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ISCR Case 09-01712.h1 — CASE

ISCR Case 09-01712.h1denied

Case Headnote

ISCR Case No. 09-01712.h1

deniedNov 24, 2010· Hon. Michael H. Leonard· hearing

Summary

A 54-year-old federal contractor employee was denied a security clearance due to concerns under Guideline F (Financial Considerations) and Guideline H (Drug Involvement). The denial primarily stemmed from a history of financial problems that began after a job layoff in 2000.

Specific financial issues included a Chapter 7 bankruptcy, a $1,116 collection account from a store credit card, and a rental property purchased in 2003 that was subject to foreclosure. The applicant also admitted to a $9,429 debt from one vehicle repossession and a $329 utility bill for the rental property, though indebtedness from another vehicle repossession was denied.

The judge found that the applicant failed to provide sufficient evidence to mitigate these financial security concerns. There was no documentation demonstrating progress in resolving the debts or a realistic plan to address the ongoing financial situation, leading to the denial of the security clearance.

Why the Applicant Was Denied

The applicant has a history of financial problems, including a Chapter 7 bankruptcy and ongoing delinquent accounts.
The applicant failed to present sufficient evidence to mitigate the security concerns related to her financial issues.
The applicant did not provide documentation showing progress in resolving her debts or a realistic plan to address her financial situation.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedFinancial Considerations
AG ¶ 19(c)raisedFinancial Considerations

Mitigating

AG ¶ 20(a)rejectedFinancial ConsiderationsThe applicant did not demonstrate that her financial problems were infrequent or unlikely to recur.
AG ¶ 20(b)rejectedFinancial ConsiderationsThe applicant did not act responsibly under the circumstances to resolve her financial issues.

Key Rule Quoted

“the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.”
— Department of Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedAug 10, 2009
Answer filedSep 1, 2009Timely response to SOR.
Hearing held—Case decided on written record.
Decision dateNov 24, 2010

Cite For

Denial of Security Clearance Due to Ongoing Financial Issues Under Guideline F
Insufficient Evidence to Mitigate Financial Concerns
Importance of Presenting Documentation to Support Claims of Financial Responsibility

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 has a history of financial problems, including a Chapter 7 bankruptcy, delinquent accounts, and repossession of a vehicle. The judge ruled against the applicant on multiple financial allegations, citing insufficient evidence to mitigate the security concerns raised by her financial history.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant sought relief via a Chapter 7 bankruptcy case, which is alleged in SOR ¶ 1.a.	Against Applicant	Bankruptcy Filing	Unknown	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Applicant admits a $1,116 collection account that began as a credit card or charge account with a large store. $1,116	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Applicant admits that a rental property, purchased in 2003, was subject to foreclosure. $19,000	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Applicant denies indebtedness stemming from repossession of a vehicle.	For Applicant	Unspecified Financial	Denied	—	—	—
1.e	Applicant admits indebtedness of $9,429 stemming from repossession of a vehicle. $9,429	Against Applicant	Auto Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	Applicant admits indebtedness of $329 stemming from a utility bill for her rental property. $329	Against Applicant	Utility or Phone 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.

Standardized Decision Profile

SEAD-4 Guideline H (Drug Involvement) · descriptive summary of a decided case

Posture: Decision on RecordDecided: denied

The judge found that the applicant had a history of financial problems, including a Chapter 7 bankruptcy and multiple delinquent accounts, which raised security concerns. The judge ruled against the applicant on most allegations, citing insufficient evidence to mitigate the concerns, but found in favor of the applicant regarding one allegation related to vehicle repossession.

¶	Allegation	Finding	Substance / event	Use level	Response	Disqualifying (¶25)	Mitigating applied (¶26)	Mitigation
1.a	Applicant has a history of financial problems that began shortly after her job layoff in 2000. As a result, Applicant was unable to meet her financial obligations and sought relief via a Chapter 7 bankruptcy case.	Against Applicant	Unspecified Drug Involvement	Unspecified	Admitted	—	—	—
1.b	Applicant admits a $1,116 collection account that began as a credit card or charge account with a large store.	Against Applicant	Unspecified Drug Involvement	Unspecified	Admitted	—	—	—
1.c	Applicant admits that a rental property, purchased in 2003, was subject to foreclosure.	Against Applicant	Unspecified Drug Involvement	Unspecified	Admitted	—	—	—
1.d	Applicant denies indebtedness stemming from repossession of a vehicle.	For Applicant	Unspecified Drug Involvement	Unspecified	Denied	—	—	—
1.e	Applicant admits indebtedness of $9,429 stemming from repossession of a vehicle.	Against Applicant	Unspecified Drug Involvement	Unspecified	Admitted	—	—	—
1.f	Applicant admits indebtedness of $329 stemming from a utility bill for her rental property.	Against Applicant	Unspecified Drug Involvement	Unspecified	Admitted	—	—	—

