ISCR Case 10-03380.h1

Case Headnote

ISCR Case No. 10-03380.h1

deniedJul 1, 2010· Hon. Rita C. O'Brien· hearing

Summary

A 54-year-old former Marine and network engineer was denied a security clearance due to concerns under Guideline E (Personal Conduct) and Guideline F (Financial Considerations). The denial stemmed from significant financial delinquencies and a lack of candor in his application.

The applicant filed for Chapter 7 bankruptcy in July 2010, which was discharged on October 25, 2010. At the time of filing, he reported assets of $371,886 and liabilities of $794,501. His financial issues included a $101,000 Home Equity Line of Credit (HELOC) that became delinquent in 2008, leading to charge-off and discharge in bankruptcy. His townhouse also faced foreclosure, with a $298,000 first mortgage and a $55,551 second mortgage both charged off and discharged in bankruptcy after he stopped payments in December 2008. Additionally, two credit card accounts, with balances of $2,270 and $42,206 respectively, were also discharged.

The judge determined that the applicant's financial issues were not sufficiently mitigated and raised concerns about his judgment and reliability. Specifically, the applicant failed to demonstrate that his financial issues were unlikely to recur, and his decision to retire from a stable job before incurring significant debt was viewed as poor judgment. Furthermore, his credibility was undermined by a lack of candor in his security clearance application, including the failure to disclose a foreclosure.

Why the Applicant Was Denied

The applicant failed to demonstrate that his financial issues were unlikely to recur, raising concerns about his reliability and judgment.
The applicant's decision to retire from a stable job and subsequently incur significant debt was viewed as poor judgment.
The applicant's lack of candor in his security clearance application, including failing to disclose a foreclosure, undermined his credibility.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedInability or Unwillingness to Satisfy Debts
AG ¶ 19(c)raisedA History of Not Meeting Financial Obligations
AG ¶ 19(e)raisedConsistent Spending Beyond One's Means

Mitigating

AG ¶ 20(b)appliedConditions Largely Beyond the Person's ControlThe applicant experienced unforeseen family health issues that impacted his financial situation.
AG ¶ 20(c)appliedReceived Counseling for the ProblemThe applicant filed for Chapter 7 bankruptcy, discharging his debts.

Key Rule Quoted

“A security clearance decision is intended only to resolve the questions of whether it is clearly consistent with the national interest for an Applicant to either receive or continue to have access to classified information.”
— Department of the Navy v. Egan, 484 U.S. 518 (1988)

Procedural Posture

SOR issuedSep 16, 2010
Answer filedOct 5, 2010
Hearing heldDec 14, 2010
Decision dateMay 12, 2011

Cite For

Denial of Security Clearance Due to Financial Irresponsibility Under Guideline F
Lack of Candor in Security Clearance Application Under Guideline E
Impact of Personal Conduct on Security Clearance Eligibility

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

¶	Allegation	Finding	Conduct	Concealed Issue	Response	Disqualifying (¶16)	Mitigating applied (¶17)	Mitigation
2.a	specific text not stated in this decision	Against Applicant	Omission or Failure to Disclose	Financial	Denied	—	—	—

Allegation

Finding

Conduct

Concealed Issue

Response

Disqualifying (¶16)

Mitigating applied (¶17)

