KEYWORD: Criminal Conduct; Personal Conduct
DIGEST: Applicant failed to mitigate criminal conduct and personal conduct security concerns
relating to allegations of corporate fraud and false claims against a former employer (1999-2004) for
which he and three others were charged with a felony and paid restitution and a fine. The conduct
occurred in 2003 and 2004 when he was investigated and discharged by his employer. The final
judgment in the criminal matter occurred only two years ago. While he is highly regarded by his
present employer and has taken positive steps to rehabilitate, it is premature at this time to grant a
clearance. Clearance is denied. 
CASENO: 05-18055.h1
DATE: 06/26/2007
DATE:  June 26, 2007
In Re:
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SSN: -----------
Applicant for Security Clearance
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ISCR Case No. 05-18055
DECISION OF ADMINISTRATIVE JUDGE
CHARLES D. ABLARD
APPEARANCES
FOR GOVERNMENT
Eric H. Borgstrom, Esq., Department Counsel
FOR APPLICANT
James E. Corl, Jr., Esq. 
SYNOPSIS
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Applicant failed to mitigate criminal conduct and personal conduct security concerns relating
to allegations of corporate fraud and false claims against a former employer (1999-2004) for which
he and three others were charged with a felony and paid restitution and a fine. The conduct occurred
in 2003 and 2004 when he was investigated and discharged by his employer. The final judgment in
the criminal matter occurred only two years ago. While he is highly regarded by his present employer
and has taken positive steps to rehabilitate, it is premature at this time to grant a clearance. Clearance
is denied. 
STATEMENT OF CASE
On March 9, 2006, the Defense Office of Hearings and Appeals (DOHA), pursuant to
Executive Order 10865, Safeguarding Classified Information Within Industry, as amended and
modified, and Department of Defense Directive 5220.6, Defense Industrial Personnel Security
Clearance Review Program (Directive), dated January 2, 1992, as amended and modified, 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. DOHA recommended the case be
referred to an administrative judge to determine whether a clearance should be granted, continued,
denied, or revoked.
On March 27, 2006, Applicant, in a sworn written statement, responded to the allegations set
forth in the SOR, and requested a hearing. The case was assigned to me on February 12, 2007. A
notice of hearing was issued on March 22, 2007, for a hearing that was held on April 10, 2007. The
Government and Applicant each introduced five exhibits at the hearing and all were admitted into
evidence. One witness testified for the government. Applicant and four witnesses testified on his
behalf. The transcript was received April 26, 2007.
PROCEDURAL MATTERS
The hearing in this matter concluded late in the day on April 10, 2007, and the parties agreed
that, in lieu of oral arguments, written arguments would be submitted at scheduled times. The
government submitted its argument on May 4, 2007, and therein moved to amend the SOR to add
allegations relating to three new factual issues brought out in the hearing involving the personal
conduct allegations concerning falsifications relating to his prior employment. Applicant objected
to the amendments on the grounds that it was too late to make such an amendment, and, if it were
granted, requested that the hearing be re-opened for additional testimony. 
The government cited several Appeal Board decisions affirming the right to amend during
a hearing as stated in Section E3.17 of Additional Procedural Guideline of the Directive. I find
nothing in the cited cases to indicate whether an amendment can be made during closing arguments
even when they are presented in oral form. In this case, because they were submitted several weeks
after the record was closed in written argument, I sustain Applicant’s objection. To grant it would
require opening the hearing for additional testimony. Judicial economy indicates a contrary result.
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The SOR was amended on motion of the government during the hearing to strike language
in Par. 1.a. alleging that Applicant pled guilty to the larceny charge.
FINDINGS OF FACT
Applicant denied both allegations in the SOR. After a complete review of the allegations in
the SOR, the documentary evidence, and testimony in the record, I make the following additional
findings of fact:
Applicant is a 32-year-old employee of a major defense contractor, working as an engineer
since October 25, 2004. He has a bachelor’s degree and is working on an MBA which he expects to
receive in 2008. Before his present employment he worked for another defense contractor from May
1999 until August 10, 2004 when he and others were terminated after an internal corporate
investigation of financial improprieties in the company (Exh. 4). The investigation involved
falsification of company expense claims and using company funds for personal gain during a seven-
month period at the end of his employment. Applicant asked to be permitted to resign but was
advised that he was already terminated. The allegations involved Applicant, his supervisor, and two
other staff members who all worked together as a marketing team for a service. He was unemployed
for two months until he was hired by his present employer in his home state. He also had worked for
another defense contractor between 1996 and 1999 when he held a security clearance. He held an
interim clearance with his present employer at the time of his arrest but it was revoked when this
proceeding began. He now works on an unclassified project.
