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ISCR Case 16-00904.h1 — CASE

ISCR Case 16-00904.h1granted

Case Headnote

ISCR Case No. 16-00904.h1

grantedOct 18, 2017· Hon. Francisco Mendez· hearing

Summary

This case concerns a 38-year-old military veteran whose security clearance was initially questioned under Guideline F (Financial Considerations) due to several financial issues. The Statement of Reasons cited two debts totaling approximately $33,000 in collection and a mortgage foreclosure that resulted in a deficiency of about $30,000. These issues raised disqualifying conditions under Adjudicative Guidelines (AG) ¶ 19(c) and AG ¶ 19(e).

However, the applicant demonstrated significant mitigating factors. He proactively addressed his financial problems by filing for Chapter 13 bankruptcy and consistently made payments according to the court-approved repayment plan. The judge noted that the financial difficulties were largely attributable to circumstances beyond his control, specifically a contentious divorce.

The judge applied mitigating conditions AG ¶ 20(a), AG ¶ 20(b), AG ¶ 20(c), and AG ¶ 20(d), finding that the applicant's responsible actions and commitment to resolving his debts mitigated the security concerns. Consequently, the applicant's security clearance was GRANTED.

Why the Applicant Prevailed

The applicant took responsible action to address his financial problems by filing for Chapter 13 bankruptcy.
He has made consistent payments under the court-approved bankruptcy plan, demonstrating a commitment to resolving his debts.
The financial issues were largely attributed to circumstances beyond his control, specifically a divorce.

Conditions Referenced

Disqualifying

AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations
AG ¶ 19(e)raisedConsistent Spending Beyond One's Means

Mitigating

AG ¶ 20(a)appliedBehavior Happened Long Ago or Infrequently
AG ¶ 20(b)appliedConditions Largely Beyond the Person's Control
AG ¶ 20(c)appliedReceived Financial Counseling and Is Resolving the Problem
AG ¶ 20(d)appliedInitiated and Adhering to a Good-faith Effort to Repay Debts

Key Rule Quoted

“[N]o one has a ‘right’ to a security clearance.”
— Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedOct 3, 2016
Answer filedOct 13, 2016
Hearing heldOct 6, 2017Record reopened for updated information.
Decision dateOct 18, 2017

Cite For

Mitigation of Financial Issues Under Guideline F Due to Responsible Actions Taken
Impact of Personal Circumstances on Financial Obligations
Importance of Demonstrating a Good-faith Effort to Resolve 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: granted

The judge found that the applicant's financial issues were primarily due to a contentious divorce and that he has taken responsible steps to address his financial situation, including filing for Chapter 13 bankruptcy. The judge ruled in favor of the applicant on all allegations under Guideline F, concluding that the applicant's current financial situation does not raise concerns about his reliability or trustworthiness.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant has two debts totaling approximately $33,000 that are in collection status. $33,000	For Applicant	Unspecified Financial	Admitted	(c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	(a) behavior happened long ago / infrequent / unlikely to recur (b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	Documented Chapter 13 Bankruptcy Claimed Debt Paid in Full
1.b	Applicant's mortgage was foreclosed, and he owes approximately $30,000 more than the home was worth at the time of foreclosure. $30,000	For Applicant	Unspecified Financial	Admitted	(c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	(a) behavior happened long ago / infrequent / unlikely to recur (b) conditions largely beyond the person’s control; acted responsibly (c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	Documented Chapter 13 Bankruptcy Claimed 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: ) ) REDACTED ) ISCR Case No. 16-00904 ) ) Applicant for Security Clearance

For Government: Benjamin R. Dorsey, Esq., Department Counsel For Applicant: Pro se

10/18/2017 ______________

STATEMENT OF CASE

______________

MENDEZ, Francisco, Administrative Judge:

Applicant presented sufficient evidence to mitigate security concerns raised by his financial situation. Clearance is granted.

Statement of the Case

On October 3, 2016, the Department of Defense (DoD) issued a Statement of Reasons (SOR) alleging security concerns under the financial considerations guideline. Applicant answered the SOR and requested a decision on the administrative (written) record (Answer).

On December 13, 2016, Department Counsel sent Applicant the Government’s written case, known as a file of relevant material (FORM). With the FORM, Department Counsel forwarded to Applicant seven exhibits (Items 1 – 7) that the Government offers for admission into the record. Applicant submitted a response to the FORM on February 13, 2017, explaining, in part, that his financial problems were related to an expensive and contentious divorce. He also stated that he had taken action to address his financial situation by filing for Chapter 13 bankruptcy. (Response)

On October 1, 2017, I was assigned the case for decision. I reopened the record to give the parties the opportunity to submit updated information. Applicant timely submitted a number of documents showing that his Chapter 13 bankruptcy plan was confirmed by a court and that he is paying per the terms of the plan. He also submitted documents about his military service, 12 years of performance evaluations at his job, and reference letters. I (re-)marked these documents Applicant’s Exhibits A – K. All exhibits were admitted into the record without objection, and the record closed on October 6, 2017.

