1
                                                             
                           
                        DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
----------------- )       ISCR Case No. 08-06727
SSN: ----------- )
)
Applicant for Security Clearance )
Appearances
For Government: Michael Lyles, Esq., Department Counsel
For Applicant: Michael Edward Lee, Esq.
                                                                            
______________
Decision
______________
MARSHALL, Jr., Arthur E., Administrative Judge:
Applicant certified a security clearance application, Electronic Questionnaires for
Investigations Processing (e-QIP), on April 1, 2008. On July 23, 2008, the Defense
Office of Hearings and Appeals (DOHA) issued a Statement of Reasons (SOR)
detailing security concerns regarding financial considerations (Guideline F). The action
was taken under Executive Order 10865, Safeguarding Classified Information within
Industry (February 20, 1960), as amended, and 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 effective within the
Department of Defense for SORs issued after September 1, 2006. 
On August 6, 2008, Applicant signed a notarized document in which he admitted
five of eight allegations raised in the SOR. A hearing before an Administrative Judge
was requested. I was assigned the case on September 28, 2008, and the parties
agreed to a hearing date of October 22, 2008. A Notice of Hearing was issued on
 Tr. 67.    1
 Tr. 29-30.    2
 Tr. 30.    3
2
October 6, 2008, to that effect. Due to scheduling conflicts, the hearing was moved to
October 23, 2008, pursuant to an Amended Notice of Hearing, issued October 9, 2008.
The hearing was timely convened. Department Counsel introduced eight
documents, accepted into the record without objection as exhibits (Exs.) 1-8. Applicant
gave testimony and offered three documents, accepted into the record without objection
as Exs. A-C. Two witnesses gave testimony on behalf of the Applicant. Applicant was
given until November 4, 2008, to submit any additional documents for consideration.
The transcript (Tr.) was received on October 31, 2008. No additional documents were
forwarded for admission. The record was closed on November 7, 2008. Based upon a
review of the case file, testimony, and exhibits presented, Applicant failed to carry his
burden and mitigate financial considerations security concerns. Clearance is denied.
Findings of Fact
Applicant is a 76-year-old architect and businessman who was raised and
educated in the same region in which he resides today. He has been married for nearly
50 years and the two have lived in the same city throughout their marriage. As a
resident, Applicant is a widely respected member of his community.  He is recognized1
for his civic activities, having served in important capacities for his church, the local
hospital, symphony, and other organizations. 
Applicant received a bachelor’s degree in building technology in 1955 and a
second bachelor’s degree in civil engineering about a decade later. After several years
working as a consultant in the areas of architecture, engineering, and land
development, Applicant went into business for himself in the mid-1960s as a civil
engineering consultant. His area of expertise was in hydro-engineering. In this capacity,
he has been regularly hired by state, regional, and municipal entities to design water
supply, storage, and distribution systems, sewage collections systems, and water
purification systems.  2
Such jobs are considered long term projects, entailing months of design before
months of production and completion.  Payment for the assignments usually takes3
place around the time actual construction begins. To fund his business until payment
began, he generally would rely on a line of credit issued by a local bank. By the time the
bank issued him a check on his line of credit, preliminary, pre-construction work on the
project would have commenced and money already obligated to employees, suppliers,
and to himself. As a consequence of this arrangement, Applicant developed long-
standing relationships with at least one local bank. Another consequence of this
arrangement is that Applicant’s business regularly reflected varying amounts of
 Tr. 31.    4
 Tr. 72.    5
 Id.    6
 Tr. 35.    7
 Tr. 36.    8
 Tr. 36-37.    9
 Tr. 38.    10
3
outstanding debt on one or more projects. Such running debt is typical in this particular
industry.  4
Applicant operated his business in this manner from 1965 until the early 1990s.
During that time, he was highly reliant on the banks for balancing his accounts.  It was5
the banks, not Applicant, apparently, that reconciled credit extended and income
earned.6
In 1993 or 1994, an electrical fire burned down Applicant’s office. All the
business’ records were lost. As he endeavored to get his business back on track,
Applicant underwent a triple by-pass operation. As an integral component of each
project, this invasive procedure interrupted Applicant’s direct involvement in his
business. Progress on projects was slowed, but Applicant was able to continue making
debt service payments with the financial help of his wife. None of his creditors sued or
instituted foreclosure proceedings during this time. Slowly, Applicant regained his health
and rebuilt his business.
In 2003, Applicant suffered a heart attack. By that time, Applicant’s business
faced increased competition from entities located outside his hometown and region.
