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ISCR Case 09-02352.h1 — CASE

ISCR Case 09-02352.h1granted

Case Headnote

ISCR Case No. 09-02352.h1

grantedFeb 3, 2010· Hon. Elizabeth M. Matchinski· hearing

Summary

A 55-year-old senior training/curriculum development engineer and military veteran was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). The Statement of Reasons cited a dismissed Chapter 13 bankruptcy from around November 2005, two delinquent consumer credit debts totaling $1,110, and a student loan account in collection for $3,374. Additionally, the applicant owed $465,954 in mortgage debt across two separate entries. These issues raised disqualifying conditions AG ¶ 19(a) and AG ¶ 19(c).

However, the decision applied mitigating conditions AG ¶ 20(a), AG ¶ 20(b), and AG ¶ 20(c). The applicant demonstrated consistent payments on her student loans since August 2007, indicating a significant improvement in her financial situation. Her stable employment history further supported this improvement, with no new delinquencies reported.

The adjudicator also considered that some of the applicant's past financial difficulties were due to circumstances beyond her control, specifically a builder's failure to honor warranty obligations. Given these mitigating factors and the demonstrated financial stability, the security clearance was granted.

Why the Applicant Prevailed

The applicant has been making consistent payments on her student loans since August 2007.
The applicant's financial situation has improved significantly with stable employment and no new delinquencies.
The applicant's past financial issues were largely due to circumstances beyond her control, including a builder's failure to honor warranty obligations.

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(a)appliedThe Behavior Was Not Recent
AG ¶ 20(b)appliedThe Individual Has Received or Is Receiving Counseling for the Problem
AG ¶ 20(c)appliedThe Individual Has a Good History of Financial Responsibility

Key Rule Quoted

“The protection of the national security is the paramount consideration.”

Procedural Posture

SOR issuedAug 28, 2009
Answer filedOct 8, 2009
Hearing heldFeb 3, 2010
Decision dateFeb 17, 2010

Cite For

Mitigating Conditions Under Guideline F for Financial Considerations
Demonstrating Improvement in Financial Responsibility
Impact of External Circumstances on Financial Difficulties

Editorial summary generated for research. Not legal advice; not a prediction. Verify against the full decision before relying on any quoted language.

Standardized Decision Profile

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

Posture: Decision on RecordDecided: granted

The judge found that the applicant had a history of financial difficulties, including defaults on a mortgage, home equity loan, and student loans. However, the applicant demonstrated significant improvement in her financial situation, leading to a decision to grant her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant filed for a Chapter 13 bankruptcy that was dismissed around November 2005	For Applicant	Unspecified Financial	Admitted	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—
1.b	owed two delinquent consumer credit debts totaling $1,110 $1,110	For Applicant	Unspecified Financial	Denied	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—
1.c	owed $3,374 on a student loan account in collection $3,374	For Applicant	Student Loan Debt	Denied	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—
1.d	owed $465,954 in mortgage debt $465,954	For Applicant	Mortgage or Home Loan Debt	Denied	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—
1.e	owed $465,954 in mortgage debt $465,954	For Applicant	Mortgage or Home Loan Debt	Denied	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—
1.f	owed two delinquent consumer credit debts totaling $1,110 $1,110	For Applicant	Unspecified Financial	Denied	(c) a history of not meeting financial obligations (a) inability to satisfy debts	—	—

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. 09-02352 SSN: ------------------- ) ) Applicant for Security Clearance )

For Government: Gina L. Marine, Esquire, Department Counsel For Applicant: Pro se

August 19, 2010 ______________

STATEMENT OF CASE

______________

MATCHINSKI, Elizabeth M., Administrative Judge:

In 2005, Applicant defaulted on her $416,000 mortgage and a $49,998 home equity loan taken out to finish the construction and make repairs to her house after her builder refused to meet the terms of his warranty. The home equity loan was paid off in a foreclosure sale of the property to the holder of the primary mortgage, who has not pursued Applicant for the deficiency balance. Applicant also defaulted on about $11,000 in student loan debt that came out of deferment around the same time. She has been making payments on her student loan debt since August 2007 and is incurring no new delinquencies. Clearance granted.

