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ISCR Case 16-01029.h1 — CASE

ISCR Case 16-01029.h1denied

Case Headnote

ISCR Case No. 16-01029.h1

deniedAug 23, 2017· Hon. Candace Le'i Garcia· hearing

Summary

A 35-year-old defense contractor was denied a security clearance under Guideline F (Financial Considerations) due to unresolved financial issues. The Statement of Reasons detailed three primary concerns: a significant delinquent mortgage on a home purchased in November 2008, a minor $79 delinquent medical account, and a $6,974 judgment from 2012 by his homeowner's association for unpaid dues.

Disqualifying conditions related to overdue debts and a history of not meeting financial obligations were raised. While a mitigating condition concerning the financial problems being largely beyond the applicant's control was considered, it was ultimately not sufficient to overcome the concerns.

The denial was based on the applicant's failure to provide corroborating documentation for efforts to resolve his debts. The judge concluded that the financial problems remained unresolved, casting doubt on the applicant's reliability and judgment, and that there was insufficient evidence to suggest these issues were unlikely to recur.

Why the Applicant Was Denied

Applicant did not provide corroborating documentation of efforts to resolve his debts.
Financial problems remain unresolved and cast doubt on his reliability and judgment.
Insufficient evidence to conclude that financial issues are unlikely to recur.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability to Satisfy Debts
AG ¶ 19(c)raisedHistory of Not Meeting Financial Obligations

Mitigating

AG ¶ 20(b)rejectedConditions Largely Beyond the Person's ControlApplicant did not provide evidence that he acted responsibly under the circumstances.

Key Rule Quoted

“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.”

Procedural Posture

SOR issuedJun 24, 2016
Answer filedJul 29, 2016
Hearing heldJun 28, 2017Rescheduled from 05/16/2017 at the request of Applicant's counsel.
Decision dateAug 23, 2017

Cite For

Insufficient Evidence of Responsible Action Under Financial Distress
Impact of Unresolved Debts on Security Clearance Eligibility
Consideration of the Whole-person Concept in Financial 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 that the applicant did not mitigate the financial considerations security concerns under Guideline F. The applicant had multiple unresolved debts, including a significant mortgage delinquency, a judgment for homeowner dues, and a minor medical debt, which raised doubts about his reliability and trustworthiness.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	SOR ¶ 1.a comprises the largest of Applicant’s delinquent debts, and is the primary mortgage on the home Applicant purchased in November 2008. $20,662	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	SOR ¶ 1.b is a minor delinquent medical account of $79. $79	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	SOR ¶ 1.c is a $6,974 judgment entered against Applicant in 2012 by his homeowner’s association for delinquent homeowner dues. $6,974	Against Applicant	Judgment Against Applicant	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—

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. 16-01029 ) Applicant for Security Clearance )

For Government: Benjamin Dorsey, Esq., Department Counsel For Applicant: Stephanie Rapp-Tully, Esq.

08/23/2017 ______________

STATEMENT OF CASE

______________

GARCIA, Candace Le’i, Administrative Judge:

Applicant did not mitigate the financial considerations security concerns. Eligibility for access to classified information is denied.

Statement of the Case

On June 24, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F (financial considerations). The action was taken under Executive Order (Exec. Or.) 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).1 Applicant responded to the SOR on July 29, 2016, and requested a hearing before an administrative judge. The case was assigned to an administrative judge on February 23, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on March 22, 2017, scheduling the hearing for May 16, 2017. At the request of Applicant’s counsel2 and with no objection from the Government, the administrative judge granted a continuance. DOHA issued a notice of hearing on May 12, 2017, scheduling the hearing for June 28, 2017. The case was transferred to me on June 6, 2017, due to the previous administrative judge’s scheduling conflict. I convened the hearing as scheduled.

The Government’s and Applicant’s exhibit lists were appended to the record as Hearing Exhibits (HE) 1 and A, respectively. Government Exhibits (GE) 1 through 6 were admitted in evidence without objection. Applicant testified and submitted Applicant’s Exhibits (AE) A through G, which were admitted in evidence without objection. DOHA received the hearing transcript (Tr.) on July 7, 2017.