As a result of the investigation and a referral to the district attorney, Applicant was arrested
in November 2004 only a few weeks after he was hired by his present employer. Criminal charges
of felony larceny were filed on April 13, 2005. He wanted to litigate the charges but the expense to
do so was prohibitive so he negotiated an admission of facts and agreed to pay $4,900 in restitution
and a $1,000 fine. The case was continued with no findings and he was released on $500 bail. He
advised his present employer when he was arrested and the charges were filed. The company security
office advised the Defense Security Service on November 15, 2004 (Exh. 3). On June 13, 2005, the
case was dismissed on recommendation of the probation office since he had no further difficulties
during the past sixty days (Exh. 5).
The improprieties and illegal actions about which Applicant, his supervisor, and the other
two employees were investigated and charged arose as a result of actions that were instigated by their
supervisor to make financial claims against their employer using false information to cover certain
expenditures. Applicant’s supervisor was authorized to approve the claims made by the three
members of his staff. The claims were usually made by the staff members and approved by the
supervisor. In some instances the supervisor had access to the credit cards of his staff and made
charges on them directly. He then told the staff members to pay the cards and make claims for
company reimbursement which he would and did approve. Threats were sometimes used by the
supervisor to obtain the cooperation of his staff on financial claims (Tr. 92). This process was
followed because, if the supervisor submitted the claims himself, then his own supervisor would be
the approval authority for the charges whereas he had the authority to give final approval for claims
submitted by his own subordinates. 
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These charges included such things as expensive tickets for major sports events, restaurant
dinners, and corporate gift cards. Some of these expenses incurred on the credit cards were for the
supervisor’s travel expenses when he used Applicant’s travel card. Often customers names were
listed on the expense vouchers when only the marketing team and their families were the guests.
Applicant and his team members were sometimes told by their supervisor that these were
expressions of appreciation for their good work and were authorized by the company since the
supervisor controlled the budget for his marketing group.
One instance involved a trip to Europe when Applicant intended to take his wife along at
company expense which his supervisor authorized. The business part of the trip in Paris was
cancelled but the supervisor authorized him to take the trip as a vacation at company expense. He
did so but did some company business during the four days in Paris at the company office and
continued on to Sweden where other company business was conducted. Applicant was aware that
the practices he engaged in probably were in violation of company policy but acceded to his
supervisor’s requests. At one point he did raise a question about the practices to another supervisor,
without results. 
The supervisor was often late in approving company reimbursements for the claims and the
company was often late in paying the claims so penalties and interest accumulated on the credit cards
of Applicant and the other staff members. Applicant and the other staff members then submitted
false vouchers for non-existent expenditures to the company to obtain reimbursement for those
charges which were occasionally as much as $1,000. Those claims were the only ones directly
attributable to Applicant by the company investigators and accounted for approximately half of his
restitution charges. The other half of his restitution was for the costs of the company investigators
who performed the internal investigation. Other false claims that he made on behalf of the supervisor
were attributed the supervisor for restitution. In addition to the restitution paid by Applicant, the
supervisor paid over $20,000 in restitution and the other two members of the staff each paid amounts
similar to Applicant’s in restitution based on the amounts of the corporate fraud attributed to each
(Exh. A). 
Although Applicant holds his former supervisor responsible for the false claims since it was
he who encouraged and authorized the conduct, he recognizes his own culpability in the matter and
now realizes that he should have taken steps to report and end the practices. He has had no contact
with his former supervisor or his former colleagues on the marketing team since his employment
terminated. 
When Applicant applied for work with his present employer, he did not reveal the reasons
for departing his former employment but only advised them that he wanted to relocate in his home
city which was his choice as a place of employment. He did advise them fully a few weeks later
when he was arrested and charged, and they continued his employment. He is well regarded by his
employer in his evaluations during the three years of his employment (Exh. C). He has had extensive
training in a great variety of subjects including ethics and personal conduct (Exh. B). These subjects
were not covered by training of his former employer and he has benefitted from the past three years
of instruction (Tr. 184). 
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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.