Statement of the Case

On August 28, 2009, the Defense Office of Hearings and Appeals (DOHA) issued to Applicant a statement of reasons (SOR) detailing the security concerns under Guideline F, Financial Considerations, that provided the basis for its preliminary decision to deny her a security clearance and to refer the matter to an administrative judge. 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 adjudicative guidelines (AG) effective within the Department of Defense on September 1, 2006.

On October 8, 2009, Applicant answered the SOR and requested a hearing. On January 7, 2010, the case was assigned to me to conduct a hearing and to determine whether it is clearly consistent with the national interest to grant or continue a security clearance for her. On January 8, 2010, I scheduled a hearing for February 3, 2010.

I convened the hearing as scheduled. Eight Government exhibits (Ex. 1-8) and six Applicant exhibits (Ex. A-F) were admitted into evidence without objection. Applicant testified, as reflected in a transcript (Tr.) received on February 16, 2010.

I held the record open for two weeks after the hearing for Applicant to submit additional documents. On February 17, 2010, Applicant timely submitted one document, which was entered without objection as Exhibit G.

FINDINGS OF FACT

The SOR alleged under Guideline F, Financial Considerations, that Applicant filed for a Chapter 13 bankruptcy that was dismissed around November 2005 (SOR 1.a), and that she owed two delinquent consumer credit debts totaling $1,110 (SOR 1.band 1.f), $3,374 on a student loan account in collection (SOR 1.c), and $465,954 in mortgage debt (SOR 1.dand 1.e). Applicant admitted the bankruptcy filing, which was dismissed at her request, but she denied the alleged debts. After considering the pleadings, exhibits, and transcript, I make the following factual findings.

Applicant is a 55-year-old senior training/curriculum development engineer, who has worked for her present employer since October 2008. She served honorably in the United States military for 21 years, retiring in December 1998 at the rank of lead chief petty officer. Applicant held a top-secret security clearance with special access while she was in the military. (Ex. 1, 2, Tr. 26.) She seeks a secret level security clearance for her present duties with a defense contractor. (Tr. 35.)

Toward the end of her military service, Applicant had some financial problems, related in part to an overseas deployment. Before she left in November 1996, she sent separate checks to her creditors, one for each month of her absence. Apparently, some creditors applied them as a single payment. Her credit report of September 1999 (Ex. 5.) includes several past due debts with no clear evidence that they have been satisfied. A telephone company charged off a $171 debt balance around February 1997. A credit card account was charged off in the amount of $4,473 in March 1997. A power company placed a $104 debt for collection in October 1997. An installment loan was charged off with $122 past due in August 1998. Three revolving charge accounts with balances of $519, $1,409, and $991 were charged off after there had been no activity since the October/November 2006 time frame. (Ex. 5.) Because the creditors would not work with her, she felt she had no alternative than to file a bankruptcy. In August 1998, she filed for a Chapter 7 bankruptcy, listing $25,000 in debt. (Ex. 2, Tr. 72.) Presumably, she was granted a discharge, although the records of the bankruptcy were not presented for my review.

After she retired from the military, Applicant began working in April 1999 as a systems analyst for a defense contractor supporting a special operations command. She held a top-secret security clearance for her duties, and her job performance exceeded her employer’s expectations in reliability and productivity. (Ex. 2, A, Tr. 28- 29.) Applicant pursued a certification in information technology. (Tr. 89.) She paid for her classes through student loans totaling $10,125 taken out between March 2000 and July 2000 (SOR 1.c). (Ex. 2, 6, 7, 8.)

In June 2000, Applicant began working as a project manager for a commercial company. She did not require a security clearance for that position. (Tr. 29.) Applicant was subsequently relocated by her employer to her present locale. She earned about $140,000 in her first year on the job due to overtime. (Tr. 61.) Around April 2001, she purchased a new construction house, taking on a mortgage loan of $259,500. (Ex. 6, G.) The price included a one-year warranty that covered repair and labor of any structural or cosmetic imperfections. The builder refused to perform under the terms of the warranty and eventually filed for bankruptcy. Applicant was forced to pay out-of- pocket for landscaping, tree removal, moving utility wiring, removal of construction debris, car damage because of an unpaved, unpacked driveway, drainage pipe installation, roof and deck replacement, and other exterior repairs. Inside the house, Applicant incurred costs to install dryer and microwave exhaust vents, new boards in the living room floor, telephone jacks, window screens, bathroom mirrors, a new shower door that fit, sump pumps in the basement, french drains, sliding glass doors and windows that could be locked, and a water heater that did not leak. (Ex. G, Tr. 93-94, 97-98.)

