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ISCR Case 16-01092.h1 — CASE

ISCR Case 16-01092.h1granted

Case Headnote

ISCR Case No. 16-01092.h1

grantedAug 11, 2017· Hon. Elizabeth M. Matchinski· hearing

Summary

A 64-year-old operations supervisor for a defense contractor was granted a security clearance despite concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The Statement of Reasons alleged the applicant falsified his September 2015 SF 86 by denying financial judgments, foreclosures, collection debts, or charged-off credit cards within the preceding seven years. Specific financial issues included a $777 judgment from October 2013, a $209,721 mortgage loan with $34,882 past due and in foreclosure, a $223 charged-off credit card debt, and a $420 collection debt.

The judge determined that the applicant did not intentionally omit these debts from his application. The applicant successfully paid off the charged-off credit card debt and modified his mortgage to prevent foreclosure. His financial difficulties were largely attributed to circumstances beyond his control, specifically the cessation of rental income he had relied upon.

Given these mitigating factors, and the finding that there was no intentional falsification, the security clearance was granted.

Why the Applicant Prevailed

The applicant demonstrated that he did not intentionally omit debts from his security clearance application.
He successfully paid off the charged-off credit card debt and modified his mortgage to avoid foreclosure.
The applicant's financial issues were largely due to circumstances beyond his control, including reliance on rental income that ceased.

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(e)appliedThe Individual Has a Reasonable Basis to Dispute the Legitimacy of the Past-due Debt
AG ¶ 20(b)appliedThe Conditions That Resulted in the Financial Problem Were Largely Beyond the Person’s Control

Key Rule Quoted

“An applicant is not required to be debt free, but is required to manage his finances in a way as to exhibit sound judgment and responsibility.”

Procedural Posture

SOR issuedJul 8, 2016
Answer filedAug 10, 2016
Hearing heldMar 27, 2017
Decision dateAug 11, 2017

Cite For

Disputed Debts Under Guideline F
Mitigating Circumstances Related to Financial Issues
Intentional Omission of Debts Under Guideline E

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 E (Personal Conduct) · descriptive summary of a decided case

Posture: Decision on RecordDecided: granted

The judge found in favor of the applicant regarding the personal conduct allegations under Guideline E. The applicant was accused of failing to disclose certain financial obligations on his security clearance application, but the judge determined that there was no intentional omission of these debts.

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	Applicant allegedly falsified his September 2015 Questionnaire for National Security Positions (SF 86) by responding negatively to all the financial record inquiries, including those involving any financial judgments, property foreclosures, collection debts, or charged-off credit cards within the last seven years.	For Applicant	Omission or Failure to DiscloseNOT DELIBERATE	Financial	Denied	—	—	—

Descriptive standardized rendering of a decided public case (Guideline E). The verbatim source decision is shown in full below.

Standardized Decision Profile

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

Posture: Decision on RecordDecided: granted

The judge found that the applicant had several financial issues, including a judgment, a mortgage in foreclosure, a charged-off credit card debt, and a collection debt. However, the judge ruled in favor of the applicant on all allegations, determining that some debts were inaccurately reported and that the applicant had taken steps to address his financial situation.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	$777 judgment from October 2013 $777	For Applicant	Judgment Against Applicant	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	(e) reasonable, documented basis to dispute the debt	Claimed Other
1.b	$209,721 ($34,882 past due) mortgage loan in foreclosure $209,721	For Applicant	Mortgage or Home Loan Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	Claimed Other
1.c	$223 charged-off credit card debt $223	For Applicant	Credit Card Debt	Admitted	—	(e) reasonable, documented basis to dispute the debt	Documented Debt Paid in Full
1.d	$420 collection debt $420	For Applicant	Unspecified Financial	Denied	—	(e) reasonable, documented basis to dispute the debt	Claimed Other

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. 16-01092 ) Applicant for Security Clearance )

For Government: Carroll J. Connelley, Esq., Department Counsel For Applicant: Pro se

08/11/2017 ______________

STATEMENT OF CASE

______________

MATCHINSKI, Elizabeth M., Administrative Judge:

Applicant was an authorized user on a $225 charged-off credit card debt from October 2013, which has been paid. His and his spouse’s home loan was $34,882 past due as of August 2015. They averted foreclosure through a modification in 2016 and have made timely loan payments since the modification. Applicant did not disclose these debts on his security clearance application, but it was not established that he intentionally omitted them. Clearance is granted.

