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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)         ISCR Case No. 07-08074
SSN: )
)
Applicant for Security Clearance )
Appearances
For Government: James F. Duffy, Esquire, Department Counsel
For Applicant: Phillip D. Cave, Esquire
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Decision
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MASON, Paul J., Administrative Judge:
Applicant submitted his Security Clearance Application (SCA) on December 6,
2005. On September 28, 2007, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) detailing security concerns under financial
considerations (Guideline F). The action was taken pursuant to Executive Order 10865,
Safeguarding Classified Information within Industry (February 20, 1960), as amended;
Department of Defense Directive 5220.6, Defense Industrial Personnel Security
Clearance Review Program (January 2, 1992), as amended (Directive), and the revised
adjudicative guidelines (AG) promulgated by the President on December 29, 2005, and
made effective within the Department of Defense for SORs issued on or after
September 1, 2006.
Applicant submitted his answer to the SOR on November 13, 2007, and
requested a decision in his case be made administratively (on the record of documents
presented). On February 28, 2008, he changed his position by deciding that he wanted
a hearing. DOHA issued a notice of hearing on April 22, 2008 for a hearing on May 30,
2008. The hearing was postponed, and the case file was transferred to the undersigned
on July 10, 2008 because of caseload considerations. 
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DOHA issued a notice of hearing on July 28, 2008 and the hearing was held on
August 12, 2008. At the hearing, eight exhibits (GE I through 8) were admitted in
evidence without objection to support the government's case. Applicant testified and
submitted seventeen exhibits. (AE A-AE Q) In the time allowed for Applicant to furnish
additional documentation, he submitted AE R1 through R98. The additional
documentation relates to pending litigation he has with another company, official
documents related to formation of his company (Company C) in 1995, and dissolution
documents of that company. There is a dispute letter addressed to the creditor in SOR
1.d. dated August 11, 2008, and a request for a title check dated August 15, 2008 in
connection with the past due account set forth in SOR 1.e. DOHA received a copy of
the transcript of the proceedings on August 19, 2008. Based upon a review of the case
file, pleadings, exhibits, and testimony, eligibility for access to classified information is
denied.
Findings of Fact
The SOR has 10 allegations under the financial considerations guideline, totaling
about $83,000.00. Most of the debts became delinquent in 2004 and 2005 (GE 4, 5, 6).
In his answer, he has admitted four of the accounts. In response to SOR 1.b., he stated
he was settling the account. He also admitted he owed the accounts identified in SOR
1.f., 1.g., and 1.j. He denied the remaining accounts, asserting they were corporate
accounts belonging to his company, Company C (AE R21).
Applicant retired from the United States (U.S.) Coast Guard receiving an
Honorable Discharge in June 1977. He has been married to his second wife since
December. 2003. They have a 21-year-old-disabled child. Applicant's wife, a nurse,
remains at home providing care for the child. Applicant has been working for his current
employer as a business development director since October 2005. Since September
2007, he has been in layoff status. He seeks a security clearance.
In 1985, Applicant developed a remote control surveillance boat that he wanted
to market to the United States (U.S.) military agencies. In 1988, Applicant formed
Company A. The purpose of the company was to develop the boat for sale to the U.S.
government. Applicant also established two patents. In 1989, Company A sold its first
boat to the U.S. Navy (Tr. 29). In 1992, Company A was sold to Company B, a foreign
business, and Applicant was designated managing director of the company. Company B
then went bankrupt, and Applicant formed Company C in 1995 (Tr. 31), appointing
himself president to continue to obtain contracts for his unmanned boat. Company C
executed more than 41 contracts between 1995 and 2000 (Tr. 33).
Some time in 2000, Company C experienced a severe reduction in business,
beginning with a 15-ship contract cancellation by a Middle Eastern customer (Tr. 36)
Also, another element of the Navy was developing the same kind of unmanned boat
that Applicant believed was a copy of his technology (Id.).
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To keep his failing business functioning, Company C sold a boat to Company D.
To increase their business, Company C sought overseas contracts, and found
continuing interest in their boat from the Middle Eastern countries.
Other adverse events impacted Applicant's business (Company C) In early 2002,
he filed for marital dissolution; the marriage was dissolved on June 26, 2002, and
Applicant was ordered to repay a $19,000.00 loan to his first wife. In June 2002,
Company C lost a big contract from a country in the Far East. Third, in the same month
Applicant had a heart attack, and spent 1 ½ weeks in intensive care (Tr. 49).
Because of Applicant's health, coupled with his company’s loss of its contracts,
and the stress generated from his competition in the U.S. Navy for boat contracts,
Applicant decided to close Company C (AE R21). Company C’s business actually
closed down in September, October and November 2002, At the time, Applicant asserts
he was trying to pay off some of Company C’s corporate debts. Applicant noted that
company credit cards were a major reason Company C was able to continue business;
these cards were in Company C's name, with Applicant's signature appearing on bills as
Company C's president (Tr. 54).
