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ISCR Case 05-00335.h1 — CASE

ISCR Case 05-00335.h1denied

Case Headnote

ISCR Case No. 05-00335.h1

deniedSep 22, 2006· Hon. Barry M. Sax· hearing

Summary

A 46-year-old software engineer was denied a security clearance under Guideline F (Financial Considerations) due to a history of significant financial problems. The applicant had three Chapter 7 bankruptcies, discharged in May 1986 ($61,150), May 1992 ($131,773), and 2000/2001 ($212,707).

The Statement of Reasons also cited multiple delinquent debts. These included child support ($6,947) and a state agency debt ($2,937), both of which were paid. Other debts, such as those to Creditor A ($69), Telephone Company C ($111), Creditor G ($979), Credit Card Company H ($2,763), and Utility Company J ($80), were settled. Several other debts, including those to Telephone Company B ($331), Telephone Company D ($142), Creditor I ($11,118), Creditor K ($3,271), Utility Company L ($112), and State Tax Agency M ($4,132), were either disputed and removed from credit reports or covered by bankruptcy.

The denial was based on the applicant's long history of financial issues and the fact that recent debt resolutions occurred only after the security clearance process began. The judge concluded that the applicant had not demonstrated sufficient financial rehabilitation or good judgment to mitigate the concerns, leading to the denial of the security clearance.

Why the Applicant Was Denied

The applicant has a long history of financial problems, including three Chapter 7 bankruptcies and ongoing delinquent debts.
Recent debt payments were made only after the initiation of the security clearance process, indicating a lack of proactive financial management.
The applicant failed to establish mitigating conditions, demonstrating insufficient evidence of financial rehabilitation or control over financial habits.

Conditions Referenced

Disqualifying

F1raisedA History of Not Meeting Financial Obligations
F3raisedInability or Unwillingness to Satisfy Debts

Key Rule Quoted

“A person seeking access to classified information enters into a fiduciary relationship with the Government based upon trust and confidence.”

Procedural Posture

SOR issuedSep 27, 2005
Answer filedOct 15, 2005
Hearing held—Decision made on written record without a hearing.
Decision dateSep 22, 2006

Cite For

Denial of Security Clearance Due to Financial Irresponsibility Under Guideline F
Impact of Recent Financial Actions on Security Clearance Eligibility
Importance of Demonstrating Financial Rehabilitation for Security Clearance Approval

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 applicant has a long history of financial difficulties, including multiple bankruptcies and significant delinquent debts. Despite some recent efforts to settle debts, the judge concluded that the applicant has not demonstrated sufficient financial rehabilitation, leading to a denial of the security clearance.

¶	Allegation	Finding	Type	Response	Disqualifying (¶19)	Mitigating applied (¶20)	Mitigation
1.a	Creditor A --$69.00. This debt was settled on October 28, 2005, by a check for $82.11 (Attachment to FORM R-1A, check with deposit stamp). $69	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.b	Telephone Company B -- $331.00. This debt was covered by Applicant's bankruptcy. He disputed the debt with Credit Bureau Report (CBR) and it has been deleted. $331	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.c	Telephone Company C-- $111.00. This debt was settled on April 24, 2006, by a check for $158.95 (Attachment R-1C, copy of statement). $111	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.d	Telephone Company D--$142.00. Applicant says this account was not his. It has been removed from his CBR. $142	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.e	Child Support --$6,947.00. As of now, the arrearage has been paid. Attachments R-1E and R-1Ea show a settlement. $6,947	Against Applicant	Child Support Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.f	State Agency F -- $2,937.00. As of now, the arrearage has been paid. Attachment R-1F shows a settlement. $2,937	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.g	Creditor G -- $979.00. As of May 2006, this debt has been settled and has a zero balance (Attachment R-1G, R-1Ga). $979	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.h	Credit Card Company H --$2,763.00. As of May 4, 2006, this debt has been settled and shows a zero balance (Attachments R-1H, R-1Ha). $2,763	Against Applicant	Credit Card Debt	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.i	Creditor I--$11,118.00. Applicant has been seeking to resolve this debt but has not yet received documentation from the creditor. Applicant disputed this debt and it has been removed from the CBR. $11,118	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.j	Utility Company J--$80.00. This debt was settled on November 15, 2005 (Attachment R-1J). $80	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.k	Creditor K -- $3,271.00. This debt was included in the March 19, 2001 bankruptcy and should not have been cited in the CBR as including a balance due. The most recent CBR shows a zero balance (Pages 4 and 5). $3,271	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.l	Utility Company L --$112.00. This debt was included in the March 19, 2001 bankruptcy. It has been removed from the CBR. No history of the dispute has been found. $112	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.m	State Tax Agency M--$4,132.00. Applicant disputed this debt, and it has been removed from the current CBR. $4,132	Against Applicant	Unspecified Financial	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.n	In May 1986, Applicant obtained a Bankruptcy Court discharge of debts totaling $61,150 under Chapter 7. $61,150	Against Applicant	Bankruptcy Filing	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.o	In May 1992, Applicant obtained a Bankruptcy Court discharge of $131,773 in debts under Chapter 7. $131,773	Against Applicant	Bankruptcy Filing	Denied	(a) inability to satisfy debts (c) a history of not meeting financial obligations	—	—
1.p	In 2000/2001, Applicant obtained a Bankruptcy Court discharge of $212,707.00 under Chapter 7, which had been converted from a Chapter 13 (GX 17). In the most recent credit bureau report (GX 7), this is the only bankruptcy shown. $212,707	Against Applicant	Bankruptcy Filing	Denied	(a) inability to satisfy debts (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