Statement of the Case

On July 8, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the security concerns under Guideline F, financial considerations, and Guideline E, personal conduct, explaining why it was unable to find it clearly consistent with the national interest to grant or continue security clearance eligibility for him. The DOD CAF took the action under Executive Order (EO) 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 for Determining Eligibility for Access to Classified Information (AG) effective within the DOD on September 1, 2006.

On August 10, 2016, Applicant answered the SOR allegations and requested a hearing before an administrative judge from the Defense Office of Hearings and Appeals (DOHA). On March 2, 2017, the case was assigned to me to conduct a hearing to determine whether it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. On March 9, 2017, I scheduled a hearing for March 27, 2017.

I convened the hearing as scheduled. Three Government exhibits (GEs 1-3) and six Applicant exhibits (AEs A-F) were admitted into evidence without objection. Applicant testified, as reflected in a transcript (Tr.) received on April 4, 2017.

I held the record open after the hearing for post-hearing submissions from Applicant. On April 26, 2017, Applicant offered three exhibits, which were entered into evidence without objection as AEs G-I. At Applicant’s request and without any objection from the Government, I extended the deadline for additional documentation to May 17, 2017. On May 4, 2017, Applicant submitted a mortgage loan verification record, which was admitted as AE J. Department Counsel filed no objection by the May 11, 2017 deadline.

While this case was pending a decision, Security Executive Agent Directive 4 was issued establishing the National Security Adjudicative Guidelines (AG) applicable to all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position. The AG supersede the adjudicative guidelines implemented in September 2006 and are effective for any adjudication made on or after June 8, 2017. Accordingly, I have adjudicated Applicant’s security clearance eligibility under the new AG.1

Summary of Pleadings

The SOR alleges under Guideline F that, as of July 8, 2016, Applicant owed a $777 judgment from October 2013 (SOR ¶ 1.a), a $209,721 ($34,882 past due) mortgage loan in foreclosure (SOR ¶ 1.b), a $223 charged-off credit card debt (SOR ¶ 1.c), and a $420 collection debt (SOR ¶ 1.d). Under Guideline E, Applicant allegedly falsified his September 2015 Questionnaire for National Security Positions (SF 86) by responding negatively to all the financial record inquiries, including those involving any financial judgments, property foreclosures, collection debts, or charged-off credit cards within the last seven years.

When Applicant answered the SOR, he denied the judgment and collection debts (SOR ¶¶ 1.a and 1.d) in that they were not his debts. He did not dispute that he had a loan with the mortgage lender in SOR ¶ 1.b, but he denied it was past due and in foreclosure. He indicated that he was current on his payments since modifying the loan. He admitted that he had owed the $225 charged-off credit card debt (SOR ¶ 1.d), but he paid it after he received confirmation of its validity. Applicant denied that he knowingly falsified his SF 86 in that he had not known about the $225 credit card delinquency and his mortgage was current.

FINDINGS OF FACT

After considering the pleadings, exhibits, and transcript, I make the following findings of fact.

Applicant is a 64-year-old operations supervisor who has worked for his defense contractor employer since March 1976. He holds a DOD secret clearance, which was granted in December 2005, although he has not needed a clearance for his duties in his current position. (GE 1.) He was a supervisor for two years in another department before transferring to his present position in 2006. (Tr. 34-35.)