In May 2003, Applicant started working for Company E as a business developer,
and they asked him to enter a partnership to market his boat technology (Tr. 57-59). In
December 2003, Company F purchased Company E, and signed a contract with a
country in the Middle East to sell Applicant's boat. As a part of this contract, Company F
entered into an agreement to pay Applicant $750,000 for his boat technology; they did
pay him $50,000.00, but he never received the balance (Tr. 68). Applicant is seeking in
litigation about $517,000.00 from Company F, which constitutes the balance owed him,
minus certain expenses (AE R9).
In March 2004, Company F purchased Applicant's product line in defunct
Company C, and also took control of the company's records. Applicant asserts that
included among those records are the documents verifying that Company C, not
Applicant, was liable for the credit card debt (answer to SOR).
The ten debts shall be discussed in the order they appear in the SOR. The total
amount of indebtedness is approximately $83,000.00.
SOR l.a., Judgment, $8,892.00. Applicant has no idea how the judgment came in
existence. He filed a response to the judgment on May 31, 2007. (Tr. 120; AE Q) The
court entered a final judgment against Applicant on November 30, 2007 (GE 7, 8).
Applicant still owes this debt.
SOR 1.b. medical debt, $221.00. AE M indicates this debt became delinquent in
2005, with a balance of $221.00 as of March 2008. Applicant admitted the debt in his
answer to the SOR, but stated at the hearing he was disputing the debt (Tr. 80).
Applicant was asked why his testimony contradicted his answer to the SOR. Before
ultimately stating he was not disputing his answer, Applicant initially explained that he
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was laid off his job in September 2007, and had been paying much closer attention to
his expenditures (Tr. 125). I find Applicant still owes this debt.
SOR 1.c. Credit Card debt. $2,486.00. Applicant explained this was a corporate
credit card with his current employer. The amount represented expenses for attending a
trade show (Tr. 129). He made a payment on the debt in March 2007 (GE 2), and paid
the card off in August or September 2007 (AE M). I find for Applicant.
SOR 1.d. Credit card account, $10,400.00. According to AE M, the account was
deleted from Applicant's credit report. I find for Applicant under this allegation.
SOR i.e. Bank debt for mobile home. Applicant contends it was a business debt,
but supplied no documentation in support. Applicant officially disputed the debt in May
2006. He executed a record check on August 15, 2008, requesting a title history for a
vehicle (AE R94). I find for Applicant under this allegation.
SOR 1.f. Credit card, $10,503.00. This account was deleted from Applicant's
credit report (AE K). I find for Applicant.
SOR 1.g. Tire account, 2,081.00. In his answer, he admitted he owed this
account. At the hearing, Applicant claimed the account was taken off his credit report.
(Tr. 81) Later in his testimony, he accepted responsibility for the debt because he had
no documents to show otherwise(Tr. 136). I find Applicant owes this debt.
SOR l.h. Credit card, $13,988.00. Applicant believed the debt could be a
duplicate of SOR i.d., a debt that was deleted from Applicant's credit report (AE M). I
find for Applicant.
SOR 1.i. Credit card, $17,370.00. Applicant claimed this was a business debt of
Company C. However, he provided no evidence of whether the debt was deleted from
his credit report, or that the debt is no longer being reported. I find against Applicant. I
find Applicant owes this debt. 
SOR 1.j. Cellular phone account. $622.00. In his answer to the SOR, Applicant
admitted he owed the account and was working to have the debt resolved through an
offered settlement. At the hearing, he was disputing the debt (Tr. 85). The overdue
account was verified in AE K. I find Applicant still owes the debt.
Character Evidence
Mr. A1, along with five other individuals, provided a written character statement in
which he lauded his relationship with Applicant based on working with him in
government contracts related to Applicant's boat technology. Based on Applicant's
professionalism, Mr. A1 recommends him for position of trust with the government. Mr.
B1 has known Applicant for two years, and considers him truthful.
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Mr. C1 wrote that he worked with Applicant closely from 1994 to 1998 when
Applicant was president of Company C. According to Mr. C1, Applicant has always
demonstrated fairness and honesty. Mr. D1 worked with Applicant from 1992 to 2000,
when Applicant was president of first Company A and then Company C., and Mr. D1
was a government program manager from 1992 to 2000. Mr. D1 considers Applicant
dependable and recommends him for a position of trust.
