DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 08-07264 
  ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Braden Murphy, Esq., Department Counsel 
For Applicant: James Q. Butler, Esquire 
 
______________ 
 
 
 
Decision 
______________ 
 
 
RICCIARDELLO, Carol G., Administrative Judge: 
 
Applicant failed to mitigate the Government’s security concerns under Guideline 
F, Financial Considerations. Applicant’s eligibility for a security clearance is denied. 
 
On October 22, 2008, the Defense Office of Hearings and Appeals (DOHA) 
issued to Applicant a Statement of Reasons (SOR) detailing the security concerns 
under Guidelines F. The action was taken under 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 effective 
within the Department of Defense for SORs issued after September 1, 2006.  
  
 Applicant answered the SOR in writing on November 4, 2008, and requested a 
hearing before an administrative judge. The case was assigned to another judge on 
January 22, 2009. DOHA issued a Notice of Hearing on February 10, 2009, and the 
hearing was scheduled for March 9, 2009. The hearing was canceled and an amended 
 
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Notice of Hearing was issued March 9, 2009, rescheduling the hearing for April 2, 2009. 
The case was assigned to me on March 12, 2009. Applicant through his attorney 
requested a continuance on March 26, 2009. It was granted and an amended Notice of 
Appearance was issued on March 31, 2009. The hearing took place as scheduled on 
April 22, 2009. The Government offered Exhibits (GE) 1 through 6. Applicant did not 
object and they were admitted. Applicant testified and offered Exhibits (AE) A and B. 
Department Counsel did not object and they were admitted. The record was held open 
until April 30, 2009, to allow Applicant to submit additional documents. A document was 
received and marked as AE C. Department Counsel did not object and it was admitted.1 
DOHA received the transcript of the hearing (Tr.) on April 29, 2009.  
 
Procedural Matters 
 
 Based on testimony provided by Applicant during his hearing, Department 
Counsel moved to amend the Statement of Reasons and add the following allegation: 
 
 1. e. You failed to file your 2006 and 2007 federal income taxes. 
 
I offered Applicant an opportunity to request a continuance to the hearing so he 
would have notice of the allegation and time to prepare. I also offered to keep the record 
open to allow Applicant to submit additional documents. Applicant waived his right to 
continue the hearing and asked that the record remain open, which was granted.  
 
Findings of Fact 
 
 Applicant denied all of the allegations in the SOR. After a thorough and careful 
review of the pleadings, exhibits, and testimony, I make the following findings of fact. 
 
 Applicant is 59 years old. He is a college graduate, single and has no 
dependents. He began working for a federal contractor in March 2008, worked for five 
months and was furloughed for a period of time. He has since resumed work.2  
 
 Applicant admitted he received credit cards or a line of credit from the four 
creditors listed in the SOR. Applicant worked in the information technology (IT) industry 
for many years. He stated that in 2001 to 2002, there was a severe depression in the 
industry and it went from a situation where jobs were plentiful and abundant to a severe 
shortage of jobs. Applicant was affected by this economic downturn. He stated salaries 
and contracts fell by 40%. His salary prior to the “crash” was in the middle $90,000 
range. He had been working overseas from 1983 to 1999 when he returned to the U.S. 
He admitted he saved his money and from February 1999 to October 2001 he did not 
work by choice and used money he had saved to live on. He also used credit cards, but 
was confident that when he chose to go back to work he would be able to get a job and 
pay his bills. According to Applicant’s security clearance application (SCA) in 
1 HE I. 
 
2 Tr. 27-30, 89-90, 129-130. 
 
3 
 
 
                                                          
approximately October 2001 until February 2005 he had a series of jobs in the IT 
industry. In February 2005 he was unemployed for a short period of time. He was next 
unemployed from November 2006 to December 2006. During his periods of 
employment Applicant was earning less than he had previously earned when the 
industry was at its peak. During this time he primarily did contract work. When he was 
not working he would use his credit cards to help pay his expenses. He had difficulty 
finding work and was intermittently employed in contract work. The work would continue 
until the contract ran out.3 
 