Applicant and his spouse have been married since April 1973. They have two daughters now ages 42 and 38. (GE 1.) Applicant and his spouse purchased their home, a duplex that was valued at $294,000, for $264,000. (Tr. 22, 29.) They had been tenants for some time and the elderly owner wanted to sell the house quickly. (Tr. 54.) Applicant and his spouse obtained a primary mortgage of $208,000 (SOR ¶ 1.b) and a second mortgage of $52,000 in October 2005. (GE 3.) Applicant’s oldest brother retired at that time and moved into the other unit. (Tr. 22.) Applicant’s brother paid them $800 a month in rent. (Tr. 59.)

Applicant testified that 11 months after he and his spouse purchased the house, it was worth only $180,000 because of a decline in home values in their area. Applicant and his spouse owed more on the mortgage than the house was worth, and they struggled to make their $2,497 monthly mortgage payments. In 2006 or 2007, Applicant and his spouse fell several thousand dollars behind in their mortgage payments and were threatened with foreclosure. His spouse handled their mortgage payments, and when Applicant confronted her about the delinquency, she told him that she had not let him know they were behind because she was embarrassed about having let their home loan situation get out of hand. Applicant worked overtime for the funds needed to bring their loan current, and he and his spouse obtained a small modification lowering their interest rate from 11% to 10%. (Tr. 46- 48, 53.)

On September 17, 2015, Applicant completed and certified to the accuracy of an SF 86 on which he responded negatively to the financial record inquiries concerning delinquency involving enforcement, including “In the past seven (7) years, you had a judgment entered against you. (Include financial obligations for which you were the sole debtor, as well as those for which you were a cosigner or guarantor).” Applicant also answered “No” to the financial record inquiries concerning delinquency involving routine accounts, including whether, in the past seven years, he had any property foreclosed, had defaulted on any loan, had any bills or debts turned over to a collection agency, or had any account or credit card suspended, charged off, or cancelled for failing to pay as agreed. (GE 1.) As of October 7, 2015, the credit bureaus were reporting some delinquencies on Applicant’s credit record under his name and social security number but also under the name of his oldest brother.2 (GEs 1, 3.) Under the public record section, Applicant’s credit report listed a $4,218 judgment filed in December 2009 that was paid in November 2010 and an unpaid $777 judgment from August 2013 (SOR ¶ 1.a). Under the trade section, Applicant’s and his spouse’s primary mortgage was reportedly $34,882 past due on a balance of $209,721 as of August 2015, and it was in foreclosure proceedings since June 2015 (SOR ¶ 1.b). Their payments had been late more than 90 days 31 times, and there had been no activity on the account since December 2014. A $420 debt assigned for collection in March 2009 had reportedly been charged off in August 2009 (SOR ¶ 1.d). In October 2013, a credit card account on which Applicant was an authorized user was charged off for $225 (SOR ¶ 1.c). Two other credit card accounts had been paid or settled in the spring of 2014. Applicant and his spouse were repaying their second mortgage according to terms at $496 per month. They were current on their car loan obtained for $18,749 (his spouse’s car) in November 2011, although they had a history of being 30 days late in their monthly payments of $389. (GE 3.)

On December 11, 2015, Applicant was interviewed by an authorized investigator for the Office of Personnel Management (OPM). Applicant was reportedly asked about any financial issues. When he provided none, he was confronted with the adverse information on his recent credit report. He denied any knowledge of several debts, including the $777 judgment, the $420 collection balance, and the $225 charged-off credit card debt. He explained that his spouse might know about them since she handled their finances. Applicant recognized his home mortgage, but not the reported $34,882 arrearage on the loan. He denied any issues with the account. Concerning the paid $4,218 judgment from December 2009, Applicant believed it was for property taxes that were not paid by his mortgage provider. Applicant indicated that he did not list any delinquent debts on his SF 86 because he was unaware of them. (GE 2.) Applicant did not obtain his credit report to complete his SF 86, although he had discussed their finances with his spouse and was led to believe “that everything was in the proper order.” (Tr. 51, 56.)

