ISCR Case No. 12-11210

AND APPEALS

In the matter of: )

)

)

ISCR Case No. 12-11210

) Applicant for Security Clearance )

Appearances

For Government: Richard Stevens, Esq., Department Counsel For Applicant: Pro se

__________

Decision __________

DUFFY, James F., Administrative Judge:

Applicant failed to mitigate the security concerns arising under Guideline F, financial considerations. Eligibility for access to classified information is denied.

On December 10, 2012, the Department of Defense (DOD) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F. This action was taken under Executive Order 10865, Safeguarding Classified Information Within Industry, dated February 20, 1960, as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program, dated January 2, 1992, as amended (Directive); and the adjudicative guidelines (AG) implemented on September 1, 2006.

The SOR detailed reasons why DOD could not find under the Directive that it is clearly consistent with the national interest to grant or continue Applicant’s security clearance. In an undated document, Applicant

nswered the SOR and requested a 06/18/2013

2

hearing. DOD received her Answer on January 23, 2013. The case was assigned to me on April 2, 2013. The Defense Office of Hearings and Appeals (DOHA) issued a Notice of Video Teleconference Hearing on April 9, 2013. The hearing was held as scheduled on April 30, 2013. At the hearing, Department Counsel offered exhibits (GE) 1 through 6 that were admitted into evidence without objection.1 Applicant testified and offered exhibits (AE) A through G that were admitted into evidence without objection. Applicant’s list of exhibits was marked as hearing exhibit (HE) 1 and the copy of the SOR that she provided was marked as HE 2. The record was left open until May 15, 2013, for the Applicant to submit additional matters. Applicant submitted documents that were marked as AE H through N and admitted into evidence without objection.2 Department Counsel’s emails indicating he had no objection to Applicant’s post-hearing submissions was marked as HE 3. The transcript (Tr.) of the hearing was received on May 10, 2013.

Applicant is a 39-year-old administrative assistant who works for a defense contractor. She has worked for that contractor since July 2011. In December 1990, she enlisted in the Army Reserve while still in high school. In 1992, she graduated from high school. In April 1993, she was honorably discharged from the Army Reserve after becoming pregnant with her first child. She has been married since 1993 and has four children, ages 8, 15, 18, and 20. She is about eight courses short of earning a bachelor’s degree. She held a security clearance for about ten years without incident.3

The SOR asserted that Applicant had 24 delinquent debts totaling $24,730. In her Answer to the SOR, Applicant admitted all of the allegations. Her admissions are incorporated as findings as fact.4

In 1998, Applicant’s husband received a job opportunity in another state. They moved to that other state and purchased a home there. At that time, she was pregnant and intended to remain at home to raise their children. Her husband, however, did not receive the job he was promised. At that time, Applicant began working in a retail store. Her husband obtained side jobs to help make ends meet. They entered into a debt management program for a period of time. In 2000, they filed Chapter 13 bankruptcy.

1 Department Counsel offered GE 6 (Chapter 13 bankruptcy records) as a rebuttal exhibit. Applicant did not have an opportunity to examine GE 6 before or during the hearing. GE 6 was conditionally admitted into evidence subject to any objections Applicant had after having an opportunity to examine that document. After receiving that document, Applicant posed no objections. See HE 3 and Tr. at 73-78. 2 Applicant initially submitted AE N in an electronic format that neither Department Counsel nor I were able to open. On May 31, 2013, she resubmitted it in a format that we could open. 3 Tr. at 6-7, 14-21, 34-36, 73; GE 1; AE J, K. 4 Applicant’s Answer to the SOR; GE 4, 5; HE 2.

3

They completed paying on that Chapter 13 bankruptcy plan in 2005. Details of that bankruptcy are not known, but it is presumed she and her husband received a discharge of any debts that were not fully paid in that bankruptcy.5

In 2005, Applicant became pregnant and decided to stop working outside the home so that she could raise her children. In 2007, she and her husband purchased two rental properties that each cost about $140,000. They rented one property for $1,600 and the other for $1,700. They, however, had unreliable tenants who failed to pay the rent. Around this time, her husband also had his salary significantly reduced. Initially, his annual salary was about $80,000. His employer, however, lost a major contract that resulted in his annual salary being reduced to about $40,000. This reduction in salary caused them financial problems. As things started to get rough financially, she decided to start working again and obtained a job in which she earned about $41,000 a year. Both of the rental properties were foreclosed. Applicant does not owe any deficiencies on the foreclosed properties.6

In June 2008, Applicant and her husband filed Chapter 13 bankruptcy again so that they could save their primary residence from foreclosure and their vehicles from repossession. Applicant received financial counseling before filing bankruptcy. This bankruptcy petition reflected that their total assets were $258,657 and their total liabilities were $329,512. Their monthly income was $5,916 and their monthly expenditures were $4,447, which left them a net monthly income of $1,468. In October 2008, the Chapter 13 Plan was confirmed. Under that plan, Applicant and her husband were required to pay $1,476 for the first 3 months and $1,508 for the remaining 57 months. The plan was later modified on four occasions, but the details of those modifications are unknown. On April 20, 2010, and June 15, 2010, the bankruptcy trustee filed motions to dismiss the bankruptcy because Applicant and her husband were in default under the plan. The Chapter 13 bankruptcy was dismissed on June 15, 2010. The trustee’s report indicated that payments totaling $13,780 in principal and $6,927 in interest were paid under the plan. Those payments were made only towards the secured debts. None of Applicant’s debts were fully resolved during the Chapter 13 bankruptcy. Applicant indicated that she and her husband stopped

ying on the Chapter 13 bankruptcy because they wanted to handle the debts themselves.7

