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ISCR Case 12-04970.h1 — CASE

ISCR Case 12-04970.h1granted

Case Headnote

ISCR Case No. 12-04970.h1

grantedMay 22, 2014· Hon. Nichole L. Noel· hearing

Summary

A 40-year-old project manager and former Air Force member was granted a security clearance despite initial concerns under Guideline F (Financial Considerations). These concerns arose from delinquent account balances on primary and secondary mortgages for three properties (Blackacre, Homestead, and Whiteacre), which were attributed to financial difficulties during her prior marriage that ended in divorce.

The applicant successfully mitigated these issues by demonstrating responsible financial behavior post-divorce. She self-reported her financial issues to her facility security officer and made good-faith efforts to resolve outstanding debts. Crucially, she had not incurred new delinquent debt since the financial issues that arose during her marriage.

The judge found that the applicant had rehabilitated her finances and that granting the security clearance was consistent with national interest. The decision highlighted the applicant's transparency and proactive steps in addressing her financial history.

Why the Applicant Prevailed

The applicant self-reported her financial issues to her facility security officer.
She has made good-faith efforts to resolve outstanding debts and rehabilitate her finances.
The applicant has not incurred new delinquent debt since her financial issues during her marriage.

Conditions Referenced

Disqualifying

AG ¶ 19(a)raisedFinancial ConsiderationsThe applicant defaulted on mortgages for her primary residence and two investment properties.
AG ¶ 19(c)raisedFinancial ConsiderationsThe applicant has a history of unresolved delinquent debt.

Mitigating

AG ¶ 20(a)appliedFinancial ConsiderationsThe applicant's financial problems were limited to her seven-year marriage.
AG ¶ 20(b)appliedFinancial ConsiderationsThe applicant has handled her obligations as a clearance holder responsibly.
AG ¶ 20(c)appliedFinancial ConsiderationsThe applicant has received financial counseling and her finances are under control.
AG ¶ 20(d)appliedFinancial ConsiderationsThe applicant has made good-faith efforts to resolve her outstanding debt.

Key Rule Quoted

“The purpose is to make 'an examination of a sufficient period of a person’s life to make an affirmative determination that the person is an acceptable security risk.'”
— AG ¶ 2(a)

Procedural Posture

SOR issuedNov 26, 2013
Answer filed—
Hearing heldMar 25, 2014
Decision dateMay 22, 2014

Cite For

Mitigation of Financial Issues Under Guideline F
Self-reporting of Financial Problems to Security Officers
Good-faith Efforts to Resolve Debts as a Mitigating Factor

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 mitigated financial concerns related to the foreclosure of three properties owned jointly with her ex-husband. Despite past financial difficulties, the applicant demonstrated responsible management of her finances and a commitment to resolving her debts, leading to a favorable decision for her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Delinquent account balances for the primary mortgage on Blackacre	For Applicant	Unspecified Financial	Unknown	—	(a) behavior happened long ago / infrequent / unlikely to recur (c) received/receiving counseling; problem being resolved	—
1.b	Delinquent account balances for the secondary mortgage on Homestead	For Applicant	Unspecified Financial	Unknown	—	(a) behavior happened long ago / infrequent / unlikely to recur (c) received/receiving counseling; problem being resolved	—
1.c	Delinquent account balances for the secondary mortgage on Blackacre	For Applicant	Unspecified Financial	Unknown	—	(a) behavior happened long ago / infrequent / unlikely to recur (c) received/receiving counseling; problem being resolved	—
1.d	Delinquent account balances for the secondary mortgage on Whiteacre	For Applicant	Unspecified Financial	Unknown	—	(a) behavior happened long ago / infrequent / unlikely to recur (c) received/receiving counseling; problem being resolved	—

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. 12-04970 ) Applicant for Security Clearance )

For Government: Caroline E. Heintzelman, Esq., Department Counsel For Applicant: Pro se

05/22/2014 ______________

STATEMENT OF CASE

______________

NOEL, Nichole L., Administrative Judge:

Applicant contests the Defense Department’s intent to deny her eligibility for a security clearance to work in the defense industry. Applicant has mitigated the financial considerations concern raised by the foreclosure of three properties she owned jointly with her ex-husband. Clearance is granted.

