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ISCR Case 17-01297.h1 — CASE

ISCR Case 17-01297.h1granted

Case Headnote

ISCR Case No. 17-01297.h1

grantedOct 18, 2017· Hon. Erin C. Hogan· hearing

Summary

A 56-year-old IT professional was granted a security clearance despite concerns under Guideline F (Financial Considerations). The Statement of Reasons detailed several financial issues, including a primary mortgage account over 120 days past due by $7,225, and a second mortgage on the primary residence also over 120 days past due by $547, with a total balance of $58,003. Additionally, a $166,414 mortgage account was past due by $61,379.

The applicant also faced multiple medical debts ranging from $19 to $197, and a $7,275 judgment filed in 2011. Disqualifying conditions under AG ¶ 19(a), AG ¶ 19(b), and AG ¶ 19(c) were raised.

However, the judge applied mitigating conditions under AG ¶ 20(a), AG ¶ 20(b), and AG ¶ 20(d). It was determined that the financial difficulties stemmed largely from circumstances beyond the applicant's control, specifically periods of unemployment and his wife's health problems. The applicant demonstrated good faith by working with lenders and promptly resolving medical debts upon discovery. Ultimately, the applicant's financial history was not deemed indicative of poor judgment or unreliability, and eligibility for a security clearance was granted.

Why the Applicant Prevailed

The applicant's financial difficulties were primarily due to circumstances beyond his control, including unemployment and medical issues affecting his household.
The applicant demonstrated responsible behavior by attempting to work with lenders and resolving medical debts promptly once aware of them.
The applicant's history of financial issues was not indicative of a lack of judgment or reliability, as he acted in good faith to address his debts.

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)raisedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(a)appliedBehavior Happened so Long Ago or Occurred Under Circumstances Unlikely to Recur
AG ¶ 20(b)appliedConditions Resulting in Financial Problems Were Largely Beyond the Person's Control
AG ¶ 20(d)appliedGood-faith Effort to Repay Overdue Creditors or Resolve Debts

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedJul 6, 2017
Answer filedJul 21, 2017
Hearing held—Decision based on the record.
Decision dateOct 18, 2017

Cite For

Mitigating Conditions Under Guideline F Due to Financial Hardships
Impact of Unemployment on Financial Obligations
Good-faith Efforts to Resolve Debts in Security Clearance 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: granted

The judge found that the applicant's financial issues stemmed from periods of unemployment and other extenuating circumstances, which were unlikely to recur. The applicant demonstrated responsible behavior in addressing his debts, leading to a decision in favor of granting the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	A mortgage account more than 120 days past due in the amount of $7,225: This is Applicant’s primary mortgage account. $7,225	For Applicant	Mortgage or Home Loan Debt	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.b	A $166,414 mortgage account that was past due in the amount of $61,379. $61,379	For Applicant	Mortgage or Home Loan Debt	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.c	A second mortgage on Applicant’s primary residence that was more than 120 days past due in the amount of $547, with a total balance of $58,003. $547	For Applicant	Mortgage or Home Loan Debt	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.d	$197 medical debt. $197	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.e	$125 medical debt. $125	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.f	$80 medical debt. $80	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.g	$28 medical debt. $28	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.h	$19 medical debt. $19	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.i	$7,275 judgment filed against Applicant in 2011. $7,275	For Applicant	Judgment Against Applicant	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly	—
1.j	$100 medical account. $100	For Applicant	Medical Debt	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—

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. 17-01297 ) ) Applicant for Security Clearance )

For Government: Rhett Petcher, Esquire, Department Counsel For Applicant: Pro se

10/18/2017 ______________

STATEMENT OF CASE

______________

HOGAN, Erin C., Administrative Judge:

On July 6, 2017, 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 (EO) 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 amended (Directive); and the adjudicative guidelines (AG) effective within the DOD on June 8, 2017.

On July 21, 2017, Applicant answered the SOR and requested a decision on the record. Department Counsel issued a File of Relevant Material (FORM) on August 12, 2017. Applicant received the FORM on September 12, 2017. Applicant had 30 days to submit a response to the FORM. He timely submitted a Response to the FORM. (Item 6) On September 18, 2017, the FORM was forwarded to the Hearing Office and assigned to me on October 2, 2017. Based upon a review of the pleadings, exhibits, and testimony, eligibility for access to classified information is granted.

