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ISCR Case 01-21939.h1 — CASE

ISCR Case 01-21939.h1denied

Case Headnote

ISCR Case No. 01-21939.h1

deniedNov 7, 2002· Hon. Joseph Testan· hearing

Summary

A 49-year-old applicant was denied a security clearance under Guideline F (Financial Considerations) due to a history of significant financial difficulties and an inability or unwillingness to satisfy substantial debts.

The applicant faced several financial challenges, including a reported $4,670.00 debt to American Express from a corporate card, which the applicant disputes, stating the employer was responsible. Other resolved or unverified debts included a $311.00 traffic ticket, a $116.00 creditor debt no longer claimed, and a $114.00 debt to a defunct creditor. The applicant also had a repossessed Toyota vehicle, which was later redeemed after a $2,500.00 payment, and a Toyota Financial Services account paid in full by September 2001.

However, significant outstanding obligations remained. The applicant owed the IRS at least $7,543.79 for tax years 1995 and 1996, and $4,537.53 for 2001, with additional undetermined amounts for other years. An agreement was reached for $295.00 monthly payments starting November 2002, though interest and penalties would continue to accrue. Furthermore, the applicant owed California at least $6,457.09 from a 1999 judgment for unemployment benefits overpayment, which remained unpaid, and a $4,040.00 state tax lien from 1998 was also outstanding.

Why the Applicant Was Denied

Applicant has a history of not meeting financial obligations.
Applicant is unable or unwilling to satisfy debts, including substantial tax liabilities and a judgment against him.

Conditions Referenced

Disqualifying

E2.A6.1.2.1raisedA History of Not Meeting Financial Obligations.
E2.A6.1.2.3raisedInability or Unwillingness to Satisfy Debts.

Key Rule Quoted

“Under the "clearly consistent with the national interest" standard that must be followed in DOHA proceedings, applicant's current financial condition precludes a finding that he is currently eligible for access to classified information.”

Procedural Posture

SOR issuedAug 8, 2002
Answer filedSep 4, 2002
Hearing heldOct 23, 2002
Decision dateNov 7, 2002

Cite For

Financial Difficulties Impacting Security Clearance Eligibility
Disqualifying Conditions Related to Financial Obligations
The Standard of "clearly Consistent with the National Interest" in Security Clearance Cases

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 difficulties, including multiple debts totaling at least $23,500.00, which have been past due for years. Despite some debts being settled or paid off, the applicant's ongoing financial duress and inability to meet obligations led to a denial of the security clearance under Guideline F.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant was employed as a customer engineer by a firm. He used an American Express (AE) corporate credit card issued to him through his employer for business-related expenses. When the company continued to refuse to pay off the card, applicant gave the card back to the company and quit his job. He called AE and told them that they should pursue his employer for the debt. Although applicant has not heard from AE since he made the call, AE reported to at least one credit reporting agency that he owes them $4,670.00 (Exhibit 4). $4,670	Against Applicant	Credit Card Debt	Unknown	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—
1.b	Exhibit 4 establishes that applicant was indebted to this city as a result of receiving a traffic ticket. He satisfied this $311.00 debt. $311	For Applicant	Unspecified Financial	Admitted	—	—	—
1.c	Exhibit 4 establishes that applicant was indebted to this creditor in the amount of $116.00. He presented proof, however, that the creditor is no longer claiming applicant is indebted to them (Exhibit A). $116	For Applicant	Unspecified Financial	Admitted	—	—	—
1.d	Exhibit 4 establishes that applicant owed this creditor $114.00, part of which was 90 days past due. This creditor is no longer in business, and the company that purchased the original creditor has no record of applicant (Exhibit C). $114	For Applicant	Unspecified Financial	Admitted	—	—	—
1.e	This debt is somehow related to the debts alleged in SOR Paragraphs 1j and 1k as they are all connected with either a Toyota dealership or a Toyota financing company. The exact status of all of these alleged debts cannot be determined; however, it is clear that (1) applicant had purchased a car from Toyota that was repossessed and eventually 'redeemed' by applicant after he made a $2,500.00 payment to Toyota (TR at 52-63), and (2) according to a letter from 'Toyota Financial Services,' applicant paid his account in full in September 2001 (Exhibit A).	For Applicant	Unspecified Financial	Unknown	—	—	—
1.l	As of June 2001, applicant was indebted to the IRS for tax years 1995 and 1996 in the total amount of $7,543.79 (Exhibit 6). It is reasonable to assume that with additional interest and penalties, the debt has grown since then. Applicant is also indebted to the IRS for tax year 2001 in the amount of $4,537.53 (Exhibit A). He is also indebted to the IRS for tax years 1997, 1999, and 2000, although the amount of this additional indebtedness cannot be determined from the record. Exhibit A establishes that applicant reached an agreement with the IRS which requires him to make monthly payments of $295.00 until his entire tax debt is paid in full. His first payment is due in November 2002. While he is making these payments, interest and penalties will continue to accrue. $12,581	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—
1.m	Applicant owes California at least $6,457.09 as a result of a judgment entered against him in 1999. The judgment was based on applicant receiving unemployment benefits he was not entitled to receive (Exhibit 2). Applicant has not paid the judgment (TR at 85). $6,457	Against Applicant	Judgment Against Applicant	Unknown	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—
1.n	A $4,040.00 state tax lien was filed against applicant in February 1998 (Exhibit 1). This tax debt has not been paid. $4,040	Against Applicant	Tax Unpaid	Unknown	(a) inability to satisfy debts (b) unwillingness to satisfy debts regardless of ability	—	—

