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ISCR Case 16-00287.h1 — CASE

ISCR Case 16-00287.h1granted

Case Headnote

ISCR Case No. 16-00287.h1

grantedAug 25, 2017· Hon. Jennifer I. Goldstein· hearing

Summary

A 50-year-old government contractor was granted a security clearance despite concerns under Guideline F (Financial Considerations). The Statement of Reasons (SOR) detailed several financial issues, including a Chapter 7 bankruptcy filed in June 2010, which discharged over $2.3 million in unsecured claims by July 2011. This bankruptcy also resolved a $32,992 vehicle loan judgment from June 2010.

Other allegations included a June 2013 judgment initially reported as $138,824, later corrected to $1,388 and satisfied by October 2016. The applicant was also indebted on a delinquent child support obligation, which decreased from $18,244 to $11,699 by October 2016, with ongoing monthly payments of $481. Additionally, a $927 business credit card collection account was reduced to $537 by October 2016 through $25 monthly payments.

The judge determined that the applicant's financial difficulties stemmed from a business failure due to an accident, a circumstance beyond his control. The applicant demonstrated good-faith efforts to resolve his debts, establishing repayment plans and incurring no new delinquencies. Based on these mitigating factors, the security clearance was granted.

Why the Applicant Prevailed

The applicant's financial difficulties were caused by a business failure due to an accident, which was beyond his control.
He has made good-faith efforts to repay his debts and has established repayment plans with creditors.
The applicant demonstrated responsible behavior by resolving or paying his debts and incurring no new delinquencies.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond the Person's Control
AG ¶ 20(d)appliedGood-faith Effort to Repay Overdue Creditors

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 issuedJun 9, 2016
Answer filedJun 24, 2016
Hearing held—Decided on the written record without a hearing.
Decision dateAug 25, 2017

Cite For

Mitigation of Financial Difficulties Under Guideline F
Impact of Circumstances Beyond Control on Financial Obligations
Good-faith Efforts in Debt Repayment as a Mitigating Factor

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 judge found that the applicant's financial difficulties stemmed from a business-related accident that led to a Chapter 7 bankruptcy filing in 2010, which was discharged in 2011. The applicant has since made efforts to resolve his debts, demonstrating responsible behavior and good faith in repayment, leading to a decision in favor of the applicant on all financial allegations.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	SOR ¶ 1.a alleged Applicant was indebted on a June 2013 judgment in the amount of $138,824, as stated on an April 14, 2015 credit report. The amount was corrected to $1,388 in an October 2016 credit report, and was listed as “satisfied.” This debt is resolved. $138,824	For Applicant	Judgment Against Applicant	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.b	SOR ¶ 1.b alleged Applicant filed Chapter 7 bankruptcy in June 2010. His schedule of creditors holding unsecured claims totaled over $2,300,000. The Chapter 7 bankruptcy was discharged in July 2011.	For Applicant	Bankruptcy Filing	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.c	SOR ¶ 1.c alleged Applicant was indebted on a judgment for a vehicle loan in the amount of $32,992. This judgment was filed in June 2010. It was discharged through Applicant’s Chapter 7 bankruptcy in April 2011. It is resolved. $32,992	For Applicant	Judgment Against Applicant	Denied	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.d	SOR ¶ 1.d alleged Applicant was indebted on a delinquent child support obligation in the amount of $18,244. Applicant’s October 2016 credit report reflects the balance of this debt decreased to $11,699. Applicant explained he currently makes monthly payments of $481 toward his child support obligation. Of that payment, $100 goes toward arears, and $381 is for the current month. His October 2016 credit report reflects that he successfully made his agreed payment in September 2016. Applicant is resolving this debt. $18,244	For Applicant	Child Support Debt	Denied with Explanation	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—
1.e	SOR ¶ 1.e alleged Applicant was indebted on a collection account in the amount of $927. This was an outstanding business credit card debt. Applicant has been making payments with money orders on this account. He provided copies of multiple money orders he claims he sent to this creditor. His October 2016 credit report reflects that the balance due has decreased to $537 and that he is making $25 monthly payments on this account. Applicant is resolving this delinquency. $927	For Applicant	Credit Card Debt	Admitted	—	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	—

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. 16-00287 ) Applicant for Security Clearance )

For Government: Eric Borgstrom, Esquire, Department Counsel For Applicant: Pro se

August 25, 2017 ______________

STATEMENT OF CASE

______________

GOLDSTEIN, Jennifer I., Administrative Judge:

Applicant discharged business debts through Chapter 7 bankruptcy filed in 2010, as a result of his business going defunct after an accident occurred. Since the discharge in 2011, he has paid or is paying all of his debts. Based upon a review of the pleadings and exhibits, eligibility for access to classified information is granted.

On March 25, 2015, Applicant submitted a security clearance application (SF- 86). (Item 3.) On June 9, 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 (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 for Determining Eligibility for Access to Classified Information. Applicant answered the SOR on June 24, 2016. (Item 2.) He requested that his case be decided by an administrative judge on the written record without a hearing. (Item 2.) On October 24, 2016, Department Counsel submitted the Government’s written case. A complete copy of the File of Relevant Material (FORM), containing six Items, was mailed to Applicant on October 25, 2016, and received by him on November 8, 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 responded to the FORM in an undated letter received by the Government on November 23, 2016. I marked his submission Applicant Exhibit (AE) A, and admitted it without objection. DOHA assigned the case to me on August 2, 2017. Items 1 through 6 are admitted into evidence.

