000. (SOR ¶ 1.m) From October 2002 to July 2009, she was the chief operating officer (COO) of a company that she and her sister operated. The first financial event after her 2000 bankruptcy discharge was a foreclosure of her home in August 2008 (SOR ¶ 1.l). In late July 2009, she resigned as COO to start her own company that

1 This case was decided using the new guidelines which became effective on June 8, 2017. These

2 A July 7, 2016 telephone PSI w remained in business until November 2015.3 Shortly before her departure, her sister verbally agreed to provide her with severance pay. Applicant’s added incentive was a potentially large contract during the start-up period of her new company. The large contract did not materialize and Applicant’s sister rescinded the severance pay. Nonetheless, Applicant started her new company. There is no indication that she attempted re-employment at her sister’s company. Applicant drew in small contracts, but she had trouble obtaining large contracts that would stabilize her company economically. (Item 3 at 4-5, 7-9; Item 6 at 27)

As Applicant’s financial problems worsened, she attempted to stay afloat by trying to sell her personal assets, including real and rental property. She was unable to refinance her home mortgage. She gave birth to another child in 2010, adding additional expense to her financial problems. She indicated that she kept creditors aware* of her financial predicament. When she filed her Chapter 7 petition documentation in October 2011 (SOR ¶ 1.b), she posted no earnings, relying on the $65,000 salary of her husband. In January 2012, she discharged $1,000,000 in liabilities, including her home. In her July 2016 PSI, she was still relying on her husband’s income. She realizes that she should have closed the company before November 2015. (Item 3 at 7-9, 16-17; Item 6 at 27)

According to her January 2016 e-QIP and her July 2016 PSI, from November 2015 to the present, Applicant described her employment position as a PMO manager. In May 2016, as a result of her employer changing its business model, Applicant became a consultant, and expected to begin working in that position when her employer received funding by September 2016. No subsequent information was provided in her answer to the SOR about the status of her employment. (Item 3 at 4-5, 17; answer to SOR)

Three of the listed accounts have been resolved. SOR ¶ 1.c is a federal tax lien ($28,457) filed in 2011, and applies to delinquent taxes for tax years 2008 and 2009. The lien was released in September 2016. SOR ¶ 1.d ($17,162, car loan) was discharged in Applicant’s 2012 Chapter 7 bankruptcy. Documentation verifies that SOR ¶ 1.h ($10,130, installment car loan) has been returned to a current status as of January 2017. The medical debt at SOR 1.k ($32) was paid in January 2017. (Item 3 at 10; Answer to SOR, attachments)

In her February 2017 answer to the SOR, Applicant claimed that she was either making payments or had made arrangements to pay SOR ¶¶ 1.a, 1.e, 1.f, 1.g, 1.i, and 1.j. Her payment claims are not credible because supporting payment information is missing. (Answer to SOR)

SOR ¶ 1.a is a judgment that was filed by a former employee against Applicant while she operated the company between July 2009 and November 2015. Applicant denied that she owed the judgment since the action should have been filed against the company. (Item 3 at 9) The debt is unresolved.

3 However, in her answer to the SOR, she claimed that she was laid off without notice, “leaving [her] with SOR ¶¶ 1.e and 1.f are unpaid state tax liens filed against Applicant in 2009. She provided no substantiating documentation that payment arrangements had been established to bring both liens to a “positive pay status.” (Item 3 at 10) The debts are unresolved.

SOR ¶ 1.g is a credit card account that became delinquent in January 2015. Even though Applicant agreed to make payments, she has not supplied the details of the agreement or documented the payments made under the agreement. (Item 5; Answer to SOR) The account is unresolved.

SOR ¶ 1.i is credit card account that became delinquent in January 2016. In her July 2016 PSI, she claimed that she paid the account in December 2015. In her February 2017 answer to the SOR, she stated that she was making payments. (Answer to SOR; Item 4 at 12) The debt remains unpaid.

SOR ¶ 1.j is a cell phone account the became delinquent in April 2015. Applicant averred that the account was closed when her company shuttered in November 2015. She was working with a credit firm to have the account removed. No additional information was provided. (Answer to SOR; Item 3 at 12-13) The debt is unresolved. The total amount of debt that Applicant owes for the six accounts identified at SOR ¶¶ 1.a, 1.e, 1.f, 1.f, 1.g, 1.i, and 1.j is $5,869.