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

DATE: November 7, 2002

In Re:

------------------

SSN: -----------

Applicant for Security Clearance

ISCR Case No. 01-21939

DECISION OF ADMINISTRATIVE JUDGE

JOSEPH TESTAN

SYNOPSIS

Applicant is currently under severe financial duress, and he is likely to remain so for the foreseeable future. Clearance is denied.

On August 8, 2002, the Defense Office of Hearings and Appeals (DOHA), pursuant to Executive Order 10865 and Department of Defense Directive 5220.6 (Directive), dated January 2, 1992, (as administratively reissued on April 20, 1999), issued a Statement of Reasons (SOR) to applicant which detailed reasons why DOHA could not make the preliminary affirmative finding under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for applicant and recommended referral to an Administrative Judge to determine whether clearance should be denied or revoked.

Applicant responded to the SOR in writing on September 4, 2002. The case was assigned to the undersigned on October 16, 2002, and a Notice of Hearing was issued on the same date. The hearing was held on October 23, 2002. The transcript was received on October 31, 2002.

RULINGS ON PROCEDURE

At the hearing, SOR Paragraph 1.m. was amended. As amended, it is as follows:

1.m. You had a judgment against you from the State of California on March 30, 1999, in the amount of approximately $6,457.09 for overpayment of unemployment benefits. As of December 21, 2000, this debt had not been satisfied.

FINDINGS OF FACT

Applicant is forty-nine years of age. He recently lost his defense-related job, allegedly as a result of the issuance of the SOR.

SOR Allegation 1.a. Applicant was employed as a customer engineer by a firm. He used an American Express (AE) corporate credit card issued to him through his employer for business-related expenses. When the company continued to refuse to pay off the card, applicant gave the card back to the company and quit his job. He called AE and told them that they should pursue his employer for the debt. Although applicant has not heard from AE since he made the call, AE reported to at least one credit reporting agency that he owes them $4,670.00 (Exhibit 4).

SOR Allegation 1.b. Exhibit 4 establishes that applicant was indebted to this city as a result of receiving a traffic ticket. He satisfied this $311.00 debt.

SOR Allegation 1.c. Exhibit 4 establishes that applicant was indebted to this creditor in the amount of $116.00. He presented proof, however, that the creditor is no longer claiming applicant is indebted to them (Exhibit A).

SOR Allegation 1.d. Exhibit 4 establishes that applicant owed this creditor $114.00, part of which was 90 days past due. This creditor is no longer in business, and the company that purchased the original creditor has no record of applicant (Exhibit C).

SOR Allegation 1.e. This debt is somehow related to the debts alleged in SOR Paragraphs 1jand 1kas they are all connected with either a Toyota dealership or a Toyota financing company. The exact status of all of these alleged debts cannot be determined; however, it is clear that (1) applicant had purchased a car from Toyota that was repossessed and eventually "redeemed" by applicant after he made a $2,500.00 payment to Toyota (TR at 52-63), and (2) according to a letter from "Toyota Financial Services," applicant paid his account in full in September 2001 (Exhibit A).

SOR Allegation 1.f. Applicant is indebted to this creditor in the amount of $712.00. (1)

SOR Allegation 1.g. Applicant had a secured credit card with this company, and he eventually stopped making payments after accruing a debt of $233.27. Applicant settled this debt with the creditor for $93.31 in September/October 2002 (Exhibit B).

SOR Allegation 1.h. Applicant was indebted to this hospital in the amount of $339.00. Applicant presented proof that he paid the hospital $200.00 in August 2002 (Exhibit A), and he testified that this partial payment satisfied the debt in full (TR at 69).

SOR Allegation 1.i. Applicant is indebted to this creditor in the amount of $251.00 (TR at 69-70).

SOR Allegations 1.j. and 1.k. These are part of the group of Toyota debts referred to above in connection with SOR Allegation 1e.

