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ISCR 16-00695.h1: Guideline F security clearance hearing, denied (2017) · CASE

ISCR Case 16-00695.h1denied

Case headnote

ISCR Case No. 16-00695.h1

deniedMar 15, 2017· Hon. Roger C. Wesley· hearing

Summary

A 56-year-old tech support engineer was denied a security clearance under Guideline F (Financial Considerations) due to a history of financial difficulties. The Statement of Reasons cited two Chapter 7 bankruptcies: one filed in March 1992 and discharged in July 1992, and a second filed in April 2013 and discharged in September 2013. Additionally, the applicant had accumulated over $30,000 in delinquent student loan debts, which remained outstanding.

The decision highlighted the applicant's failure to provide sufficient evidence of efforts to mitigate these financial concerns, specifically noting a lack of documented evidence addressing the student loan debts after returning to employment. While Mitigating Condition 20(b) was considered, the applicant's character references were deemed insufficient to overcome the significant financial concerns.

Ultimately, the judge concluded that the applicant's history of not meeting financial obligations, including the two bankruptcies and outstanding student loans, meant that granting a security clearance was not consistent with national interest. The clearance was therefore denied.

Why the applicant was denied

The applicant did not provide documented evidence of addressing his student loan debts after returning to employment.
The applicant's financial difficulties included two Chapter 7 bankruptcies and a history of not meeting financial obligations.
The applicant's character references were insufficient to mitigate the financial concerns raised.

Conditions referenced

Disqualifying

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

Mitigating

MC ¶ 20(b)rejectedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person’s ControlThe applicant did not act responsibly under the circumstances as he provided no evidence of addressing his debts after returning to employment.

Key rule quoted

“Eligibility for access to classified information is denied.”

Procedural posture

SOR issuedJun 10, 2016
Answer filedApr 26, 2016
Hearing heldOct 25, 2016
Decision dateMar 15, 2017

Cite for

Insufficient Evidence of Financial Responsibility Under Guideline F
Impact of Multiple Bankruptcies on Security Clearance Eligibility
Importance of Documented Efforts to Mitigate Financial Issues in Clearance Cases

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

From the decision

Facts this decision states, each with the exact sentence it comes from. Descriptive of the record, not an assessment.

Age at decision: 56: “Applicant is a 56-year-old tech support engineer for a defense contractor who seeks a security clearance.”
Tenure: ~10 years: “Applicant has worked for his current employer since August 2006 as a tech support engineer.”
Delinquent debt cited: $30,000 (on a payment plan; bankruptcy discharged): “Applicant allegedly (a) petitioned for Chapter 7 bankruptcy relief in March 1992 and was discharged in July 1992; (b) petitioned for Chapter 7 bankruptcy relief in April 2013 and was discharged in September 2013; and (c) accumulated two delinquent student loan debts exceeding $30,000.”

Standardized Decision Profile

SEAD-4 Guideline F · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found that the applicant's financial issues, including two Chapter 7 bankruptcies and significant student loan defaults, raised security concerns under Guideline F. The applicant failed to provide sufficient evidence of efforts to mitigate these concerns, leading to a denial of the security clearance.

The sub-allegation breakdown is part of the Professional plan. See what it includes.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation

Descriptive standardized rendering of a decided public case. 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. 16-00695 ) ) Applicant for Security Clearance )

For Government: Ray Blank, Esq., Department Counsel For Applicant: Pro se 03/15/2017 _____________

STATEMENT OF CASE

______________

WESLEY, Roger C., Administrative Judge:

Based upon a review of the pleadings, exhibits, and testimony, I conclude that Applicant did not mitigate the security concerns regarding his financial considerations. Eligibility for access to classified information is denied.