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, implemented new adjudicative guidelines, effective June 8, 2017. All security clearance decisions 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 by SEAD 4. I considered the previous adjudicative guidelines, effective September 1, 2006, as well as the new AG, effective June 8, 2017, in adjudicating Applicant’s security clearance eligibility. My decision would be the same under either set of guidelines, although this decision is issued pursuant to the new AG.

FINDINGS OF FACT

Applicant is 50 years old and divorced since 2002. He has two children, ages 17 and 29. He has worked for his current employer, a Government contractor, since October 2014. (Item 3.)

The SOR alleged that Applicant was delinquent on four debts in the total amount of $190,987. Additionally, he was alleged to have filed a Chapter 7 bankruptcy petition in 2010, which was discharged in 2011. (Item 1; FORM.) Applicant admitted SOR ¶¶ 1.band 1.e. He denied SOR ¶¶ 1.a, 1.c, and 1.d. (Item 2; AE A.)

SOR ¶ 1.a alleged Applicant was indebted on a June 2013 judgment in the amount of $138,824, as stated on an April 14, 2015 credit report. The amount was corrected to $1,388 in an October 2016 credit report, and was listed as “satisfied.” This debt is resolved. (FORM; Item 5; Item 4.)

SOR ¶ 1.balleged Applicant filed Chapter 7 bankruptcy in June 2010. His schedule of creditors holding unsecured claims totaled over $2,300,000. (Item 7 at 16.) He explained that the bankruptcy resulted from a “tractor trailer accident with his business that resulted in a total loss of the business.” (Item 6 at 2.) The vehicle accident left the “business defunct.” (Item 3 at 12.) His creditors included $1,494,034 in liens against real property and improvements, and multiple deficiencies, which resulted from surrendering vehicles to the creditors. The Chapter 7 bankruptcy was discharged in July 2011.1 (Item 6.)

SOR ¶ 1.calleged Applicant was indebted on a judgment for a vehicle loan in the amount of $32,992. This judgment was filed in June 2010. It was discharged through Applicant’s Chapter 7 bankruptcy in April 2011. It is resolved.

SOR ¶ 1.dalleged Applicant was indebted on a delinquent child support obligation in the amount of $18,244. Applicant’s October 2016 credit report reflects the balance of this debt decreased to $11,699. Applicant explained he currently makes monthly payments of $481 toward his child support obligation. Of that payment, $100 goes toward arears, and $381 is for the current month. His October 2016 credit report reflects that he successfully made his agreed payment in September 2016. Applicant is resolving this debt. (Item 2; Item 4 at 2; AE A.)

SOR ¶ 1.e alleged Applicant was indebted on a collection account in the amount of $927. This was an outstanding business credit card debt. Applicant has been making payments with money orders on this account. He provided copies of multiple money orders he claims he sent to this creditor. His October 2016 credit report reflects that the balance due has decreased to $537 and that he is making $25 monthly payments on this account. Applicant is resolving this delinquency. (Item 4.)

Applicant’s October 2016 credit report reflects all of Applicant other accounts are resolved or are in good standing. He indicated in his Answer, “since 2010 I have paid my debts or made payment arrangements to satisfy any debt, I am current with all my creditors including my federal taxes and child support.” (AE A.)

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines 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, administrative judges apply the guidelines 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. According to AG ¶ 2(a), 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.

Directive ¶ E3.1.14 requires the Government to present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.15 states that 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 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 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 information.

Section 7 of E O 10865 provides that adverse 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 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 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.

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

(a) inability to satisfy debts; and

Applicant’s credit reports and bankruptcy filings documented significant indebtedness beginning in approximately 2010 that culminated in the discharge of more than two million dollars of debt. Despite receiving a discharge of those debts in 2011, Applicant incurred delinquent child support obligations and a delinquent credit card. The facts establish prima facie support for the foregoing disqualifying conditions, and shift the burden to Applicant to mitigate those concerns.

The guideline includes three conditions in AG ¶ 20 that could mitigate the security concerns arising from Applicant’s alleged 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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; and

(d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts.

Applicant’s financial problems were caused by a commercial vehicle accident that caused his business to close and left him without the means to pay his financial obligations. He chose to exercise his legal right to file bankruptcy and discharged the majority of his debt in 2011. The debts that were not discharged are being repaid through monthly installments. Applicant’s financial problems were the result of conditions beyond his control, and are unlikely to be repeated. They do not cast doubt on Applicant’s current reliability, trustworthiness, or good judgment. He has acted reasonably and responsibly under the circumstances, by setting up repayment plans with his remaining creditors and demonstrating a history of good faith by making the agreed payments. The above mitigating conditions apply.

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 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 eligibility for a security clearance 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 individual who is accountable for the decisions and choices that led to his financial difficulties. He demonstrated responsible behavior in resolving or paying his debts and incurring no new delinquencies. His past delinquent debts no longer establish any potential for pressure, coercion, or duress.

Overall, the record evidence leaves me without questions or doubts as to Applicant’s eligibility and suitability for a security clearance. For these reasons, I conclude that he met his burden to mitigate the security concerns arising from his 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: FOR APPLICANT

Subparagraphs 1.a through1.e: 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. National security eligibility for access to classified information is granted.

Jennifer Goldstein Administrative Judge

FOOTNOTES

1 Department Counsel notes that Applicant’s Chapter 7 bankruptcy filing included Federal and state income taxes owed. Those debts were not alleged in the SOR, but are considered below for mitigation purposes. Applicant presented evidence that he has an installment agreement and is resolving his Federal tax debt. He credibly claimed he resolved his state tax debt. (FORM; AE A.)