The number of his competitors grew from about five to around 25.  While business7
became less vigorous, Applicant continued with his projects and the management of
both his business finances and running debt. Seeking a way to generate more income,
Applicant received a license as a home inspector in 2006. He opened a home
inspection business as an extension of his engineering business license.  This8
extension, however, was ill timed. It coincided with the slowing of the national economy
and a downward trend in the local real estate market.  9
Despite the addition of the home inspection business, the slowing economy
hindered Applicant’s ability to stay timely on his accounts. Applicant contemplated filing
for bankruptcy protection. He rejected filing Chapter 7 personal bankruptcy. As a life-
long resident of the region, he wanted to “clear up” his name and honor his creditors.10
Consequently, he and his wife chose to file for Chapter 11 bankruptcy protection in
2007, thus invoking a more rigorous process which could ultimately lead to the
 Tr. 11, 38.    11
 Ex. A (Bankruptcy Petition).    12
 Tr. 41; Ex. A (Bankruptcy Petition); Exhibit B (Disclosure Statement and Plan).    13
 Tr. 54.    14
 Tr. 41.    15
 Tr. 54-55.    16
 Tr. 42.    17
 Ex. B (Disclosure Statement and Plan) at 6.    18
4
reorganization of his business.  As part of that process, Applicant retained an attorney11
and both Applicant and his wife received financial counseling.12
The Chapter 11 filing is detailed. Included in the Chapter 11 package is a list of
creditors holding the largest unsecured claims. The completed reorganization plan
includes approximately $15,000 owed to Applicant’s state for overdue taxes. It also
includes approximately $144,000 to the Internal Revenue Service (IRS) from Form
1040 for years 1999, 2000, and 2002.  Applicant failed to file for these periods13
because he was “discombobulated” following his office fire and health concerns.14
Otherwise, Applicant’s taxes are current.  He stated that he ultimately filed for the15
years at issue and was making payments on both debts by the time he filed for
bankruptcy, but he failed to provide copies of such filings.  Applicant’s reorganization16
plan is awaiting confirmation by the bankruptcy judge, pending Applicant’s acquisition of
employment.  17
Applicant is also in debt to two banks. He owes the first bank approximately
$345,000 for the balance due on a promissory note. Based on his 40 year working
relationship with this bank, Applicant, with the approval of the bankruptcy court, has
entered into an agreement under which he is currently making adequate protection
payments in the amount of $1,844 per month. The proposed reorganization plan
provides for payment of this claim in full to this bank. 
Applicant owes a second bank approximately $241,361 for the balance due on a
promissory note. This claim is secured by commercial property with a value exceeding
the balance of the claim. That property is currently generating rental income for the
bank in accordance with the terms of the original note. The Chapter 11 plan proposes
payments of $2,300 per month until the debt is paid. 
General unsecured claims in the approximate amount of $505,410 exist for
unpaid debts.  The proposed Chapter 11 plan would establish payments of $2,200 per18
month for 36 months to the creditors included in this class of claims. 
 Ex. 5 (Credit Report, dated April 9, 2008).    19
 Tr. 42-43.    20
 Tr. 46; Ex. 5 (Credit Report, dated April 9, 2008) at 7, 11.    21
 Tr. 46-47, 50-51.    22
 Ex. 5 (Credit Report, dated April 9, 2008) at 14.    23
 Tr. 48.    24
 Tr. 49-53    25
 Tr. 23.    26
5
Not included in the bankruptcy is a judgment against Applicant for approximately
$8,991. The judgment was filed in Applicant’s county court in June 2003.  This account19
was not noted in Applicant’s bankruptcy paperwork. Applicant has no recollection of the
debt.  Applicant does, however, acknowledge that he has had a credit card with this20
entity.  Not having ever reviewed a credit report, Applicant has no basis for knowing21
about this entry except for its reference in the SOR.  No evidence was introduced22
showing what, if any, investigations were made to discern the origin of this entry on his
credit report after he received notice it was an issue in the SOR.
As well, a collection effort on behalf of a bank for an obligation of approximately
$64,323 is not included in the bankruptcy action.  Applicant testified that his attorney’s23
secretary investigated this entry and “found no record of this,”  but he failed to offer24
any documentary evidence of such communication or such a conclusion. There is no
evidence of any other inquiry as to this credit report entry. It is unknown whether the
account was ultimately disputed with the credit reporting agency or the named
creditor.25
Applicant is currently earning approximately $5,500 to $6,000 per month. His
wife does not work. After living expenses and adequate protection payments to the one
bank, Applicant has a net remainder of approximately $1,200. Should he be granted a
security clearance, Applicant will assume a position, earning about $115,000 per year.26
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 not inflexible rules of law. Instead, recognizing the complexities of human behavior,
these guidelines are applied in conjunction with the factors listed in the adjudicative
process. The Administrative Judge’s over-arching adjudicative goal is a fair, impartial
and common sense decision. Under AG ¶ 2(c), this process is a conscientious scrutiny
 See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995).    27
 Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).    28
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).    29
 Id.    30
 Executive Order 10865 § 7.    31
6
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. AG ¶ 2(b)
requires that “[a]ny 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 reasonable, logical and based
on the evidence contained in the record. Likewise, I have avoided drawing inferences
grounded on mere speculation or conjecture.