On June 10, 2016, the Department of Defense (DoD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) detailing reasons why DoD adjudicators could not make the affirmative determination of eligibility for a security clearance, and recommended referral to an administrative judge to determine whether a security clearance should be granted, continued, denied, or revoked. The action was taken under Executive Order 10865 (Exec. Or.), 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 (AGs) implemented by the DoD on September 1, 2006. Applicant responded to the SOR on April 26, 2016, and requested a hearing. The case was assigned to me on August 12, 2016, and was scheduled for hearing on October 25, 2016. At the hearing, the Government's case consisted of five exhibits (GEs 1-5). Applicant relied on one witness (himself) and no exhibits. The transcript (Tr.) was received on November 7, 2016.

Procedural Issues

Before the close of the hearing, Applicant requested the record be kept open to permit him the opportunity to supplement the record with documentation of a student loan consolidation agreement and supporting payments. For good cause shown, Applicant was granted 14 days to supplement the record. Department Counsel was afforded three days to respond. Applicant did not supplement the record with any documented evidence.

Summary of Pleadings

Under Guideline F, Applicant allegedly (a) petitioned for Chapter 7 bankruptcy relief in March 1992 and was discharged in July 1992; (b) petitioned for Chapter 7 bankruptcy relief in April 2013 and was discharged in September 2013; and (c) accumulated two delinquent student loan debts exceeding $30,000. Allegedly, these debts remain outstanding.

In his response to the SOR, Applicant admitted each of the allegations with explanations. He claimed his first bankruptcy petition in 1992 resulted from his divorce and financial issues with his ex-wife. He claimed his second bankruptcy petition was based on advice from his attorney. Further, he claimed he attempted to settle his student loan debts with payment offers refused by the lender. And he claimed he is working with a hearing advocate again to settle his student loan debts.

FINDINGS OF FACT

Applicant is a 56-year-old tech support engineer for a defense contractor who seeks a security clearance. The allegations covered in the SOR and admitted by Applicant are incorporated and adopted as relevant and material findings. Additional findings follow.

Background

Applicant married in November 1986 and divorced his spouse in February 1999. (GE 1) He has three adult children from this marriage. Currently, he is in a cohabitation relationship with his girlfriend who contributes to his household expenses. (GE 1; Tr. 36, 43) Applicant earned a bachelor’s degree in September 2007. (GE 1; Tr. 30, 39)

Applicant enlisted in the Air Force (AF) in April 1980, served four and a half years of active duty, and received his honorable discharge in October 1984. (GE 1) Between May 1985 and October 2003, he served in the active AF Reserve and received an honorable discharge in October 2003. (GE 1) Applicant has worked for his current employer since August 2006 as a tech support engineer. (GE 1) He was unemployed between June 2005 and August 2006. Between August 1997 and May 2005, he worked as an aircraft mechanic for another employer. (GE 1; Tr. 29)

Applicant’s finances

Between 1986 and 1992, while married, Applicant accumulated a number of delinquent debts. When he could no longer service the debts, he petitioned for Chapter 7 bankruptcy relief in March 1992. He received his bankruptcy discharge in July 1992. (GEs 1 and 2)

In 2005, Applicant enrolled in on-line college classes and financed his education with two student loans. (GEs 5-8; Tr. 34) For the first six months of his employment with his current employer (even after receiving a promotion), he earned less than $30,000 a year and fell behind with his debts. After assuming care responsibility for his mother, diagnosed with Alziemers and Dementia, and his girlfriend’s mother who underwent double knee repairs, his bills continued to escalate out of control. (Tr. 26)

Based on the advice of a lawyer in late 2012, Applicant ceased paying on his student loans. (Tr. 30, 40-41) When he petitioned for Chapter 7 bankruptcy relief in 2013, he included his student loans in his bankruptcy petition. (GE 4) However, the loans were not dischargeable and remain personal obligations of Applicant. (GEs 3-4; Tr. 41)

Applicant scheduled $292,000 in assets in his 2013 bankruptcy petition, $195,327 in secured claims, and $102,176 in unsecured, non-priority claims (inclusive of his two student loans with an aggregate balance of $25,853). (GE 4) His bankruptcy discharge relieved him of about $28,000 in consumer debt. (GE 4; Tr. 37-38, 49)