Mitigation

2.a

specific text not stated in this decision

Against Applicant

Omission or Failure to Disclose

Financial

Denied

—

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Chapter 7 Bankruptcy. Applicant retained an attorney in approximately July 2010 and filed a bankruptcy petition. The attorney’s letter notes that Applicant filed Chapter 7 'to ensure that his financial issues would not affect his security clearance.' The petition lists assets of $371,886 and liabilities of $794,501. It showed a total monthly income of $5,710. The bankruptcy was successfully discharged on October 25, 2010.	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—
1.b	Townhouse HELOC - $101,000. This line-of-credit account became delinquent in 2008. Applicant contacted the lender in 2008 and 2009 to negotiate a reduced payment plan. His monthly payment was $670; in June 2009, he was sending payments of $300 every other month. The lender charged off the debt and sold it to a collection agency. This debt was discharged in Applicant's bankruptcy. $101,000	Against Applicant	Unspecified Financial	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—
1.c	Townhouse foreclosure: 1st mortgage $298,000. The value of the townhouse fell during the nationwide economic crisis. Between late 2007 and December 2008, Applicant contacted the lender several times. In November and December 2008, he requested a loan modification. He stopped making mortgage payments in December 2008. The first mortgage was charged off and sold to a collection agency. The first mortgage was discharged in Applicant's bankruptcy. $298,000	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—
1.d	Townhouse foreclosure: 2nd mortgage $55,551. The second mortgage was charged off and sold to a collection agency. The second mortgage was discharged in Applicant's bankruptcy. $55,551	Against Applicant	Mortgage or Home Loan Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—
1.e	Creditor A credit card account, past due $250. Applicant opened this account in 2004. His credit bureau report of December 2009 shows a balance of $2,270. This debt was discharged in Applicant's bankruptcy. $2,270	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—
1.f	Creditor A credit card account, past due $4,300. In June 2003, Applicant opened this credit account. His December 2009 credit bureau report shows a balance of $42,206. This debt was discharged in Applicant's bankruptcy. $42,206	Against Applicant	Credit Card Debt	Admitted	(a) inability to satisfy debts (c) a history of not meeting financial obligations (e) consistent spending beyond one’s means / irresponsible spending	—	—

Allegation

Finding

Type

Response

Disqualifying (¶19)

Mitigating applied (¶20)

Mitigation

1.a

Chapter 7 Bankruptcy. Applicant retained an attorney in approximately July 2010 and filed a bankruptcy petition. The attorney’s letter notes that Applicant filed Chapter 7 'to ensure that his financial issues would not affect his security clearance.' The petition lists assets of $371,886 and liabilities of $794,501. It showed a total monthly income of $5,710. The bankruptcy was successfully discharged on October 25, 2010.

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

1.b

Townhouse HELOC - $101,000. This line-of-credit account became delinquent in 2008. Applicant contacted the lender in 2008 and 2009 to negotiate a reduced payment plan. His monthly payment was $670; in June 2009, he was sending payments of $300 every other month. The lender charged off the debt and sold it to a collection agency. This debt was discharged in Applicant's bankruptcy.

$101,000

Against Applicant

Unspecified Financial

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

1.c

Townhouse foreclosure: 1st mortgage $298,000. The value of the townhouse fell during the nationwide economic crisis. Between late 2007 and December 2008, Applicant contacted the lender several times. In November and December 2008, he requested a loan modification. He stopped making mortgage payments in December 2008. The first mortgage was charged off and sold to a collection agency. The first mortgage was discharged in Applicant's bankruptcy.

$298,000

Against Applicant

Mortgage or Home Loan Debt

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

1.d

Townhouse foreclosure: 2nd mortgage $55,551. The second mortgage was charged off and sold to a collection agency. The second mortgage was discharged in Applicant's bankruptcy.

$55,551

Against Applicant

Mortgage or Home Loan Debt

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

1.e

Creditor A credit card account, past due $250. Applicant opened this account in 2004. His credit bureau report of December 2009 shows a balance of $2,270. This debt was discharged in Applicant's bankruptcy.

$2,270

Against Applicant

Credit Card Debt

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

1.f

Creditor A credit card account, past due $4,300. In June 2003, Applicant opened this credit account. His December 2009 credit bureau report shows a balance of $42,206. This debt was discharged in Applicant's bankruptcy.

$42,206

Against Applicant

Credit Card Debt

Admitted

(a) inability to satisfy debts

(c) a history of not meeting financial obligations

(e) consistent spending beyond one’s means / irresponsible spending

—

Loading case…

Case Profile

Summary

Why the Applicant Was Denied

Conditions Referenced

Key Rule Quoted

Procedural Posture

Cite For

Full decision

DEFENSE OFFICE OF HEARINGS AND APPEALS

HEARING

APPEARANCES

STATEMENT OF CASE

FINDINGS OF FACT

POLICIES

ANALYSIS

FOOTNOTES