The Government must present evidence to establish controverted facts alleged
in the SOR. An 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 burden of proof is something less than a27
preponderance of evidence.  The ultimate burden of persuasion is on the applicant.  28 29
A person who seeks access to classified information enters into a fiduciary
relationship with the Government predicated upon trust and confidence. This
relationship transcends normal duty hours and endures throughout off-duty hours. 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.
Section 7 of Executive Order 10865 provides that decisions shall be “in terms of
the national interest and shall in no sense be a determination as to the loyalty of the
applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites
for access to classified or sensitive information). “The clearly consistent standard
indicates that security clearance determinations should err, if they must, on the side of
denials.”  Any reasonable doubt about whether an applicant should be allowed access30
to sensitive information must be resolved in favor of protecting such sensitive
information. The decision to deny an individual a security clearance is not necessarily a
determination as to the loyalty of an applicant.  It is merely an indication that the31
applicant has not met the strict guidelines the President and the Secretary of Defense
have established for issuing a clearance.
 Revised Adjudicative Guideline (AG) ¶ 18.    32
7
Analysis
Based upon consideration of the evidence, I find Guideline F (Financial
Considerations) to be the most pertinent to the case. Under that guideline, failure or an
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. Conversely, an individual
who is financially overextended is at risk of having to engage in illegal acts to generate
funds.  The AG sets out several potential disqualifying conditions. 32
By occupation, Applicant managed a business in which payment for a project
was generally tendered after Applicant’s work had commenced. He used an interim line
of credit to fund operations until actual payment was made. Consequently, he regularly
incurred and carried debt on each project until certain progress was made. Due to ill
health, increased competition, and a souring economy, however, Applicant ended up
with debt that he could no longer manage without resort to bankruptcy. 
Cumulatively at issue in the SOR is over $1,300,000 in delinquent debt.
Applicant’s 2007 bankruptcy reorganization has been placed on hold. Payment is only
currently being made to one creditor, a bank with which Applicant has a long-standing
relationship. Consequently, Financial Considerations Disqualifying Condition (FC DC)
AG ¶ 19(a) (“inability or unwillingness to satisfy debts”) and FC DC AG ¶ 19(c) (“a
history of not meeting financial obligations”) apply. With such conditions raised, the
burden is placed on Applicant to overcome the case against him and mitigate security
concerns. 
In 1993 or 1994, Applicant’s office burned down. All papers related to the
businesses projects and accounts were lost. Shortly thereafter, Applicant received a
medically necessary triple by-pass. These incidents provided a double blow to
Applicant’s business, impacting both his immediate income and his ability to keep pace
with his running debt. A decade later, in 2005, Applicant suffered a heart attack at a
time when competition in his region had increased five-fold and shortly before the
beginning of an economic downturn. Under such circumstances, Financial
Considerations Mitigating Condition (FC MC) AG ¶ 20(b) (“the conditions that resulted
in the behavior were largely beyond the person’s control (e.g., loss of employment, a
business downturn, unexpected medical emergency, or a death, divorce or separation)
and the individual acted responsibly under the circumstances”) applies.
Applicant’s business is predicated on carrying a certain amount of debt until a
project has been designed, developed, and under construction. When payments are
made on a project, any incurred debt can be satisfied and profits realized. Such a
business is not conducted without some degree of financial risk, nor is it insulated from
8
economic forces. More importantly, the success of his business is directly linked to him,
his personal participation, and his reputation within the community. 
Applicant’s business first faced obstacles in 1993 or 1994 with the office fire and
his triple by-pass surgery. A little over a decade later, increased competition, a heart
attack, and an economic decline all contributed to the business’ economic troubles.
Applicant’s business has been vulnerable to both external forces and those affecting
Applicant, himself, on at least two occasions. Although Applicant continued to conduct
himself and his business ethically and in accordance with industry practices, there is
little evidence that his business will be henceforth insulated from such forces in the
future. Therefore, Financial Considerations Mitigating Condition (FC MC) AG ¶ 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
current reliability, trustworthiness, or good judgment”) does not apply.
