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ISCR Case 16-00179.h1 — CASE

ISCR Case 16-00179.h1granted

Case Headnote

ISCR Case No. 16-00179.h1

grantedJun 7, 2017· Hon. Robert J. Kilmartin· hearing

Summary

A 49-year-old federal contractor was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). These concerns arose from delinquent debts, including approximately $25,000 owed to a creditor after his business was a victim of fraud in 2012, and other debts charged off in 2009.

The applicant successfully mitigated these issues. He provided bank statements showing a payment of $399.37 to one creditor on May 19, 2016, and another payment of $145 to a different creditor on June 10, 2016.

The clearance was granted because all delinquent debts were either resolved or in repayment status. The applicant demonstrated responsible behavior in addressing his financial issues, which were largely attributed to circumstances beyond his control, such as a divorce, a business downturn, and the aforementioned fraud.

Why the Applicant Prevailed

All delinquent debts were resolved or in repayment status.
Financial difficulties were largely due to circumstances beyond the applicant's control.
The applicant demonstrated responsible behavior in addressing his financial issues.

Conditions Referenced

Disqualifying

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

Mitigating

AG ¶ 20(a)appliedBehavior Happened Long Ago or Infrequently
AG ¶ 20(b)appliedConditions Largely Beyond the Person's Control
AG ¶ 20(d)appliedGood-faith Effort to Repay Debts

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedMay 18, 2016
Answer filedNot specified
Hearing heldNot specifiedDecided on written record.
Decision dateJun 7, 2017

Cite For

Mitigation of Financial Concerns Under Guideline F
Impact of External Circumstances on Financial Difficulties
Good-faith Efforts in Debt Resolution

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 mitigated the financial concerns under Guideline F, as all delinquent debts were resolved. The applicant's financial issues were attributed to circumstances beyond his control, and he demonstrated responsible behavior in addressing his debts.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant attached bank statements to his response to the FORM, showing payment of $399.37 to the creditor at SOR ¶ 1.a on May 19, 2016. $399	For Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.b	The same bank statements show a payment to the creditor at SOR ¶ 1.b of $145 on June 10, 2016. $145	For Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.c	Credit reports show that this debt in SOR ¶ 1.c was charged off in 2009.	For Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	Documented Debt Paid in Full
1.d	Applicant reported delinquent debts, including approximately $25,000 owed to a creditor because his business was the victim of fraud in 2012. $25,000	For Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(b) conditions largely beyond the person’s control; acted responsibly (d) good-faith effort to repay or otherwise resolve debts	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 No. 16-00179 ) Applicant for Security Clearance )

For Government: Ross Hyams, Esq., Department Counsel For Applicant: Pro se

______________ 06/07/2017

STATEMENT OF CASE

______________

KILMARTIN, Robert J., Administrative Judge:

Applicant mitigated the security concerns under Guideline F, financial considerations. Applicant’s eligibility for access to classified information is granted.

Statement of the Case

On May 18, 2016, the Department of Defense (DOD) issued Applicant 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 effective within the DOD for SORs issued after September 1, 2006.

Applicant timely answered the SOR and elected to have his case decided on the written record. Department Counsel submitted the Government’s file of relevant material (FORM) on August 12, 2016. Applicant received the FORM on October 11, 2016, and had 30 days to file objections and submit material in refutation, extenuation, or mitigation. Applicant did not object to the Government’s evidence, and he provided a detailed 19 page response to the FORM, with attachments.1 The Government’s evidence, identified as Items 1 through 7, is admitted into evidence without objection. The case was assigned to me on May 24, 2017.

Findings of Fact2

Applicant is 49-years old. He obtained his bachelor’s degree in 2005. Applicant has been employed by a federal contractor since February 2015. He previously owned and operated his own home-based computer business from 2004 to 2015. Applicant reports no military service and he was married from 1999 to 2007, when he got divorced. Applicant is up to date on his re-payment of approximately $50,000 in student loans. He reported delinquent debts, including approximately $25,000 owed to a creditor because his business was the victim of fraud in 2012, in section 26 of his Security Clearance Application (SCA).3 This is his largest-delinquent debt by far, alleged at SOR ¶ 1.d. He also disclosed a hospital bill, and that he had deferred-student loans awaiting repayment once he obtained full-time employment.