Between July 2016 and October 2016, Applicant’s student loan lender (SOR ¶¶ 1.cand 1.d) garnished Applicant’s earnings for two months and recovered $1,800 worth of student loan indebtedness. (Tr. 42) After receiving Applicant’s personal financial statement, the lender ceased further garnishment initiatives. (Tr. 32, 42) Applicant remains in default on his two student loans. (GEs 5-8) He has not made any further payments on his loans since 2012. (GEs 5-6 and 8)

In an interview with an investigator of the Office of Personnel management (OPM) in October 2015, Applicant was asked about his debts. (GE 8) Once he was confronted by the investigator with the specifics, he told the investigator about his individual delinquent debts. (GE 8)

Applicant has since been in verbal discussion with his student loan lender in his attempt to consolidate the loans and establish payment arrangements on them. (Tr. 44- 45) Reportedly, the lender declined to accept monthly payments from Applicant on the loan balance. (Tr. 30, 44) Beyond his reported contact with the lender Applicant has provided no documentary evidence of his addressing his student loan debts with either loan payments or a forbearance application since the discharge of his Chapter 7 bankruptcy petition in 2013. (GEs 5-6 and 8; Tr. 33) Nor did he provide any evidence of financial counseling or budgeting.

Character references

Applicant is well-regarded by friends who have known him for many years. They credit Applicant with honesty, trustworthiness, good ethical behavior, and strong moral character. (AE A)

P o l i c i e s

The AGs list guidelines to be used by administrative judges in the decision-making process covering security clearance cases. These guidelines take into account factors that could create a potential conflict of interest for the individual applicant, as well as considerations that could affect the individual’s reliability, trustworthiness, and ability to protect classified information. These guidelines include "[c]onditions that could raise a security concern and may be disqualifying” (disqualifying conditions), if any, and many of the "[c]onditions that could mitigate security concerns.”

These guidelines must be considered before deciding whether or not a security clearance should be granted, continued, or denied. The guidelines do not require administrative judges to place exclusive reliance on the enumerated disqualifying and mitigating conditions in the guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the context of the whole person in accordance with AG ¶ 2(c).

In addition to the relevant AGs, administrative judges must take into account the pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a) of the AGs, which are intended to assist the judges in reaching a fair and impartial commonsense decision based upon a careful consideration of the pertinent guidelines within the context of the whole person.

The adjudicative process is designed to examine a sufficient period of an applicant’s life to enable predictive judgments to be made about whether the applicant is an acceptable security risk. The following AG ¶ 2(a) factors are pertinent: (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 chances; (7) the motivation for the conduct; (8) the potential for pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or recurrence.

Viewing the issues raised and evidence as a whole, the following individual guidelines are pertinent in this case:

Financial Considerations

The Concern: 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. Compulsive gambling is a concern as it may lead to financial crimes including espionage. Affluence that cannot be explained by known sources of income is also a security concern. It may indicate proceeds from financially profitable criminal acts. AG ¶ 18.

Burden of Proof

By virtue of the principles and policies framed by the AGs, a decision to grant or continue an applicant's security clearance may be made only upon a threshold finding that to do so is clearly consistent with the national interest. Because the Directive requires administrative judges to make a commonsense appraisal of the evidence accumulated in the record, the ultimate determination of an applicant's eligibility for a security clearance depends, in large part, on the relevance and materiality of that evidence. See United States, v. Gaudin, 515 U.S. 506, 509-511 (1995). As with all adversarial proceedings, the judge may draw only those inferences which have a reasonable and logical basis from the evidence of record. Conversely, the judge cannot draw factual inferences that are grounded on speculation or conjecture.

The Government's initial burden is twofold: (1) it must prove by substantial evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the facts proven have a material bearing to the applicant's eligibility to obtain or maintain a security clearance. The required materiality showing, however, does not require the Government to affirmatively demonstrate that the applicant has actually mishandled or abused classified information before it can deny or revoke a security clearance. Rather, the judge must consider and weigh the cognizable risks that an applicant may deliberately or inadvertently fail to safeguard classified information.

