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ISCR Case 14-05205.h1 — CASE

ISCR Case 14-05205.h1denied

Case Headnote

ISCR Case No. 14-05205.h1

deniedDec 19, 2017· Hon. Pamela C. Benson· hearing

Summary

A 43-year-old male applicant was denied a security clearance under Guideline F (Financial Considerations) due to a history of unresolved financial issues. The Statement of Reasons detailed several concerns, including the failure to file federal and state income tax returns for tax year 2010, resulting in a $2,300 debt to the state Department of Revenue. Additionally, the applicant admitted to owing $27,692 in delinquent debts across multiple accounts.

These debts included a $10,533 unsecured financial installment account charged off around 2013, and two car loan accounts totaling $6,440 and $3,148, which were also charged off as bad debts. The applicant acknowledged that excessive gambling from 2005 to at least March 2013 contributed to his delinquencies on rent, utility bills, car loans, and personal loans taken to manage other debts.

The denial was based on the applicant's failure to provide evidence of resolving the delinquent debts or filing the outstanding tax returns. The judge noted that the financial difficulties stemmed from reckless spending and gambling, which were within the applicant's control. Furthermore, there was no evidence of financial counseling or good-faith efforts to repay creditors.

Why the Applicant Was Denied

The applicant failed to provide evidence of resolving delinquent debts or filing tax returns.
The applicant's financial issues stemmed from reckless spending and gambling, which were within his control.
There was no evidence of financial counseling or good-faith efforts to repay creditors.

Conditions Referenced

Disqualifying

F.1.araisedInability to Satisfy Debts
F.1.braisedUnwillingness to Satisfy Debts
F.1.craisedHistory of Not Meeting Financial Obligations
F.1.fraisedFailure to File Income Tax Returns

Key Rule Quoted

“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.”

Procedural Posture

SOR issuedFeb 2, 2015
Answer filedJun 12, 2015
Hearing held—Decided on written record
Decision dateDec 19, 2017

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Impact of Gambling on Financial Stability
Importance of Demonstrating Financial Responsibility for 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 that the applicant failed to mitigate financial concerns under Guideline F, as he had numerous unresolved debts totaling $27,692, including unpaid taxes and charged-off loans. The applicant's financial issues stemmed from excessive gambling and poor budgeting, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant has not filed his Federal and state income tax returns for tax year 2010 and owes the state Department of Revenue $2,300. $2,300	Against Applicant	Tax Unpaid	Admitted	(f) failure to file / fraudulent filing of tax returns or unpaid tax	—	—
1.b	Applicant admitted he owed the delinquent debts cited in SOR ¶¶ 1.b through 1.m (ranging from $10,533 to $163; totaling $27,692).	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	The largest debt, SOR ¶¶ 1.c ($10,533), is an unsecured financial installment account that was charged off as a bad debt in approximately 2013. $10,533	Against Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	The next two largest debts, 1.d ($6,440) and 1.e ($3,148), are car loan accounts also charged off as bad debts. $6,440	Against Applicant	Auto Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	The next two largest debts, 1.d ($6,440) and 1.e ($3,148), are car loan accounts also charged off as bad debts. $3,148	Against Applicant	Auto Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.n	Applicant admitted that from 2005 to at least March 2013, he gambled to excess, which caused him to be delinquent on rent, utility bills, car loans, as well as personal loans he took out to pay off his delinquent debts during that time.	Against Applicant	Gambling Losses	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—
1.f–1.n	9 sub-charges — specific text not stated in this decision (against the applicant). (low confidence)	Against 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. 14-05205 ) Applicant for Security Clearance )

For Government: Ray T. Blank Jr., Esq., Department Counsel For Applicant: Pro se

12/19/2017 ______________

STATEMENT OF CASE

______________

BENSON, Pamela, C., Administrative Judge:

Applicant failed to mitigate the security concerns under Guideline F, (Financial Considerations). Eligibility for access to classified information is denied.

Statement of the Case

Applicant submitted a security clearance application (SCA) on February 19, 2014. On February 2, 2015, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued him a Statement of Reasons (SOR) 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 September 1, 2006. On June 8, 2017, new AG were implemented and are effective for decisions issued on or after that date.1 Applicant answered the SOR on June 12, 2015, and elected to have his case decided on the written record in lieu of a hearing. On April 26, 2017, Department Counsel submitted the Government’s file of relevant material (FORM). Applicant received it on June 13, 2017. The Government’s evidence is identified as Items 1 through 8. He was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. Applicant did not provide a response to the FORM, object to the Government’s evidence, or submit documents. The case was assigned to me on September 26, 2017.

PROCEDURAL MATTERS

Department Counsel’s FORM includes Exhibit 7, which is a report of investigation (ROI) summarizing Applicant’s interview that took place during the 2014 background investigation. The ROI is not authenticated by a witness, which is required under ¶ E3.1.20 of the Directive.2 Likewise, Section 5(a) of Executive Order 10865 prohibits receipt and consideration of “investigative reports” without authenticating witnesses. The Directive provides no exception to the authentication requirement. Indeed, the authentication requirement is the exception to the general rule that prohibits consideration of an ROI.

Department Counsel’s written brief includes a footnote advising Applicant that the summary was not authenticated and that failure to object may constitute a waiver of the authentication requirement. Nevertheless, the written record does not demonstrate that Applicant, who has not replied to the FORM, understood the concepts of authentication, waiver, and admissibility. It also does not demonstrate that he understood the implications of waiving an objection. Accordingly, given the lack of an authenticating witness, I have not considered the ROI in reaching my decision.