FINDINGS OF FACT

Applicant, 38, earned a high school diploma in 1997 and then enlisted in the U.S. military. He earned several awards and medals for his military service, and was promoted to the rank of sergeant (E-5) before receiving an honorable discharge in 2005. After leaving the military, Applicant was hired by his current employer. He was granted a security clearance while in the military, which he has retained to the present day. 1

Applicant started experiencing financial trouble in approximately mid-2013, when his wife decided to change careers. This resulted in a substantial reduction in their household income. Applicant’s ex-wife went from earning about $38,000 annually to $16,000. Applicant attempted to make up the financial shortfall by working overtime. By April 2014, he was no longer able to afford the monthly mortgage payments on their marital residence and other marital debts.2

Applicant then attempted to resolve the mortgage debt by selling his former home. He had purchased the home at the height of the housing market bubble in 2008. By 2014, the home was still worth less than the balance owed on the mortgage. The bank rejected several short-sale offers and, in 2015, foreclosed on the property. A 1099-A reflects that, at the time the home was foreclosed, Applicant and his wife owed about $30,000 more than the home was worth.

Applicant self-reported the mortgage defaulted and foreclosure to his facility security officer (FSO). He kept his FSO informed about his financial problems, and discussed them during the course of a recent security clearance background investigation.3

Around the time of the foreclosure in 2015, Applicant and his wife formally separated. Applicant then sought the advice of a bankruptcy attorney. He was advised to not pay his debts, including the two listed on the SOR totaling $33,000. He was also advised by the attorney to wait until after his divorce was finalized to file for bankruptcy.

In September 2016, a divorce decree was issued. Applicant then took the necessary pre-bankruptcy financial counseling, gathered the necessary financial documents, and set aside enough money to pay the bankruptcy attorney’s retainer fee. In February 2017, Applicant filed for Chapter 13 bankruptcy. He listed the two SOR debts on his bankruptcy petition. The proposed Chapter 13 plan was confirmed in April 2017. Applicant submitted documentation showing that he has made eight consecutive $200 monthly payments per the terms of the court-approved bankruptcy plan.4

Applicant is required, as a separate condition of the court-approved 60-month bankruptcy plan, to surrender two time shares. He is also required over the next five years to submit his income tax returns to the bankruptcy trustee, and remit any tax refunds exceeding $1,200 to the trustee to distribute to his creditors as supplemental plan payments. He has completed an additional financial counseling course.5

Applicant earned an associate’s degree in 2010. He is currently attending college in pursuit of a degree in electrical engineering, which he is a few credits shy of earning. His performance evaluations over the past 12 years are favorable. His supervisors write that Applicant exhibits a strong work ethic, is trustworthy, and is of high moral character. They further note that Applicant never shies away from doing extra work and is a team player. Co-workers agree with the supervisors’ assessment that Applicant is a hard worker, dependable, and a person of good moral character.6

Law, Policies, and Regulations

This case is decided under Executive Order (E.O.) 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 (AG) implemented on June 8, 2017, through Security Executive Agent Directive 4 (SEAD-4). ISCR Case No. 02-00305 at 3 (App. Bd. Feb. 12, 2003) (security clearance decisions must be based on current DoD policy and standards).

“[N]o one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). Instead, persons are only eligible for access to classified information “upon a finding that it is clearly consistent with the national interest” to authorize such access. E.O. 10865 § 2.

When evaluating an applicant’s eligibility for a security clearance, an administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations, the guidelines list potentially disqualifying and mitigating conditions. The guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, an administrative judge applies the guidelines in a commonsense manner, considering all available and reliable information, in arriving at a fair and impartial decision. AG ¶ 2. Department Counsel must present evidence to establish controverted facts alleged in the SOR. Directive ¶ E3.1.14. Applicants are responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by the applicant or proven . . . and has the ultimate burden of persuasion as to obtaining a favorable clearance decision.” Directive ¶ E3.1.15.

Administrative Judges must remain fair and impartial, and carefully balance the needs for the expedient resolution of a case with the demands of due process. Therefore, an administrative judge will ensure that an applicant: (a) receives fair notice of the issues, (b) has a reasonable opportunity to address those issues, and (c) is not subjected to unfair surprise. Directive, ¶ E3.1.10; ISCR Case No. 12-01266 at 3 (App. Bd. Apr. 4, 2014).

In evaluating the evidence, a judge applies a “substantial evidence” standard, which is something less than a preponderance of the evidence. Specifically, substantial evidence is defined as “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all the contrary evidence in the same record.” Directive, ¶ E3.1.32.1.7

Any doubt raised by the evidence must be resolved by a judge in favor of the national security. AG ¶ 2(b). See also SEAD-4, ¶ E.4. Additionally, the Supreme Court has held that responsible officials making “security clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531.

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. 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 an applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information.