APPEARANCES

DATE: September 22, 2006

In Re:

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

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

Applicant for Security Clearance

ISCR Case No. 05-00335

DECISION OF ADMINISTRATIVE JUDGE

BARRY M. SAX

SYNOPSIS

This 46 -year-old software engineer received discharges in bankruptcy in 1986 ($61,121.00); 1992 ($131,773.00); and 2000/2001 ($212, 707.00). Since the 2001 discharge, he has again incurred significant delinquent debts, many of which have recently been paid off, but only after the current adjudication process began. It is not clear whether Applicant has learned the hard lessons of financial discipline or is simply responding to pressure; i.e., his desire to keep his clearance. Mitigation has not yet been adequately established. Clearance is denied.

STATEMENT OF CASE

On September 27, 2005, 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 amended, issued a Statement of Reasons (SOR) to the Applicant. The SOR detailed reasons why DOHA could not make the preliminary affirmative finding required under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for the Applicant. The SOR recommended referral to an Administrative Judge to conduct proceedings and determine whether a clearance should be granted, denied or revoked.

On October 15, 2005, and again on November 14, 2005, Applicant responded to the allegations set forth in the SOR, and elected to have a decision made by a DOHA Administrative Judge on the written record; i.e., without a hearing. A File of Relevant Material was issued on June 29, 2006. Applicant was informed that any response to the FORM was due within 30 days of receipt. In this case, any response was due by July 29, 2006. Applicant submitted a timely response on July 5, 2006, to which Department Counsel did not object. The case was assigned to me for resolution on August 14, 2006.

FINDINGS OF FACT

Applicant is a 46-year-old software engineer director for a defense contractor. The SOR contains sixteen (16) allegations under Guideline F (Financial). Although Applicant responded to the SOR, none of his answers can appropriately be considered to be literal admissions of fact. Therefore, all of them are deemed to be denials.

After considering the totality of the evidence, I make the following additional FINDINGS OF FACT as to the status of each SOR allegation.

Guideline F (Financial)

Applicant has a history of past due debts (delinquent, charged off, referred for collection, or reduced to judgment) to the following creditors in the amounts cited below. The current status of each debt is also given:

1.a. Creditor A --$69.00. This debt was settled on October 28, 2005, by a check for $82.11 (Attachment to FORM R- 1A, check with deposit stamp).

1.b. Telephone Company B -- $331.00. This debt was covered by Applicant's bankruptcy. He disputed the debt with Credit Bureau Report (CBR) and it has been deleted.

1.c. Telephone Company C-- $111.00. This debt was settled on April 24, 2006, by a check for $158.95 (Attachment R- 1C, copy of statement).

1.d. Telephone Company D--$142.00. Applicant says this account was not his. It has been removed from his CBR.

1.e. Child Support --$6,947.00. As of now, the arrearage has been paid. Attachments R-1E and R-1Ea show a settlement.