Descriptive standardized rendering of a decided public case (Guideline H). 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. 09-01712 SSN: ------------------------------ ) ) Applicant for Security Clearance )

For Government: Nichole Noel, Esq., Department Counsel For Applicant: Pro se

November 24, 2010 ______________

STATEMENT OF CASE

______________

LEONARD, Michael H., Administrative Judge:

Applicant contests the Defense Department’s intent to deny or revoke her eligibility for a security clearance to work in the defense industry. Applicant has a history of financial problems, which are ongoing. That history includes a Chapter 7 bankruptcy case in 2001, and more recently delinquent accounts, repossession of a vehicle, and foreclosure upon a rental property. Applicant failed to present sufficient evidence to overcome the security concerns raised by her history of financial problems. Accordingly, as explained below, this case is decided against Applicant.

Statement of the Case

Acting under the relevant Executive Order and DoD Directive, on August 10, 2009, the Defense Office of Hearings and Appeals (the Agency) issued a statement of reasons (SOR) explaining it was unable to find it is clearly consistent with the national interest to grant Applicant access to classified information. The SOR is similar to a complaint, and it detailed the factual basis for the action under the security guideline known as Guideline F for financial considerations. The SOR also recommended that the case be submitted to an administrative judge to decide whether to deny or revoke Applicant’s security clearance.

Applicant answered the SOR in a timely fashion. Neither Applicant nor Department Counsel requested a hearing, and so, the case will be decided on the written record.2

On or about September 1, 2010, the Agency submitted its written case consisting of all relevant and material information that could be adduced at a hearing. This so- called file of relevant material (FORM) was mailed to Applicant and received by her on September 16, 2010. She then had a 30-day period to submit a response setting forth objections, rebuttal, extenuation, mitigation, or explanation. To date, she has not replied. The case was assigned to me November 8, 2010.

FINDINGS OF FACT

Based on the record evidence as a whole, the following facts are established by substantial evidence.

Applicant is a 54-year-old employee of a federal contractor, and she completed a security clearance application in November 2008. In the application, she reported working for the same company in various capacities since 1980 except for the period November 2000 to May 2002, when she was laid off. She is currently working as a quality control inspector. She was unemployed for a month after the job layoff in 2000. She then worked as a sales clerk at a department store from December 2000 to August 2001, and as an administrative assistant for a local police department from August 2001 to May 2002, when she was recalled by her current employer. Her employment history also includes working as a part-time aerobic instructor or fitness trainer since 1990.

Applicant has married and divorced twice, and she is currently living with a man in a spouse-like relationship. She has two children, daughters, born in 1986 and 1989, both of whom live with Applicant. In addition to her two adult children, a granddaughter, born in 2008, lives with Applicant. The 21-year-old son of her partner also lives in the household. Applicant’s father is deceased, but her mother lives nearby.

Applicant has a history of financial problems that began shortly after her job layoff in 2000. As a result, Applicant was unable to meet her financial obligations and sought relief via a Chapter 7 bankruptcy case, which is alleged in SOR ¶ 1.a. The case was filed in about September 2001, and the court granted Applicant a discharge in bankruptcy in January 2002. The record is silent concerning the number of creditors, the estimated assets, and the estimated liabilities in the bankruptcy case. Applicant attributes the bankruptcy to the job layoff and the resulting 18-month period of unemployment and underemployment.

In addition to the Chapter 7 bankruptcy case, Applicant reported more recent financial problems in her 2008 security clearance application as follows: (1) foreclosure upon a rental property; (2) repossession of two vehicles; (3) a delinquent credit card account charged off as a bad debt; and (4) a delinquent utility account on the rental property. These debts, all of which are alleged in the SOR, are addressed below.

In response to SOR ¶ 1.b, Applicant admits a $1,116 collection account that began as a credit card or charge account with a large store. She fell behind on the account in 2007, and the account was charged off and then placed for collection with the current creditor. Applicant reports that she contacted the creditor and was negotiating the matter. Applicant did not present any documentation on this debt.

In response to SOR ¶ 1.c, Applicant admits that a rental property, purchased in 2003, was subject to foreclosure. She reports that she fell behind on the mortgage loan payments in 2007, when her tenants stopped paying monthly rent and she was unable to keep up with the payment. A 2008 credit report describes the loan as 180 days past due in the amount of $8,219 with a balance of $54,283. A 2009 credit report shows the loan was past due in the amount of $11,155. And a 2010 credit report indicates the loan was past due in the amount of $19,000 and in foreclosure. Applicant reports that the home was sold via foreclosure in August 2009, and she is waiting to hear if she owes a deficiency balance. Applicant did not present any documentation on this debt.

