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ISCR Case 16-00420.h1 — CASE

ISCR Case 16-00420.h1denied

Case Headnote

ISCR Case No. 16-00420.h1

deniedMay 22, 2017· Hon. Martin H. Mogul· hearing

Summary

A 59-year-old Senior Software Engineer was denied a security clearance under Guideline F, Financial Considerations, due to significant unresolved financial issues. The Statement of Reasons (SOR) detailed nine specific allegations. These included four mortgage accounts (A, B, C, and D) that went into foreclosure in 2009, indicating issues with rental properties.

Additionally, the applicant had five overdue collection accounts, with amounts of $4,543, $2,610, $27,477, $18,124, and $519. While some debts were settled, the overall pattern of financial management raised concerns.

The denial was based on the applicant's significant unresolved debts, including the multiple foreclosures, and a failure to demonstrate a consistent history of meeting financial obligations. The adjudicator determined that the financial difficulties were largely self-inflicted and not adequately mitigated, leading to the denial of the security clearance. Disqualifying conditions AG ¶ 19(a) and AG ¶ 19(c) were raised, while mitigating conditions AG ¶ 20(b) and AG ¶ 20(d) were applied but ultimately insufficient.

Why the Applicant Was Denied

The applicant has significant unresolved debts, including multiple foreclosures on rental properties.
The applicant failed to demonstrate a consistent history of meeting financial obligations.
The applicant's financial difficulties were largely self-inflicted and not adequately mitigated.

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(b)rejectedConditions Beyond the Person's ControlWhile the applicant's financial difficulties were partly due to economic downturns, he did not act responsibly to resolve his debts after terminating his attorney's services.
AG ¶ 20(d)rejectedGood-faith Effort to Repay DebtsThe applicant's efforts to resolve debts were insufficient and inconsistent.

Key Rule Quoted

“Any doubt concerning personnel being considered for access to classified information will be resolved in favor of national security.”

Procedural Posture

SOR issuedJun 3, 2016
Answer filedJun 22, 2016
Hearing heldSep 27, 2016
Decision dateMay 22, 2017

Cite For

Denial of Security Clearance Due to Unresolved Financial Issues Under Guideline F
Impact of Financial Management on Security Clearance Eligibility
Whole-person Concept Applied in Financial Considerations 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 significant unresolved financial issues for the applicant, leading to a denial of the security clearance. While some debts were settled, many remained outstanding, raising concerns about the applicant's financial responsibility and judgment.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	This overdue debt is cited in the SOR for a collection account in the amount of $4,543. $4,543	Against Applicant	Unspecified Financial	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	This overdue debt is cited in the SOR for a collection account in the amount of $2,610. $2,610	For Applicant	Credit Card Debt	Admitted	—	—	Documented Debt Paid in Full
1.c	This overdue debt is cited in the SOR for mortgage account A that went into foreclosure in 2009. $234,000	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	This overdue debt is cited in the SOR for mortgage account B that went into foreclosure in 2009. $270,791	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	This overdue debt is cited in the SOR for mortgage account C that went into foreclosure in 2009. $173,826	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	This overdue debt is cited in the SOR for mortgage account D that went into foreclosure in 2009. $192,925	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	This overdue debt is cited in the SOR for a collection account in the amount of $27,477. $27,477	Against Applicant	Credit Card Debt	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	This overdue debt is cited in the SOR for a collection account in the amount of $18,124. $18,124	Against Applicant	Credit Card Debt	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i	This overdue debt is cited in the SOR for a collection account in the amount of $519. $519	For Applicant	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. 16-00420 ) ) Applicant for Security Clearance )

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

May 22, 2017 ______________

STATEMENT OF CASE

______________

MOGUL, Martin H., Administrative Judge:

Statement of the Case

On June 3, 2016, the Department of Defense (DoD) issued a Statement of Reasons (SOR) detailing the security concerns under Guideline F for Applicant. The action was taken under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992) as amended; and the adjudicative guidelines (AG), effective within the Department of Defense for SORs issued after September 1, 2006.

