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ISCR Case 16-00736.h1 — CASE

ISCR Case 16-00736.h1granted

Case Headnote

ISCR Case No. 16-00736.h1

grantedJul 24, 2017· Hon. Matthew E. Malone· hearing

Summary

A 61-year-old male applicant was granted a security clearance despite initial concerns under Guideline F (Financial Considerations) due to multiple delinquent debts totaling $15,825. Disqualifying conditions related to overdue debts and an inability to meet financial obligations were initially raised.

However, the judge determined that the applicant's financial difficulties stemmed from circumstances largely beyond his control, specifically family medical emergencies and business failures. Mitigating conditions were applied, recognizing that the problems were not due to irresponsibility.

The applicant demonstrated a good-faith effort to repay his debts, establishing a systematic plan to resolve his remaining obligations. Positive character references and credible testimony further supported his reliability and trustworthiness, leading to the security clearance being granted.

Why the Applicant Prevailed

The applicant's financial problems were largely due to circumstances beyond his control, including medical issues and business failures.
He has made a good-faith effort to repay his debts and has a systematic plan in place to resolve remaining obligations.
Positive character references and credible testimony supported his reliability and trustworthiness.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedA History 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

“A security clearance decision is intended only to resolve whether it is clearly consistent with the national interest for an applicant to either receive or continue to have access to classified information.”

Procedural Posture

SOR issuedJun 15, 2016
Answer filed—Applicant requested a hearing after initially seeking a decision without one.
Hearing heldMar 7, 2017
Decision dateApr 11, 2017Record closed on this date.

Cite For

Mitigation of Financial Issues Under Guideline F Due to Circumstances Beyond Control
Good-faith Efforts to Repay Debts as a Mitigating Factor
Consideration of Whole-person Factors in Security Clearance Decisions

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 issues stemmed from circumstances beyond his control, including medical emergencies and loss of income. The applicant demonstrated a commitment to repaying his debts and successfully mitigated the security concerns raised under Guideline F, resulting in a favorable decision for his security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a–1.m	13 sub-charges — specific text not stated in this decision (for the applicant).	For Applicant			—	—	—

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: ) ) ) [NAME REDACTED] ) ISCR Case No. 16-00736 ) ) ) Applicant for Security Clearance

For Government: Benjamin Dorsey, Esq., Department Counsel For Applicant: Donna Price, Esq.

07/24/2017 ______________

STATEMENT OF CASE

______________

MALONE, Matthew E., Administrative Judge:

Applicant’s financial problems arose from circumstances beyond his control. In response to his financial problems, he has paid several debts and embarked on a systematic plan to repay his remaining debts. Applicant established that his debts are not reflective of his judgment and reliability. He has mitigated the security concerns about his debts, and his request for a security clearance is granted.

Statement of the Case

On April 24, 2015, Applicant submitted an Electronic Questionnaire for Investigations Processing (EQIP) to obtain a security clearance required for his employment with a defense contractor. Based on the results of the ensuing background investigation, Department of Defense (DOD) adjudicators could not determine that it is clearly consistent with the interests of national security for Applicant to have a security clearance.1

On June 15, 2016, DOD issued a Statement of Reasons (SOR) alleging facts which raise security concerns addressed under the adjudicative guideline2 for financial considerations (Guideline F). Applicant timely responded to the SOR (Answer) and requested a decision without a hearing. Department Counsel sent Applicant a File of Relevant Material (FORM) in support of the Government’s case; however, Applicant then retained legal counsel and requested a hearing. I received the case on February 1, 2017.3

I convened the requested hearing on March 7, 2017. The parties appeared as scheduled. Department Counsel presented Government Exhibits (Gx.) 1 – 4, which I admitted without objection. Applicant presented two witnesses and testified on his own behalf. He also presented 21 exhibits. Applicant’s Exhibit (Ax.) A consists of Ax. A.1.a – A.1.p. Also presented were Ax. B1, B2, C1, C2, and D. Ax. A.1.a, A.1.b, A.1.d – A.1.f, A.1.i, A.1.l, A.1.m, B1, B2, C1 and D were admitted at hearing. Applicant submitted the remaining documents post-hearing. I admitted all of Applicant’s exhibits without objection. I received a transcript of the hearing (Tr.) on March 20, 2017. The record closed on April 11, 2017.