In response to SOR ¶ 1.d, Applicant denies indebtedness stemming from repossession of a vehicle. Applicant reports that this debt resulted from her partner’s purchase of a truck for his son who then failed to make the loan payments. She denies that she cosigned for the loan, although her partner did so. Although this account appears on Applicant’s credit reports as a repossession, all three credit reports show a zero balance as well as a zero past-due balance on the account. Applicant did not present any documentation on this debt.

In response to SOR ¶ 1.e, Applicant admits indebtedness of $9,429 stemming from repossession of a vehicle. Applicant reports this debt resulted from her cosigning a loan with her daughter who then failed to make the loan payments when she was unable to work due to pregnancy. The 2008 and 2009 credit reports describe this debt as a repossession or charged-off account in the amount of $9,429. The 2010 credit report shows the debt was transferred or sold to another creditor. Applicant did not present any documentation on this debt.

In response to SOR ¶ 1.f, Applicant admits indebtedness of $329 stemming from a utility bill for her rental property. Applicant reports that she contacted the utility and offered to make weekly payments of $25, but the utility could not locate the account. Both the 2008 and 2010 credit reports describe it as a charged-off account. Applicant did not present any documentation on this debt.

Applicant reports that her current financial problems stem from circumstances beyond her control. She reports that her mother became ill and she had to assume responsibility for her mother’s care and expenses. And about the same time, her daughter became pregnant and was unable to work, resulting in Applicant covering her daughter’s expenses as well. Applicant did not reply to the FORM. Likewise, the record is silent concerning Applicant’s good employment record or constructive community involvement. The record is also silent concerning Applicant’s overall financial situation; for example, her current income, her financial assets (checking or savings accounts, investment accounts, etc.), and her ability to repay any of the indebtedness addressed above along with her current financial obligations.

Law and Policies

This section sets forth the general principles of law and policies that apply to an industrial security clearance case. The only purpose of a clearance decision is to decide if an applicant is suitable for access to classified information. The Department of Defense takes the handling and safeguarding of classified information seriously because it affects our national security, the lives of our servicemembers, and our operations abroad.

It is well-established law that no one has a right to a security clearance. As noted by the Supreme Court in Department of Navy v. Egan, “the clearly consistent standard indicates that security clearance determinations should err, if they must, on the side of denials.” Under Egan, Executive Order 10865, and the Directive, any doubt about whether an applicant should be allowed access to classified information will be resolved in favor of protecting national security.

A favorable clearance decision establishes eligibility of an applicant to be granted a security clearance for access to confidential, secret, or top-secret information. An unfavorable decision (1) denies any application, (2) revokes any existing security clearance, and (3) prevents access to classified information at any level.

There is no presumption in favor of granting, renewing, or continuing eligibility for access to classified information. The Government has the burden of presenting evidence to establish facts alleged in the SOR that have been controverted. An applicant is responsible for presenting evidence to refute, explain, extenuate, or mitigate facts that have been admitted or proven. In addition, an applicant has the ultimate burden of persuasion to obtain a favorable clearance decision. In Egan, the Supreme Court stated that the burden of proof is less than a preponderance of the evidence.26 The DOHA Appeal Board has followed the Court’s reasoning, and a judge’s findings of fact are reviewed under the substantial-evidence standard.27

The AG set forth the relevant standards to consider when evaluating a person’s security clearance eligibility, including disqualifying conditions and mitigating conditions for each guideline. In addition, each clearance decision must be a commonsense decision based upon consideration of the relevant and material information, the pertinent criteria and adjudication factors, and the whole-person concept.

The Government must be able to have a high degree of trust and confidence in those persons to whom it grants access to classified information. The decision to deny a person a security clearance is not a determination of an applicant’s loyalty. Instead, it is a determination that an applicant has not met the strict guidelines the President has established for granting eligibility for access.

ANALYSIS

Under Guideline F for financial considerations, the suitability of an applicant may be questioned or put into doubt when that applicant has a history of excessive indebtedness or financial problems or difficulties. The overall concern under Guideline F is that:

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. Similarly, an individual who is financially irresponsible may also be irresponsible, unconcerned, negligent, or careless in properly handling and safeguarding classified information within the defense industry. Indeed, the practice of evaluating a person based on their record of financial responsibility (or lack thereof) is used in various industries. For example, the insurance industry uses credit-based insurance scores when determining insurance rates because the scores have been found to be effective in predicting future losses.