Mr. E1 knew Applicant professionally from 1991 to 1993, then again in 2005,
when their professional careers brought them together. While admiring Applicant
assume difficult stands with his employer at the time, Mr. E1 never explained what
those positions were. Mr. E1 concluded by stating Applicant is trustworthy. Mr. F1 met
Applicant in the late i980s, and was impressed with his boat technology. With Mr. Fl's
recommendation in hand, Applicant's current employer hired him. Based on his frequent
contact with Applicant, Mr. F1 recommends him for a position of trust.
Having weighed and balanced the entire record, particularly Applicant's testimony
disputing past due debts that he admitted in his answer to the SOR, I find Applicant's
overall credibility weakened by the conflicting testimony in those areas. Applicant's
unemployment situation does not supply a reasonable excuse for not providing candid
answers about his debts. Applicant still owes the debts identified in SOR l.a., 1.b., l.g.,
1.i., and l.j. totaling $29,186.00. I find for Applicant under SOR 1.c., l.d., I.e., 1.f., and
l.h.
Policies
When evaluating an applicant's suitability for a security clearance, the
Administrative Judge must consider the revised adjudicative guidelines (AG). In addition
to brief introductory explanations for each guideline, the adjudicative guidelines list
potentially disqualifying conditions and mitigating conditions, which are useful in
evaluating an Applicant's eligibility for access to classified information.
These guidelines are flexible rules of law. Recognizing the complexities of human
behavior, these guidelines are applied in conjunction with the factors listed in the
adjudicative process. The Administrative Judge's ultimate adjudicative goal is a fair,
impartial and common sense decision. According to the AG, the entire process is a
careful, thorough evaluation of a number of variables known as the "whole person
concept." The Administrative Judge must consider all available, reliable information
about the person, past and present, favorable and unfavorable, in making a decision.
The protection of the national security is the paramount consideration.
Reasonable doubt concerning personnel being considered for access to classified
information will be resolved in favor of national security. In reaching this decision, I have
drawn only those conclusions that are sensible, logical and based on the evidence
contained in the record. Likewise, I have avoided drawing inferences grounded on mere
speculation or conjecture.
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Under Directive ¶ E3.l.14, the Government must present evidence to establish
controverted facts alleged in the SOR. Under Directive ¶ E3.l.l5, the Applicant is
responsible for presenting "witnesses and other evidence to rebut, explain, extenuate,
or mitigate facts admitted by applicant or proven by Department Counsel. . . ." The
applicant has the ultimate burden of persuasion as to obtaining a favorable security
decision.
A person who seeks access to classified information enters into a fiduciary
relationship with the government predicated upon trust and confidence. This relationship
is not restricted to normal duty hours. Rather, the relationship is an-around-the-clock
responsibility between an applicant and the federal government. The government
reposes a high degree of trust and confidence in individuals to whom it grants access to
classified information. Decisions include, by necessity, consideration of the possible risk
the applicant may deliberately or inadvertently fail to protect or safeguard classified
information. Such decisions entail a certain degree of legally permissible extrapolation
as to potential, rather than actual, risk of compromise of classified information.
Analysis
Financial Considerations (FC)
18. The Concern. "Failure or inability to live within one's means, satisfy debts, and
meet financial obligations may indicate poor self-control, lack of judgment, or
unwillingness to abide by rules and regulations, all of which can raise questions about
an individual's reliability, trustworthiness and ability to protect classified information. An
individual who is financially overextended is at risk of having to engage in illegal acts to
generate funds. Compulsive gambling is a concern as it may lead to financial crimes
including espionage. Affluence that cannot be explained by known sources of income is
also a security concern. It may indicate proceeds from financially profitable criminal
acts."
FC disqualifying condition (DC) I9.a. (inability or unwillingness to satisfy debts)
and FC DC 1 9.c. (a history not meeting financial obligations) are applicable to this
case. Applicant incurred most of the overdue debt in 2004 and 2005 (GE 4, 5, 6), and
still owes more than $29,000.00.
Evidence of financial problems may be mitigated by FC mitigating condition (MC)
20.a. (the behavior happened so long ago, was so infrequent, or occurred under such
circumstances that it is unlikely to recur and does not cast doubt on the individual's
reliability, trustworthiness, and good judgment). This condition provides some
mitigation) because most of the debts became delinquent more than four years ago.
However, Applicant's lack of candor about several of the debts, i.e., disputing SOR 1.b.
debt after admitting he owes the debt and receiving documented verification) casts
doubt on his reliability and trustworthiness, notwithstanding his glowing character
evidence complimenting his good judgment and honesty for the last 20 years.