After his interview, Applicant obtained his credit report and began filing disputes about some of the debts. He confronted his spouse about their delinquent mortgage, and according to Applicant, “she showed [him] paperwork that made [him] believe [they] were current.” He and his spouse contacted the entity holding the mortgage, and they reportedly received a letter dated August 8, 2016, confirming their payment on August 5, 2016. (Tr. 56, 60.) Applicant did not believe he incurred the credit card debt in SOR ¶ 1.c, but he could not definitively prove it was not his debt. On August 2, 2016, he paid the $225 debt in full. (AE D; Tr. 40, 52.) On March 27, 2017, a collection entity advised Applicant that his oldest brother was named on the $4,218 judgment from December 2009. (AE G.) As for the $777 default judgment from August 2013, a court record shows that it was entered against a person with the same name as Applicant’s oldest brother who had an out-of-state address. (AE H.) Applicant believes it is his nephew’s debt, but he has not asked his nephew about it. (Tr. 23, 38-39.) In correspondence addressed to Applicant’s now deceased oldest brother, on April 18, 2017, the collection entity holding the $420 debt (SOR ¶ 1.d) reported that the debt was for an insufficient funds check to a casino and that that it was unable to verify the debt with the creditor. (AE I.)

Applicant denies knowing that his and his spouse’s mortgage had ever been in foreclosure with their current mortgage servicer (Tr. 52), which acquired the loan in October 2015. (AE F.) Applicant testified that his spouse began working on a loan modification in July 2016 to lower the interest rate on their loan from 10% and that it was approved in September 2016.3 (Tr. 45-49.) In the loan modification, the interest rate on the mortgage was lowered to 4.25% and $66,665 of the principal balance was deferred for ten years. In 2026, Applicant will have the option of making a lump-sum payment of the deferred balance or adding the deferred amount to his mortgage loan. (Tr. 49-50.) Mortgage documentation shows that Applicant and his spouse paid $994 on August 5, 2016, which was applied to their payment due on September 1, 2016. Their next payment was due on October 1, 2016. (AE A.) As of May 2017, Applicant and his spouse had no record of late payments on their modified loan. They pay $1,023 monthly. (AEs B, J.)

Applicant testified in March 2017 that the other unit in his duplex had been vacant for almost a year after his daughter moved (Tr. 43), although he indicated on his SF 86 in September 2015 that his oldest brother was deceased and his older daughter was living elsewhere. He gave a post office box address for his younger daughter, who was incarcerated for a serious crime. (GEs 1, 2.) Evidence suggests that the rental unit may have been vacant for 18 months or more as of March 2017. Applicant’s daughter had apparently paid rent of $1,000 a month. (Tr. 59.) Even without any rental income, Applicant testified that he can pay the current $1,023 monthly mortgage payment on his budget. (Tr. 47.) He paid off the loan on his spouse’s car on March 8, 2017. (AE C.)

Applicant cites his 41-year tenure with a defense contractor as evidence of his service to the United States and indication that he can be trusted. He denies any intentional deception. (Tr. 61.)

POLICIES

The U.S. Supreme Court has recognized the substantial discretion the Executive Branch has in regulating access to information pertaining to national security, emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 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 required to be considered 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, these guidelines are applied in conjunction with the factors listed in the adjudicative process. The administrative judge’s overall 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.” 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 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 that the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Section 7 of EO 10865 provides that 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 concerns about financial considerations are articulated 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.

An applicant is not required to be debt free, but is required to manage his finances in a way as to exhibit sound judgment and responsibility. Applicant’s spouse handled their household finances, including repaying their mortgage loan, apparently with little involvement or oversight on Applicant’s part. As of October 2015, the entity currently holding their primary mortgage loan was reporting the loan as $34,882 past due. While Applicant denied the accuracy of the reported delinquency, he does not dispute that he and his spouse obtained a loan modification in September 2016. He testified that his spouse initiated the modification process in July 2016. (Tr. 45.) A loan account statement of March 2017 shows that the entity holding their modified mortgage deferred $66,665 of the $209,327 principal balance, which Applicant indicates was the reduction needed to lower his interest rate. (Tr. 57.) The Appeal Board has held that adverse information from a credit report is normally sufficient to meet the substantial evidence standard to establish a debt. See, e.g., ISCR Case No. 14-03612 (App. Bd. Aug. 25, 2015.) Applicant provided no documentation to prove that he and his spouse made any payments on their primary mortgage between January 2015 and July 2016. Guideline F disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting financial obligations,” apply because of Applicant’s mortgage delinquency.

