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ISCR Case 16-00295.h1 — CASE

ISCR Case 16-00295.h1denied

Case Headnote

ISCR Case No. 16-00295.h1

deniedJun 1, 2017· Hon. Marc E. Curry· hearing

Summary

A 49-year-old single man with degrees in accounting and management was denied a security clearance under Guideline F (Financial Considerations). The denial stemmed from approximately $255,000 in delinquent debt, primarily consisting of student loans and mortgage obligations.

Specific allegations included three separate student loan debts of $31,000 each, a disputed debt of $4,766, a miscellaneous debt of $1,634, a $1,280 judgment, and two separate delinquent mortgage debts of $222,955 each. Disqualifying conditions under Guideline F, specifically AG ¶ 19(a) and AG ¶ 19(c), were raised.

The applicant's financial difficulties were reportedly exacerbated by unemployment and family illness. However, the denial was based on his failure to demonstrate responsible financial management, including not making payments on his debts despite over six years of employment, and not seeking credit counseling or maintaining a budget.

Why the Applicant Was Denied

The applicant has approximately $255,000 in delinquent debt, including student loans and mortgage obligations.
He has not made any payments towards his debts despite being employed for over six years.
The applicant did not seek credit counseling or maintain a budget, indicating a lack of financial responsibility.

Conditions Referenced

Disqualifying

AG ¶ 19(a)appliedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)appliedA History of Not Meeting Financial Obligations

Key Rule Quoted

“Failure or inability 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 information.”

Procedural Posture

SOR issuedJun 9, 2016
Answer filedJun 19, 2016
Hearing heldMar 1, 2017
Decision dateJun 1, 2017

Cite For

Failure to Mitigate Financial Considerations Under Guideline F
Impact of Personal Circumstances on Financial Obligations
Lack of Evidence for Disputing Debts in Security Clearance Cases

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 had significant financial issues, including delinquent student loans, miscellaneous debts, and mortgage debts, which he failed to mitigate. While one debt was resolved in the applicant's favor, the majority of the financial concerns were deemed against the applicant, leading to the denial of his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	$31,000 in student loans $31,000	Against Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	$31,000 in student loans $31,000	Against Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	$31,000 in student loans $31,000	Against Applicant	Student Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	$4,766 debt in dispute $4,766	For Applicant	Unspecified Financial	Denied	—	—	—
1.e	$1,634 miscellaneous debt $1,634	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	$1,280 judgment against applicant $1,280	Against Applicant	Judgment Against Applicant	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	$222,955 delinquent mortgage debt $222,955	Against Applicant	Mortgage or Home Loan Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	$222,955 delinquent mortgage debt $222,955	Against Applicant	Mortgage or Home Loan Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

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. 16-00295 ) ) Applicant for Security Clearance

For Government: Tovah Minster, Esq., Department Counsel Allison Marie, Esq., Department Counsel For Applicant: Pro se

06/01/2017 ______________

STATEMENT OF CASE

______________

Curry, Marc E., Administrative Judge:

Applicant failed to mitigate the financial considerations security concerns. Clearance is denied.

Statement of the Case

On June 9, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing security concerns under Guideline F, financial considerations and explaining why it was unable to find it clearly consistent with the national interest to grant security clearance eligibility for him. The DOD CAF took the action 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 (AG) effective within the DOD on September 1, 2006.

On June 19, 2016, Applicant admitted all of the SOR allegations except subparagraphs 1.d, 1.e, 1.g, and 1.h, and requested a hearing, On December 16, 2016, the case was assigned to me. On February 1, 2017, the Defense Office of Hearings and Appeals issued a notice of hearing, scheduling Applicant’s case for March 1, 2017. The hearing was held as scheduled. At the hearing, I received three Government exhibits (GE 1 – GE 3), and Applicant exhibit (AE) A. In addition, I marked and received the discovery letter, dated August 16, 2016, mailed from Department Counsel to Applicant. (Hearing Exhibit I) The transcript (Tr.) was received on March 9, 2017.

FINDINGS OF FACT

Applicant is a 49-year-old single man. He has a bachelor’s degree in accounting and a master’s degree in management. (GE 1 at 10) Since June 2012, he has worked for a defense contractor as a senior financial analyst. (Tr. 13)

Since 2008, Applicant has incurred approximately $255,000 of delinquent debt, including $31,000 in student loans (subparagraphs 1.a - 1.c); $3,000 of miscellaneous debt (subparagraphs 1.e and 1.f); and $222,955 of delinquent mortgage debt (subparagraphs 1.fand 1.g). Applicant incurred the student loan debts, alleged in subparagraphs 1.a through 1.c, in 2011 to finance the completion of his master’s degree. (Tr. 14; GE 3 at 2) These student loan debts have been delinquent since January 2014. (GE 3 at 2) He has been attempting to develop a payment plan since June 2016. They remain outstanding.