SOR Allegation 1.l. As of June 2001, applicant was indebted to the IRS for tax years 1995 and 1996 in the total amount of $7,543.79 (Exhibit 6). It is reasonable to assume that with additional interest and penalties, the debt has grown since then. Applicant is also indebted to the IRS for tax year 2001 in the amount of $4,537.53 (Exhibit A). He is also indebted to the IRS for tax years 1997, 1999, and 2000, although the amount of this additional indebtedness cannot be determined from the record. Exhibit A establishes that applicant reached an agreement with the IRS which requires him to make monthly payments of $295.00 until his entire tax debt is paid in full. His first payment is due in November 2002. While he is making these payments, interest and penalties will continue to accrue. It is obvious from applicant's testimony that he is not really sure what he owes the IRS, or when he first reached the agreement with them (TR at 76-79).

SOR Allegation 1.m. Applicant owes California at least $6,457.09 as a result of a judgment entered against him in 1999. The judgment was based on applicant receiving unemployment benefits he was not entitled to receive (Exhibit 2). Applicant has not paid the judgment (TR at 85).

SOR Allegation 1.n. A $4,040.00 state tax lien was filed against applicant in February 1998 (Exhibit 1). This tax debt has not been paid. SOR Allegation 1.o. A Personal Financial Statement that applicant completed in May 2001 indicates that he had a monthly cash flow of $3,173.00 (Exhibit 5). This information is clearly outdated. At the present time, it is unlikely that applicant has a positive monthly cash flow.

In Exhibit 5, applicant stated the following about the origin of his financial difficulties: "In 1990, after my divorce, my finances began to suffer from job losses, child support, failed business and some financial mismanagement." In his response to the SOR, he stated the following about the difficulties he has faced trying to satisfy his debts: "The reason that it is taking me so long (to pay his creditors) is due to several divorces, loss of job, loss of residence, complete loss of earnings and transportation."

During his testimony applicant mentioned that he is utilizing the services of a consumer credit counseling service to help him deal with his various debts (TR at 42-43, 63-64). However, he offered no credible evidence that they have provided him with any meaningful assistance.

Applicant completed and executed a Security Clearance Application (SCA) on December 13, 2000. In response to Question 38 of the SCA which asked, "In the last 7 years, have you ever been over 180 days delinquent on any debt(s)?" applicant stated "no." In response to Question 39 of the SCA which asked, "Are you currently over 90 days delinquent on any debt(s)?" applicant stated "no." These responses were obviously false. However, given applicant's disclosure of the vehicle repossession and tax lien in response to two other questions on the SCA, I find that applicant was not trying to mislead the Government about his financial condition when he responded "no" to questions 38 and 39. By disclosing the repossession and tax lien on the same SCA, he had to know his financial history would be investigated. Accordingly, Guideline E is found for applicant.

No evidence was offered in support of SOR Allegation 3a. Guideline J is therefore found for applicant.

POLICIES

Enclosure 2 of the Directive sets forth Guidelines (divided into Disqualifying Factors and Mitigating Factors) which must be followed by the Administrative Judge. Based on the foregoing Findings of Fact, the following Disqualifying Factors and Mitigating Factors are applicable:

Financial Considerations

Disqualifying Factors

1. E2.A6.1.2.1: A history of not meeting financial obligations.

2. E2.A6.1.2.3: Inability or unwillingness to satisfy debts.

Mitigating Factors

None.

CONCLUSION

Even if the questionable debts (2) are not held against applicant, the evidence establishes that (1) applicant is indebted to at least four different creditors in the total amount of at least $23,500.00, (2) most of these debts have been past-due for years, and (3) interest and penalties continue to accrue on the tax debts, which represent the bulk of applicant's indebtedness. Applicant's inability or unwillingness to pay his taxes and to honor his other financial commitments reflects adversely on his judgment, reliability and trustworthiness, and strongly suggests that he cannot be relied upon to safeguard classified information.

The fact that applicant's financial difficulties were caused in part by factors beyond his control is a mitigating factor, as is the fact he has settled and/or paid off a number of his smaller past-due debts. The fact remains, however, that applicant has been under severe financial duress for many years, and in all likelihood he will continue to be under severe financial duress for the foreseeable future. Under the "clearly consistent with the national interest" standard that must be followed in DOHA proceedings, applicant's current financial condition precludes a finding that he is currently eligible for access to classified information. For this reason, Guideline F is found against applicant.

FORMAL FINDINGS

PARAGRAPH 1: AGAINST THE APPLICANT

PARAGRAPH 2: FOR THE APPLICANT

PARAGRAPH 3: FOR THE APPLICANT

DECISION

In light of all the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant or continue a security clearance for applicant.

____________________________

Joseph Testan

Administrative Judge

1. Exhibit 7 seems to indicate that applicant is indebted to this creditor in the amount of $4,842.00. Exhibit 7, however, is not credible evidence.

2. The debts alleged in SOR Paragraphs 1a, 1d, 1e, 1jand 1k.

FOOTNOTES

01-21939.h1 FOR GOVERNMENT Melvin A. Howry, Department Counsel FOR APPLICANT Pro Se