1.f. State Agency F -- $2,937.00. As of now, the arrearage has been paid. Attachment R-1F shows a settlement.

1.g. Creditor G -- $979.00. As of May 2006, this debt has been settled and has a zero balance (Attachment R-1G, R- 1Ga).

1.h. Credit Card Company H --$2,763.00. As of May 4, 2006, this debt has been settled and shows a zero balance (Attachments R-1H, R-1Ha).

1.i. Creditor I--$11,118.00. Applicant has been seeking to resolve this debt but has not yet received documentation from the creditor. Applicant disputed this debt and it has been removed from the CBR.

1.j. Utility Company J--$80.00. This debt was settled on November 15, 2005 (Attachment R-1J).

1.k. Creditor K -- $3,271.00. This debt was included in the March 19, 2001 bankruptcy and should not have been cited in the CBR as including a balance due. The most recent CBR shows a zero balance (Pages 4 and 5).

1.l. Utility Company L --$112.00. This debt was included in the March 19, 2001 bankruptcy. It has been removed from the CBR. No history of -the dispute has been found.

1.m. State Tax Agency M--$4,132.00. Applicant disputed this debt, and it has been removed from the current CBR.

1.n. In May 1986, Applicant obtained a Bankruptcy Court discharge of debts totaling $61,150

under Chapter 7.

1.o. In May 1992, Applicant obtained a Bankruptcy Court discharge of $131,773 in debts under Chapter 7.

1.p. In 2000/2001, Applicant obtained a Bankruptcy Court discharge of $212,707.00 under Chapter 7, which had been converted from a Chapter 13 (GX 17). In the most recent credit bureau report (GX 7), this is the only bankruptcy shown.

POLICIES

In evaluating the relevance of an individual's conduct, the adjudicator should consider the following nine generic factors: (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 voluntariness of participation; (6) the presence or absence of rehabilitation and other pertinent 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 (Directive, E.2.2.1., on page 16 of Enclosure 2). I have considered all nine factors, individually and collectively.

The eligibility criteria established by Executive Order 10865 and DoD Directive 5220.6 identify personal characteristics and conduct that are reasonably related to the ultimate question of whether it is "clearly consistent with the national interest" for an individual to hold a security clearance. An applicant's admission of the information in specific allegations relieves the Government of having to prove those allegations. If specific allegations and/or information are denied or otherwise controverted by the applicant, the Government has the initial burden of proving those controverted facts alleged in the Statement of Reasons.

If the Government meets its burden (either by the Applicant's admissions or by other evidence) and proves conduct that creates security concerns under the Directive, the burden of persuasion then shifts to the Applicant to present evidence in refutation, extenuation or mitigation sufficient to demonstrate that, despite the existence of conduct that falls within specific criteria in the Directive, it is nevertheless consistent with the interests of national security to grant or continue a security clearance for the Applicant.

A person seeking access to classified information enters into a fiduciary relationship with the Government based upon trust and confidence. As required by DoD Directive 5220.6, as amended, at E2.2.2., "any doubt as to whether access to classified information is clearly consistent with the interests of national security will be resolved in favor of the nation's security."

CONCLUSION

Applicant is a 46-year-old employee of a defense contractor. He has had a series of financial problems over the past several decades. I conclude that all of the actual allegations made in the SOR were originally accurate. I also conclude that since 2005, and particularly over the past few months, he has made substantial progress toward paying off of resolving most of the cited delinquent debts, and had been seeking to identify and resolve them.

Applicant has documented paying off or otherwise resolving the delinquent debts cited in the following allegations: 1.a., 1.c., 1.e., 1.f., 1.g., and 1.j.

Applicant has documented that the following delinquent debts were discharged in the 2000 bankruptcy and have been removed from his credit bureau report: 1.b., 1.k., 1.i., and 1.m.

Applicant has disputed the delinquent debts cited in the following allegations, and they have been removed from his credit bureau report: 1.d., 1.h.,1.l.

