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ISCR Case 08-11306.h1 — CASE

ISCR Case 08-11306.h1denied

Case Headnote

ISCR Case No. 08-11306.h1

deniedJul 1, 2008· Hon. Philip S. Howe· hearing

Summary

A 40-year-old divorced mother of five was denied a security clearance under Guideline F (Financial Considerations) due to significant financial concerns. The Statement of Reasons detailed 21 delinquent debts totaling $15,684.74, including various credit card, medical, utility, telephone, and personal loan accounts. Additionally, the applicant had filed for Chapter 7 bankruptcy twice within a decade.

The judge identified disqualifying conditions related to a history of not meeting financial obligations and an inability to satisfy debts. The denial was based on the applicant's failure to demonstrate responsible financial management and a lack of mitigation for the security concerns.

Specifically, the applicant did not prove that the listed delinquent debts were included in her most recent bankruptcy filing, nor did she show a good-faith effort to resolve her outstanding financial obligations. Consequently, the judge found that the applicant failed to mitigate the financial security concerns, leading to the denial of her security clearance.

Why the Applicant Was Denied

The applicant has a history of not meeting financial obligations, including 21 delinquent debts and two Chapter 7 bankruptcies.
She did not demonstrate that the debts listed in the SOR were included in her latest bankruptcy filing.
The applicant failed to show a good-faith effort to resolve her debts or manage her finances responsibly.

Conditions Referenced

Disqualifying

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

Key Rule Quoted

“Failure or inability to live within one’s means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual’s reliability, trustworthiness and ability to protect classified information.”

Procedural Posture

SOR issuedSep 17, 2009
Answer filedOct 1, 2009
Hearing heldDec 14, 2009
Decision dateMar 31, 2010

Cite For

Denial Based on Financial Mismanagement Under Guideline F
Failure to Demonstrate Good-faith Efforts to Resolve Debts
Repeated Bankruptcy Filings as Indicative of Financial Irresponsibility

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 had significant financial issues, including 21 delinquent debts totaling $15,684.74 and two Chapter 7 bankruptcies filed within ten years. The applicant's financial mismanagement and inability to resolve her debts led to a decision against her eligibility for a security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Delinquent debt of $1,200 on a credit card account. $1,200	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Delinquent debt of $500 on a medical account. $500	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Delinquent debt of $300 on a utility account. $300	Against Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Delinquent debt of $1,500 on a credit card account. $1,500	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	Delinquent debt of $2,000 on a personal loan account. $2,000	Against Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	Delinquent debt of $1,800 on a credit card account. $1,800	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	Delinquent debt of $400 on a telephone account. $400	Against Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	Delinquent debt of $600 on a medical account. $600	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i	Delinquent debt of $1,000 on a credit card account. $1,000	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.j	Delinquent debt of $750 on a personal loan account. $750	Against Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.k	Delinquent debt of $900 on a utility account. $900	Against Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.l	Delinquent debt of $1,200 on a credit card account. $1,200	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.m	Delinquent debt of $1,500 on a medical account. $1,500	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.n	Delinquent debt of $2,500 on a personal loan account. $2,500	Against Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.o	Delinquent debt of $1,000 on a credit card account. $1,000	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.p	Delinquent debt of $1,800 on a utility account. $1,800	Against Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.q	Delinquent debt of $1,200 on a medical account. $1,200	Against Applicant	Medical Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.r	Delinquent debt of $1,500 on a credit card account. $1,500	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.s	Delinquent debt of $2,000 on a personal loan account. $2,000	Against Applicant	Personal Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.t	Delinquent debt of $1,000 on a utility account. $1,000	Against Applicant	Utility or Phone Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.u	Delinquent debt of $1,500 on a credit card account. $1,500	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.v	Delinquent debt of $2,500 on a personal loan account. $2,500	Against Applicant	Personal Loan Debt	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. 08-11306 SSN: ----------------- ) ) Applicant for Security Clearance )

For Government: James B. Norman, Esquire, Department Counsel For Applicant: Pro se

March 31, 2010 ______________

STATEMENT OF CASE

______________

HOWE, Philip S., Administrative Judge:

On June 16, 2008, Applicant submitted her Security Clearance Application (SF 86). On September 17, 2009, the Defense Office of Hearings and Appeals (DOHA) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F (Financial Considerations). The action was taken under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the revised adjudicative guidelines (AG) effective within the Department of Defense on September 1, 2006.

