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ISCR Case 15-08881.h1 — CASE

ISCR Case 15-08881.h1denied

Case Headnote

ISCR Case No. 15-08881.h1

deniedOct 13, 2017· Hon. Mark W. Harvey· hearing

Summary

A 55-year-old principal systems engineer was denied a security clearance under Guideline F, Financial Considerations, due to unresolved financial issues. The Statement of Reasons detailed six delinquent debts totaling $57,823. Specific allegations included a $13,606 charged-off debt, a $431 telecommunications debt placed for collection, and an $8,545 bank debt also placed for collection.

Disqualifying conditions under AG ¶ 19(a), AG ¶ 19(b), and AG ¶ 19(c) were raised. While mitigating conditions AG ¶ 20(a) through AG ¶ 20(e) were considered, they were not sufficient to overcome the concerns.

The denial was based on the applicant's failure to provide sufficient evidence of debt resolution. No corroborating documentation was presented to support claims of addressing the debts, and the applicant did not demonstrate a good-faith effort to repay or settle them.

Why the Applicant Was Denied

Applicant provided insufficient evidence of resolution of financial issues.
No corroborating documentation was presented to support claims of debt resolution.
Applicant did not demonstrate a good-faith effort to repay or settle 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)rejectedBehavior Happened Long Ago or InfrequentlyApplicant's financial issues are recent and ongoing.
AG ¶ 20(b)rejectedConditions Beyond the Person's ControlInsufficient evidence provided to show that circumstances were beyond the applicant's control.
AG ¶ 20(c)rejectedReceived Financial CounselingNo evidence of financial counseling was presented.
AG ¶ 20(d)rejectedGood-faith Effort to Repay DebtsApplicant did not provide a plan or evidence of payments.
AG ¶ 20(e)rejectedReasonable Basis to Dispute DebtsDisputes were not substantiated with documentation.

Key Rule Quoted

“Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines.”

Procedural Posture

SOR issuedJun 13, 2016
Answer filedAug 22, 2016Applicant did not request a hearing.
Hearing held—
Decision dateOct 13, 2017

Cite For

Insufficient Evidence of Financial Responsibility Under Guideline F
Importance of Corroborating Documentation in Financial Cases
Burden of Proof on Applicant to Mitigate Financial Concerns

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 against the applicant on most financial allegations, citing insufficient evidence of resolution for the debts. The applicant's financial issues were deemed unresolved, leading to a denial of eligibility for access to classified information.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	is a charged-off debt for $13,606 $13,606	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.d	is a telecommunications debt placed for collection for $431 $431	For Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly	Claimed Other
1.e	is a bank debt placed for collection for $8,545 $8,545	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.g	specific text not stated in this decision	Withdrawn	Unspecified Financial	Unknown	—	—	—

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. 15-08881 ) ) Applicant for Security Clearance

For Government: Mary Margaret Foreman, Esq., Department Counsel For Applicant: Pro se

10/13/2017 ___________

STATEMENT OF CASE

___________

HARVEY, Mark, Administrative Judge:

Applicant provided insufficient evidence of resolution of his financial issues. Financial considerations security concerns are not mitigated. Eligibility for access to classified information is denied.

Statement of the Case

On June 2, 2015, Applicant signed his Questionnaire for National Security Positions (SF 86) or security clearance application (SCA). Item 3. On June 13, 2016, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a statement of reasons (SOR) to Applicant under Executive Order (Exec. Or.) 10865, Safeguarding Classified Information within Industry, February 20, 1960; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (Directive), January 2, 1992; and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information, effective on September 1, 2006. The SOR set forth security concerns arising under the financial considerations guideline. Item 1.

On August 22, 2016, Applicant provided a response to the SOR, and he did not request a hearing. Item 2. On September 22, 2016, Department Counsel completed the File of Relevant Material (FORM). Department Counsel withdrew the allegation in SOR ¶ 1.g. FORM at 2. On October 12, 2016, Applicant received the FORM, and he did not respond to the FORM. On October 1, 2017, the case was assigned to me. The case file consists of five exhibits. Items 1-5. Applicant did not object to any of the Government exhibits, and they were admitted into evidence.