 Applicant was paying at least the minimum payments on his credit cards during 
this time and was never late. He stated that the credit card companies began looking at 
all his accounts and his debt to income ratio and increased the interest payments. He 
decided to stop making any payments to any of his credit cards in November 2003 
because it would take him too many years to repay the debts if he continued to make 
minimum payments. He admitted that with his current salary he could afford to make 
more than the minimum payment.4  
 
 Applicant does not accept the validity of any of the collection companies that 
have assumed his delinquent debts. He has made demands on them to provide proof of 
their legitimacy.5  
 
 The debt in SOR ¶ 1.a ($20,000) is a credit card debt. Applicant has not paid 
anything on this debt since November 2003. He stated he has not been sued. He 
believed the actual amount of debt he incurred was $20,000. Applicant was asked if he 
made an attempt with this creditor to begin a repayment plan. He stated: “I neither 
originated communication to them on that, nor did they originate communication to 
me.”6 He believed because his credit report shows the balance to the original creditor 
as zero he does not owe anything to the collection company who holds the account 
because they have failed to provide him proof of ownership. Applicant disputed how the 
collection company calculated the amount owed. He advised the collection company 
that if they did not provide substantiated proof of their claim within 30 days it would be 
viewed as evidence of their waiver of all collection claims. He has not contacted the 
creditor to legitimately and fairly resolve the debt.7  
 
Regarding the debt listed in SOR ¶ 1.b, Applicant admitted he incurred this credit 
card debt ($24,000). He believed the amount of items actually purchased if he had paid 
cash was about $15,000. He never contacted this creditor to set up a repayment plan 
3 Tr. 36-45, 99-103, 130-133. 
 
4 Tr. 46-49, 73-77; AE A. 
 
5 AE A. 
 
6 Tr. 105. 
 
7 Tr. 37-48, 58, 105; AE A. 
 
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after he stopped making payments in November 2003. He sent a novation8 letter on 
February 4, 2005, and a $100 check dated February 10, 2005, advising the company 
that this was a settlement offer and if they cashed the check it would constitute 
acceptance and unequivocal assent to the novation/offer without recourse. He dictated 
that the creditor was to notify him within 30 days if they did not agree. He admitted he 
received a letter and bill from a collection company for this debt in October 2008. 
Applicant indicated the creditor cashed the check. Applicant has not made any other 
payments to resolve this debt. Applicant admitted he never received any documentation 
from the creditor that they considered the matter closed.9 
 
Applicant provided identical novation letters and $100 checks to the creditors 
listed in SOR ¶¶ 1.c ($16,000, actual amount incurred approximately $10,000) and 1.d 
($49,000, actual amount owed with interest $45,000). He stated the creditors cashed 
the checks. Applicant stated at one time he received an offer to settle the debt in SOR ¶ 
1.d from the creditor for $12,000. He did not accept it because he could not afford it. 
Applicant also provided documentation that he believes the statute of limitations is 
applicable to these debts. He stated he believed the debts were satisfied and no one 
ever sued him. Applicant has not made any other payments to legitimately and fairly 
resolve these debts. Applicant never received documentation from the creditor that they 
considered the matter closed.10  
 
Applicant has paid a total of $300 since November 2003 on the four debts listed 
in the SOR totaling over $109,000.  
 
Applicant stopped paying his credit card debts in November 2003. He stated:  
 
The important thing to understand is that the rules of the game changed. 
In other words, yea, I decided to get into the IT profession. That’s what 
I’ve been doing for a very long time, and I got these credit cards and I 
made charges on them that I was fully able to cover the payments and 
fully able to pay them off much earlier on when I made the charges. But 
then the rules of the game changed.11  
 
 
 
 
8 Black’s Law Dictionary defines novation as follows: Substitution of new contract between same 
or different parties. The substitution of a new debt or obligation for an existing one. The substitution by 
mutual agreement of one debtor for another or of one creditor for another whereby the old debt is 
extinguished. The requisites of a “novation” are a previous valid obligation, an agreement of all the parties 
to a new contract, the extinguishment of the old obligation, and the validity of the new one.  
 