However, Applicant’s credit report was shown to be inaccurate in some aspects. Applicant presented documentation showing that the December 2009 judgment debt on his credit record was entered against his oldest brother. Applicant’s brother (or perhaps his nephew) is the listed party against whom the 2013 judgment (SOR ¶ 1.a) was issued. In correspondence addressed not to Applicant but to his oldest brother, the collection entity for the $420 returned check debt (SOR ¶ 1.d) indicated that it was unable to verify the debt. Those debts appear to have been erroneously reported as Applicant’s liabilities on his credit report. Concerning the credit card debt in SOR ¶ 1.c, Applicant was listed as an authorized user on that account and had no contractual liability for repayment. Presumably, it was his spouse’s debt because the creditor had no other names on the account. They paid it in August 2016. AG ¶ 20(e) applies to the debts in SOR ¶¶ 1.a, 1.c, and 1.d. It provides:

(e) the individual has a reasonable basis to dispute the legitimacy of the past-due debt which is the cause of the problem and provides documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue.

Concerning the mortgage delinquency, an applicant who has exercised poor financial judgment with regard to such an important debt as his home loan may be unconcerned or irresponsible in handling or safeguarding classified information. It is difficult to apply mitigating condition 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.” As of August 2015, the mortgage loan had been 90 days past due 31 times. Applicant admitted that he had been threatened with foreclosure approximately ten years ago when he and his spouse fell several months behind on their loan. Moreover, Applicant’s October 2015 credit record shows a history of late payments at times on a car loan, which is now paid, and a settlement of a credit card delinquency in February 2014, so his financial problems were not limited to the mortgage. The Appeal Board has held that conduct not alleged may be considered to assess whether a particular provision of the AGs is applicable. See, e.g., ISCR Case No. 09-07219 (App. Bd. Sep. 27, 2012.)

Applicant’s and his spouse’s struggles with their mortgage payment were due in part to the loss of rental income after their daughter moved out of their rental unit. Applicant testified, albeit without corroboration, that their daughter had been paying $1,000 per month in rent, and that they counted on that rent to meet their mortgage obligation. The unit had been vacant for “almost a year,” if not longer, as of March 2017. AG ¶ 20(b) provides for mitigation where there are circumstances beyond one’s control that caused or contributed to the delinquency, as follows:

(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;

However, Applicant and his spouse had problems paying their mortgage even before their daughter vacated the premises. Applicant allowed his spouse to handle the family’s finances even after she gave him cause to question her handling of their mortgage loan around 2006 or 2007 when foreclosure was first threatened. Applicant denies knowing that his spouse had again fallen behind on their mortgage loan. Alerted about the recent $34,882 delinquency by the OPM investigator in December 2015, Applicant obtained his credit report and confronted his spouse, who showed him a document that led him to believe the mortgage loan was current. He testified that he and his spouse contacted the entity servicing the mortgage and that they received the letter dated August 8, 2016 (AE A), confirming their payment of $994 on August 5, 2016. While Applicant acted responsibly by disputing the adverse credit information that he did not recognize, Applicant was so uninformed about his mortgage loan that he was unaware that the loan was seriously in arrears as of August 2015.

Yet, in his favor, Applicant and his spouse successfully modified their home loan in September 2016. As verified by their mortgage loan servicer on May 2, 2017, their “balloon” loan is rated as current with no history of late payments in the last 12 months. AG ¶ 20(c) has some applicability in that the mortgage delinquency has been addressed, but there is no evidence that Applicant, or his spouse for that matter, has had financial counseling, which is required for full mitigation under AG ¶ 20(c), “the person has received or is receiving counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control.” AG ¶ 20(d), “the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts,” is also established because of the loan modification with timely payments acceptable to his loan servicer.