On June 22, 2016, Applicant replied to the SOR (RSOR) in writing, and he requested a hearing before an Administrative Judge (AJ). The case was assigned to this AJ on August 17, 2016. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on August 29, 2016, and the hearing was convened as scheduled on September 27, 2016. At the hearing, the Government offered Exhibits 1 through 9, which were received without objection. Applicant testified on his own behalf and submitted Exhibits A and B, which were also admitted without objection. The record was kept open until October 7, 2016, to allow Applicant to submit additional evidence. The documents that were timely received have been identified and entered into evidence without objection as Exhibits C through O. DOHA received the transcript of the hearing (Tr) on October 5, 2016. Based upon a review of the pleadings, exhibits, and the testimony of Applicant, eligibility for access to classified information is denied.

FINDINGS OF FACT

After a complete and thorough review of the evidence in the record, including Applicant's RSOR, the admitted documents, and the testimony of Applicant, and upon due consideration of that evidence, I make the following findings of fact:

Applicant is 59 years old. He is not married, and he has no children. Applicant received a Bachelor of Science degree in 1980 in Electrical Engineering. Applicant is employed as a Senior Software Engineer, and he seeks a DoD security clearance in connection with his employment in the defense sector.

Guideline F, Financial Considerations

The SOR lists nine allegations (1.a. through 1.i.) regarding financial difficulties, specifically overdue debts, under Adjudicative Guideline F. All of the SOR allegations will be discussed below in the order they were listed on the SOR:

1.a. This overdue debt is cited in the SOR for a collection account in the amount of $4,543. Applicant wrote in his RSOR that he previously had two credit cards with this creditor, and he was not certain to which credit card this allegation referred. However, he contended that he had settled both credit card debts.

At the hearing, Applicant testified that because of his financial difficulties with his properties, which will be discussed below, he used credit cards to pay for his regular expenses. To help him resolve his delinquent debts, he engaged the services of an attorney, paying him $700 a month. At some point in time after less than two years, Applicant became aware that the attorney was no longer trying to resolve his debts, and so Applicant terminated his agreement with the lawyer. However, Applicant represented that the lawyer had resolved some of his debts. While Applicant believed that the attorney had settled this debt for $ .10 on the dollar, he testified that a creditor for this debt subsequently filed a lawsuit against Applicant, which was dismissed without prejudice. (Tr at 30-43.)

As reviewed above, Applicant submitted a number of documents after the hearing, which have been entered into evidence. Exhibit J includes a letter from Applicant, in which he reiterates that he had two debts to this creditor, and he settled one of the debts, but not the other one. An additional letter on behalf of one of the creditor shows one of the debts was paid. I find that one of the debts to this creditor has been settled but one is still outstanding.

1.b. This overdue debt is cited in the SOR for a collection account in the amount of $2,610. Applicant wrote in his RSOR that he had settled this credit card debt in 2009.

At the hearing, Applicant testified that he believed this debt was also settled by his attorney, but ultimately he settled it himself on June 22, 2016. (Tr at 42-44.) Applicant submitted a post-hearing letter from the creditor establishing that this debt has been settled. (Exhibits C and D.),

1.c. This overdue debt is cited in the SOR for mortgage account A that went into foreclosure in 2009. Applicant admitted this allegation in his RSOR and wrote that this was a mortgage on a rental property that was foreclosed.

Applicant testified that allegations 1.c. through 1.f. were for debts that he incurred when he purchased rental property in approximately 2004. He purchased five properties in total, and he still owns one of them. As the market underwent its downturn in 2008, he lost money on each of the four properties. He was unable to renegotiate a payment plan with the creditors so he ultimately just stopped making payments on the four properties, and they eventually all went into foreclosure. (Tr at 46-54.) Exhibit J includes a Form 1099-A that Applicant received in 2010 for a debt in the amount of $234,000. While Applicant did receive Form 1099-As for all of the properties that were foreclosed, as reviewed below, it is not clear if they have been resolved through Applicant's taxes requirements. The purchase and ultimate foreclosure of each property must also be considered adversely as to Applicant's overall financial acumen and responsibility.

1.d. This overdue debt is cited in the SOR for mortgage account B that went into foreclosure in 2009. Applicant admitted this allegation in his RSOR and wrote that this was a mortgage on a rental property that was foreclosed. Exhibit F includes a Form 1099-A that Applicant received in 2010 for this debt in the amount of $270,791.

1.e. This overdue debt is cited in the SOR for mortgage account C that went into foreclosure in 2009. Applicant admitted this allegation in his RSOR and wrote that this was a mortgage on a rental property that was foreclosed. Exhibit E includes a Form 1099-A that Applicant received in 2010 for this debt in the amount of $173,826.

