ISCR Case 09-05963.h1

Case Headnote

ISCR Case No. 09-05963.h1

deniedSep 30, 2010· Hon. Arthur E. Marshall, Jr.· hearing

Summary

A 55-year-old managing director of a defense contractor, holding a master's degree in taxation, was denied a security clearance due to concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The denial stemmed from multiple adverse judgments against him, totaling nearly $7 million, which raised significant questions about his reliability and trustworthiness.

Specifically, the applicant faced four adverse judgments. One, for approximately $5.4 million, resulted from an arbitration panel's finding of fraud related to a tax-saving tool. Additionally, he incurred two judgments in July 2008 for $665,000 and $884,230, respectively, after taking demand loans with minimal interest and signing confessional judgments. A fourth judgment, for $25,000, was issued against him for failing to read the fine print in an entertainment contract, though this debt was paid in full in December 2009.

The judge determined that the applicant's history of financial irresponsibility, including his decision to settle a fraud case without contesting the findings, indicated a lack of willingness to abide by rules and regulations. His overall management of financial obligations and legal challenges suggested a lack of forthrightness and reliability, leading to the denial of his security clearance.

Why the Applicant Was Denied

The applicant had multiple adverse judgments totaling nearly $7 million, indicating a history of financial irresponsibility.
The applicant's choice to settle a fraud case without contesting the findings raised concerns about his willingness to abide by rules and regulations.
The applicant's management of financial obligations and legal challenges suggested a lack of forthrightness and reliability.

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(c)appliedThe 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
AG ¶ 20(d)appliedThe Individual Initiated a Good-faith Effort to Repay Overdue Creditors or Otherwise Resolve Debts

Key Rule Quoted

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

Procedural Posture

SOR issuedJan 25, 2010
Answer filedFeb 9, 2010
Hearing heldJun 14, 2010
Decision dateSep 30, 2010

Cite For

Financial Irresponsibility and Adverse Judgments Under Guideline F
Impact of Personal Conduct on Security Clearance Under Guideline E
Importance of Compliance with Legal Obligations in Security Clearance Determinations

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	Applicant failed to read the fine print in an entertainment contract, then tried to pay a band only for their inconvenience, not the full contract price stipulated.	Against Applicant	Rules Violation at Workplace	—	Denied	(a) deliberate omission, concealment, or falsification on a security form (c) credible adverse information across areas supporting a whole-person concern	—	—

Allegation

Finding

Conduct

Concealed Issue

Response

Disqualifying (¶16)

Mitigating applied (¶17)

Mitigation

2.a

Applicant failed to read the fine print in an entertainment contract, then tried to pay a band only for their inconvenience, not the full contract price stipulated.

Against Applicant

Rules Violation at Workplace

—

Denied

(a) deliberate omission, concealment, or falsification on a security form

(c) credible adverse information across areas supporting a whole-person concern

—

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	four adverse judgments amounting to nearly $7 million dollars. One was entered as the result of an arbitration panel’s imputation of fraud regarding an alleged tax-saving tool. The arbitration panel awarded the plaintiffs about $5,400,000, including costs and expenses. This debt is cited as being for $5,345,455 in SOR allegation ¶ 1.a. $5,345,455	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Applicant borrowed money from both entities which ultimately resulted in adverse judgments against him in about July 2008 for $665,000 and $884,230, respectively. He intentionally took the demand loans with minimal interest terms and signed confessional judgments to permit adverse judgments against him. $1,546,230	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	The umbrella corporation for which Applicant serves as managing director includes an acquisitions entity and a holdings entity, the organizations noted in SOR allegations ¶¶ 1.b and 1.c, respectively. Applicant is president of the acquisitions entity which is owned by a pension trust, of which Applicant is the beneficial owner of 85% of the pension trust.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Applicant signed a contract to hire a band, but overlooked the fine print. The band was granted a judgment against Applicant in the amount of $25,000, as reflected in SOR allegation ¶ 1.d. The debt was paid in full in December 2009. $25,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

Allegation

Finding

Type

Response

Disqualifying (¶19)

Mitigating applied (¶20)

Mitigation

1.a

four adverse judgments amounting to nearly $7 million dollars. One was entered as the result of an arbitration panel’s imputation of fraud regarding an alleged tax-saving tool. The arbitration panel awarded the plaintiffs about $5,400,000, including costs and expenses. This debt is cited as being for $5,345,455 in SOR allegation ¶ 1.a.

$5,345,455

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

—

1.b

Applicant borrowed money from both entities which ultimately resulted in adverse judgments against him in about July 2008 for $665,000 and $884,230, respectively. He intentionally took the demand loans with minimal interest terms and signed confessional judgments to permit adverse judgments against him.

$1,546,230

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

—

1.c

The umbrella corporation for which Applicant serves as managing director includes an acquisitions entity and a holdings entity, the organizations noted in SOR allegations ¶¶ 1.b and 1.c, respectively. Applicant is president of the acquisitions entity which is owned by a pension trust, of which Applicant is the beneficial owner of 85% of the pension trust.

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

—

1.d

Applicant signed a contract to hire a band, but overlooked the fine print. The band was granted a judgment against Applicant in the amount of $25,000, as reflected in SOR allegation ¶ 1.d. The debt was paid in full in December 2009.

$25,000

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

—

Loading case…

Case Profile

Summary

Why the Applicant Was Denied

Conditions Referenced

Key Rule Quoted

Procedural Posture

Cite For

Full decision

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

STATEMENT OF CASE

FINDINGS OF FACT

POLICIES

ANALYSIS

WHOLE PERSON CONCEPT

FORMAL FINDINGS

CONCLUSION

FOOTNOTES