When faced with an unwieldy amount of debt as the country faced an economic
downturn, Applicant solicited the aid of an attorney and filed for Chapter 11 bankruptcy
protection. To his credit, he chose Chapter 11 protection to help assure that his
obligations would be honored. Applicant maintains that he is in repayment with one
bank and states he has made agreements with regard to his taxes. He has introduced
evidence of his Chapter 11 petition and reorganization plan. That petition, however, was
initiated in 2007 and no evidence of current payments toward any of his creditors was
introduced. FC MC AG ¶ 20(d) (“the individual initiated a good-faith effort to repay
overdue creditors or otherwise resolve debts”) does not apply. Similarly, although
Applicant received financial counseling as part of the bankruptcy process, it is
premature to determine the applicability of FC MC AG ¶ 20(c) (“the person has received
or is receiving counseling for the problem and there are clear indications that the
problem is being resolved or is under control”).
Conducting a business such as that conducted by Applicant demands a
considerable amount of good faith and interaction with the banks. Applicant’s reputation
in the community and decades of successful projects brought him that good faith. It is
his express intention to maintain his solid reputation and honor his obligations. To that
end, Applicant’s attorney has well demonstrated what efforts have been made in filing
for Chapter 11 bankruptcy and developing Applicant’s reorganization plan. Such action
was originally initiated in, however, in 2007. Approval of the reorganization plan is
presently on hold. This is troubling. Delay in seeking the bankruptcy judge’s approval on
the reorganization plan may be tactical and, at least in part, predicated on Applicant’s
eligibility for a new job. This does not, however, overcome the fact that progress is
currently at a relative standstill with the majority of the obligations at issue. 
Similarly worrisome are the minimal efforts exerted to mitigate concerns
regarding a judgement for nearly $9,000 and a collection effort for approximately
$64,500. The burden is on Applicant in this proceeding to explain, extenuate, or
mitigate allegations established by the Government. The sum of $73,500 may seem
minor in light of the total amount of debt at issue. Without evidence that these accounts
were not, at least, disputed through the credit reporting agency, however, it is hard to
 See, e.g., ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999); ISCR Case No. 08-08291 (App. Bd. Aug.    33
26, 2008).
9
conclude proper diligence and appropriate judgement was exercised in addressing the
security concerns set forth in the SOR. 
Whole Person Concept
Under the whole person concept, the Administrative Judge must evaluate an
Applicant’s eligibility for a security clearance by considering the totality of the
Applicant’s conduct and all the circumstances. The Administrative Judge should
consider the nine adjudicative process factors listed at AG ¶ 2(a): “(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
participation is 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.” Under AG ¶ 2(c), the ultimate determination of whether to grant eligibility
for a public trust position must be an overall common sense judgment based upon
careful consideration of the guidelines and the whole person concept. 
I considered the potentially disqualifying and mitigating conditions in light of the
facts and circumstances surrounding this case, as well as the “whole person” factors.
Applicant is a mature, educated, and articulate man with significant work experience.
He is a pillar of his community, both as a businessman and as a civic-minded citizen.
The record shows that he applies honor and integrity in both his professional and
personal life. It similarly shows he is highly reliant on his bankers and legal counsel.  
Applicant’s business is one which is highly vulnerable to market conditions and
his vigorous participation. He has twice experienced financial downturns. While he
recovered from professional and personal blows in the early 1990s, the current
economic climate was less forgiving to blows received in the 2000s. In 2007, he sought
Chapter 11 bankruptcy protection. That petition and the related reorganization plan
have been poised for approval by the bankruptcy judge, but have remained in limbo.
Following numerous recitations by the Appeal Board, however, it has become axiomatic
that promises to pay in the future do not mitigate security concerns with regard to
financial considerations. Such promises are not a substitute for a track record of paying
debts in a timely manner and otherwise acting in a financially responsible manner.  33
Particularly troubling was Applicant’s failure to carry his burden and provide
documentary evidence in several areas. For example, Applicant stated he has worked
out agreements with regard to his state and federal taxes, but no such agreements
were presented. Similarly, there was no discussion of any exhibits detailing his current
payment or debt satisfaction arrangements with the banks. Glaringly, no evidence was
admitted with regard to efforts undertaken to refute or dispute two of the seven
obligations set forth in the SOR which, combined, represent nearly $75,000 in
10
delinquent debt. There is no question that Applicant is a gentleman of integrity and
significant achievement. Through such failures, however, he has failed to mitigate
financial considerations security concerns. Clearance is denied. 
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, Guideline F: AGAINST APPLICANT
Subparagraph 1.a: Against Applicant
Subparagraph 1.b: Against Applicant
Subparagraph 1.c: Against Applicant
Subparagraph 1.d: Against Applicant
Subparagraph 1.e: Against Applicant
Subparagraph 1.f: Against Applicant
Subparagraph 1.g: Against Applicant
Subparagraph 1.h: Against Applicant
Conclusion
In light of all of the facts and circumstances presented by the record in this case,
it is not clearly consistent with national security to determine Applicant eligible for a
security clearance. Clearance is denied.
ARTHUR E. MARSHALL, JR.
Administrative Judge