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ISCR Case 03-20597.h1 — CASE

ISCR Case 03-20597.h1denied

Case Headnote

ISCR Case No. 03-20597.h1

deniedJan 23, 2006· Hon. James A. Young· hearing

Summary

A 46-year-old flight control engineer was denied a security clearance under Guideline F, Financial Considerations, due to significant unresolved debts. The applicant's financial issues originated from a failed restaurant venture in 1998, leading to over $64,000 in delinquent debt and a federal tax lien exceeding $28,000.

Specifically, the applicant was indebted to the IRS for more than $28,950 from tax year 1998, had an unpaid judgment of more than $16,890, a bad debt exceeding $40,750, and an account over 120 days past due for more than $6,890. Disqualifying conditions related to a history of not meeting financial obligations and an unwillingness to resolve debts were raised.

Despite having the financial means to settle her debts, the applicant refused to do so, asserting that her creditors had acted in bad faith. The judge determined that the applicant failed to mitigate the financial concerns, specifically noting her history of not meeting obligations and her unwillingness to satisfy debts despite her ability to pay. Consequently, the security clearance was denied.

Why the Applicant Was Denied

Applicant has a history of not meeting her financial obligations.
Applicant has been unwilling to satisfy her debts despite having the means to do so.
Applicant's refusal to pay debts was based on her belief that creditors acted in bad faith.

Conditions Referenced

Disqualifying

E2.A6.1.2.1raisedFinancial Considerations - History of Not Meeting Financial Obligations
E2.A6.1.2.3raisedFinancial Considerations - Unwillingness to Satisfy Debts

Mitigating

E2.A6.1.3.2rejectedFinancial Considerations - Isolated IncidentThe restaurant failure occurred over seven years ago.
E2.A6.1.3.3rejectedFinancial Considerations - Conditions Beyond ControlWhile the restaurant failure was beyond her control, the applicant has the means to pay her debts.
E2.A6.1.3.6rejectedFinancial Considerations - Good Faith Effort to Repay DebtsThe applicant has not made a good faith effort to resolve her debts.

Key Rule Quoted

“"[N]o one has a 'right' to a security clearance."”
— Department of the Navy v. Egan, 484 U.S. 518, 528 (1988)

Procedural Posture

SOR issuedFeb 8, 2005
Answer filedMar 2, 2005
Hearing heldOct 18, 2005
Decision dateJan 23, 2006

Cite For

Denial of Clearance Due to Financial Irresponsibility Under Guideline F
Impact of Refusal to Pay Debts on Security Clearance Eligibility
Consideration of Financial Means Versus Willingness to Pay Debts in Clearance Decisions

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 issues, including a federal tax lien and multiple unpaid debts totaling over $64,000. Despite having the means to pay these debts, the applicant refused to do so, leading to a denial of her security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Applicant is indebted to the IRS for more than $28,950 from tax year 1998 $28,950	For Applicant	Tax Unpaid	Unknown	—	(c) received/receiving counseling; problem being resolved (d) good-faith effort to repay or otherwise resolve debts	—
1.b	has an unpaid judgment of more than $16,890 $16,893	Against Applicant	Judgment Against Applicant	Admitted	(b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.c	has a bad debt of more than $40,750 $40,750	Against Applicant	Unspecified Financial	Denied	(b) unwillingness to satisfy debts regardless of ability (c) a history of not meeting financial obligations	—	—
1.d	has an account that is 120 days past due for more than $6,890 $6,899	Against Applicant	Unspecified Financial	Unknown	(b) unwillingness to satisfy debts regardless of ability (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.

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

SYNOPSIS

KEYWORD: Financial

DIGEST: Applicant owned a restaurant that failed in 1998 leaving her with more than $64,000 in delinquent debt and a federal tax lien of more than $28,000. Applicant refuses to "grovel" to creditors whom she believes acted in bad faith by rejecting her offers of partial payment of the debts. Applicant failed to mitigate financial consideration security concerns. Clearance is denied.

