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ISCR Case 15-06882.h1 — CASE

ISCR Case 15-06882.h1denied

Case Headnote

ISCR Case No. 15-06882.h1

deniedOct 12, 2017· Hon. David M. White· hearing

Summary

A 35-year-old employee in the mining and chemical processing industry was denied a security clearance under Guideline F (Financial Considerations). The denial stemmed from over $13,000 in newly delinquent debt incurred after a Chapter 7 bankruptcy in 2007. The Statement of Reasons included allegations of unresolved financial obligations, specifically noting a $375 debt from 2010 that was settled for less than the full balance in 2012.

The judge identified several disqualifying conditions, including a history of not meeting financial obligations and an inability or unwillingness to satisfy debts. While some mitigating conditions were considered, such as the debt not being recent and the individual having initiated a good-faith effort to resolve some issues, these were insufficient to overcome the security concerns.

The primary reasons for denial were the significant amount of new delinquent debt post-bankruptcy, the applicant's failure to explain or justify the nonpayment of outstanding debts, and the lack of evidence demonstrating financial counseling or proactive efforts to resolve the debts. Consequently, the applicant failed to provide sufficient evidence of financial responsibility or mitigation.

Why the Applicant Was Denied

Applicant incurred over $13,000 in new delinquent debt after a Chapter 7 bankruptcy discharge.
Applicant failed to explain or justify the nonpayment of outstanding debts.
No evidence of financial counseling or efforts to resolve debts was provided.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(b)raisedUnwillingness to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(f)raisedFailure to File or Fraudulently Filing Income Tax Returns

Mitigating

AG ¶ 20(e)appliedDispute of Legitimacy of Past-due DebtApplicant documented a legitimate basis to dispute one debt that was erroneously reported.
AG ¶ 20(g)rejectedArrangements with Tax AuthorityApplicant failed to provide documentation of compliance with any repayment arrangement for unpaid taxes.

Key Rule Quoted

“Any doubt concerning personnel being considered for national security eligibility will be resolved in favor of the national security.”

Procedural Posture

SOR issuedJun 6, 2016
Answer filedJul 11, 2016
Decision dateOct 12, 2017

Cite For

Failure to Mitigate Financial Concerns Under Guideline F
Impact of Unresolved Debts on Security Clearance Eligibility
Importance of Providing Evidence of Financial Responsibility

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 significant financial concerns under Guideline F, noting that the applicant incurred over $13,000 in new delinquent debt after a previous bankruptcy. The applicant admitted to several debts but failed to provide sufficient documentation or evidence of efforts to resolve them, leading to a denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	specific text not stated in this decision	Against Applicant	Unspecified Financial	Admitted	—	—	—
1.w	Applicant provided documentation showing that he resolved the $375 debt that became delinquent in 2010, and was placed for collection in 2011, through a 2012 settlement payment for less than the full balance due. $375	For Applicant	Unspecified Financial	Admitted	—	(e) reasonable, documented basis to dispute the debt	Documented Debt Paid in Full

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: 15-06882 ) Applicant for Security Clearance )

For Government: Jeff A. Nagel, Esquire, Department Counsel For Applicant: Pro se

10/12/2017 ______________

STATEMENT OF CASE

______________

WHITE, David M., Administrative Judge:

Applicant incurred more than $13,000 in newly delinquent debt after discharging previous debt through Chapter 7 bankruptcy in 2007. Resulting security concerns were not mitigated. Based upon a review of the pleadings and exhibits, national security eligibility is denied.

On November 26, 2014, Applicant submitted a security clearance application. (Item 2.) On June 6, 2016, the Department of Defense Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of Reasons (SOR), detailing security concerns under Guideline F, Financial Considerations. (Item 1.) The action was taken under Executive Order 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 for Determining Eligibility for Access to Classified Information, effective within the DoD after September 1, 2006. Applicant answered the SOR on July 11, 2016, and requested that his case be decided by an administrative judge on the written record without a hearing. (Item 1.) On August 16, 2016, Department Counsel submitted the Government’s written case. A complete copy of the File of Relevant Material (FORM), containing five Items, was mailed to Applicant on August 18, 2016, and received by him on August 25, 2016. The FORM notified Applicant that he had an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of his receipt of the FORM. Applicant did not submit additional information in response to the FORM, did not file any objection to its contents, and did not request additional time to respond beyond the 30-day period he was afforded. Items 1 through 5 are admitted.