The Director of National Intelligence (DNI) issued Security Executive Agent Directive 4, establishing in Appendix A the National Security Adjudicative Guidelines for Determining Eligibility for Access to Classified Information or Eligibility to Hold a Sensitive Position (AGs), which he made applicable to all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position on or after June 8, 2017. The new AGs supersede the previous AGs. Accordingly, I have evaluated Applicant’s security clearance eligibility under the new AGs.1

Findings of Fact2

In Applicant’s SOR response, he admitted the SOR allegations in SOR ¶¶ 1.a, 1.b, and 1.dthrough 1.f. Item 2. He also provided extenuating and mitigating information. Item 2.

Applicant is 55 years old, and he has been employed as a principal systems engineer since July 2015.3 In 1980, he graduated from high school, and in 1985, he received a bachelor’s degree. Item 4. He has not served in the military. He has never married, and he does not have any children. There is no evidence of security violations, abuse of alcohol, or use of illegal drugs.

Financial Considerations

Applicant’s SOR alleges six delinquent debts totaling $57,823: ¶ 1.a is a charged- off debt for $13,606; ¶ 1.bis a charged-off bank debt for $20,167; ¶ 1.cis a utility debt placed for collection for $601; ¶ 1.dis a telecommunications debt placed for collection for $431; ¶ 1.e is a bank debt placed for collection for $8,545; and ¶ 1.fis a bank debt placed for collection for $14,473. Item 1.

Applicant did not recognize the debt in SOR ¶ 1.c; he indicated the debts in SOR ¶¶ 1.a, 1.b, 1.e, and 1.fwere charged off several years ago; and he disputed the debt in SOR ¶ 1.dbecause the telecommunications creditor was unwilling to accept their cable equipment.4 He did not provide his plan to resolve the charged-off debts. Applicant lost his employment in 2008, he worked from 2008 to 2012 in a business he owned with a friend that was ultimately unsuccessful; and he was unemployed from April 2012 to June 2015, when he obtained his current employment. He used his savings for several years while he was unemployed.

In the FORM, Department Counsel noted the absence of corroborating or supporting documentation of resolution of the SOR debts. FORM at 3. Aside from Applicant’s uncorroborated statements, there is no documentary evidence that Applicant paid, arranged to pay, settled, compromised, or otherwise resolved any of the SOR debts. The record lacks corroborating or substantiating documentation and more detailed explanations of the causes for his financial problems, impact on his finances, and other mitigating information. The FORM informed Applicant that he had 30 days from the receipt of the FORM “in which to submit a documentary response setting forth objections, rebuttal, extenuation, mitigation, or explanation, as appropriate. If you do not file any objections or submit any additional information . . . your case will be assigned to an Administrative Judge for a determination based solely” on the evidence set forth in this FORM. FORM at 3-4. He did not respond to the FORM.

POLICIES

The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicant’s eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended.

Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable.

The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See Exec. Or. 10865 § 7. Thus, nothing in this decision should be construed to suggest that it is based, in whole or in part, on any express or implied determination about applicant’s allegiance, loyalty, or patriotism. It is merely an indication the applicant has not met the strict guidelines the President, Secretary of Defense, and DNI have established for issuing a clearance.

Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability. See ISCR Case No. 95-0611 at 2 (App. Bd. May 2, 1996).

Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of disproving a mitigating condition never shifts to the Government. See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b).

ANALYSIS

Financial Considerations

AG ¶ 18 articulates the security concern for financial problems:

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. . . . An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. . . .

The Appeal Board explained the scope and rationale for the financial considerations security concern in ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012) (citation omitted) as follows:

This concern is broader than the possibility that an applicant might knowingly compromise classified information in order to raise money in satisfaction of his or her debts. Rather, it requires a Judge to examine the totality of an applicant’s financial history and circumstances. The Judge must consider pertinent evidence regarding the applicant’s self-control, judgment, and other qualities essential to protecting the national secrets as well as the vulnerabilities inherent in the circumstances. The Directive presumes a nexus between proven conduct under any of the Guidelines and an applicant’s security eligibility.