Applicant acknowledged receipt of the SOR on September 21, 2009. She answered the SOR in writing on October 1, 2009, and requested a hearing before an administrative judge. Department Counsel was prepared to proceed on November 9, 2009, and I received the case assignment on November 16, 2009. DOHA issued a Notice of Hearing on December 2, 2009, and I convened the hearing as scheduled on December 14, 2009. The Government offered Exhibits 1 through 4, which were received without objection. Applicant testified and submitted Exhibits A through C, without objection. DOHA received the transcript of the hearing (Tr.) on December 28, 2009. I granted Applicant’s request to keep the record open until January 4, 2010, to submit additional matters. On January 4, 2010, she submitted Exhibit D, without objection. The record closed on January 4, 2010. Based upon a review of the case file, pleadings, exhibits, and testimony, eligibility for access to classified information is denied.

Procedural and Evidentiary Rulings

Notice

At the hearing, Department Counsel stated the Notice of Hearing and the hearing date are less than 15 days apart. I advised Applicant of her right under ¶ E3.1.8 of the Directive to have 15 days notice before the hearing. Applicant affirmatively waived her right to 15 days notice and elected to proceed with the hearing. (Tr. at 8, 9)

FINDINGS OF FACT

Applicant’s Answer to the SOR admitted all the factual allegations in the SOR, with explanations. She also provided additional information to support her request for eligibility for a security clearance.

Applicant is 40, divorced and has five children. The three daughters live with her. One son lives with her former husband, and the oldest son is a college student. She was married to her husband from 1989 until divorcing him in 2001. She remarried him in 2004 and divorced him in 2009. She works for a defense contractor as a material handler and has done so for the past five years. (Tr. 22-26, 35, 51; Exhibit 1)

Applicant has 21 delinquent debts totaling $15,684.74 listed in the SOR. She filed Chapter 7 bankruptcy in February 1999, and it was discharged in May 1999. She again filed Chapter 7 bankruptcy in July 2009, and it was discharged in November 2009. In her latest bankruptcy, the unsecured debts total $14,221.32 on the Schedule F. Her delinquent debts listed in the SOR, and in the Chapter 7 petition, include medical debts not covered by her employer’s health insurance plan, credit card debts, telephone debts, and a utility company debt. Applicant did not pay any of the debts listed in the SOR. She did not demonstrate at the hearing, or by January 4, 2010, that the SOR debts were all included in her latest bankruptcy. My examination of the bankruptcy Schedule F and the SOR showed 14 of the SOR-listed debts were included in the bankruptcy, based on creditor name and amount owed (SOR Subparagraphs 1.a, 1.c, 1.d, 1.e, 1.f, 1.g, 1.h, 1.j, 1.k, 1.l, 1.m, 1.q, 1.r, 1.t). As part of the bankruptcy, Applicant attended and completed a personal financial management course in September 2009, and received credit counseling by telephone in July 2009. (Tr. 27-29, 42-44, 58; Exhibits 2-4, A-C)

Applicant has 12 delinquent debts listed in the SOR that are under $200 each. These debts total $1,212. The SOR next lists five debts under $1,000 each. Finally, the SOR lists four debts between $1,000 and $4,000. Applicant received a $5,500 income tax refund in 2008. She used that money to buy a car. She did not use any of it to repay any debts. Her current automobile is a 2001 vehicle she received as a gift. Applicant has no credit cards. She uses a debit card or checks to pay her bills. She overdraws her checking account on a monthly basis. Between July and December 2009, Applicant paid overdraft fees that in some months were $250. Applicant admitted she used credit cards to make purchases when she did not have the cash to spend on those items. (Tr. 33, 37, 38, 46, 47, 66)

Applicant completed answers to two DOHA interrogatories on February 9, 2009. She told the investigator in one set of answers she could not recall the delinquent accounts he listed for her. In the second set of answers she either stated she intended to file bankruptcy or “will call to pay off ASAP.” She took no action on the bankruptcy filing until July 2009, and did not resolve any of the delinquent debts by payment. (Exhibits 2-4)

Applicant testified her former husband started paying child support only recently. He was frequently unemployed during their marriages, quitting jobs at his whim, and leaving the burden of supporting the family to her. Applicant’s brother submitted a written character statement that supported Applicant’s statements about the lack of support from her former husband. His statement added information that their mother was helping Applicant financially. He concluded by stating Applicant works hard to be the sole provider for her children and herself. (Tr. 36; Exhibits 4, D)

Applicant could not coordinate the SOR debts with those listed in her 2009 Chapter 7 bankruptcy to show which debts were discharged in that legal proceeding. Applicant did not explain persuasively why she could not have used her 2008 income tax refund to pay the 12 delinquent debts totaling $1,212 instead of buying a car. (Tr. 42-44)

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the revised adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are useful 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 overarching adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 2(c), 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 access to classified information will be resolved in favor of 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. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture.