Statement of the Case

On November 26, 2013, the Department of Defense (DOD) issued a Statement of Reasons (SOR) detailing security concerns under the financial considerations guideline.1 DOD adjudicators were unable to find that it is clearly consistent with the national interest to grant Applicant’s security clearance. Applicant timely answered the SOR and requested a hearing.2 At the hearing convened on March 25, 2014, I admitted Government’s Exhibits (GE) 1 through 7, as well as Applicant’s Exhibits (AE) A through I, without objection. After the hearing, Applicant submitted AE J, also admitted without objection.3 I received the transcript (Tr.) on April 9, 2014.

FINDINGS OF FACT

Applicant, 40, works as a project manager. She has worked for a federal contactor since separating from the Air Force in 1999 after eight years of active duty service. She has held a security clearance since 1992, without incident. The SOR alleges financial problems that occurred during the course of Applicant’s marriage, which lasted from October 2004 to January 2011.4

Applicant and her husband purchased their home, Homestead, in November 2004. Because she had the stronger credit history, Applicant financed the home, using 80/20 financing. The primary mortgage on Homestead secured 80% of the $331,000 purchase price and a secondary mortgage secured the remaining 20%. At the time of purchase, Applicant and her husband earned a household income of $150,000. Under their arrangement, Applicant paid the mortgage from her salary, which consumed her entire net pay, and her husband assumed responsibility for the household expenses. The couple withdrew $80,000 in equity from Homestead to fund upgrades to the property. In November 2005, Applicant and her husband purchased two investment properties, Blackacre and Whiteacre. Applicant also financed Blackacre and Whiteacre using 80/20 financing. Although Applicant obtained the financing on the properties alone, the properties were deeded to her and her husband jointly.5

The couple intended to sell Blackacre and Whiteacre within 6 months of purchase. The sale of Blackacre was thwarted by the downturn in the real estate market in 2006. Although the couple had a buyer for Whiteacre, the buyer was unable to secure financing. Unable to sell the homes as planned, Applicant’s husband, acting as property manager for both properties, rented them from the summer of 2006 until September 2009.6

Soon after purchasing the investment properties, Applicant’s husband quit his job to start his own business. Applicant’s marriage began to strain under the financial pressures caused by their reduced household income and increasing financial obligations. Applicant borrowed money from her 401K account to cover the mortgages for Blackacre and Whiteacre to keep the mortgages on the properties current when their renters became unreliable. The couple separated in September 2009, which was also the last month they made the mortgage payments on Blackacre and Whiteacre. After a brief reconciliation in 2010, Applicant’s husband abandoned the marriage, absconding with half of the couple’s savings. Unable to maintain Homestead on her own, Applicant stopped paying the mortgages on the property in July 2010. Applicant attempted to negotiate new mortgage terms with her lender. She offered to surrender the deed to Homestead in lieu of foreclosure, and attempted to short sale the property, but the creditor rejected each offer. Applicant self-reported the status of the properties to her facility security officer (FSO). Applicant’s divorce was finalized in January 2011. The divorce settlement did not address the resolution of any deficiency balances on the three properties.7

In 2011, Applicant underwent a periodic reinvestigation. She reported the foreclosures as well as the delinquency on Homestead on her security clearance application. She also discussed the properties during her subject interview. When Applicant began her current position in September 2012, she reported the status of the properties to her new FSO.8

In July 2012, the mortgager for Homestead foreclosed on the property. In November 2013, DOD issued the SOR alleging that Applicant has delinquent account balances for the secondary mortgage on Homestead (¶ 1.b), both mortgages on Blackacre (¶¶ 1.a and 1.c), and the secondary mortgage on Whiteacre (¶ 1.d). In response to collection attempts by the creditors holding the secondary mortgages on Homestead and Whiteacre, Applicant negotiated settlements with the creditors. The Blackacre mortgages remain unresolved. The mortgagers have not made attempts to collect the debt. She has contacted the last known creditor, but it is unable to locate Applicant’s account.9

Before her marriage, Applicant maintained a favorable financial history. During her marriage, Applicant ceded financial control to her husband to stabilize the union. In doing so, Applicant admitted to making decisions that went against her better judgment to keep the peace. Applicant accepts full responsibility for the financial choices she made during her marriage, and she has worked diligently to rehabilitate her finances. She sought financial counseling and lives well below her means. Since 2012, Applicant has paid off all of her consumer debt in addition to $26,000 in personal loans to her parents. Applicant is rebuilding her cash and retirement savings.10

POLICIES

When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are to be used 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, administrative judges apply the guidelines 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 the 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 the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of potential, rather than actual, risk of compromise of classified information.