FINDINGS OF FACT

Applicant is 56 years old and a potential employee of a DOD contractor. He has been offered a position contingent upon receiving a security clearance. He currently does not have full-time employment, but works for his father’s business on a full-time seasonal basis, and part time the rest of the year. He is also a part-time photographer. He has held a security clearance in the past with no known compromises. His highest level of education is a bachelor’s degree. He is married and has three children, ages 21, 19, and 15. (Item 2)

On June 28, 2016, Applicant submitted an Electronic Questionnaire for Investigations Processing (Item 3) A subsequent background investigation revealed Applicant had three past-due mortgages and seven debts with an approximate total balance of $7,824. Of that amount, six of the debts were medical accounts totaling $549. (Item 4; Item 5)

In his response to the SOR, Applicant admits the allegations relating to the past- due mortgages (SOR ¶¶ 1.a-1.c: Item 4 at 6; Item 5 at 1-2), denies the medical allegations claiming the medical bills were paid (SOR ¶¶ 1.d – 1.h, and 1.j: Item 5 at 2- 3, and 10); and admits a $7,275 judgement for a credit card. (SOR ¶ 1.i: Item 5 at 10)

Applicant indicates the medical debts were satisfied before the SOR was issued. His other debts were the result of financial hardships caused by his periods of under employment, a rental property being destroyed by a tenant, and his wife’s extended illness. (Item 1)

Applicant has worked in the information technology (IT) industry since 1983. In 2005, he was laid off for three months. He found employment with DOD Contractor 1 and applied for and received a security clearance. He worked for DOD Contractor 1 until early 2008 when he was laid off. He was unemployed six months and found employment with DOD Contractor 2 on a nine-month contract as a subcontractor to DOD Contractor 3. He was eventually hired as a permanent employee of DOD Contractor 3. In the fall of 2012, sequestration forced DOD Contractor 3 to reduce staffing and he was laid off again. He was unemployed until June 2013, when he found a job with a private company. In April 2016, Applicant was laid off because of company downsizing. In June 2016, Applicant was offered a job with DOD Contractor 4 contingent on Applicant receiving a security clearance. In June 2017, DOD Contractor 4 rescinded their job offer because they no longer had an available position. DOD Contractor 5 immediately offered Applicant a position contingent on Applicant receiving a security clearance and is sponsoring him for a security clearance. (Item 1)

Between 2005 and the present, Applicant also worked for two family businesses. He worked for his father’s business, part-time while employed full-time, and full-time when unemployed. He also has his own part-time photography business. He and his wife also started a business. The business has not generated any profit. Applicant attempted to look for other employment opportunities, but was unsuccessful. (Item 1) The status of the SOR debts are:

SOR ¶ 1.a: A mortgage account more than 120 days past due in the amount of $7,225: This is Applicant’s primary mortgage account. It remains past due with a larger balance. Applicant says that he has had trouble paying the mortgage because of reduced income from four periods of unemployment over a 12 year period. Applicant was unemployed for parts of 2005, 2008, and 2013, for a total of 18 months. Currently, he has not had a full-time position since April 2016. Applicant and his wife were working with the mortgage company to maintain the loan. He states that if he was employed full-time, he would be able to pay his mortgage. In response to the FORM, Applicant provided proof that he retained the services of a law firm to assist him with obtaining either a loan modification, a repayment plan, or a short sale if the previous two options are not successful. Applicant did not feel he was making progress attempting to work directly with the lender and opted to obtain representation in order to make progress towards this issue. (Item 2; Item 6 at 5, 30-37)

SOR ¶ 1.b: A $166,414 mortgage account that was past due in the amount of $61,379. This is a mortgage for Applicant’s rental property. One of Applicant’s tenants severely damaged the house resulting in expensive repairs. The housing collapse in 2007-2008 also limited Applicant’s options in dealing with this mortgage. The property was worth less than owed on the mortgage, and Applicant was unable to rent the property over an extended period of time. Applicant and his wife worked with two mortgage servicing companies in an attempt to modify the terms of the loan. Neither company did a good job negotiating a loan modification. The second company allowed the property to be foreclosed and sold at a sheriff’s sale while the loan modification application was in progress. The mortgage went to foreclosure. (Item 2; Item 6)

SOR ¶ 1.c: A second mortgage on Applicant’s primary residence that was more than 120 days past due in the amount of $547, with a total balance of $58,003: Applicant was advised not to make payments on this second mortgage while they were in the process of modifying their primary mortgage. Applicant believes they are only in arrears about $1,000. If they successfully obtain a loan modification or loan repayment on their primary mortgage, this loan will automatically be brought up to date and they will continue to make payments.