An evaluation of whether the applicant meets the security guidelines includes consideration
of the following factors: (1) the nature, extent, and seriousness of the conduct; (2) the circumstances
surrounding the conduct; (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 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, ¶ E2.2.1. Security clearances are granted only when “it is clearly consistent with the
national interest to do so.” Executive Order No. 10865 § 2. See Executive Order No. 12968 § 3.1(b).
Initially, the Government must establish, by something less than a preponderance of the
evidence, that conditions exist in the personal or professional history of the applicant which
disqualify, or may disqualify, the applicant from being eligible for access to classified information
See Egan, 484 U.S. at 531. The applicant then bears the burden of demonstrating that it is clearly
consistent with the national interest to grant or continue the applicant’s clearance. “Any doubt as to
whether access to classified information is clearly consistent with national security will be resolved
in favor of the national security.” Directive, ¶ E2.2.2. “[S]ecurity clearance determinations should
err, if they must, on the side of denials.” Egan, 484 U.S. at 531. See Executive Order No. 12968 §
3.1(b).
CONCLUSIONS
Upon consideration of all the facts in evidence, and after application of all appropriate legal
precepts, factors, and conditions above, I conclude the following with respect to all allegations set
forth in the SOR:
Under Guideline J, Criminal Conduct, a security concern arises when there is a history of
pattern of criminal activity that creates doubt about a person’s judgment, reliability, and
trustworthiness (E2.A10.1.1.). Conditions that could raise a security concern and may be
disqualifying include allegations or admission of criminal conduct, regardless of whether the person
was formally charged (E2.A10.1.2.1.), or a single serious offense or multiple lesser offenses
(E2.A10.1.2.2.). The evidence raises those concerns. The allegations could be mitigated if the
criminal behavior was not recent (E2.A10.1.3.1.), or there is clear evidence of successful
rehabilitation (E2.A10.1.3.6.). While the conduct ended with his termination in 2004, the criminal
proceedings that developed as a result of that conduct ended only two years ago. There is evidence
of rehabilitation but more time is needed to satisfactorily establish that there is clear evidence of
rehabilitation as the guidelines require. 
Under Guideline E Personal Conduct, actions involving questionable judgment,
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untrustworthiness, unreliability, or unwillingness to comply with rules and regulations could indicate
that the person may not properly safeguard classified information (E2.A5.1.1.). The deliberate
falsification of expense accounts of his former employer was established by corporate investigators
and resulted in state criminal felony charges which are conditions raising security concern
(E2.A5.1.2.1). The burden shifts to the Applicant to show that Mitigating Conditions (MC) are
applicable to him. While it is unlikely that these events could lead to coercion, I find that there are
no mitigating conditions that are fully applicable to facts and circumstances of this case. 
The objective of the security clearance process is the fair-minded, commonsense assessment
of a person’s trustworthiness and fitness for access to classified information. The “whole person”
concept recognizes that we should view a person by the totality of their acts and omissions. Each
case must be judged on its own merits taking into consideration all relevant circumstances, and
applying sound judgment, mature thinking, and careful analysis.
Applicant is an impressive young man who has a bright future with his present employer. His
employer is aware of his past conduct having become fully aware of it only a few weeks after he
joined the company, and did not give the reasons for leaving the former employer when he was hired.
This is a tribute to him and is illustrative of  the opinion of him held by his employer. While he has
learned a valuable lesson in corporate ethical conduct, he was old enough at the time of the actions
for which he has been punished to know better than to join in the effort of his supervisor to take
advantage of his employer. The conduct occurred over time and involved multiple false claims. The
activity was induced by the supervisor but Applicant was motivated by a desire to get along with the
supervisor and enhance his career. While there is little likelihood of a recurrence of such conduct,
I conclude that, because the actions taken against him only ended less than two years ago, a decision
in his favor at this time is not warranted. 
After considering all the evidence in its totality and as an integrated whole to focus on the
whole person of Applicant, it is premature at this time to grant him access to classified information.
Thus, I find against Applicant. 
FORMAL FINDINGS 
Formal findings as required by the Directive (Par. E3.1.25) are as follows:
Paragraph 1. Guideline J: AGAINST APPLICANT
Subparagraph 1.a.: Against Applicant
Paragraph 2. Guideline E: AGAINST APPLICANT
Subparagraph 2.a.: Against Applicant
DECISION
In light of all of the circumstances presented by the record in this case, it is not clearly
consistent with the national interest to grant or renew a security clearance for Applicant. Clearance
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is denied.
Charles D. Ablard 
Administrative Judge