FINDINGS OF FACT

Applicant admitted all the allegations in his Answer to the SOR. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact.

Applicant is 43 years old. He has never married and has no children. He earned a high school diploma in June 1992, and he attended college classes in 2004, but did not earn a degree. He served on active duty in the U.S. Navy from 1993 through 1997 and received an Honorable Discharge. He also served in the U.S. Navy Reserve for three months in 1998. He has been employed by his present employer, a federal contractor, since June 2002. In his SCA, Applicant disclosed two part-time jobs in addition to his full-time employment for the period of March 2006 to March 2008. Applicant has been employed steadily since 2002, and he was granted a secret clearance in March 2004. On his SCA, Applicant disclosed that he moved in with his parents in February 2006 and lived with them for over a year in an effort to get his finances in order. Applicant also listed that he moved in with his friend in August 2011 after he was evicted from his apartment. He listed several delinquent debts on the SCA, and disclosed that he had been going out quite often, eating at casual dining establishments about 4-5 times a week. He also listed that he had been taking vacations when he should have been saving money. Applicant acknowledged that he had not maintained his personal budget.3

The delinquent debts alleged in the SOR are supported by credit reports from March 2014, August 2015, and April 2017. Applicant admitted he owed the delinquent debts cited in SOR ¶¶ 1.bthrough 1.m (ranging from $10,533 to $163; totaling $27,692). The largest debt, SOR ¶¶ 1.c ($10,533), is an unsecured financial installment account that was charged off as a bad debt in approximately 2013. The next two largest debts, 1.d ($6,440) and 1.e ($3,148), are car loan accounts also charged off as bad debts. The SOR also alleged that Applicant had not filed his Federal and state income tax returns for tax year 2010. Applicant admitted in his Answer that he had not yet filed these tax returns and that he also owed the state Department of Revenue $2,300. (See SOR ¶¶ 1.a. and 1.b). Applicant also admitted that from 2005 to at least March 2013, he gambled to excess, which caused him to be delinquent on rent, utility bills, car loans, as well as personal loans he took out to pay off his delinquent debts during that time. (SOR ¶¶ 1.n.)4

I have inferred from Applicant’s SCA and his Answer to the SOR that his financial problems stem from periods of over-spending, gambling, and not maintaining a personal budget. He listed on the SCA that he intended to obtain another part-time job to assist him with his mounting expenses. There is no evidence that he participated in any type of financial counseling. There is also no evidence to indicate that Applicant sought debt consolidation or had begun to address his delinquent debts.5

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 AG list potentially disqualifying conditions and mitigating conditions, which are used 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 overarching adjudicative goal is a fair, impartial, and commonsense decision. 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 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. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel, and 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 an 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.

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 provides conditions that could raise security concerns. The following are potentially applicable:

(a) inability to satisfy debts;

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

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

Applicant experienced financial difficulty beginning in 2002 even though he was working full time with his current employer in June 2002. His financial problems have continued despite Applicant working part-time jobs in addition to working full time for his current position. The delinquent debts alleged are unresolved. There is sufficient evidence to support the application of the above disqualifying conditions.

The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions under AG ¶ 20 are potentially applicable:

(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 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

(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 began experiencing financial problems in 2002 after recklessly spending money, gambling, and failing to live within his means. Applicant has numerous debts that remain unresolved. He has not provided proof that he has paid or resolved even the smallest debt in the SOR. His financial issues are ongoing. AG ¶ 20(a) does not apply.

Applicant’s gambling and unrestrained spending were not conditions beyond his control. AG ¶ 20(b) does not apply.

There is no evidence that Applicant is enrolled in a credit service or undertaken financial counseling. There is insufficient evidence to show that he has made a good- faith effort to repay overdue creditors or otherwise resolve his delinquent debts. He did not provide sufficient evidence to show he disputed the legitimacy of any of the delinquent debts alleged or provided documented proof to substantiate the basis of a dispute or evidence of actions to resolve the issues. Insufficient evidence was provided to apply AG ¶¶ 20(c), 20(d), and 20(e).

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 the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(d) were addressed under that guideline, but some warrant additional comment.

Applicant is 43 years old and had financial setbacks beginning in 2002, which caused him to move into his parents’ home in order to save money to pay mounting debts. He started working for his current employer in June 2002. During March 2006 to March 2008, Applicant was working part-time jobs in addition to his full-time job. He continued to accumulate debts due to reckless spending, gambling, and an inability to live within his means. Applicant did not file 2010 income tax returns or pay Federal and state taxes due to running late on his rent, paying past due bills, and dealing with a couple of vehicle repossessions.6 Insufficient evidence was provided by Applicant to conclude his debts are paid or being resolved, or that his Federal and state tax returns were filed or otherwise resolved. Applicant failed to show he is responsibly managing his finances. The record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate the security concerns arising under Guideline F, financial considerations.

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

Subparagraphs 1.a-1.n: Against Applicant

CONCLUSION

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

Pamela C. Benson Administrative Judge

FOOTNOTES

1 I considered the previous AG, effective September 1, 2006, as well as the new AG, effective June 8, 2017. My decision would be the same if the case was considered under the previous AG. 2 See generally ISCR Case No. 12-10933 (App. Bd. Jun. 29, 2016) (In a concurring opinion, Judge Ra’anan notes the historical concern about reports of investigation in that they were considered by some to present a heightened problem in providing due process in security clearance cases. Judge Ra’anan raises a number of pertinent questions about using an unauthenticated ROI in a non-hearing case with a pro se applicant.). 3 Item 4.

4 Item 1, 2, 5, 6, 8.

5 Items 2, 4. 6 Item 4.