In December 2001, Applicant was laid off from her employment in a corporate downsizing. (Tr. 29.) Applicant had problems finding employment because she did not have a degree, so she returned to school. She supported herself on her military retirement and unemployment. She also started her own consulting business and took odd jobs to meet her financial obligations. (Ex. 1, Tr. 29-30, 57.) In November 2002, she refinanced her mortgage through a new $311,250 loan. In January 2003, she acquired a home equity loan of $49,998 (SOR 1.d). (Ex. 6, 8.) She used all her savings, about $50,000, and about $40,000 of the equity in the home to make the needed repairs and improvements to her house. (Tr. 63, 93, 97-98.)

In May 2003, Applicant was awarded her bachelor of science degree. (Ex. 1, Tr. 41.) Apart from some consulting and part-time hours as a security guard on the weekends, she was unemployed for the next two years. (Ex. 1, 3, Tr. 31, 64.) In the fall of 2003, she began taking classes at night toward her master’s degree. Between October 2003 and February 2005, she obtained additional student loans totaling about $24,560. (Ex. 6.) Available credit reports show other student loans opened in November 2005 totaling $8,690 (Ex. 6, 7.). She testified that she earned her master’s degree in 2005 (Tr. 42.), so it is unclear whether the $8,690 represents additional student loans or rather a transfer of account balances. The only graduate degree listed on her e-QIP is an M.S. in information technology expected in May 2010. (Ex. 1.)

Applicant was unable to work at times in 2004 due to illness. (Tr. 31, 53.) She began having problems making her mortgage payment. In February 2005, Applicant refinanced her primary mortgage with the lender in SOR 1.e, taking on a loan of $416,000 to finish the home repairs so that she could list the property for sale. (Ex. D, Tr. 97.) Although she had been employed since June 2005 as a director of an information technology program at $49,500 per year (Ex. 1, Tr. 61.), and had borrowed money from her family, she defaulted on the mortgage and home equity loan. (Tr. 32- 33.) Around October 2005, the mortgagee identified in SOR 1.e initiated foreclosure proceedings (Ex. 3.), and transferred the $416,000 loan balance to a loan servicer (company X). On the advice of an attorney, Applicant sought bankruptcy protection in a Chapter 13 filing (SOR 1.a) to give herself time to remove her belongings from the house. (Tr. 32, 66.) She had her bankruptcy case dismissed in November 2005. (Ex. 8.) In October 2006, the property was sold for $399,500 at a foreclosure auction to company X through a real estate liquidation company. (Ex. D.) With the legal transfer of the property in December 2006, the home equity loan identified in SOR 1.dwas satisfied after it had been charged off. (Ex. C, F.)

From February to July 2007, Applicant was employed in information technology technical support for a security company. Her earnings were based on an annual salary in the $70,000s. (Ex. 1, Tr. 60.) She worked on a short-term contract as a project manager from July 2007 until September 2007, when she was again unemployed. (Ex. 1.)

In August 2007, Applicant consolidated her student loans for her graduate study with bank Y, who opened two accounts of $28,841 and $9,166. Also around August 2007, Applicant was informed that her student loans from 2000, which had come out of deferment in 2005 or 2006 (tr. 41.), were considered to be in default. (Ex. 6, Tr. 44.) Applicant testified that she believed the Veteran’s Administration (VA) had paid $11,000 to the school on her behalf. (Tr. 43.) But since she could not produce the receipt to substantiate her dispute (Tr. 50.), she elected to pay the loans. She paid $250 per month to rehabilitate those loans while she was unemployed from September 2007 to February 2008 (Tr. 49.), although the student loans were still on her credit record as collection debts as of January 2009. (Ex. 7.)

In February 2008, Applicant began working in state government as a manager of information systems at $75,000 per year. (Tr. 59.) In May 2008, she was forced to resign due to illness. (Ex. 1, Tr. 55.) Applicant supported herself on her military disability retirement pay of $2,400 per month. (Tr. 56, 59.)