In his Answer to the SOR, Applicant admitted all four of the alleged delinquent debts. He averred that the primary reasons for his financial difficulties were his divorce in 2007, and the subsequent downturn in the economy with the recession of 2008. Applicant provided his tax returns, showing that he earned below the poverty level at all relevant times.4 Specifically, Applicant provided a three-page statement as his Answer to the SOR with attached documents.5 The attachments included a 2007 dissolution agreement and letters from creditor in SOR ¶ 1.cindicating that his ex-wife had filed for bankruptcy protection in 2009. This left Applicant solely responsible for the debt, although he gave her the house. Credit reports show that this debt in SOR ¶ 1.cwas charged off in 2009. Applicant has been in contact with the creditor and is attempting to resolve this debt. It is currently reported as being in voluntary payment status.6 This debt has been resolved. SOR ¶¶ 1.a and 1.bhave also been resolved. Applicant attached bank statements to his response to the FORM, showing payment of $399.37 to the creditor at SOR ¶ 1.a on May 19, 2016. The same bank statements show a payment to the creditor at SOR ¶ 1.bof $145 on June 10, 2016. With respect to the delinquency alleged at SOR ¶ 1.d, Applicant explained in his answer to the SOR that his company was the victim of credit-card fraud. Customers had used stolen credit cards to purchase products online through Applicant’s website store. Applicant’s company processed these credit cards through this creditor which purported to validate and verify the authenticity of his online payments. These credit cards were approved by VISA/MasterCard in March 2012. So, approximately $23,000 in products were sent out to the fraudulent customers. About two weeks later, Applicant learned that this creditor was implementing a charge-back against Applicant’s company for the $23,000 since it turned out that the credit cards were not valid.

Applicant attached to his FORM response an August 31, 2016 letter from the creditor in SOR ¶ 1.dagreeing to accept payments of $100 per month starting in September 2016 to resolve this debt. He also attached email correspondence from the creditor, bank statements, and a payment history showing that $500 in payments had been made by the end of 2016 toward resolving this delinquency. This track record persuades me that the debt alleged in SOR ¶ 1.dis being resolved.

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, 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 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. 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. Under 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 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.

This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information.

AG ¶ 19 provides conditions that could raise security concerns. The following apply here: (a) inability or unwillingness to satisfy debts; and

Applicant admitted to the delinquent debts alleged in the SOR. They are also confirmed by his credit reports. The Government produced substantial evidence to support the disqualifying conditions in AG ¶¶ 19(a) and 19(c), thereby shifting the burden to Applicant to produce evidence to rebut, explain, extenuate, or mitigate the facts.7 Applicant has met that burden. All of the delinquent debts have been resolved.

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 problems were largely beyond the person’s control, and the individual acted responsibly under the circumstances;

(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; and

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

Applicant endured a divorce, a business downturn, and his home-based business was the victim of fraud in early 2012. He struggled as his income was frequently below the poverty level. These conditions were beyond his control. He has demonstrated that he acted responsibly under the circumstances. Applicant has now paid off or made progress toward resolving all of the four delinquent debts alleged in the SOR. Applicant has met his burden to provide sufficient evidence to show that his financial problems are under control, and that his debts were incurred under circumstances unlikely to recur. The mitigating conditions enumerated above 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 the circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a):

(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(a) were addressed under that guideline.

Applicant’s finances no longer remain a security concern. There is sufficient evidence to conclude that Applicant’s financial problems are under control. He has met his burden of persuasion. The record evidence leaves me with no questions or doubts as to Applicant’s suitability for a security clearance. For all these reasons, I conclude Applicant has mitigated 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: FOR APPLICANT

Subparagraphs 1.a – 1.d: 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 a security clearance. Eligibility for access to classified information is granted.

________________________ Robert J. Kilmartin Administrative Judge

FOOTNOTES

1 Attachments include: 7 p. bank statement for 2016; 21 p. bank statement for 2015-’16; a 2 p. account debit to pay a Hospital; a 1 p. letter from C R G(Intuit) dated Aug 31, 2016; a 1 p. email from Intuit; a 1 p. September 2016 payment history showing 4 payments to Innovative Merchant Solutions (Intuit) totaling $500; 6 pp. of charge-back-debit advice letters dated May 2, 2012, from Intuit showing fraud; a divorce judgment order dated December 14, 2007; a payment history showing student loans are current; and poverty guidelines.

2 Unless stated otherwise, the source of the information in this section is Applicant’s August 25, 2014 SCA. (Item 4).

3 Item 4, page 34.

4 Attached to FORM response.

5 Item 3.

6 Response to FORM, p. 13. 7 Directive ¶ E3.1.15. See ISCR Case No. 02-31154 at 5 (App. Bd. Sep 22, 2005) (An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government).