Applicant has been through Chapter 7 bankruptcies in 1986, 1992, and 2000, with debts discharged in all three instances (1.n., 1.o.,1.p.). Applicant states the cause of the bankruptcies to be (1) 1985 -$61,150.00 in debts discharged - due to "a divorce," (2) 1992 -$131,773.00 - due to another "divorce," and (3) 2000 - $30,385.02 in debts discharged -due to "a lot of bills and not enough money to pay them"(GX 8). In his Personal Financial Statement, dated November 2002 (Attachment to GX 8), Applicant does not list any monthly debts, except $200 to an attorney. Yet, within a few years, Applicant again had incurred significant delinquent debts, as cited in the SOR. I conclude from this history that Applicant had again fallen into the same pattern of spending more than he earned that led to the earlier Bankruptcies. It is a matter of record that Applicant did not move to resolve most of the delinquent debts cited in the SOR until he felt the pressure caused by the security clearance investigation that resulted in the current adjudication, so the weight to be given his efforts is less than it would have been if he had acted earlier.

The most recent credit bureau report, dated May 17, 2006, shows 20 currently "satisfactory accounts" and no currently "delinquent/derogatory accounts." However, the report also cites an "Approximate Total Debt" of $14,966.00, and a credit score of 568, which "represents a medium high risk for most lenders"(Id.).

Viewed under the Directive's "whole person concept," it is an inescapable conclusion that the 46-year-old Applicant (born 1960) has had serious delinquent debts for more than 20 years, characterized by (1) financial problems, followed (2) by a Chapter 7 Bankruptcy, followed (3) by more financial problems, (4) a second Chapter 7, (5) another round of financial problems, (6) a third Chapter 7 Bankruptcy, followed (7) by yet a fourth period of incurring of significant delinquent debts that has produced a current "medium high risk" level from a credit reporting service.

Guideline F (Financial Considerations) - The Concern: An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Unexplained affluence is often linked to proceeds from financially profitable criminal acts.

Disqualifying Conditions: (1) A history of not meeting financial obligations; (3) Inability or unwillingness to satisfy debts.

Mitigating Conditions - None that are established by the record; e.g., (1). The behavior remains recent; (2). It was not an isolated incident; (3) There is insufficient evidence to conclude that conditions that resulted in the recent and past financial misconduct were largely beyond the person's control as to the incurring and delayed resolution of the debts; e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation; and (4) There is no evidence that Applicant has received or is receiving counseling for the problem and there are no clear indications that the problem is being resolved or is under control. Mitigating Conduct (6) is only partially applicable in that Applicant initiation of his effort to repay overdue creditors or otherwise resolve debts took so long to get under way.

Despite the recent resolution of most of the cited debts, I am, as yet, unable to conclude that Applicant has demonstrated a fundamental change in his long standing character traits and financial habits. Consequently, he had not established that he as yet possesses the good judgment, reliability, and trustworthiness required of anyone seeking a security clearance. In the year that must pass after this decision becomes final, at which time Applicant can reapply for a clearance, he will have the opportunity to continue the resolution of his delinquent debts and to show that he can be considered to have shown financial rehabilitation.FORMAL FINDIN GS

Formal Findings as required by Section 3, Paragraph 7 of Enclosure 1 of the Directive are hereby rendered as follows:

Guideline F (Financial Considerations) Against the Applicant

Subparagraph l.a. Against the Applicant

Subparagraph 1.b. Against the Applicant

Subparagraph 1.c. Against the Applicant

Subparagraph 1.d. Against the Applicant

Subparagraph l.e. Against the Applicant

Subparagraph l.f. Against the Applicant

Subparagraph 1.g. Against the Applicant

Subparagraph 1.h. Against the Applicant

Subparagraph 1.i. Against the Applicant

Subparagraph l.j. Against the Applicant

Subparagraph l.k. Against the Applicant Subparagraph 1.l. Against the Applicant

Subparagraph 1.m. Against the Applicant

Subparagraph 1.n. Against the Applicant

Subparagraph l.o. Against the Applicant

Subparagraph l.p. Against 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.

BARRY M. SAX

ADMINISTRATIVE JUDGE

FOOTNOTES

05-00335.h1 FOR GOVERNMENT Jennifer I. Goldstein, Esquire, Department Counsel FOR APPLICANT Pro Se file:///usr.osd.mil/...yComputer/Desktop/DOHA%20transfer/DOHA-Kane/dodogc/doha/industrial/Archived%20-%20HTML/05-00335.h1.html[7/2/2021 3:41:30 PM] 05-00335.h1