9 Tr. 49-65; 103, 105-109; AE A 
 
10 Tr. 65-73; 104-108; AE A. 
 
11 Tr. 78. 
 
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He then went on to say: 
 
Because the numbers no longer added up, and what I mean by that is I 
had a certain amount of income, and then I had debt that I had to pay, and 
the calculated payoff for that debt was some fantastic amount of time into 
the future.12  
 
Applicant admitted while he was accruing his credit card debt he was making minimum 
payments on the debts. He stated he went on the internet and did legal research. He 
contacted a company that specialized in handling credit card debt and he followed legal 
advice of an attorney that was associated with the company. He then used novation 
letters to reduce his credit card debts.13  
 
Applicant’s current income is $138,000. His income last year was approximately 
$125,000. He stated he has no financial problems except his debts from six years ago. 
He has never had financial counseling and has not filed for bankruptcy. He has one 
credit card and maintains a balance owed of approximately $2,000 each month.14 
 
On his security clearance application (SCA) submitted on April 14, 2008, which 
asked if in the last 7 years, he was over 180 days delinquent on any debts, Applicant 
answered “no.” He also answered “no” when asked if he was “currently over 90 days 
delinquent on any debt.”15 He stated the following: 
 
Because when I answered those questions, you know, I answered the 
question asked. In other words, debt refers to something financial. When 
you’re operating in the financial world, if someone says you owed me 
money, there must be a contract there, a valid contract. There was no 
valid contract and I did not owe any debt, and that’s why I answered no.16 
 
He went on to explain the following: 
 
When I hired on this firm to handle my credit card debts, they took the 
legal position that there was no valid, legal debt there and they offered up, 
you know, a legal argument for it. So in filling out that form, I took the 
same perspective, that there was no legal debt there, and that was why I 
answered those questions the way I did. In terms of what has actually 
12 Tr. 79. 
 
13 Tr. 73, 82-83. 
 
14 Tr. 76-77, 87-88, 93-94, 109. 
 
15 I have not considered Applicant’s answers on his SCA for disqualifying purposes, but have 
considered them when analyzing the whole person and for purposes of determining credibility. 
 
16 Tr. 111-112. 
 
 
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occurred in life, the fact that none of these companies ever sued or even 
threatened to sue, demonstrated their timidity in asserting.17 
 
There is no indication from a review of Applicant’s documents that a law firm prepared 
the document on his behalf or represented him. Applicant’s stated that through his legal 
research on the internet and his association with “this company” the credit card debts 
were not legal debts. Applicant’s position regarding divulging his past delinquent debts 
is as follows:   
 
When I filled the form out, I had full obligation to convey past debts. But 
my perspective was that if these were not debts of legal validity, legal 
enforceability, then they were not debts under the law.18  
 
Applicant was asked if he had filed all of his tax returns on time. He admitted he 
had not yet filed his 2006 and 2007 tax returns. He stated he has been “well beyond 
busy.”19 When it was brought to his attention that he had stated he was unemployed 
during some of this time, he stated:  
 
Well, I didn’t feel a compelling necessity. I mean I’m tardy on those two 
because I didn’t feel the compelling necessity to get them done, because I 
don’t owe any money. I’m due refunds.20  
 
He further stated:  
 
Because I’m due a refund, and I figured and this is actually correct. If you don’t 
owe the federal government money and you’re tardy on the filing, they don’t like it, but it 
really doesn’t add up to much. They may or may not assess a penalty for late filing.21 
 
Applicant stated he had not yet filed his 2008 taxes, but filed for an extension. 
When asked by his attorney about his intentions regarding his delinquent tax filings he 
explained he intended to file them very soon. He admitted he had not yet completed the 
paper work on these taxes. He stated he has an accountant that handles his taxes. 
When asked why the accountant did not file them he explained he did not provide the 
accountant the information required to file them. On April 30, 2009, Applicant’s attorney 
provided a letter that stated Applicant’s 2006 and 2007 tax information were in the 
hands of his accountant. His attorney further stated “The returns are in the process of 
17 Tr. 113. 
 