FINDINGS OF FACT

Under Guideline F, the Government alleged that Applicant owed $15,825 for 13 delinquent or past-due debts (SOR 1.a - 1.m). In response, Applicant admitted, with explanations, all of the SOR allegations. (Answer) In addition to the facts thus established, I make the following additional findings of fact.

Applicant is 61 years old. He and his wife, a certified nursing assistant, have been married since May 1986. They have three adult children. Applicant worked temporarily for the defense contractor sponsoring his request for clearance in February and March 2015. His continued employment is contingent on obtaining eligibility for access to classified information. That employer has paid Applicant about $14 hourly. Applicant also has an opportunity for similar work at a different location at roughly $20 an hour. This is Applicant’s first application for a security clearance. (Answer; Gx. 1; Tr. 108 – 110) Applicant and his five siblings grew up in a family doing business as a corporation that owned beachfront hotels starting in the 1920s. Applicant had been working for eight years as the general manager of the family’s hotel, when their father died in 1984. At that time, the hotel was 22 years old and needed significant capital improvements. Applicant maintained the hotel as best he could, but money that normally would have been used for the building upkeep was instead being used to care for his mother, who had chronic medical problems the costs of which often exceeded any medical insurance the family had. In 1997, they entered into a partnership with a local property management company to redevelop their hotel as a franchise of a national hotel chain. In 1998, the old hotel business closed and Applicant’s family became minority owners of a new hotel to be built on the sight of their old hotel. The new hotel took about 18 months to build, during which Applicant had no income. Thereafter, he was paid $25,000 a year as an industry consultant, and his family shared 35 percent of the net proceeds from the new hotel. (Answer; Tr. 24 – 32)

Applicant’s family ownership interest in the new hotel yielded about $350,000 annually (divided six ways) for about seven years. Thereafter, the property management company with whom the family was partnered started building several new hotels with the same national chain. This ate into the business revenue of the original franchise and the family’s annual income from the original franchise fell to about $200,000. When Applicant’s sister challenged their partner about the loss of income, the partner sold the hotel out from under Applicant’s family. In 2008, after all loans, taxes, and other costs of sale were paid, Applicant and his siblings received about $44,000 each. For his part, Applicant’s only way of earning a living was in the hospitality industry. However, no one would hire a 53-year-old with no college education and no experience in the national hotel business. (Answer; Tr. 32 – 42)

Applicant’s financial problems worsened in 2009, when his wife developed cancer. Her employer-sponsored medical insurance covered most of her medical bills, but many were not covered and she lost income because she could not work. By that time, Applicant could only work odd jobs for friends and associates. He obtained his real estate license, but the real estate business was greatly depressed at that time. In 2013, Applicant himself underwent multiple surgeries; however, this time he had no insurance (only his wife is covered on her policy) to cover medical bills. Additionally, Applicant could not work for several months. In 2014, he developed heart problems that required bypass surgery and another extended period when he was unable to work. He and his wife then moved to another state to start over but returned after a year. Before returning to his original state of residence, Applicant hired on with the company that is sponsoring his request for clearance. While he awaits the outcome of this adjudication, Applicant has been working sporadically for another defense contractor doing similar, albeit unclassified, work. (Answer; Gx. 1; Ax. D; Tr. 43 – 46, 59 - 65)

In May 2016, Applicant’s wife was injured in a hit-and-run car accident. Her car was a total loss and the remaining balance on their car note was paid by insurance. Police later caught the at-fault driver, and Applicant’s attorney has been negotiating a settlement that will pay Applicant’s wife’s medical bills and other damages, such as lost wages. Applicant estimates they will receive about $20,000, and he plans to pay his remaining debts with those funds. In the meantime, Applicant has paid the debts alleged at SOR 1.e, 1.g, 1.h, and 1.m. They are engaged in structured repayment plans with the creditors for the debts in the remaining SOR allegations. Applicant provided schedules for automatic debits from his bank account and records of payments made so far. His monthly payments are modest and will take time to complete, but he is able to pay them based on his current household income. Once the settlement of damages from his wife’s car accident is finalized, that money will be enough to pay off his remaining debts. To document Applicant’s commitment to using those funds for debt repayment, he recently obtained a high-interest loan using the anticipated settlement as collateral. (Answer; Ax. A.1.o; Ax. A.1.p Tr. 75 – 80, 113 - 115)

Applicant and his wife live modestly and well-within their means. They have moved into a small apartment and are able to meet all of their current obligations. They drive older model cars that were given to them by friends after their medical problems and his wife’s accident. References from friends and associates laud his integrity, professionalism, honesty, and willingness to work hard. At hearing, I found his testimony to be straightforward and credible. (Ax. C; Tr. 47 – 50, 82 - 83)

POLICIES

Each security clearance decision must be a fair, impartial, and commonsense determination based on examination of all available relevant and material information,4 and consideration of the pertinent criteria and adjudication policy in the adjudicative guidelines (AG). Decisions must also reflect consideration of the factors listed in ¶ 2(d) of the guidelines. Commonly referred to as the “whole-person” concept, those factors are:

(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.