CASENO: 03-20597.h1

DATE: 01/23/2006

DATE: January 23, 2006

In re:

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

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

Applicant for Security Clearance

ISCR Case No. 03-20597

DECISION OF ADMINISTRATIVE JUDGE

JAMES A. YOUNG SYNOPSIS

Applicant owned a restaurant that failed in 1998 leaving her with more than $64,000 in delinquent debt and a federal tax lien of more than $28,000. Applicant refuses to "grovel" to creditors whom she believes acted in bad faith by rejecting her offers of partial payment of the debts. Applicant failed to mitigate financial consideration security concerns. Clearance is denied.

STATEMENT OF CASE

The Defense Office of Hearings and Appeals (DOHA) declined to grant or continue a security clearance for Applicant. On 8 February 2005, DOHA issued a Statement of Reasons (1) (SOR) detailing the basis for its decision-security concerns raised under Guideline F (Financial Considerations) of the Directive. (2) Applicant answered the SOR in writing on 2 March 2005 and elected to have a hearing before an administrative judge. The case was assigned to me on 6 September 2005. On 18 October 2005, I convened a hearing to consider whether it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. DOHA received the hearing transcript (Tr.) on 31 October 2005.

FINDINGS OF FACT

Applicant is a 46-year-old flight control engineer for a defense contractor. She was married from 1980-94. Applicant has held a security clearance, with a small break in service, since 1983. This proceeding was initiated after Applicant applied to upgrade her clearance from secret to top secret.

In 1995, Applicant left her job with a defense contractor to open a restaurant. The restaurant did not succeed and, in February 1997, Applicant found employment with a defense contractor. Her secret clearance was reinstated. In 1998, she was forced to close the restaurant.

Because of the restaurant failure, Applicant had a loss and carried that loss forward on her taxes. In 1998, the IRS audited Applicant on her 1996 tax return. The IRS claims she owes the Government more than $28,000. Applicant asserts the IRS insists she carry losses back before she can carry them forward. Applicant does not dispute this, but claims the IRS miscalculated her liability. She believes the IRS owes her $12,000 with ten years of interest. Tr. 23. She is still arguing with the IRS about this.

In addition to the tax debt, Applicant incurred other debts as a result of expenses from her restaurant. One of the banks to which she was indebted obtained a judgment against her in 1999 for $16,893. SOR ¶ 1.b. The judgment has not been paid. Tr. 28. Applicant admits the judgment, but denies she owes the amount stated in the judgment.

The debt alleged in ¶ 1.cof more than $40,000 is from a line of credit she established for her business. (3) Tr. 28. She expects the debt will come off her credit report soon due to the passage of time. She has not paid the debt and does not intend to do so.

The debt alleged in ¶ 1.dis from a bank for $6,899. Applicant is not sure how she acquired this debt, but claims she reduced it to $3,000 before "a policy change caused the debt to fall back into collections." She accused the creditor of not acting in good faith. She has not paid this debt but it has been "retired" because it no longer appears on her credit reports. Answer at 7.

Applicant's mother and father are deceased. She now owns ten acres of real estate and houses outright valued at approximately $250,000. She owns four vehicles and a tractor, all paid for. She has a pension plan with two defense contractors, more than $100,000 in a bank account, and more than one-half million dollars in investments. Tr. 20. Although she has the money to pay these debts, she has chosen not to do so. Tr. 31-32. She was willing to work with these creditors, but they refused to accept partial payments of the debts. She pays her bills. She is not going back to "grovel" to people who she took abuse from in the past. Tr. 37.

POLICIES

"[N]o one has a 'right' to a security clearance." Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has "the authority to . . . control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to occupy a position . . . that will give that person access to such information." Id. at 527. The President authorized the Secretary of Defense or his designee to grant applicants eligibility for access to classified information "only upon a finding that it is clearly consistent with the national interest to do so." Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960). Eligibility for a security clearance is predicated upon the applicant meeting the security guidelines contained in the Directive. An applicant "has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance." ISCR Case No. 01-20700 at 3.