The debt alleged in subparagraph 1.d, totaling $4,766, is included in two credit reports from 2015 and 2016. (GE 2 and GE 3) Both credit reports indicate that this debt is in dispute status. Applicant reiterated his dispute of this debt at the hearing. (Tr. 31)

The debt alleged in subparagraph 1.e, totaling $1,634, has been outstanding since March 2010. (GE 3 at 2) Applicant disputes this debt, but provided no evidence substantiating the basis of his dispute.

Subparagraph 1.f, totaling $1,280, is a delinquent debt owed to a bank. The creditor obtained a judgement against Applicant in November 2013. (GE 2 at 3; GE 3 at 3; Tr. 34) It remains outstanding.

Subparagraphs 1.gand 1.hare the primary and secondary mortgages on a property that Applicant cosigned with his father in April 2007. (Tr. 39) Applicant’s father asked Applicant to cosign the mortgage loans because he had bad credit and was unable to be approved for these loans without a cosigner. (Tr. 41) Applicant’s father stopped making mortgage payments in November 2008, approximately 18 months after purchasing the home. (GE 2 at 3) At or about the time Applicant’s father stopped making mortgage payments, Applicant was laid off from his job. (GE 1 at 13) He was subsequently unemployed for the next eight months. Consequently, he was unable to make any of these mortgage payments.

In July 2009, Applicant obtained a full-time job, but it paid approximately $25,000 less than his previous job. (Tr. 53) In 2012, Applicant’s father became seriously ill. Applicant spent the next three years, through his father’s death, preoccupied with his care, helping pay for medical treatments and general elder care. He never attempted to resume the mortgage payments. Since December 2014, the home has been in foreclosure status. (GE 2 at 3)

In 2006, approximately a year before Applicant cosigned the home mortgages with his father, he purchased a home for himself. (GE 3 at 1) He financed the purchase with a mortgage, and later opened a home equity line of credit secured by the home. Applicant fell behind on this mortgage after he lost his job in 2008. He attempted to resume payments after regaining employment in2009, but could not afford the monthly payments, as they exceeded his after-tax income. (Tr. 54) Although he obtained a loan modification, it only reduced the payment by $50. Unable to afford mortgage payments, Applicant lived in the home for the next five years, through 2014 before moving after the bank filed a notice of foreclosure. The home has since been foreclosed. (Answer at 2) Applicant’s difficulty paying his home mortgage coincided with the period when his student loans, as discussed above, became delinquent. (Tr. 55)

Applicant has never sought credit counseling. (Tr. 61) He does not maintain a budget, but estimates that he has approximately $500 of monthly discretionary income. (Tr. 62)

POLICIES

The U.S. Supreme Court has recognized the substantial discretion the Executive Branch has in regulating access to information pertaining to national security, emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are required to be considered 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 overall 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 access to classified information will be resolved in favor of 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. Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The applicant has the ultimate burden of persuasion to obtain 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 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. Section 7 of Executive Order 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).

Under the whole-person concept, the administrative judge must consider the totality of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative process factors in AG ¶ 2(a).1

ANALYSIS

Guideline F, Financial Considerations

The security concerns about financial considerations are set forth in AG ¶ 18:

Failure or inability 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 information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds.

Applicant denies subparagraph 1.dand the only evidence supporting the Government’s contention that Applicant owes this debt are two credit reports that list it, but indicate that it is in dispute status. I conclude that the Government did not meet its burden of production with respect to subparagraph 1.d, and I resolve it in Applicant’s favor.

The remaining delinquencies alleged in the SOR are established by the evidence and trigger the application of disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting financial obligations.”

The following mitigating conditions are potentially applicable:

AG ¶ 20(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), and the individual acted responsibly under the circumstances;”

AG ¶ 20(c), the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control;

AG ¶ 20(d), the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts; and

AG ¶ 20(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’s financial problems initially occurred after an eight-month period of unemployment, beginning in November 2008, and were compounded when his father became seriously ill, requiring costly treatment that Applicant helped pay. Conversely, Applicant has been working full-time for more than six years, and has made no payments towards the satisfaction of any of his debts. In addition, he decided to attend graduate school, financing it with student loans, since regaining employment, during a period of time when he was living in his home and not making mortgage payments. Under these circumstances, AG ¶ 20(b) does not apply.

In addition to not initiating debt repayments, Applicant has not sought counseling. Neither AG ¶¶ 20(c) nor 20(d) apply. Applicant provided no documentary evidence supporting the basis of his dispute of subparagraphs 1.e and 1.f. AG ¶ 20(e) does not apply.

WHOLE PERSON CONCEPT

Applicant’s decision to help his father reflects admirably upon his character. Conversely, Applicant provided this help without first considering his financial limitations, and consequently compounded his financial problems, which he has yet to address. Under these circumstances, he has failed to mitigate the security concern.

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.c: Against Applicant

Subparagraph 1.d: For Applicant

Subparagraphs 1.b – 1.h: 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 interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied.

_____________________ Marc E. Curry Administrative Judge

FOOTNOTES

1 The factors under AG ¶ 2(a) are as follows:

(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.