The presence or absence of a disqualifying or mitigating condition is not determinative of a conclusion for or against an applicant. However, specific applicable guidelines should be followed whenever a case can be measured against them as they represent policy guidance governing the grant or denial of access to classified information. A security clearance decision is intended only to resolve whether it is clearly consistent with the national interest5 for an applicant to either receive or continue to have access to classified information. The Government bears the initial burden of producing admissible information on which it based the preliminary decision to deny or revoke a security clearance for an applicant. Additionally, the Government must be able to prove controverted facts alleged in the SOR. If the Government meets its burden, it then falls to the applicant to refute, extenuate or mitigate the Government’s case. Because no one has a “right” to a security clearance, an applicant bears a heavy burden of persuasion.6 A person who has access to classified information enters into a fiduciary relationship with the Government based on trust and confidence. Thus, the Government has a compelling interest in ensuring each applicant possesses the requisite judgment, reliability and trustworthiness of one who will protect the national interests as his or her own. The “clearly consistent with the national interest” standard compels resolution of any reasonable doubt about an applicant’s suitability for access in favor of the Government.7

ANALYSIS

Financial Considerations

The Government’s information reasonably raised a security concern about Applicant’s finances. That concern is stated at AG ¶ 18, as follows:

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. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage.

More specifically, the record as a whole requires application of the disqualifying conditions at AG ¶¶ 19(a) (inability to satisfy debts) and 19(c) (a history of not meeting financial obligations). I have also considered the following pertinent AG ¶ 20 mitigating conditions:

(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 are the result of a long-term confluence of adverse and unforeseen events. The failure of his family’s hotel business and local partnership in a national franchise venture left Applicant without opportunities to work in the only business he knew. Thereafter, a series of unforeseen medical problems hindered Applicant and his wife from earning enough money to meet their financial obligations. However, their medical problems are not likely to recur and they have documented a systematic approach to paying those debts they have not yet been able to resolve fully. Additionally, Applicant established he would commit funds from a settlement of his wife’s accident damages to resolve those debts that he and his wife are currently repaying through monthly payment plans.

Applicant has acted responsibly in the face of the medical and employment problems he and his family experienced. His efforts to resolve his debts reflect well on his judgment and reliability. In view of all of the foregoing, the continued presence of unresolved debts is not disqualifying. All three of the above-named mitigating conditions apply, and Applicant has mitigated the security concerns raised by adverse information about his finances.

I also have evaluated this record in the context of the whole-person factors listed in AG ¶ 2(d). Applicant’s actions to resolve his debts, along with positive information about his character and trustworthiness, are sufficient to satisfy the security concerns raised by his financial problems. A fair and commonsense assessment of the record as a whole shows that Applicant has met his burden of persuasion in showing that he is suitable for access to classified information.

FORMAL FINDINGS

Formal findings 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.m: For Applicant

CONCLUSION

In light of all of the foregoing, it is clearly consistent with the interests of national security for Applicant to have access to classified information. Applicant’s request for a security clearance is granted.

MATTHEW E. MALONE Administrative Judge

FOOTNOTES

1 Required by Executive Order 10865, as amended, and by DOD Directive 5220.6 (Directive), as amended.

2 At the time they issued the SOR, DOD adjudicators applied the adjudicative guidelines implemented by the Department of Defense on September 1, 2006. On December 10, 2016, the Director of National Intelligence issued a new version of the adjudicative guidelines, to be effective for all adjudications on or after June 8, 2017. In this decision, I have considered and applied the new adjudicative guidelines. My decision in this case would have been the same under either version.

3 Tr. 4 – 5. 4 See Directive. 6.3. 5 See Department of the Navy v. Egan, 484 U.S. 518 (1988).

6 See Egan, 484 U.S. at 528, 531.

7 See Egan; AG ¶ 2(b).