In October 2008, Applicant began working for her current employer at an annual salary of $75,400. (Tr. 58.) When she applied for her security clearance on November 25, 2008, Applicant listed the foreclosure of her home in October 2005 but no other financial problems. (Ex. 1.) A check of Applicant’s credit in December 2008 revealed the Chapter 13 bankruptcy filing in 2005 that had been dismissed, the student loan debt in collection, and two other delinquent debts (SOR 1.band 1.f) that were in dispute. Also listed on the credit report as delinquent as of August and October 2008 were the primary mortgage of $416,000 (SOR 1.e) and the home equity loan (SOR 1.d). (Ex. 6.)

In November 2008, Applicant opened a credit card account with a $300 limit. She also financed the purchase of a new vehicle through a loan of $23,000, to be repaid at $576 per month. As of September 2009, she owed $21,000 on the vehicle and was current in her payments. She had a zero balance on the credit card account. (Ex. 8, Tr. 77.)

On February 2, 2009, Applicant explained to a Government investigator that the mortgage and home equity loans were now closed following the foreclosure of her house in October 2005. She indicated that she was paying $200 per month on her student loans from 2000, and expected to have them satisfied by January 2010. She described her financial situation as improving with her full-time employment. (Ex. 3.) At DOHA’s request, Applicant completed a personal financial statement in May 2009. She estimated that with her military retirement pay and her employment income, she had discretionary funds of $3,567.17 each month after paying her expenses and two debts: $600 on her car loan and $200 on the student loan debt of $11,000 from 2000. (Ex. 4.)

As of October 2009, her consolidated student loans with bank Y were deferred with reported balances of $32,000 and $9,586. Included on her credit report was a new $10,000 student loan opened in July 2009. (Ex. 8.) Applicant did not take out additional student loan debt (Tr.86), but she had consolidated her student loans from 2000 within the past year. (Tr. 80.) In September 2009, Trans Union deleted the line items for the student loans that had previously been in default (Ex. F.), although Applicant admits that she still owes a debt balance of $3,000. Applicant testified that the outstanding balance of all her student loans was only about $22,000 (Tr. 46.), although her credit report does not corroborate her claimed payments.

Equifax also continued to report that Applicant owes a past due balance on the primary mortgage of $416,000 (SOR 1.e). (Ex. 6, 7, 8.) As of February 2010, Applicant had not been notified that she owed a deficiency balance between what she owed on the primary mortgage and the sale price. When she contacted company X, she was told that her account had been closed (Tr. 69.), but she has received no release from company X.

As of December 2008, the credit bureaus were also reporting that Applicant owed consumer collection balances of $254 from February 2003 (SOR 1.b), and $856 from September 2007 (SOR 1.f). (Ex. 6.) Applicant successfully disputed the $254 debt listing based on fraud, and it was removed from her credit file. (Ex. 4, 8, E, F.) As of February 2010, she was still disputing the $856 collection debt (Tr. 81.), which was not on her October 2009 credit report. (Ex. 8.)

Applicant rents an apartment at $1,100 per month. She had a little more than $1,000 in savings and about $3,000 in checking account deposits as of February 2010. She owes family members about $15,000 for personal loans that she has been repaying at $400 to $500 per month for the last six months. (Tr. 73, 85.) She files her income tax returns every two years (e.g., for 2006 and 2007 in 2008) because she receives refunds every year. (Tr. 74-75.)

Applicant is highly regarded by a retired lieutenant commander for whom she worked in 2000. He continued to maintain contact with her after she left his company. He considers her to be a person of high personal integrity and trustworthiness. (Ex. A.) A friend of Applicant’s for the past 34 years, who also served in the military although not in the same command, is aware that Applicant has held high levels of security clearance in the past. In her experience, Applicant has always exhibited leadership and reliability and she can be trusted with classified information. (Ex. B.)

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 (AG). 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 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. 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 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 about finances 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.

Applicant has had a history of financial problems starting when she was in the military. Before she retired, she filed for discharge in bankruptcy of some $25,000 in unsecured debt. Applicant’s September 1999 credit report did not include the bankruptcy, and the bankruptcy records were not made available for my review. But none of the debts on her September 1999 credit report appear on the more recent credit reports in evidence. So, presumably she was discharged of her liability for those obligations. During the 2000/01 time frame, when her annual earnings were about $140,000, Applicant bought a new construction house in her present locale. She was laid off later that year, in December 2001. While working part-time and living primarily off her military retirement, she spent $40,000 of a home equity loan and exhausted her personal savings to repair and finish the construction of her home with the intent of selling it. In February 2005, she refinanced her primary mortgage through a $416,000 loan when she did not have a full-time job. Not surprisingly, she could not afford the $3,815 monthly payment. She defaulted on both her mortgage and her home equity loan, and lost the house to foreclosure. She filed for Chapter 13 bankruptcy in October 2005, but it was solely to buy time to move out of the home. She defaulted on her student loans from 2000, although she claims not to have known about the loans until about August 2007. Disqualifying conditions AG ¶ 19(c), “a history of not meeting financial obligations,” and AG ¶ 19(a), “inability or unwillingness to satisfy debts,” apply to the mortgage and student loan defaults.