Once the Government meets its initial burden of proof of establishing admitted or controverted facts, the evidentiary burden shifts to the applicant for the purpose of establishing his or her security worthiness through evidence of refutation, extenuation, or mitigation. Based on the requirement of Exec. Or. 10865 that all security clearances be clearly consistent with the national interest, the applicant has the ultimate burden of demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations should err, if they must, on the side of denials.” See Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).

ANALYSIS

Security concerns are raised over Applicant’s history of Chapter 7 bankruptcy petitions (one in 1992 and another in 2013) and accumulation of defaulted student loans. Since he was discharged in bankruptcy in 2013, he has taken no documented steps to address his student loans, and they remain in default.

Applicant’s two bankruptcy discharge and accumulated student loan defaults in issue warrant the application of two of the disqualifying conditions (DC) of the financial consideration guideline. DC ¶ 19(a), “inability or unwillingness to satisfy debts,” and DC ¶ 19(c), “a history of not meeting financial obligations,” apply to Applicant’s situation.

Holding a security clearance involves the exercise of important fiducial responsibilities, among which is the expectancy of consistent trust and candor. Financial stability in a person cleared to access classified information is required precisely to inspire trust and confidence in the holder of the clearance. While the principal concern of a clearance holder’s demonstrated financial difficulties is vulnerability to coercion and influence, judgment and trust concerns are also explicit in financial cases.

Applicant’s extended unemployment in 2005-2006 and assumption of care responsibilities for his mother and girlfriend’s mother account for some of his financial difficulties, enough to merit limited application of MC ¶ 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.” Because he provided no evidence of his addressing his identified debts after he returned to gainful employment in August 2006, he cannot satisfy the second prong of MC ¶ 20(b) that he acted responsibly under the circumstances.

Without more documented information about his delinquent debts and corrective steps he has taken to mitigate the Government’s financial concerns, Applicant cannot demonstrate the level of financial progress required to meet the criteria established by the Appeal Board for assessing an applicant’s efforts to rectify his poor financial condition with responsible efforts considering his circumstances. See ISCR Case No. 08-06567 at 2-3 (App. Bd. Oct. 29, 2009). Applicant’s lack of documented repayment actions of his own with the resources available to him prevent him from meeting the Appeal Board’s requirements for demonstrating financial stability. ISCR Case No. 07- 06482 (App. Bd. May 21 2008); see 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). From a whole-person standpoint, Applicant has provided no evidence of demonstrated efforts to date to address and resolve his student loan defaults. Based on the information provided, a whole-person assessment of Applicant’s strong character references from friends who know him and vouch for his honesty and trustworthiness are not enough to overcome concerns raised by his history of difficulties in managing his finances.

Considering all of the circumstances surrounding Applicant’s history of bankruptcies and uncured student loan defaults, Applicant’s actions in addressing his delinquent debts are insufficient to meet mitigation requirements imposed by the guideline governing his finances. Unfavorable conclusions are warranted with respect to the allegations covered by subparagraphs 1.a through 1.d. of Guideline F.

FORMAL FINDINGS

In reviewing the allegations of the SOR and ensuing conclusions reached in the context of the findings of fact, conclusions, conditions, and the factors listed above, I make the following formal findings:

GUIDELINE F (FINANCIAL CONSIDERATIONS): AGAINST APPLICANT

Subparas. 1.a-1.d: Against Applicant

CONCLUSION

In light of all the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant or continue Applicant’s security clearance. Clearance is denied.

Roger C. Wesley Administrative Judge

FOOTNOTES

It is not clear how the loan balance rose from Applicant’s scheduled $25,853 aggregate balance in his 2013 Chapter 7 bankruptcy petition to the $53,000 aggregate balance he currently reports to be owing on the two loans. Presumably, the increased balance is attributable to compounded interest. Without documentation from the lender, though, accurate estimates cannot be made.