Applicant and her husband have been trying to avoid creating new debt. She was working to satisfy all delinquent debt. She hoped that OPM would obtain an updated credit report that would show how much debt she has eliminated since completing her January 2016 e-QIP. To reduce her overhead, Applicant moved into a smaller home and only uses one credit card. (Item 3 at 17)

When evaluating an applicant's suitability for a security clearance, the administrative judge must consider the guidelines in the AG. Each guideline lists potentially disqualifying conditions and mitigating conditions that are useful in evaluating an applicant's eligibility for access to classified information.

The administrative judge's ultimate goal is to reach a fair and impartial decision that is based on sound and prudent judgment. The decision should also include a careful, thorough evaluation of a number of general factors known as the "whole-person concept" that brings together all available, reliable information about the person, past and present, favorable and unfavorable, in making a decision. 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 the potential, rather than actual, risk of compromise of classified information.

Under Directive ¶ E3.l.14., the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.l.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 bears the ultimate burden of persuasion in demonstrating that he warrants a favorable security clearance decision.

The security concern for financial considerations is set forth 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 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 concern of Guideline F is whether an applicant possesses the good judgment and trustworthiness necessary for safeguarding classified information at all times and in all places. An applicant who handles his personal finances irresponsibly or who fails to comply with rules and regulations, may display the same irresponsibility toward safeguarding classified information.

The disqualifying conditions under AG ¶ 19 are:

(a) inability to satisfy debts;

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

(f) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required.

Applicant’s financial problems began when her home was foreclosed on in August 2008. In January 2012, her Chapter 7 petition allowed her to she discharge about $1,000,000 in liabilities. Following the discharge, Applicant incurred four delinquent debts between 2013 and January 2016. The two 2009 state tax liens have not been satisfied. AG ¶¶ 19(a),19(c), and 19(f) apply.

The potential mitigating conditions under AG ¶ 20 are: (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 reliability, trustworthiness, and good judgment;

(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 identify theft), and the individual acted responsibly under the circumstances;

(c) the person has received or is receiving 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;

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

(g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements.

Though the two state tax liens were filed in 2009, they are still unpaid. The record reveals a January 2012 Chapter 7 discharge of about $1,000,000 in liabilities followed by an accumulation of additional delinquent debt. Applicant’s unsupported claims of paying on the listed debts casts doubts on her trustworthiness and reliability. AG ¶ 20(a) does not apply.

AG ¶ 20(b) applies when life’s unexpected events occur to negatively affect an applicant’s financial affairs. In her February 2017 answer to the SOR, she claimed that she was laid off without notice. AG ¶ 20(b) does not apply. The lack of financial counseling and documented payments under a plan eliminates AG ¶¶ 20 (c) and 20(d) from consideration.

I have examined the evidence under the disqualifying and mitigating conditions of the financial considerations guideline. I have also weighed the circumstances within the context of nine variables of the whole-person concept. In evaluating the relevance of an individual's conduct, the administrative judge should consider the following factors listed in AG ¶ 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 the participation was 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). The final security clearance decision must be an overall commonsense judgment based upon careful consideration of the specific guidelines, each of which is to be evaluated in the context of the whole person. (AG ¶ 2(c))

Applicant has held a security clearance for more than 18 years. He was informed in 2015 that he had not filed his federal and state tax returns nor paid taxes for tax year 2011, and he knew that he had not paid his federal and state taxes for tax year 2014. Based on absence of evidence showing resolution of the tax issues, Applicant has not overcome the security concerns raised by the guideline for financial considerations. See AG ¶ 2(a)(1) through AG ¶ 2(a)(9).

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.d.: Against Applicant

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

____________________ Paul J. Mason Administrative Judge

guidelines superseded the former guidelines which had been in effect since September 1, 2006. My decision in this case would be the same under the 2006 or 2017 guidelines. as conducted to establish employment leads. ( Tem 4) A PSI was also conducted in August 2006 (Item 8) an income of unemployment of $265 a week and $800,000 in financial debt.” (Answer to SOR)