In her response to interrogatories on July 31, 2012, Applicant indicated that she joined her company’s group legal services program with the intention of challenging incorrect information on her credit reports and having the legal service provider

5 Tr. at 19-21, 34, 37-38, 58-61; GE 2; AE A, H. 6 Tr. at 58-63, 68-69; GE 6 (page 29 of 63). It is not totally clear from the evidence whether Applicant’s husband’s salary was reduced from $80,000 to $40,000 before their first or second Chapter 13 bankruptcy filing. The preponderance of the evidence, however, supports a finding that reduction occurred before the second bankruptcy filing. See Applicant’s Personal Subject Interview in GE 2. 7 Tr. at 37-38, 58-61; GE 1, 2, 6; AE H.

4

negotiate settlement amounts with creditors. She provided a list of the debts that would be challenged and those that would be negotiated and settled. No evidence was presented to show that the identified debts were disputed or the others were negotiated and settled.8

At the hearing, Department Counsel and Applicant had the following exchange:

Department Counsel: All right. Ma’am, when you indicated in your filings back to DOHA about the status of these debts, I believe you indicated that you chose -- you and your husband elected to withdraw from this confirmed Chapter 13 plan, so that you could tackle the debts on your own and try to restore your credit, without the direct supervision of the trustee. Is that a fair statement of what you said?

Applicant: Yes.

Department Counsel: Okay. Now having withdrawn from this Chapter 13 in the summer of 2010, do you have any documents to show what you did, as far as trying to resolve any of these debts? Any by that, I mean did you pay any things off separately by yourselves? What actions did you take after you withdrew from the plan?

Applicant: Once we withdrew from the plan, honestly we did not pursue at that time to get everything paid off. At that time, we were -- we had one sick child and one getting ready to start college, and we put that on top of our bills. We made that a priority.

So we did not pursue like we should have responsibly, to get everything taken care of in that Chapter 13. We really didn’t start doing that until the latter part of last year.9

In late April

013, Applicant hired a law firm (a different law firm than the group legal services program noted above) to examine her credit reports and verify and/or challenge information on her credit reports. She indicated that the debts in SOR ¶ 1.a, 1.b, 1.f, 1.i, and 1.q were disputed with the help of that law firm and no longer appeared on her credit report. She provided a credit report dated April 11, 2013, to show those debts no longer appear on that document. That credit report, however, apparently predated her agreement with the law firm. No documentation was presented to show that she has a reasonable basis for disputing the legitimacy of those debts, which she

8 GE 2. 9 Tr. at 56-57.

5

admitted in her Answer to the SOR. The alleged debts and their status are reflected in the following table.10

SOR/DEBT AMOUNT STATUS EVIDENCE SOR 1.a – medical account in collection

$482 Applicant testified that this debt was incurred in 1999 or 2000 and was resolved in her first Chapter 13 bankruptcy. She also testified that it was no longer reflected on her credit reports. Credit reports, however, indicated that this account was placed for collection in December 2008. This account is unresolved. Tr. at 37-38; GE 2, 4, 5; AE B. SOR 1.b – telephone account in collection

$541 This account was placed for collection in June 2008. In her post-hearing submission, Applicant indicated that this account was still past due. She indicated that she plans to pay $25 a month towards this account starting in August 2013. This account is unresolved. Tr. at 38-39; GE 2, 4, 5; AE B, D, I. SOR 1.c – medical account in collection

$956 This account was placed for collection in March 2007. In her post-hearing submission, Applicant indicated that she has not been able to verify this account even though it was included in her second Chapter 13 bankruptcy. She indicated that she planned to dispute it. This account is unresolved. Tr. at 39-41; GE 2, 4, 5, 6; AE I. SOR 1.d – credit card account in collection

$483 The date of last activity on this account was in March 2006. In her post-hea

ng submission, Applicant indicated that this account was outstanding. She indicated that she plans to pay $50 a month towards this account starting in August 2013. This account is unresolved. Tr. at 41; GE 2, 4, 5; AE B, D.

10 GE 5; AE B, C, D, G. Debts may fall off credit reports for various reasons, including the passage of time.

6

SOR 1.e – returned check $301 This account was opened in April 2008. Applicant testified that she received a letter from the district attorney’s office about this debt and paid it in about 2009. It was still reflected on her credit report dated April 11, 2012. Insufficient evidence was presented to show this account was resolved. Tr. at 41-43, 70; GE 2, 5; AE B, D. SOR 1.f – collection account

$421 The date of last activity on this account was August 2008. Applicant testified that she had no recollection of this debt, but thought it was resolved in her second Chapter 13 bankruptcy. Insufficient evidence was presented to show this account was resolved. Tr. at 43; GE 2, 4, 5; AE B. SOR 1.g – loan in colle

ion for repossessed vehicle

$4,375 In her post-hearing submission, Applicant indicated she contacted this creditor and was informed this account has

t been paid. She noted the creditor is willing to work with her on resolving this debt and she will start making monthly payments of $75 in the future. This account is unresolved. Its balance is now $5,688 Tr. at 43-44; GE