Enclosure 2 of the Directive sets forth personnel security guidelines, as well as the disqualifying conditions (DC) and mitigating conditions (MC) under each guideline. In evaluating the security worthiness of an applicant, the administrative judge must also assess the adjudicative process factors listed in ¶ 6.3 of the Directive. The decision to deny an individual a security clearance is not necessarily a determination as to the loyalty of the applicant. See Exec. Or. 10865 § 7. It is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance.

CONCLUSION

In the SOR, DOHA alleged Applicant is indebted to the IRS for more than $28,950 from tax year 1998 (¶ 1.a); has an unpaid judgment of more than $16,890 (¶ 1.b); has a bad debt of more than $40,750 (¶ 1.c); and has an account that is 120 days past due for more than $6,890 (¶ 1.d). Applicant admits the existence of debts, but denies the amounts and asserts that the debt alleged in ¶ 1.cis actually the same debt alleged in ¶ 1.b. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Directive ¶ E2.A6.1.1.

The Government's evidence establish potentially disqualifying conditions under Guideline F. Applicant has a history of not meeting her financial obligations (DC E2.A6.1.2.1) and has been unwilling to satisfy these debts (DC E2.A6.1.2.3). An applicant may mitigate the security concerns by establishing that the debt was an isolated incident (MC E2.A6.1.3.2), the debts resulted from conditions that were largely beyond the applicant's control (MC E2.A6.1.3.3) or the applicant initiated a good-faith effort to repay the overdue creditors or otherwise resolve her debts (MC E2.A6.1.3.6). Applicant's delinquent debts arose from the failure of her restaurant, a condition beyond her control. Thus, MC E2.A6.1.3.2 and MC E2.A6.1.3.3 apply. And Applicant testified that she had paid off some of her delinquent debts from the restaurant failure. So MC E2.A6.1.3.6 applies, at least to a limited extent. Nevertheless, I find against Applicant. The restaurant failed more than seven years ago, Applicant obviously has the means to pay the outstanding delinquent debts, but has refused to do so. She is upset that creditors expect to be paid in full and have not made concessions to her. She is waiting for these debts to drop off her credit report.

Although Applicant has been disputing her debt to the IRS some seven years, as it is still actively disputed, I granted her the benefit of the doubt. I find for Applicant on ¶ 1.a.

FORMAL FINDINGS

The following are my conclusions as to each allegation in the SOR:

Paragraph 1. Guideline F: AGAINST APPLICANT

Subparagraph 1.a: For Applicant

Subparagraph 1.b: Against Applicant

Subparagraph 1.c: Against Applicant

Subparagraph 1.d: Against Applicant

DECISION

In light of all of the circumstances in this case, it is not clearly consistent with the national interest to grant or continue a security clearance for Applicant. Clearance is denied. James A. Young

Administrative Judge

1. As required by Exec. Or. 10865 (Feb. 20, 1960), as amended and modified, and Department of Defense Directive 5220.6 (Jan. 2, 1992), as amended and modified (Directive).

2. The SOR incorrectly states the ISCR Case No. as 03-20957.

3. Applicant insisted she had never incurred such a debt and that it was the same debt as alleged in ¶ 1.b. Answer at 7. She provided no corroboration of this claim and, at the hearing, seemed unsure of the status of this debt. Tr. 29.

FOOTNOTES

APPEARANCES

FOR GOVERNMENT file:///usr.osd.mil/...Computer/Desktop/DOHA%20transfer/DOHA-Kane/dodogc/doha/industrial/Archived%20-%20HTML/03-20597.h1.htm[6/24/2021 3:33:56 PM] Robert E. Coacher, Esq., Department Counsel FOR APPLICANT Pro Se