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ISCR Case 14-04865.h1 — CASE

ISCR Case 14-04865.h1granted

Case Headnote

ISCR Case No. 14-04865.h1

grantedSep 14, 2016· Hon. Marc E. Curry· hearing

Summary

This case concerns a 47-year-old married business analyst for a defense contractor whose security clearance was granted despite financial considerations under Guideline F. The applicant's financial difficulties, including approximately $600,000 in first and second mortgages and consolidated credit card debt, led to a Chapter 7 bankruptcy filing. These issues were largely attributed to her husband's post-deployment health problems.

Disqualifying conditions related to financial irresponsibility were raised, but the judge applied several mitigating conditions. The decision highlighted that the applicant's financial problems were primarily beyond her control.

Crucially, the applicant demonstrated responsible efforts to resolve her debt, including the bankruptcy filing, and established a budget, showing signs of financial stability after her bankruptcy discharge. Based on these mitigating factors and her proactive steps, the security clearance was granted.

Why the Applicant Prevailed

The applicant's financial problems were largely beyond her control due to her husband's health issues.
She demonstrated responsible efforts to resolve her financial difficulties, including filing for Chapter 7 bankruptcy.
The applicant maintained a budget and showed signs of financial stability post-bankruptcy discharge.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond the Person's Control
AG ¶ 20(c)appliedReceiving Counseling or Indications That the Problem Is Being Resolved
AG ¶ 20(d)appliedGood-faith Effort to Repay Overdue Creditors
AG ¶ 20(e)appliedReasonable Basis to Dispute Legitimacy of Past-due Debt

Key Rule Quoted

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

Procedural Posture

SOR issuedFeb 17, 2015
Answer filedApr 20, 2015
Hearing heldJun 23, 2016
Decision dateSep 14, 2016

Cite For

Mitigation of Financial Issues Under Guideline F Due to Circumstances Beyond Control
Responsible Efforts to Resolve Financial Difficulties Through Bankruptcy
Demonstrating Financial Stability Post-bankruptcy Discharge

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 applicant faced financial difficulties primarily due to circumstances beyond her control, including her husband's health issues and her subsequent job loss. She successfully filed for Chapter 7 bankruptcy, discharging her unsecured debts, and demonstrated improved financial stability, leading the judge to rule in her favor on all allegations under Guideline F.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Approximately $600,000 of this debt constitutes the first and second mortgages on her home $600,000	For Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.b	Applicant obtained a loan to consolidate multiple credit card accounts	For Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.c–1.g	5 sub-charges — specific text not stated in this decision (for the applicant). (low confidence)	For Applicant			—	—	—
1.h	Approximately $600,000 of this debt constitutes the first and second mortgages on her home $600,000	For Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.i–1.j	2 sub-charges — specific text not stated in this decision (for the applicant). (low confidence)	For Applicant			—	—	—

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

Full decision

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

Decision text, by section

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS

In the matter of: ) ) ) ISCR Case No. 14-04865 ) Applicant for Security Clearance )

For Government: Rhett E. Petcher, Esq., Department Counsel For Applicant: Pro se

09/14/2016 ______________

STATEMENT OF CASE

______________

CURRY, Marc E., Administrative Judge:

Applicant’s financial problems stemmed from circumstances beyond her control. Given the responsible and diligent manner that she has attempted to ameliorate her financial problems, obtaining a Chapter 7 bankruptcy after exhausting other remedies, and continuously working with the holder of her home mortgage to modify her home loan, I conclude that she has mitigated the financial considerations security concern. Clearance is granted.

Statement of the Case

On February 17, 2015, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant detailing trustworthiness concerns under Guideline F, financial considerations. The action was taken under 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) implemented by the DOD on September 1, 2006. On April 20, 2015, Applicant answered the SOR, admitting all of the allegations and requesting a hearing. On October 22, 2015, Department Counsel amended the SOR, alleging nine additional allegations (SOR subparagraphs 1.c - 1.j). (Hearing Exhibit (HE I) On November 19, 2015, Applicant answered the Amended SOR, admitting the supplemental allegations. On May 4, 2016, Department Counsel received an e-mail from Applicant’s employer that Applicant was selected to work on a classified contract and needed a security clearance. On May 23, 2016, Department Counsel again amended the SOR, changing the caption from ADP Case No. 14-04865 to ISCR Case No. 14-04865 and deleting any references to automatic data processing in the introductory paragraph. (HE II)

The case was assigned to me on April 11, 2016. DOHA issued a notice of hearing on May 10, 2016, scheduling the hearing for June 23, 2016. The hearing was held as scheduled. Department Counsel submitted five exhibits that I identified and received as Government Exhibits (GE) 1 through 5. I identified and received three exhibits that Applicant submitted (AE A - C), and I took administrative notice of three documents. (HE I - HE III) DOHA received the transcript (Tr.) on June 1, 2016.

FINDINGS OF FACT

Applicant is a 47-year-old married woman. She earned a GED in 1990. Since then, she has taken some college courses in the field of information technology and network administration. Currently, she works for a defense contractor as a business analyst. (Tr. 31)

Between 2007 and 2012, Applicant incurred nearly $700,000 of debt. Approximately $600,000 of this debt constitutes the first and second mortgages on her home (SOR subparagraphs 1.a and 1.h). (Tr. 43) Applicant’s financial problems began in the mid-2000s, a few years after her husband, a veteran, returned home from a combat deployment, suffering from various maladies, including post-traumatic stress disorder. (Answer, Attachment (Att.) B at 1) Applicant and her husband were dependent upon both incomes to make ends meet. Before her husband was deployed, he worked full-time. As he became increasingly incapacitated, his ability to work full time diminished.