The SOR in this case was issued under the adjudicative guidelines that came into effect within the DoD on September 1, 2006. Security Executive Agent Directive (SEAD) 4, National Security Adjudicative Guidelines (December 10, 2016), implements new adjudicative guidelines, effective June 8, 2017. All national security eligibility decisions1 issued on or after June 8, 2017, are to be decided using the new National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AG), as implemented in Appendix A of SEAD 4. I considered the previous adjudicative guidelines, as well as the new AG, in adjudicating Applicant’s national security eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG promulgated in SEAD 4.

FINDINGS OF FACT

Applicant is 35 years old, and has worked for a mining and chemical processing company since June 2001. He has applied for a position with a defense contractor, which is contingent on him obtaining national security eligibility. He is a high school graduate. He was divorced in 2012, after ten years of marriage, and has five children ranging from 6 to 14 years of age. He has no prior military service or Federal civilian employment. This is his first application for a security clearance. (Item 2.)

In his answer to the SOR, Applicant admitted the allegations in SOR ¶¶ 1.a through 1.w, with some explanations, and denied the allegation in SOR ¶ 1.x. (Item 1.) Applicant’s 2007 Chapter 7 bankruptcy and delinquent debts are also documented in record credit bureau reports from 2014 and 2016. (Items 4 and 5.)

Applicant reported on his security clearance application, and confirmed in his answer to the SOR, that he failed to file his 2011 Federal and state income tax returns as required. His answer included copies of Federal and state returns for that year, which were professionally prepared by a Certified Public Accountant and signed during March 2012. It appears that Applicant’s disclosure was based on his failure to include some of his earnings that year for payments under the Family Paid Medical Leave Act, which he erroneously thought were non-taxable, resulting in about $1,200 in unpaid taxes. He claimed that he would resolve these back taxes through various means, but provided no documentation that he had done so. (Item 1; Item 2.)

In his July 2016 answer to the SOR, Applicant claimed that he had recently resolved the three debts alleged in SOR ¶¶ 1.f, 1.m, and 1.v, totaling $1,777. He asked “for an extension so I can support the statements above with documentation.” (Item 1.) He did not submit any documentation in support of those claims during the 30-day period, ending September 24, 2016, which was provided for his response to the FORM.

Applicant’s 22 SOR-alleged debts became delinquent between 2010 and 2014, and totaled more than $14,000. In addition to the 3 debts discussed above, Applicant admitted that 17 debts, totaling $10,443 (alleged in SOR ¶¶ 1.cthrough 1.e, 1.gthrough 1.l, and 1.nthrough 1.u), remain unresolved. Five of those debts were for less than $50. (Item 1; Item 4; Item 5.)

Applicant provided documentation showing that he resolved the $375 debt that became delinquent in 2010, and was placed for collection in 2011, through a 2012 settlement payment for less than the full balance due. This debt is alleged in SOR ¶ 1.w. (Item 1; Item 4.)

Applicant provided documentation showing that the $1,830 collection account, alleged in SOR ¶ 1.x, was erroneously reported to the credit bureau. This debt is resolved. (Item1.)

Applicant provided no explanation or justification for his nonpayment of his outstanding delinquent debts, and no evidence of his willingness or ability to resolve them. He did not document any financial counseling or provide budget information from which to predict his future solvency. He offered no evidence to support findings concerning his character or trustworthiness, the quality of his professional performance, the level of responsibility his duties entail, or his track record with respect to handling sensitive information and observation of security procedures. I was unable to evaluate his credibility, demeanor, or character in person since he elected to have his case decided without a hearing.

POLICIES

When evaluating an applicant’s suitability for national security eligibility, the administrative judge must consider the pertinent adjudicative guidelines. In addition to brief introductory explanations of the security concern, the guidelines list potentially disqualifying conditions and mitigating conditions, which are to be used in evaluating an applicant’s national security eligibility. 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 AG ¶ 2 describing the adjudicative process. The administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. The entire process is a conscientious scrutiny of applicable guidelines in the context 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. I have not drawn inferences based on mere speculation or conjecture.

Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance decision.”

A person applying for national security eligibility seeks to enter 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 national security eligibility. 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 potential, rather than actual, risk of compromise of classified or sensitive information.

Finally, as emphasized in Section 7 of Executive Order 10865, “[a]ny determination under this order adverse to an applicant shall be a determination in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also Executive Order 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information.)

ANALYSIS

Guideline F: Financial Considerations

The security concerns relating to the guideline for financial considerations are set out in AG ¶ 18, which reads in pertinent part:

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 personal 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.

AG ¶ 19 describes four conditions that could raise security concerns and may be disqualifying in this case:

(a) inability to satisfy debts;

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

(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 has been continuously employed since 2001, yet incurred more than $13,000 in new delinquent debts after discharging his previous debts through Chapter 7 bankruptcy in 2007. He was unable or unwilling to repay most of these debts, and failed to explain why they remain delinquent. These financial issues date back to 2010, and continue. Five of the unresolved debts involve less than $50. He timely filed, but failed to properly report and pay some of his 2011 Federal and state income taxes. These facts establish prima facie support for the foregoing disqualifying conditions, and shift the burden to Applicant to mitigate the resulting security concerns. The guideline includes six conditions in AG ¶ 20 that could mitigate the security concerns arising from Applicant’s financial difficulties:

(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, or 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;

(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; 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.

Applicant admittedly continues to owe more than $10,000 for debts that became delinquent between 2010 and 2014. He claimed, but did not document, that he had resolved over $3,000 in additional tax and consumer debt. He offered no reasonable basis to conclude that such problems will not recur, so mitigation was not established under AG ¶ 20(a).

Applicant neither asserted nor documented that his delinquent debts arose from conditions that were beyond his control, or that he acted responsibly under the circumstances, as required for mitigation under AG ¶ 20(b). He also failed to provide evidence of financial counseling or efforts to resolve the debts that could establish mitigation under the provisions of AG ¶¶ 20(c) or 20(d). Applicant documented a legitimate basis to dispute the debt alleged in SOR ¶ 1.x, because it was erroneously reported to the credit bureau as a collection account. Mitigation of security concerns relating to this debt was established under AG ¶ 20(e).

Applicant documented that he timely filed his 2011 Federal and state income tax returns. However, he provided several different explanations for how he would resolve his estimated $1,200 in unpaid taxes for that year, and failed to provide documentation of compliance with any repayment arrangement. Full mitigation of resulting security concerns was not established under AG ¶ 20(g).

WHOLE PERSON CONCEPT

Under the whole-person concept, the administrative judge must evaluate an applicant’s national security eligibility by considering the totality of the applicant’s conduct and all relevant 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.

According to AG ¶ 2(c), the ultimate determination of whether to grant national security eligibility must be an overall commonsense judgment based upon careful consideration of the applicable guidelines and the whole-person concept.

I considered the potentially disqualifying and mitigating conditions in light of all pertinent facts and circumstances surrounding this case. Applicant is a mature adult, who is accountable for his choices. He continues to owe more than $10,000 in delinquent debt that he has accumulated over the past seven years, and either cannot or chooses not to repay. These delinquencies were incurred following his 2007 Chapter 7 bankruptcy discharge, demonstrating an absence of rehabilitation or permanent behavioral changes. The potential for pressure, exploitation, or duress from his financial situation remains undiminished. Overall, the evidence creates significant doubt as to Applicant’s judgment, eligibility, and suitability for a security clearance. He failed to meet his burden to mitigate the security concerns arising under the guideline for financial considerations.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by ¶ E3.1.25 of Enclosure 3 of the Directive, are:

Paragraph 1, Guideline F: AGAINST APPLICANT

Subparagraphs 1.a through 1.v: Against Applicant Subparagraphs 1.wand 1.x: For Applicant

CONCLUSION

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

DAVID M. WHITE Administrative Judge

FOOTNOTES

1 SEAD 4 ¶ D.7 defines “National Security Eligibility” as, “Eligibility for access to classified information or eligibility to hold a sensitive position, to include access to sensitive compartmented information, restricted data, and controlled or special access program information.”