FINDINGS OF FACT

Applicant admitted the SOR allegations. He is 35 years old. He has worked for his current employer, a defense contractor, since September 2011. He obtained a high- school diploma in May 2000. He served honorably in the U.S. Marine Corps from November 2000 to December 2003, during which time he deployed to Iraq for three and a half months in 2003. He worked for a previous defense contractor from January 2004 to September 2011. He has never been married. His one child, age 12, lives in another state with the child’s mother. He has held a DOD security clearance since 2004.3

The SOR alleges a $6,974 judgment entered against Applicant in 2012, a delinquent mortgage account that was $20,662 past due with a $160,492 balance, and a minor delinquent medical debt for $79. The SOR allegations are established by Applicant’s admissions and the credit reports.4

Applicant’s financial problems started in late 2007, when cancer recurred for his child’s mother and she consequently lost her job. As her insurance has not agreed to pay for a costly surgery, she has since been on medication and held only sporadic employment. In addition to paying for his own household expenses as well as child- related expenses, Applicant has significantly contributed to paying her household expenses.5

SOR ¶ 1.a comprises the largest of Applicant’s delinquent debts, and is the primary mortgage on the home Applicant purchased in November 2008. Applicant stated that he first became delinquent on his mortgage shortly upon purchasing the home, after his child’s mother lost her job, but he was able to bring the account current. He stated that between 2010 and 2012, he unsuccessfully worked with a company to try to obtain a loan modification. He paid the company $1,200, but the company went out of business.6

Applicant became delinquent again on his mortgage in late 2014. He stated that he attempted to obtain a loan modification and began working with an attorney, referred to him by a friend, in March 2015 to assist him with doing so. He stated that the attorney required a $2,500 payment before they could begin the loan modification process, and he made payments to the attorney totaling $1,545. On the attorney’s advice, Applicant stated that he stopped paying his mortgage during the loan modification process, but believed he made several trial payments until his attorney told him to stop because the creditor was billing Applicant an amount different than what the creditor had discussed with the attorney. Applicant believed his attorney was renegotiating the terms of the loan modification. Applicant stated that he filed Chapter 13 bankruptcy in June 2016 because the attorney told him that doing so would help Applicant resolve his delinquent mortgage. Applicant stated that he made three payments towards the Chapter 13 bankruptcy plan, but was unaware why it was dismissed in July 2016.7

Applicant stated that he learned his home was foreclosed in late April 2017, when he pulled a copy of his credit report. Prior to the foreclosure, Applicant stated that his attorney received notice of the foreclosure but told Applicant to disregard it. After the foreclosure, when Applicant discussed with the attorney the option of resolving his delinquent mortgage through a short sale of the home, Applicant stated that he stopped hearing from the attorney. Despite Applicant’s attempts to contact the attorney, Applicant stated that he had not heard from the attorney as of the date of the hearing.8

AE D is an April 2017 mortgage account summary that reflects a total amount due of $195,863 and a reinstatement amount of $41,468. AE G reflects that the creditor purchased Applicant’s home at a foreclosure sale in late April 2017 for $88,920, and $195,628 was due under the note and deed of trust as of the sale. One of Applicant’s most recent credit reports from June 2017, in AE C, reports this debt as $43,717 past due with a $160,492 balance.9

As of the hearing date, Applicant stated that he was in communication with the creditor, and he was living in the home with the creditor’s knowledge. He has not made any payments on his mortgage since the home was foreclosed. He stated that he had not received notice of any outstanding debt since the foreclosure sale, nor had he received an IRS Form 1099-C or IRS Form 1099-A indicating that this debt was canceled or he is not responsible for any deficiency balance. He stated that as of the hearing date, he had unsuccessfully attempted to contact the creditor but was transferred to various departments and was unable to speak to someone. He stated that he is of the understanding that the creditor is in the process of determining whether to resell the house back to him or require him to move out. Applicant did not provide documentation of his efforts to resolve this debt.10

SOR ¶ 1.bis a minor delinquent medical account of $79. Applicant stated that he had an accident in 2012, and all of his consequent medical bills were paid through workman’s compensation with help from an attorney. He stated that he was unaware this medical bill was outstanding and plans to pay it, though his attempts to locate the creditor were unsuccessful. He stated that he last tried to locate the creditor in 2016.11