AG ¶ 19 includes three disqualifying conditions that could raise a security concern and may be disqualifying in this case: “(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.” In ISCR Case No. 08-12184 at 7 (App. Bd. Jan. 7, 2010), the Appeal Board explained:

It is well-settled that adverse information from a credit report can normally meet the substantial evidence standard and the government’s obligations under [Directive] ¶ E3.1.14 for pertinent allegations. At that point, the burden shifts to applicant to establish either that [he or] she is not responsible for the debt or that matters in mitigation apply.

(internal citation omitted). The record establishes the disqualifying conditions in AG ¶¶ 19(a), 19(b), and 19(c) requiring additional inquiry about the possible applicability of mitigating conditions.

Five financial considerations mitigating conditions under AG ¶ 20 are potentially applicable in this case:

(a) the behavior happened so long ago,5 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;6 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.

The DOHA Appeal Board concisely explained Applicant’s responsibility for proving the applicability of mitigating conditions as follows:

Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong presumption against the grant or maintenance of a security clearance. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991). After the Government presents evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those concerns. See Directive ¶ E3.1.15. The standard applicable in security clearance decisions is that articulated in Egan, supra. “Any doubt concerning personnel being considered for access to classified information will be resolved in favor of the national security.” Directive, Enclosure 2 ¶ 2(b).

ISCR Case No. 10-04641 at 4 (App. Bd. Sept. 24, 2013).

None of the mitigating conditions fully apply. Applicant’s financial problems were related to unemployment and the failure of his business. Without more information, he did not establish that he acted prudently. He did not show the extent circumstances beyond his control adversely affected his finances. Applicant did not prove he acted responsibly under the circumstances because he did not show the changes in his income over the last five years, and he did not establish he was unable to make any payments to address any of the SOR debts.

Applicant’s SOR alleges six delinquent debts totaling $57,823. I have credited him with mitigating the debt in SOR ¶ 1.d, a telecommunications debt placed for collection for $431. Applicant offered to return the telecommunications equipment, and the telecommunications company failed to act reasonably to accept their property.

Applicant states that several of his debts are in charged-off status, and he did not describe any plan to resolve them. When a creditor charges off a debt, this action signifies the creditor’s decision to remove the debt from the asset column of a balance sheet.7 A charged-off debt is normally more than six months past due and unlikely to be paid in the near future. The creditor’s accounting decision to charge off the debt does not affect the obligation to pay what is owed. Eventually the charged-off debts will be dropped from his credit report.

“[T]hat some debts have dropped off his credit report is not meaningful evidence of debt resolution.” ISCR Case No. 14-05803 at 3 (App. Bd. July 7, 2016) (citing ISCR Case No. 14-03612 at 3 (App. Bd. Aug. 25, 2015)). The Fair Credit Reporting Act requires removal of most negative financial items from a credit report seven years from the first date of delinquency or the debt becoming collection barred because of a state statute of limitations, whichever is longer.8 Debts may be dropped from a credit report upon dispute when creditors believe the debt is not going to be paid, a creditor fails to timely respond to a credit reporting company’s request for information, or when the debt has been charged off. Applicant’s failure to provide a plan to resolve the charged-off debts on his credit report precludes mitigation of those debts in this case.

Applicant did not provide documentation relating to his SOR debts such as: (1) proof of payments, such as checking account statements, photocopies of checks, or a letter from the creditor proving that he paid or made any payments to the creditor; (2) correspondence to or from the creditor to establish maintenance of contact;9 (3) copies of credible debt disputes sent to the creditor and/or credit reporting companies indicating he did not believe he was responsible for the debt and why he held such a belief; (4) evidence of attempts to negotiate payment plans, such as settlement offers or agreements to show that he was attempting to resolve this debt; or (5) other evidence of progress or resolution.

There is insufficient evidence about why Applicant was unable to make greater documented progress resolving his SOR debts. There is insufficient assurance that his financial problem is being resolved and will not recur in the future. Under all the circumstances, he failed to establish that financial considerations security concerns are mitigated.

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), “[t]he ultimate determination” of whether to grant a security clearance “must be an overall commonsense judgment based upon careful consideration of the guidelines” and the whole-person concept. My comments under Guideline F are incorporated 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 55 years old, and he has been employed as a principal systems engineer since July 2015. In 1985, he received a bachelor’s degree. Applicant’s financial problems were related to unemployment and the failure of his business. There is no evidence of security violations, abuse of alcohol, or use of illegal drugs.