Applicant defaulted on the mortgage (SOR 1.e), home equity (SOR 1.d), and student loans (SOR 1.c) about four years ago. However, I cannot apply 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.” While the home equity loan was paid off in the foreclosure sale, the primary mortgage was transferred in October 2005 to the loan servicer (company X) who bought the property one year later for $399,500, $16,500 less than the principal balance of Applicant’s loan. It may be unlikely that company X will pursue Applicant for the balance, given the lack of any effort to do so by February 2010, although certainly it is possible. As for the student loan debt from 2000, Applicant had the opportunity to substantiate her claim that the VA paid the school $11,000, and she failed to do so. Applicant still owes at least $3,000 on the student loan debt identified in SOR 1.c. AG ¶ 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,” is implicated. An unforeseen job layoff from her well-paying job in December 2001 left her without steady income when she had to pay for necessary repairs to her home. While some of the fixes could have been put off (e.g., removal of 13 large trees, installation of an irrigation system, installation of telephone jacks throughout the house, light kits in ceiling fans), other expenditures were necessary to avoid risk of fire (e.g., an exhaust vent for the dryer) and further water damage to the premises (e.g., a new roof). Applicant’s bouts of illness also left her unable to work at times, although she had her military retirement income and should have budgeted accordingly. But AG ¶ 20(b) does not mitigate Applicant’s questionable financial judgment in taking on a sizeable mortgage of $416,000 in February 2005, or in failing to ensure that she had no repayment obligation for the loans from 2000, assuming that the VA had paid the school directly.

AG ¶ 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,” applies. As reflected in Exhibit C, the home equity loan in SOR ¶ 1.dwas satisfied. Equifax’s listing of the debt as still delinquent with a balance of $49,000 as of September 2009 (Ex. 8) is likely attributable to the lender’s failure to record a release of the debt with the court. (Ex. C.) Company X, to whom the primary mortgage was transferred in October 2005, took possession of the house following the foreclosure. Unlike the home equity loan, there is no document in the record that releases Applicant from any further liability on the loan identified in SOR 1.e. But Applicant has also not been pursued for the debt, and she was told that her account was closed. Concerning the defaulted student loans, Trans Union had deleted the line items from her credit file as of September 2009. (Ex. F.) While Applicant did not produce the documents of repayment or consolidation, I accept her testimony that she has been making payments on the debt and is likely to continue to do so. AG ¶ 20(d), “the individual initiated a good- faith effort to repay overdue creditors or otherwise resolve debts,” applies to the limited extent that she has continued to make payments on her student loan debt from 2000. Resolution of a mortgage debt through foreclosure eliminates financial pressure, but it is entitled to less weight in reform than a track record of payment to rehabilitate a loan.

AG ¶ 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,” is pertinent. Applicant disputed the validity of the debts alleged in SOR 1.band 1.f. The creditor identified in SOR 1.bdetermined that the debt was fraudulently placed in her name. (Ex. E.) As for the collection debt in SOR 1.f, Applicant had not received any response to her verification request as of February 2010. As of October 2009, the debt was not on her credit report. The evidence falls short of establishing that she owes a delinquent balance to the creditor identified in SOR 1.f.