SOR ¶ 1.cis a $6,974 judgment entered against Applicant in 2012 by his homeowner’s association for delinquent homeowner dues. Applicant stated that he was unaware the homeowner’s association obtained a judgment against him. He stated that he unsuccessfully attempted to make a payment arrangement for his homeowner dues before the delinquent balance reached $6,974, and made some payments between 2012 and 2014, but the association would not work with him to reach a payment arrangement, and he could not keep up with payments because he had to prioritize paying his other bills. He subsequently forgot about his homeowner dues and did not make any payments between 2014 and 2017. He plans to resolve the judgment with his tax refund.12

AE F contains a February 2017 account statement and letter from the homeowner’s association reflecting an outstanding balance of $11,823 immediately due, and a monthly assessment of $135 beginning in March 2017. Applicant stated that AE F is from a new company managing his homeowner’s association, and he made some payments towards the $11,823 outstanding balance. He stated that he was still negotiating with the new company regarding whether he could continue paying the outstanding balance at $300 monthly, as agreed to by the prior company that managed his homeowner’s association, and not $500 monthly as he was recently billed. He also stated that he was negotiating with the new company regarding the monthly assessment. He occasionally sends payments to the homeowner’s association, and his last payment occurred several months before the hearing date. Applicant did not provide documentation of his efforts to resolve this debt.13

Applicant has worked at the same location, for a prior and his current defense contractor, since January 2004. His coworker and supervisor describe him as an upstanding, trustworthy, and reliable individual. He is one of ten to twelve employees, out of 34, authorized to handle cash from clients ranging between $1,000 and $100,000, he has been so authorized for 10 out the 13 years that he has worked at this location, and he has never had any issues doing so. He has taken advantage of overtime opportunities at work, he also worked odd labor jobs, and he has continued to look for additional part-time job opportunities. He does not have a budget, but provided a summary of his personal financial statement in which he indicated that his monthly net remainder after expenses ranges from $100 to $1,000. He has not received credit counseling, but he has researched such options since 2007. In 2017, he received tax refunds totaling $9,200, but used them towards other bills instead of applying them towards any of the SOR debts. While he does not have any other delinquent debts, he acknowledged that he needs time to address the SOR debts and intends to do so.14

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. 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(a), 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 national security eligibility will be resolved in favor of the national security.”

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 safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information.

Section 7 of Exec. Or. 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 Exec. Or. 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:

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.

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

(a) inability to satisfy debts; and

Applicant was unable to pay his debts. The evidence is sufficient to raise AG ¶¶ 19(a) and 19(c) as disqualifying conditions.

Conditions that could mitigate the financial considerations security concerns are provided under AG ¶ 20. The following 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; and (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.

Applicant’s SOR debts remain unresolved. He did not provide corroborating documentation to show that he has tried to resolve them. There is insufficient evidence to conclude that his financial problems are unlikely to recur. His failure to address his delinquent debts casts doubt on his current reliability, trustworthiness, and good judgment. AG ¶ 20(a) does not apply.

Circumstances beyond his control contributed to Applicant’s financial problems. For the full application of AG ¶ 20(b), Applicant must provide evidence that he acted responsibly under the circumstances. Applicant has not provided corroborating documentation of his efforts to resolve the SOR debts. There is insufficient evidence to conclude Applicant acted responsibly under the circumstances. AG ¶ 20(b) is partially applicable.

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(d):

(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.

Overall, the record evidence leaves me with questions and doubts as to Applicant’s eligibility and suitability for a security clearance. I conclude Applicant did not mitigate 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

Subparagraphs 1.a - 1.c: Against 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 continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is denied.

________________________ Candace Le’i Garcia Administrative Judge

FOOTNOTES

1 I decided this case using the AG implemented by DOD on June 8, 2017. However, I also considered this case under the previous AG implemented on September 1, 2006, and my conclusions are the same using either set of AG. 2 AE A. 3 Applicant’s SOR response; Tr. at 13-91; GEs 1, 6; AEs B, E. 4 SOR; Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 5 Applicant’s SOR response; Tr. at 13-91; GEs 1, 6; AE F. 6 Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 7 Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 8 Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 9 Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 10 Applicant’s SOR response; Tr. at 13-91; GEs 1-6; AEs C, D, F, G. 11 Applicant’s SOR response; Tr. at 13-91; GE 6. 12 Applicant’s SOR response; Tr. at 13-91; GE 6; AE F. 13 Tr. at 13-91; AE F. 14 Applicant’s SOR response; Tr. at 13-91; GE 6; AEs B, E.