The evidence against grant of a security clearance is more substantial. Applicant’s SOR alleges six delinquent debts totaling $57,823. I have credited him with mitigating the debt in SOR ¶ 1.dfor $431. He did not provide sufficient evidence of changes in his income to show he was unable to make any payments to any of his SOR creditors, especially after becoming employed by his current employer. He provided insufficient corroborating or substantiating documentary evidence of payments and an established payment plan or other mitigating information relating to five of his SOR debts. His actions show lack of financial responsibility and judgment and raise unmitigated questions about Applicant’s reliability, trustworthiness, and ability to protect classified information. See AG ¶ 18. More documented information about inability to pay debts, financial history, or financial progress is necessary to mitigate security concerns.

It is well settled that once a concern arises regarding an applicant’s security clearance eligibility, there is a strong presumption against the granting a security clearance. See Dorfmont, 913 F. 2dat 1401. Unmitigated financial considerations security concerns lead me to conclude that grant of a security clearance to Applicant is not warranted at this time. This decision should not be construed as a determination that Applicant cannot or will not attain the state of reform necessary for award of a security clearance in the future. With more effort towards documented resolution of his past-due debts, and a track record of behavior consistent with his obligations, he may well be able to demonstrate persuasive evidence of his security clearance worthiness.

I have carefully applied the law, as set forth in Egan, Exec. Or. 10865, the Directive, and the AGs, to the facts and circumstances in the context of the whole person. Financial consideration security concerns are not mitigated. It is not clearly consistent with the interests of national security to grant Applicant security clearance eligibility at this time.

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 through 1.c: Against Applicant Subparagraph 1.d: For Applicant Subparagraphs 1.e and 1.f: Against Applicant Subparagraph 1.g: Withdrawn

CONCLUSION

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

_________________________ Mark Harvey Administrative Judge

FOOTNOTES

1 Application of the AGs that were in effect as of the issuance of the SOR would not change my decision in this case. The new AGs are available at http://ogc.osd.mil/doha/SEAD4 20170608.pdf.

2 Some details were excluded to protect Applicant’s right to privacy. Specific information is available in the cited exhibits.

3 Unless stated otherwise, the source of the information in this paragraph is Applicant’s June 2, 2015 Questionnaire for National Security Positions (SF 86) or security clearance application (SCA). Item 3.

4 Unless stated otherwise, the source of the information in this paragraph is Applicant’s August 22, 2016 SOR response. Item 2. 5 A debt that became delinquent several years ago is still considered recent because “an applicant’s ongoing, unpaid debts evidence a continuing course of conduct and, therefore, can be viewed as recent for purposes of the Guideline F mitigating conditions.” ISCR Case No. 15-06532 at 3 (App. Bd. February 16, 2017) (citing ISCR Case No. 15-01690 at 2 (App. Bd. Sep. 13, 2016)).

6 The Appeal Board has previously explained what constitutes a “good faith” effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term “good-faith.” However, the Board has indicated that the concept of good- faith “requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.” Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy) in order to claim the benefit of [the “good faith” mitigating condition].

(internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 7 The information in this paragraph about charged-off debts is from two articles. See Experian website, “Charged Off Debt Must Still Be Repaid,” July 13, 2016, https://www.experian.com/blogs/ask- experian/charged-off-debt-must-still-be-repaid/; Bankrate website, Steve Bucci, “Debt charged off — do I still have to pay?” June 4, 2015, http://www.bankrate.com/finance/debt/debt-charged-off-still-pay.aspx.

8 Title 15 U.S.C. § 1681c. See Federal Trade Commission website, Summary of Fair Credit Reporting Act Updates at Section 605, https://www.consumer.ftc.gov/articles/pdf-0111-fair-credit-reporting- act.pdf. 9 “Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances outside his [or her] control, the Judge could still consider whether Applicant has since acted in a reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99-0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03-13096 at 4 (App. Bd. Nov. 29, 2005)). A component is whether he or she maintained contact with creditors and attempted to negotiate partial payments to keep debts current.