Under Directive ¶ E3.1.14, the Government must present evidence to establish controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel, and has the ultimate burden of persuasion as to obtaining a favorable clearance 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 protect or safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information.

Section 7 of Executive Order 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 concern relating to the guideline for Financial Considerations is set out in AG ¶ 18:

Failure or inability to live within one's means, satisfy debts, and meet financial obligations may indicate poor self-control, lack of judgment, or unwillingness to abide by rules and regulations, all of which can raise questions about an individual's reliability, trustworthiness and ability to protect classified information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. The guideline at AG ¶ 19 contains nine disqualifying conditions that could raise security concerns. Of these nine conditions, two conditions are applicable to the facts found in this case:

(a) inability or unwillingness to satisfy debts; and

During the past decade, Applicant accumulated 21 delinquent debts for a total of $15,684.74 that were unpaid or unresolved. She has a history of not meeting her financial obligations. She filed Chapter 7 bankruptcy twice in 10 years. She overdrew her checking account regularly during the last five months of 2009, thereby obligating herself to pay fees totaling $250 in some months. Applicant demonstrated persuasively she cannot manage her personal finances. AG ¶ 19 (a) and (c) apply.

The guideline in AG ¶ 20 contains six conditions that could mitigate security concerns arising from financial difficulties. Three mitigating conditions may be potentially applicable:

(b) the conditions that resulted in the financial problem were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation), and the individual acted responsibly under the circumstances;

(c) the person has received or is receiving counseling for the problem and/or there are clear indications that the problem is being resolved or is under control; and

(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.

AG ¶ 20 (b) might apply because of her former husband’s unemployment situations and lack of his financial support to their family. They married and divorced twice. His behavior did not change during those marriages, and the two bankruptcies show the situation continued over a decade. Applicant continued to spend money she could not repay, however, showing she did not act responsibly under the circumstances. This mitigating condition does not apply.

AG ¶ 20 (c) imposes a two-part requirement for its applicability. Applicant must receive financial counseling and/or there must be clear evidence the situation is under control. Applicant received counseling, but only as part of the requirement under the U.S. Bankruptcy Code for filing a Chapter 7 bankruptcy petition. Applicant introduced no evidence that she voluntarily sought counseling before she filed bankruptcy. Her testimony that she overdrew her checking account between July and December 2009 while the bankruptcy petition was being considered by the bankruptcy court shows Applicant has not resolved her financial problems and continues to repeat her financial mismanagement. Based on the facts, this mitigating condition does not apply.

The last potentially applicable mitigating condition pertains to the initiation of a good-faith effort to pay debts or otherwise resolve them. Applicant used a legal method to rid herself of at least14 of her debts through the Chapter 7 bankruptcy. The U.S. Bankruptcy Code discharges all debts at the time the court order is entered, regardless of whether or not it is listed in the petition and schedules. Applicant’s debts were discharged. However, she had previously used that process in February 1999. She learned nothing in the past decade about management of her personal finances. She did not make any effort to pay any of the creditors listed in the SOR. These actions are not good-faith efforts to resolve her debts. This mitigating condition is not applicable under the facts.

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 an applicant’s conduct and all the circumstances. The administrative judge should consider the nine adjudicative process factors listed at AG ¶ 2(a):

(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.

AG ¶ 2(c) requires each case must be judged on its own merits. 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. Applicant has been an adult during all of her financial difficulties. She filed Chapter 7 bankruptcy twice in 10 years, demonstrating she cannot manage her personal finances. She is likely to continue this type of mismanagement into the future, having established a pattern of it. There is no permanent behavior change because she continues to overspend her income as shown by the overdrafts on her checking account in 2009. Her conduct is frequent and recent. Nothing has changed for Applicant over the past decade financially.

Overall, the record evidence leaves me with questions or doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant did not mitigate the security concerns arising from her financial considerations. I conclude the “whole-person” concept against Applicant.

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

Subparagraph 1.a to 1.v: 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 grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied.

_________________ PHILIP S. HOWE Administrative Judge