The evidence here, except for the repossession of her partner’s son’s truck and resulting indebtedness, supports a conclusion that Applicant has a history of financial problems. That repossession is not fairly attributable to Applicant, and SOR ¶ 1.dis resolved in her favor. Her history of financial problems raises security concerns because it indicates inability or unwillingness to satisfy debts and a history of not meeting financial obligations within the meaning of Guideline F. The facts are sufficient to establish these two disqualifying conditions.

Under Guideline F, there are six conditions that may mitigate security concerns:34

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;

20(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;

20(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;

20(d) The individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts;

20(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; and 20(f) The affluence resulted from a legal source of income.

Of those mitigating conditions, the most pertinent here are subparagraphs 20(a) and 20(b). It appears Applicant’s financial problems were caused by unique circumstances largely beyond her control—the job layoff in 2000 and the nonpaying tenants in 2007. Both events led to major financial problems—the bankruptcy and the foreclosure on the rental property. In addition, family circumstances placed a financial burden on Applicant.

Applicant is required to act responsibly under the circumstances in order to receive full credit in mitigation under subparagraph 20(b), and she has not met that requirement. A responsible applicant would have made the effort to present documentation in support of her case. Applicant did not present any documentation showing the current status of the debts in the SOR. Likewise, she did not present documentary proof of payment, in full or in part, of the debts. Applicant did not present documentary evidence of her ability to repay. And she failed to present a realistic plan of action to resolve the indebtedness. Lacking such a plan, as well as any measurable progress in working the plan, the credit in mitigation is insufficient to mitigate the security concerns. Indeed, had Applicant paid the two smallest debts (the $1,116 collection account and the $329 utility account) and presented documentation showing some progress on the other two debts, I might have decided this case for her. But based on this record, a favorable decision is not justified. At bottom, Applicant’s ongoing financial problems raise doubts or questions about her judgment, reliability, and trustworthiness.

To conclude, following Egan and the clearly-consistent standard, I resolve these doubts in favor of protecting national security. In reaching this conclusion, I gave due consideration to the whole-person concept. Applicant did not meet her ultimate burden of persuasion to obtain a favorable clearance decision. This case is decided against Applicant.

FORMAL FINDINGS

The formal findings on the SOR allegations are as follows:

Paragraph 1, Guideline H: Against Applicant

Subparagraphs 1.a, 1.b, 1.c, 1.e, 1.f: Against Applicant Subparagraph 1.d: For Applicant

CONCLUSION

In light of the record as a whole, 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.

Michael H. Leonard Administrative Judge

FOOTNOTES

This case is adjudicated under Executive Order 10865, Safeguarding Classified Information within Industry, signed by President Eisenhower on February 20, 1960, as amended, as well as DoD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program, dated January 2, 1992, as amended (Directive). In addition, the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), effective within the Defense Department on September 1, 2006, apply to this case. The AG were published in the Federal Register and codified in 32 C.F.R. § 154, Appendix H (2006). The AG replace the guidelines in Enclosure 2 to the Directive. Directive, Enclosure 3, ¶ E3.1.7. The file of relevant material consists of Department Counsel’s written brief and supporting documents, some of which are identified as exhibits in this decision. Exhibit 4. Exhibit 9. Answer to SOR. Exhibits 7, 8, and 9. Answer to SOR. Exhibit 9. Exhibit 8. Exhibit 7. Answer to SOR. Exhibits 7, 8, and 9. Exhibits 8 and 9. Exhibit 7. Exhibit 7 and 9. Exhibit 6. Department of Navy v. Egan, 484 U.S. 518, 528 (1988) (“it should be obvious that no one has a ‘right’ to th a security clearance”); Duane v. Department of Defense, 275 F.3d 988, 994 (10 Cir. 2002) (no right to a security clearance). 484 U.S. at 531. Directive, ¶ 3.2. Directive, ¶ 3.2. ISCR Case No. 02-18663 (App. Bd. Mar. 23, 2004). Directive, Enclosure 3, ¶ E3.1.14. Directive, Enclosure 3, ¶ E3.1.15. Directive, Enclosure 3, ¶ E3.1.15. Egan, 484 U.S. at 531. ISCR Case No. 01-20700 (App. Bd. Dec. 19, 2002) (citations omitted). Executive Order 10865, § 7. AG ¶¶ 18, 19, and 20 (setting forth the security concern and the disqualifying and mitigating conditions). See ISCR Case No. 95-0611 (App. Bd. May 2, 1996) (It is well settled that “the security suitability of an applicant is placed into question when that applicant is shown to have a history of excessive indebtedness or recurring financial difficulties.”) (citation omitted). AG ¶ 18. AG ¶ 19(a). AG ¶ 19(c). AG ¶ 20 (a) – (f). AG ¶ 2(a)(1) – (9).