The salient issue is whether Applicant can be counted on to continue to make his and his spouse’s mortgage payments on time. He presented evidence of timely payments acceptable to the loan servicer from August 5, 2016, through April 5, 2017. I have to weigh his nine months of payments against a history of serious delinquency on the home loan, which had been placed in foreclosure proceedings in June 2015 for nonpayment. The $66,665 deferred principal under the modified loan likely encompasses the deficiency owed on the loan before the modification. Applicant had an opportunity to present evidence of payments to dispute the reported delinquency, and the only payments on record are those made since August 2016.

The security clearance adjudication is not aimed at collecting an applicant’s personal debts. See ISCR Case No. 09-02160 (App. Bd. Jun. 21, 2010). In evaluating Guideline F cases, the Appeal Board has held that an applicant is not required, as a matter of law, to establish that he has paid off the debts in the SOR. He is required to demonstrate that he has an established plan to resolve his financial problems and that he has taken significant actions to implement that plan. See ISCR 07-06482 at 2-3 (App. Bd. May 21, 2008). Applicant testified that his current $1,023 monthly mortgage payment is within his budget. With the payoff of the loan for his spouse’s car in March 2017, he should have an extra $389 per month for household expenses. He is not likely to jeopardize the security clearance that he needs for his employment by neglecting his mortgage obligation in the future. The financial considerations security concerns are adequately mitigated.

Guideline E: Personal Conduct

The concerns for personal conduct are articulated in AG ¶ 15:

Conduct involving questionable judgment, lack of candor, dishonesty, or unwillingness to comply with rules and regulations can raise questions about an individual’s reliability, trustworthiness and ability to protect classified or sensitive information. Of special interest is any failure to cooperate or provide truthful and candid answers during national security investigative or adjudicative processes.

The undisputed evidence is that Applicant certified to the accuracy of a September 2015 SF 86 on which he responded negatively to all the financial record inquiries. The SOR alleges that Applicant falsified his responses to inquiries concerning any judgments entered against him in the past seven years; any property repossessed or foreclosed in the past seven years; any debts turned over for collection in the past seven years; and any accounts or credit cards charged off or suspended in the past seven years. As his credit record shows, Applicant and his spouse were past due $34,882 on their primary mortgage loan and in foreclosure proceedings as of August 2015. In ISCR Case No. 08-12184 at 7 (App. Bd. Jan. 7, 2010), the Appeal Board explained that once the government meets its burden of establishing pertinent allegations, which can normally be met by adverse information in a credit report, the burden shifts to the applicant “to establish either that [he or] she is not responsible for the debt or that matters in mitigation apply.”

Applicant denies any intention to deceive, explaining that he answered "no” because he did not know about any of the debts. Concerning the mortgage, Applicant’s credit report shows that the mortgage loan was seriously in arrears and in foreclosure proceedings. Applicant and his spouse did not lose their home to a foreclosure. Nonetheless, the loan was clearly in default and should have been reported in response to an SF 86 inquiry concerning whether he had defaulted on any loan in the past seven years. However, his spouse handled the finances, and she led him to believe that their loan was current. AG ¶ 16(a) is not established when omissions are due to misunderstanding, inadvertent mistake, or other cause that could negate the willful intent. That disqualifying condition provides:

(a) deliberate omission, concealment, or falsification of relevant facts from any personnel security questionnaire, personal history statement, or similar form used to conduct investigations, determine employment qualifications, award benefits or status, determine national security eligibility or trustworthiness, or award fiduciary responsibilities.