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FC MC 20.b. (the conditions that resulted in the financial problem were largely
beyond the person's control and individual acted responsibly under the circumstances)
may apply in those circumstances where events outside the person's control contributed
to the financial difficulty. Applicant's divorce, health condition, competition, loss of
business, and current unemployment, have been thoroughly evaluated. The record
shows that his marital dissolution occurred in June 2002. Applicant's health condition
improved to a level where he resumed working in May 2003. Applicant did not
demonstrate responsible action regarding the unpaid debts until May 2006, when he
requested certain debts be removed from his credit report. However, the only debt in the
SOR he paid was SOR 1.c. debt, and the payoff did not occur until the debt had gone to
collection (AE M). When he received documentation he owed the SOR l.b. debt, he
changed his position by disputing it rather than, to simply state at the hearing that he did
not pay the debt because he was unemployed, and did not have the money. On
balance, the limited mitigation Applicant receives under FC MC 20.a. and 20.b. is
insufficient to overcome his financial indebtedness.
FC MC 20.c. (the person has received or is receiving counseling for the problem
and/or there are clear indications that the problem is being resolved or is under control)
FC MC 20.d. and (the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts) shall be addressed together because there is no evidence of
financial counseling, and no evidence the outstanding delinquent debts in SOR l.a., l.b. ,
l.g., 1.i., and 1.j. have been paid, or that they are debts of Company C. There has been
no action to pay the debts.
FC MC 20.e. (the individual has a reasonable basis to dispute the legitimacy of
the past-due debt which is the cause of the problem and provides evidence of actions to
resolve the issue) applies in those situations where an applicant has a reasonable
dispute, and has provided documented proof to substantiate the basis for the dispute.
Applicant provided documentation in May 2007 denying that SOR l.a. debt is his
responsibility. The court reviewed his documentation but rejected it in their final
judgment in November 2007. The documentation shows there is no basis for Applicant's
dispute of SOR 1.b. Applicant has no reasonable basis to dispute the tire account in
SOR l.g., particularly after he admitted the account was his. The absence of
documentation provides little basis for Applicant's contention that SOR 1.i. account is
not his account. Applicant indicated in his answer to the SOR that the cellular phone
account (SOR l.j.) was his responsibility, yet disputed the account at the hearing.
Overall, Applicant's evidence is insufficient to meet his burden of persuasion under the
financial considerations guideline.
Whole Person Concept (WPC)
I have examined the evidence with the disqualifying and mitigating conditions in
my ultimate finding for Applicant under the Fl guideline. I have also weighed the
circumstances within the context of nine variables known as the whole person concept.
In evaluating the relevance of an individual's conduct, the administrative judge should
consider the following factors:
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(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 extent to which the participation was voluntary; (6) the presence or absence of
rehabilitation and other permanent 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. AG ¶ 2(a)
I have considered the disqualifying and mitigation conditions in light of all the
facts and circumstances surrounding the case, and the whole person concept. Applicant
is 56 years old. His professional accomplishments appear in the documentation. I have
reviewed the unanticipated events that occurred in his life to cause or exacerbate his
financial problems. Applicant incorporated a company to manufacture and sell his
unmanned surveillance boat. A series of events emerged at the same time in 2002 that
forced him to dissolve his company at the end of 2002. At least four years have passed
since Company C closed. I have found that certain accounts identified in SOR 1.d., i.e.,
l.f., and l.h. were business debts that he is not responsible for. I found that he paid the
SOR l.c. account in 2007. These debts were found in his favor based on documentation
he provided that showed the debts were deleted or paid. On the other hand, the
accounts in SOR l.a., l.b., l.g., l.i., and l.j. are resolved against him due to the lack of
documentation to support his claim they were not his debts or were business debts.
Those debts total about $29,000.00. With respect to l.b., I.g., and l.i., Applicant's
conflicting positions regarding his responsibility for these debts undercut his credibility,
and generate ongoing concerns for a continuation of financial troubles in the future. 
Overall, I have carefully evaluated the respect Applicant's colleagues have
demonstrated for him in the past 20 years. This favorable character evidence is
creditable, but insufficient to surmount the security concerns engendered by his
continuing financial delinquencies. Having considered the entire record and all the
exhibits, Applicant has not met his ultimate burden of persuasion under the financial
considerations guideline.
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Formal Findings
Formal findings for or against Applicant on the allegations set forth in the SOR,
as required by section E3.1.25 of Enclosure 3 of the Directive, are:
Paragraph 1 (Financial Considerations, Guideline F): AGAINST APPLICANT
Subparagraph 1.a. Against Applicant
Subparagraph 1.b. Against Applicant
Subparagraph 1.c. For Applicant
Subparagraph 1.d. For Applicant 
Subparagraph 1.e. For Applicant
Subparagraph 1.f. For Applicant
Subparagraph 1.g. Against Applicant
Subparagraph 1.h. For Applicant
Subparagraph 1.i. Against Applicant
Subparagraph 1.j. Against Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is not
clearly consistent with national security to grant Applicant eligibility for a security
clearance. Eligibility for access to classified information is denied.
Paul J. Mason
Administrative Judge