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 conduct and all the relevant circumstances in light of the nine adjudicative process factors listed at AG ¶ 2(a). Applicant has not always handled her personal finances as responsibly as one would expect from a retired chief petty officer. She filed for bankruptcy in 1998 listing $25,000 in delinquent debt, at least in part because creditors had not properly applied some of her payments. That experience should have led to increased vigilance about her finances. Instead, while not to diminish the fault of the contractor who built her home, Applicant chose to close in April 2001 on a new construction home that had structural as well as cosmetic problems. When the builder refused to meet the terms of the warranty, she exhausted her savings and most of the equity in the house to address not only safety and habitability concerns, but also some landscaping and interior fixes that could probably have waited until she had steady employment income. With the refinancing of her primary mortgage in February 2005, she took on a mortgage obligation beyond what she could reasonably afford. Concerning her student loans from 2000, even assuming she had a receipt showing the VA had paid $11,000 to the school, she would have had to have signed for the student loans for them to be in her name. She exhibited poor financial judgment in not following up with the school, the VA, or the student loan lender to determine the extent of her liability on the loans. Furthermore, although not alleged as a concern by the Government, her pattern of filing her income tax returns every other year is not in compliance with her filing obligations, which are based on income levels and not on whether the taxpayer is entitled to refunds.

That said, Applicant paid a high price for her poor financial judgment in that she lost her house to foreclosure. To a large extent, the financial pressures have been mitigated by that foreclosure and sale of the home. While she owes sizeable student loan debt that is currently in deferment, her $75,000 salary and $2,400 monthly military retirement would appear to be enough to make her monthly payments on the student loans now held by bank Y. Applicant pays her day-to-day living expenses on time, and she is not continuing to incur any delinquent debt. She has only one active credit card account on which she owed no balance as of September 2009. (Ex. 8.) Applicant’s financial situation since the 2005/06 time frame has sufficiently improved to minimize the risk of future financial problems. Furthermore, although certainly not determinative of her present security worthiness, Applicant held high levels of clearances without any adverse incidents in the past. Based on the circumstances of record, I conclude that it is clearly consistent with the national interest to grant Applicant a security clearance.

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

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

CONCLUSION

In light of the record in this case, it is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted.

Elizabeth M. Matchinski Administrative Judge

FOOTNOTES

On her July 1999 security clearance application (Ex. 2), Applicant indicated that while she was on temporary duty overseas, “bills were paid but were not applied as requested to creditors.” W hen she returned from deployment, she was informed that she was six months behind when she had paid “minimum payments in advance for 6 months.” At her hearing, she testified that in November 1996, she sent 12 checks to each of her creditors and discovered that all those payments had been applied to a single month so she was 11 payments behind. (Tr. 71.) W hether she made six or 12 months of payments, there is no indication that the delinquent debts listed on her September 1999 credit report were among those included in the bankruptcy. Applicant testified that she took out first and second mortgage loans at the time of purchase. Her credit reports do not show a second mortgage of around $50,000 before the home was refinanced in late 2002.

As detailed by the attorney who handled her closing, the construction was clearly substandard. (Ex. G.) Applicant could have delayed the closing but she relied to her detriment on the builder’s warranty. Applicant admitted that while she fell ill again, in 2006, she was able to work in the mornings. Her illness did not affect her income because of paid sick leave. (Tr. 55.)

As of November 2009, the home equity lender had not filed a release of the debt with the court. (Ex. F.) Consequently, Equifax was still reporting that debt as $49,000 past due. (Ex. 8.) Applicant testified that the loans came off deferment in 2005 or 2006 (Tr. 41.), but also that she did not know that she owed on the loans before 2007 because she thought the VA had paid the $11,000 directly to the school. (Tr. 43.) Her testimony makes sense only if I assume that she was made aware by the collection agency when contacted in 2007 that the loans had been deferred through 2005 or 2006. If she received a receipt for the payment from the VA after she had taken out loans, then one has to question her judgment in not checking with the school to ensure that payment was received, and then in not receiving reimbursement from the school for any monies paid by her or by her student loan lender.

Applicant testified at her hearing that she began repaying her consolidated student loans at $400 to $500 per month at that time. (Tr. 45.) There is no evidence of any progress made at that point to repay her loans for her master’s degree, which remain deferred. If she was referring to the defaulted student loans from 2000, she indicated in February 2009 (Ex. 3), and again in May 2009 (Ex. 4.), that she was repaying the loans at $200 per month. As of October 2009, Equifax listed three debts of $3,374 with the same collection agency. It is unclear whether all three entries pertain to the same debt, or three separate debts of the same amount. The Government alleged only one $3,374 debt owed the collection agency (SOR 1.c), which would be consistent with Applicant’s testimony that she had been making payments. However, neither the Government nor the Applicant presented documentation of repayment. The adjudicative factors under AG ¶ 2(a) 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.