By 2007, Applicant’s husband was making significantly less income than he did before his deployment. Consequently, they began using credit cards to compensate for the income loss. That year, Applicant obtained a loan to consolidate multiple credit card accounts (SOR subparagraph 1.b). (Answer at 2) In 2008, Applicant attempted to obtain loan modifications of her mortgages. (Tr. 41) She successfully obtained a modification of the secondary loan, but not the primary loan. (Tr. 42) In 2009, the interest rates on her adjustable rate primary mortgage loan accelerated, increasing her mortgage payments by $700 monthly. (Answer, Att. B2 at 3)

Despite Applicant’s difficulties making ends meet, she continued to pay debts on time. (Tr. 30) She was able to do so, in part, by obtaining a modification of her consolidation loan (SOR subparagraph 1.b) in 2010, and by withdrawing money from her savings account. (Answer at 2) In September 2011, Applicant was laid off from her job. (Tr. 30) Although she was able to partially offset her income loss with a part-time job obtained in April 2012 (GE 1 at 9), she was either unemployed, or underemployed for approximately a year until obtaining her current job in August 2012. (GE 1 at 9, 12; Tr. 30) Consequently, her debts became delinquent.

In November 2012, the primary mortgage on Applicant’s home was foreclosed upon. (Answer, Att. B7 at 2) In response, Applicant sued the mortgagee alleging wrongful sale and foreclosure. (Answer, Att. B7) In January 2013, while the litigation was pending, the mortgagee requested that Applicant vacate the home. Applicant did not move. Instead, she drafted a proposal requesting that they work out a payment agreement whereupon she could remain in the home. The mortgagee did not respond. As of March 2015, a motion for default judgment, filed by Applicant, has been pending. (Answer, Att. B7) Currently, Applicant remains in the home. She has not made any mortgage payments while the litigation has been pending.

In March 2015, Applicant filed for Chapter 13 bankruptcy protection. (Answer at 2) The unsecured debts alleged in subparagraphs 1.b, and subparagraphs 1.dthrough 1.fwere included in the filing. In September 2015, Applicant obtained an order converting the filing from Chapter 13 of the bankruptcy code to Chapter 7 of the bankruptcy code. In December 2015, the bankruptcy court discharged her unsecured debt, including SOR subparagraphs1.b, and subparagraphs 1.dthrough 1.j. (AE A)

Applicant maintains a budget. (GE 5 at 19-20) She has approximately $2,000 of monthly, after-expense income, and $17,000 deposited between a checking and a savings account. (Tr. 69)

POLICIES

The adjudicative guidelines list potentially disqualifying conditions and mitigating conditions. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, they are applied together with the factors listed in the adjudicative process. According to AG ¶ 2(c), 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 to classified information will be resolved in favor of national security.”

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 for obtaining a favorable security decision.

ANALYSIS

Guideline F, Financial Considerations

Applicant’s history of financial problems triggers the application of AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting financial obligations.”

The following mitigating conditions under AG ¶ 20 are potentially applicable:

(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, or a death, divorce or separation), and the individual acted responsibly under the circumstances;

(c) the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control;

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

(e) 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.

Applicant’s financial problems were not caused by irresponsible or profligate spending. Instead, they occurred after her husband, whose income she needed to help support their household, returned from a combat deployment suffering from post- traumatic stress disorder, a disability that progressively interfered with his ability to maintain steady, full-time employment. Applicant tried to offset this loss of income by refinancing several debts into a consolidation loan and using her savings to make ends meet. However, she totally lost control of her finances when she was laid off from her job in 2012. Unable to make ends meet, she decided to resolve her financial crisis through the federal bankruptcy court. Currently, all of her unsecured debt has been discharged. AG ¶ 20(b) and 20(d) apply.

Applicant’s home mortgage remains in foreclosure status, and though she has remained in the home, she has not made any mortgage payments in more than two years. Conversely, she has been working actively trying to modify the mortgage with the mortgagee since she first fell behind on her payments. Currently, she is challenging the foreclosure in court and attempting to negotiate a resolution of the dispute. It is not within the purview of this court to assess the merits of civil claims tangentially related to an applicant’s security worthiness. However, given the comprehensive nature of Applicant’s motion for a default judgment pleading in her civil case against the bank that foreclosed upon her mortgage (Answer, Att. B), and the fact that the case is still pending, her dispute appears, at minimum, to have a reasonable, good-faith basis. I conclude AG ¶ 20(e) applies.

Applicant has demonstrated that her finances are under control. She maintains a budget. She earns $83,000 annually, has a combined $17,000 deposited in two bank accounts, and now has approximately $2,000 of after-expense income since the bankruptcy discharge. AG ¶ 20(c) applies.

WHOLE PERSON CONCEPT

Under the whole-person concept, the administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a). They are as follows:

(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.

I conclude that mitigating circumstances such as the cause of Applicant’s financial distress, the reasonable manner in which she confronted it, and the signs of stability indicated by her reserve income and her ample discretionary income outweigh the negative security ramifications of the foreclosure status of her home. Applicant has mitigated the financial considerations security concern.

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 national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted.

MARC E. CURRY Administrative Judge