ANALYSIS

Applicant started experiencing financial trouble about three years ago, when his marriage started falling apart. His former wife’s decision to start a new career, which reduced her income by more than half, became a source of great financial strain. Applicant was unable to keep up with the payments on their home and the other debts that they had jointly acquired during the marriage. He tried to resolve the mortgage by selling his former home, but was unable to find a buyer willing to offer enough to cover the amount remaining on the mortgage. The bank refused several short-sell offers and eventually foreclosed on the property.

Applicant then took action to resolve his financial problems. He sought the advice of a bankruptcy attorney, obtained the necessary financial counseling, and is responsibly addressing his past financial problems through a court-approved Chapter 13 plan. He submitted documentary proof showing a track record of debt repayments per the terms of the court-approved bankruptcy plan. Nonetheless, Applicant’s recent problems raise the Guideline F security concern, which is explained at AG ¶ 18:

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. . . .8

In assessing Applicant’s case, I considered all the disqualifying and mitigating conditions under Guideline F, including the following:

AG ¶ 19(c): a history of not meeting financial obligations;

AG ¶ 19(e): consistent spending beyond one's means or frivolous or irresponsible spending, which may be indicated by excessive indebtedness, significant negative cash flow, a history of late payments or of non-payment, or other negative financial indicators;

AG ¶ 20(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;

AG ¶ 20(b): the conditions that resulted in the financial problem were largely beyond the person's control (… divorce or separation . . .), and the individual acted responsibly under the circumstances;

AG ¶ 20(c): the individual has received or is receiving financial counseling for the problem . . . and there are clear indications that the problem is being resolved or is under control; and

AG ¶ 20(d): the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts.

Security clearance assessments about a person require a judge to closely examine the individual’s conduct and circumstances, both past and present. In a Guideline F case, an administrative judge examines the way an applicant handles his or her personal financial obligations to assess how they may handle their security obligations.9 Additionally, the resolution of past financial issues alone without evidence of true reform and rehabilitation is of limited probative value in the security clearance context.10

Here, Applicant’s past financial problems were, in part, attributable to the dissolution of his marriage. He immediately reported his financial problems to his FSO and kept his FSO in the loop. He then took responsible action to address his financial problems. He received financial counseling and is adhering to a court-approved debt repayment plan. Although Applicant is still in the process of repairing his finances, his current financial situation does not raise a concern about his suitability for a security clearance. AG ¶¶ 20(a) through 20(d) apply, in full or in part, and when considered together with the positive whole-person matters raised by the record evidence,11 mitigate the security concerns at issue.

FORMAL FINDINGS

Formal findings for or against Applicant on the allegations set forth in the SOR, as required by Directive, ¶ E3.1.25, are:

Paragraph 1, Guideline F (Financial Considerations): FOR APPLICANT

Subparagraphs 1.a and 1.b: For Applicant

CONCLUSION

In light of the record evidence, it is clearly consistent with the interests of national security to grant Applicant initial or continued access to classified information. Applicant’s request for a security clearance is granted.

____________________ Francisco Mendez Administrative Judge

FOOTNOTES

1 Answer; Response; Item 3; Exhibits A, B, D (military awards and decorations); I (DD 214).

2 Answer; Response; Item 4; Exhibits A and B.

3 Answer; Response; Item 4; Item 7; Exhibit C (1099-A). 4 Answer; Response; Item 4; Exhibit E (bankruptcy petition and order confirming plan); Exhibit F (plan payments); Exhibit G (counseling).

5 Exhibit E at 73-88; Exhibit G.

6 Item 4; Exhibits J; Exhibit K. 7 However, a judge’s mere disbelief of an applicant’s testimony, without actual evidence of disqualifying conduct or admission by an applicant to the disqualifying conduct, is not enough to sustain an unfavorable finding. ISCR Case No. 15-05565 (App. Bd. Aug. 2, 2017); ISCR Case No. 02-24452 (App. Bd. Aug. 4, 2004). Furthermore, an unfavorable decision cannot be based on solely non-alleged conduct. ISCR Case No. 14-05986 (App. Bd. May 26, 2017). Likewise, a judge can only use non-alleged conduct for specific limited purposes, such as, assessing mitigation and credibility, unless an applicant is placed on notice that such conduct also raises a security concern. ISCR Case No. 16-02877 at 3 (App. Bd. Oct. 2, 2017). 8 AG ¶ 18. 9 See generally ISCR Case No. ISCR Case No. 12-09719 at 2-3 (App. Bd. Apr. 6, 2016).

10 Compare, ISCR Case No. 12-04806 (App. Bd. July 3, 2014) (despite the presence of unresolved debt, notably, a second mortgage loan tied to a property that had been foreclosed, Board upheld grant because clear evidence of reform and rehabilitation), with, ISCR Case No. 15-03481 (App. Bd. Sep. 27, 2016) (applicant’s resolution of alleged financial issue (overdue tax returns) insufficient to mitigate security concerns, because no extenuating circumstances to explain issue or evidence of true financial reform).

11 See generally AG ¶ 2. See also SEAD-4, ¶ E.4; Directive, ¶ 6.3.