Section 7 of EO 10865 provides that adverse 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

Financial Considerations

Unresolved delinquent debt is a serious security concern because failure to “satisfy debts [or] 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.”11 Similarly, an individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handling and safeguarding classified information. Specifically, Applicant admits that between 2009 and 2010, she defaulted on the mortgages for the primary residence and two investment properties she owned with her ex-husband. Applicant’s failure to pay these mortgages demonstrates an inability to pay her debts and a history, albeit a brief one, of not doing so.12

However, the record contains sufficient evidence to mitigate the financial concern. Although Applicant’s financial problems were not entirely beyond her control, she did handle the obligations attendant to having a security clearance responsibly.13 Applicant timely self-reported her issues to her FSO at her former and current employer. She properly reported adverse information on her 2011 security clearance application and discussed the issues candidly throughout her re-investigation and the adjudication of these issues. In doing so, she eliminated her financial issues as a source of potential exploitation.

Even though her ex-husband walked away from the financial fall-out from their marriage and failed real estate ventures, Applicant has made a good-faith effort to resolve all of her outstanding debt and to rehabilitate her finances.14 In addition to resolving her consumer debts and personal loans, Applicant has negotiated settlements to resolve the deficiency balances on the mortgages for Homestead (1.b) and Whiteacre (1.d). Applicant has received financial counseling and presented evidence that her finances are under control.15 She lives well below her means and has not incurred any new delinquent debt. Applicant’s financial problems were limited to her seven-year marriage, and it is unlikely that the circumstances leading to Applicant’s financial problems will recur.16

WHOLE PERSON CONCEPT

I have no doubts or reservations about Applicant’s current reliability, trustworthiness, and ability to protect classified information. In reaching this conclusion, I have also considered the whole-person factors at AG ¶ 2(a). The financial concerns in this case are mitigated even though the mortgages related to Blackacre remain unresolved. Applicant acknowledged that she made mistakes that had great financial consequences in an effort to maintain her marriage. However, it is not the purpose of a security clearance adjudication to assign guilt or blame and then punish or sanction a person for their past actions. Likewise a security clearance case is not aimed at collecting debts. Rather the purpose is to make “an examination of a sufficient period of a person’s life to make an affirmative determination that the person is an acceptable security risk.”17 Applicant has handled her obligations as a clearance holder appropriately. In doing so, she has proven that she takes the duties attendant to her fiduciary relationship seriously and that she continues to be worthy of the Government’s trust and confidence.

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, Financial Considerations: For Applicant

Subparagraphs 1.a – 1.d: For Applicant

CONCLUSION

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

________________________ Nichole L. Noel Administrative Judge

FOOTNOTES

1 This case is adjudicated under Executive Order (EO) 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. 2 To assist in her preparation for the hearing, Applicant received correspondence from Department Counsel and the Chief Administrative Judge. These letters are appended to the record as Appellate Exhibits (AP) I and II. 3 The Government’s position regarding Applicant’s post-hearing submission is appended to the record as AP III. 4 Tr. 15-17; GE 1. 5 Tr. 19-24, 27-28, 35-36, 45-47, 65-66. 6 Tr. 37-40, 47-49. 7 Tr. 25-26, 28, 31-32, 48, 66-67, 72-74. 8 Tr. 75-76; GE 1-2. 9 Tr. 28, 32-35, 40-44, 49, 51-56; GE 6-7; AE E-F, J. 10 Tr. 18, 56-64; AE A, G. 11 AG ¶ 18. 12 AG ¶¶ 19(a) and (c). 13 AG ¶ 20(b). 14 AG ¶ 20(d). 15 AG ¶ 20(c). 16 AG ¶ 20(a). 17 AG ¶ 2(a).