SOR ¶¶ 1.d, 1.e, 1.f, 1.g, and 1.hare medical debts in the amount of $197, $125, $80, $28, and $19: Applicant believed that these medical bills would be covered by his medical insurance. The claims were denied and he was not aware that they were denied. He did not become aware of these debts until he checked his credit report in June 2017. He paid the debts on June 28, 2017. (Item 1 at 7, 19)

SOR ¶ 1.i: $7,275 judgment filed against Applicant in 2011: Applicant admits this debt, but states the actual balance is $5,101.47. Applicant misunderstood the meaning of charged-off accounts. He believed this meant the account was settled. Applicant was not aware that they owed additional money until he received the SOR. He believes that there may have been a settlement on the account and contacted the creditor to inquire as to whether there was a settlement. If the account is not settled, Applicant states he will make payment arrangements when he is financially able to make payments.

SOR ¶ 1.j: $100 medical account: Applicant states this was a dental bill. He paid the bill in November 2016. (Item 1 at 8, 22, 24)

Applicant’s finances were also complicated by his wife’s health issues. (Item 1 at 12-13) He and his wife previously sought the help of a credit repair company. They withdrew from the agreement after hearing unfavorable press about the company. He previously settled four accounts that were not alleged in the SOR. (Item 5 at 3; Item 4 at 5 -6; Item 3; Item 6)

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the AG. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are useful in evaluating 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 over-arching adjudicative goal is a fair, impartial and commonsense decision. According to AG ¶ 2(a), 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 for national security eligibility will be resolved in favor of the 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 that 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 EO 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 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.

AG ¶ 19 notes several disqualifying conditions that could raise security concerns. The disqualifying conditions that are relevant to Applicant’s case include:

(a) inability to satisfy debts;

(b) unwillingness to satisfy debts regardless of the ability to do so; and

(c) a history of not meeting financial obligations. All of the above disqualifying conditions apply because Applicant incurred ten delinquent accounts to include two mortgages, a second mortgage, six medical accounts, and a credit card account. An individual who is financially irresponsible may also be irresponsible, unconcerned, or careless in his 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 his 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 concern under Financial Considerations is broader than the possibility that a person might knowingly compromise classified information to obtain money or something else of value. It encompasses concerns about a person’s self-control, judgment, and other important qualities.

The Government’s substantial evidence and Applicant’s admissions raised 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))

AG ¶ 20 includes examples of conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions potentially apply:

(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;

(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;

(c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit financial counseling service, and there are clear indications the problem is being resolved or is under control; and (d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts.

AG ¶ 20(a) and A.G ¶ 20(b) apply because Applicant’s financial issues occurred as a result of his numerous periods of unemployment. The circumstances were unusual and are unlikely to recur when Applicant obtains full-time employment. AG ¶ 20(b) applies because Applicant’s periods of unemployment were beyond his control. Applicant was laid off as a result of company downsizing and as well as the sequestration imposed by Congress in 2012. His wife’s chronic medical problems also contributed to the household financial situation. Despite these problems, the Applicant has acted responsibly under the circumstances. He attempted to work with the lender of his rental property to modify the mortgage, but the lender foreclosed on the property in the middle of his modification application. He resolved all of the medical bills. He did not pay the judgment alleged in SOR ¶ 1.i because he mistakenly believed that a charged-off account meant that the account was resolved. He is attempting to modify his primary residence’s mortgage and intends to bring the second mortgage current if he is successful. Considering Applicant’s lengthy periods of unemployment, he does not have a significant amount of delinquent debt. He acted responsibly under the circumstances.

AG ¶ 20(d) applies with respect to the debts alleged in SOR ¶¶ 1.d – 1.hand 1.j. Applicant was not aware that he owed these debts, believing they were paid by his medical insurance. Once he learned of these debts, he paid the debts in full. He is looking into the delinquent credit card account and intends to pay it as soon as he is financially capable. He was working in good-faith with the mortgage companies to modify the loans for his primary residence and his rental property. Despite the financial hardships he has endured, he has worked in good-faith to resolve his delinquent debts. I note that he previously resolved four debts that were not alleged in the SOR.

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(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 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.

I considered Applicant’s employment history as an IT professional and his four periods of unemployment over the past 12 years. Applicant has continued to look for employment, but has been unsuccessful. He continues to operate a part-time photography business and works for his father’s business while he looks for full-time employment. His wife’s medical issues have also affected the household finances. When looking at his numerous hardships, Applicant has not incurred a significant amount of consumer debt, which indicates, that if not for being laid off, he would have been able to make his mortgage payments. Applicant has paid what debts he could and is attempting to modify the loan on his primary residence. Circumstances beyond his control have impacted his ability to pay his mortgages. His financial situation is not perfect, but he demonstrated that he is aware of the issues and what steps need to be done to work on his delinquent accounts. The security concerns raised under financial considerations are 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: FOR APPLICANT

Subparagraphs 1.a – 1.j: For Applicant

CONCLUSION

In light of all of the circumstances presented by the record in this case, it is clearly consistent with the interests of national security to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted.

_________________ ERIN C. HOGAN Administrative Judge