The DOHA Appeal Board has explained the process for analyzing falsification cases, stating:

(a) when a falsification allegation is controverted, Department Counsel has the burden of proving falsification; (b) proof of an omission, standing alone, does not establish or prove an applicant’s intent or state of mind when the omission occurred; and (c) a Judge must consider the record evidence as a whole to determine whether there is direct or circumstantial evidence concerning the applicant’s intent or state of mind at the time the omission occurred. [Moreover], it was legally permissible for the Judge to conclude Department Counsel had established a prima facie case under Guideline E and the burden of persuasion had shifted to the applicant to present evidence to explain the omission.

ISCR Case No. 03-10380 at 5 (App. Bd. Jan. 6, 2006) (citing ISCR Case No. 02-23133 (App. Bd. June 9, 2004)). Applicant provided a plausible explanation to avert the reasonable inference that he falsified his SF 86 by not listing his past-due mortgage loan. While he exhibited questionable financial judgment by failing to exercise appropriate oversight over the household finances, particularly given their mortgage delinquency ten years ago and his spouse’s concealment of that delinquency from him, those concerns are more appropriately addressed under Guideline F. The judgment debt in SOR ¶ 1.a, the credit card delinquency in SOR ¶ 1.c, and the collection debt in SOR ¶ 1.dwere not Applicant’s debts. He did not falsify the specific inquiries alleged in the SOR. Intentional falsification was not established. AG ¶ 17(f), “the information was unsubstantiated or from a source of questionable reliability,” applies.

WHOLE PERSON CONCEPT

In the whole-person evaluation, the administrative judge must consider the totality of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative process factors in AG ¶ 2(d).4 Some of the factors in AG ¶ 2(d) were addressed under Guideline F and Guideline E, but some warrant additional comment.

Applicant exercised questionable financial judgment in handling his home loan. He would have had a stronger case in mitigation had he taken a more active role in addressing his and his spouse’s delinquent mortgage on learning of the delinquency in December 2015. However, he does not appear to be at risk of engaging in illegal acts to generate funds, and his present financial situation is stable. Applicant’s and his spouse’s monthly mortgage payment after the modification is within their budget, and they made nine months of timely payments as of the close of the record. Applicant presented no evidence about his work performance, but it may reasonably be inferred from his 41 years of service to his employer that his work has met expectations.

Applicant may face financial stress in ten years when payment of the $66,665 deferred principal comes due or is added to the mortgage principal, which would in all likelihood increase his and his spouse’s monthly mortgage obligation. Even so, Applicant may no longer require security clearance eligibility because of retirement or other circumstance. The security clearance decision involves an evaluation of an applicant’s current judgment, reliability, and trustworthiness in light of the security guidelines in the Directive and cannot be based on speculation of what might happen in the future. For the reasons noted above, I conclude that it is clearly consistent with the national interest to continue Applicant’s security clearance eligibility.

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: FOR APPLICANT

Subparagraphs 1.a-1.d: For Applicant

Paragraph 2, Guideline E: FOR APPLICANT Subparagraph 2.a: For Applicant

CONCLUSION

In light of all of the circumstances, it is clearly consistent with the national interest to continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is granted.

_____________________ Elizabeth M. Matchinski Administrative Judge

FOOTNOTES

1 Application of the AGs that were in effect as of the issuance of the SOR would not change my decision in this case. 2 Applicant’s credit report is inaccurate to the extent that the credit bureaus were reporting credit under two names, i.e., Applicant’s name and also the name of Applicant’s oldest brother, who was by then deceased, or perhaps Applicant’s nephew at least with respect to the judgment debts. 3 Mortgage loan information shows that Applicant and his spouse have a balloon mortgage for 478 months with the original origination date of October 28, 2005, and a maturity date of September 1, 2045. (AEs B, J.) Applicant testified that his spouse began working on a loan modification in July 2016. The loan servicer corroborates that Applicant and his spouse paid $994 on August 5, 2016 (AE A), which could have been a partial payment prior to the formal modification under terms acceptable to the loan servicer. Applicant provided little detail about the loan modification process which was handled by his spouse. 4 The factors under AG ¶ 2(d) are as follows:

(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.