1.f. This overdue debt is cited in the SOR for mortgage account D that went into foreclosure in 2009. Applicant admitted this allegation in his RSOR and wrote that this was a mortgage on a rental property that was foreclosed. Exhibit G includes a Form 1099-A that Applicant received in 2010 for this debt in the amount of $192,925.

1.g. This overdue debt is cited in the SOR for a collection account in the amount of $27,477. Applicant wrote in his RSOR that he had settled this credit card debt, and the legal action that was filed against him by this creditor was dismissed. Applicant testified that he believed this debt was also settled by his attorney, but eventually a creditor for this debt filed a lawsuit against Applicant. The lawsuit was dismissed without prejudice. (Tr at 54-56.) In a post-hearing letter, Applicant wrote that he had a payment plan in 2011, and he made 12 payments of $223, but he stopped after that because he could not continue to make payments. He added that he has renewed a payment plan with this creditor. Exhibits K and L establish that this debt is being reduced, but there is a significant amount left to be paid, and less than a positive payment history.

1.h. This overdue debt is cited in the SOR for a collection account in the amount of $18,124. Applicant wrote in his RSOR that he had settled this credit card debt, but he did not have documentation to establish that fact. He indicated that he was in contact with the creditor, and he hoped to have the documentation by the time of the hearing.

Applicant testified that while he thought he had settled this debt, at the time of the hearing, he still had not obtained any documentation to establish that he had resolved this debt. (Tr at 56-58.) In a post-hearing letter, Applicant wrote that the attorney that he had hired to resolve his debts had sent one payment of $1,960 to this creditor in December 2010, but that did not settle this debt. A letter from this creditor, establishes that a settlement plan was set with this creditor for the settlement amount of $15,258, with Applicant making one payment of $2,000 in October 2016, and 37 additional monthly payments of $368.29. (Exhibit N.) There is no evidence that any of the payments have yet been made.

1.i. This overdue debt is cited in the SOR for a collection account in the amount of $519. Applicant wrote in his RSOR that he was not aware of this debt, and the creditor also informed him that they could not locate his name on a debt. He wrote that he planned to dispute this debt.

Applicant testified that he contacted the creditor, but they did not have any documentation showing the amount owed on this debt, but he never received anything showing this debt had been resolved. (Tr at 58-60.) While this debt was not listed on the latest credit report it was listed on the earlier reports offered into evidence by the Government. In a post-hearing letter, Applicant reiterated that he had contacted this creditor, who indicated to him that they could find no history of this debt. (Exhibit O.) I find that no evidence was introduced to establish that this debt has been resolved or reduced, although it appears that Applicant has been making a good faith effort to resolve this debt.

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 to be 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 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.

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 the 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 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 EO 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 concern for Financial Considerations is set out in AG ¶ 18, as follows:

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.

The guideline notes several conditions that could raise security concern under AG ¶ 19. Two are potentially applicable in this case:

(a) inability or unwillingness to satisfy debts; and

The record is clear that Applicant has significant debt incurred over many years to different companies, some of which has remained unresolved. The evidence is sufficient to raise the above disqualifying conditions.

Two Financial Considerations Mitigating Conditions under AG ¶ 20 are potentially applicable:

(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; and

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

Applicant’s financial difficulties occurred in large part because of the downturn in the economy, which ultimately led to four of his investment properties being foreclosed, and Applicant trying to pay many of his other bills with credit cards. When Applicant was faced with his debts, he first took the responsible position of engaging the services of an attorney to attempt to resolve his delinquent indebtedness. However, as Applicant became aware that the attorney had not fulfilled his obligation, he failed to make a good faith effort to resolve the debts himself. While some of the debts have now been satisfied, some of the significant debts have not yet been resolved or reduced, and it is not clear that his current financial status is stable and secure. Until Applicant has shown a more, consistent history of meeting his obligation to repay all of his debts, the concern has not yet been mitigated, and neither mitigating factor can be applied in this case.

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(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. There are significant unresolved concerns about Applicant’s finances and judgment.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant has not mitigated the Financial Considerations security concerns.

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

Subparagraph 1.a.: Against Applicant Subparagraph 1.b.: For Applicant Subparagraphs 1.c.-1.h.: Against Applicant Subparagraph 1.i.: 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 eligibility for a security clearance. Eligibility for access to classified information is denied.

Martin H. Mogul Administrative Judge