18 Tr. 114-117. 
 
19 Tr. 121. 
 
20 Tr. 122. 
 
21 Tr. 123. 
 
 
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being completed, and we anticipate them being finished within one week. At that time 
they will be promptly sent to the IRS.”22 
 
Applicant does not believe he has a financial obligation to any of the creditors 
listed in the SOR. I have considered all of the documents Applicant provided. I 
considered his interpretation of the rules and law. I have considered his entire testimony 
and arguments regarding the legitimacy of his claims.23  
 
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. According to AG ¶ 
2(c), the entire process is a conscientious scrutiny 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. 
 
Under Directive ¶ E3.1.14, the Government must present evidence to establish 
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, 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 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 
22 Tr. 123-124; 134-136; AE C. 
 
23 Tr. 125-127. 
 
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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).  
 
Analysis 
 
Guideline F, Financial Considerations 
 
The security concern relating to the guideline for Financial Considerations is set 
out in AG & 18:  
 
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.  
 
The guideline notes several conditions that could raise security concerns. I have 
considered all of the disqualifying conditions under AG & 19 and especially considered: 
 
(a) inability or unwillingness to satisfy debts;   
 
(c) a history of not meeting financial obligations; and  
 
(g) failure to file annual Federal, state, or local income tax returns as 
required or the fraudulent filing of the same. 
 
Applicant failed to responsibly satisfy his delinquent debts. The debts are more 
than six years old and total approximately $109,000. Applicant failed to file his federal 
income tax returns for 2006 and 2007. I find the above disqualifying conditions apply.  
 
The guideline also includes examples of conditions that could mitigate security 
concerns arising from financial difficulties. I have considered the following mitigating 
conditions under 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 
 
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doubt on the individual=s current reliability, trustworthiness, or good 
judgment;  
 
(b) the conditions that resulted in the financial problem 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;  
 
(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,  
 
(d) the individual initiated a good-faith effort to repay overdue creditors or 
otherwise resolve debts; and 
 
(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 
documented proof to substantiate the basis of the dispute or provides 
evidence of actions to resolve the issue.  
 
 Applicant admitted he incurred the debts listed in the SOR. He admitted he 
received merchandise for his expenditures. He stopped paying these debts in 
November 2003 because he was dissatisfied with how the creditors calculated interest. 
He has made $100 payments to three of the creditors and declared it as his settlement 
offer and if they cashed the check it would constitute their acceptance to settle the debt 
in full. I find his actions were not good faith offers to pay his just debts, but rather were a 
tool for him to renege on his responsibility to pay his exorbitant delinquent debts. He 
has not set up payment plans to resolve the debts and his actions cast serious doubts 
about his judgment, reliability and trustworthiness. I find mitigating condition (a) does 
not apply. 
 
 Applicant was in an industry that went from high paying salaries to a bust in the 
industry. The crash in the industry was a condition beyond Applicant’s control. However, 
Applicant chose not to work for two years, spent his savings and used credit cards 
because he thought he would be able to resume a good paying job. I do not find he 
acted responsibly under the circumstances. He accumulated $109,000 in credit card 
debt. He does not own a house, he has no dependents to support and although the job 
market did not offer the same type of wages he had been accustomed to, he is also 
partially responsible for his plight. Instead of conserving and saving, he made a choice 
to not work. He then experienced periods of unemployment. This is not a case where 
Applicant has done the best he can to repay the debts. To the contrary his attitude has 
been one of hostility towards his creditors. I find (b) only partially applies.  
 
 Applicant did not provide evidence that he has received financial counseling. He 
did not provide evidence that the problem is being resolved. He did not provide any 
proof that his creditors considered the debts resolved. Applicant contends the statute of 
 
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limitations applies to his debts. In security clearance cases, the statute of limitations is 
not a shield from acting responsibly. I find Applicant did not initiate a good faith effort to 
pay his creditors or resolve his debts. Instead he looked for a way to renege on them. 
Applicant admitted he made purchases with his credit cards and then failed to pay them. 
I find mitigating conditions (c), (d) and (e) do not apply.  
 
 Applicant failed to file his 2006 and 2007 income tax returns. His cavalier attitude 
about his responsibilities reflects a pattern of questionable judgment. After his hearing 
his attorney provided a letter stating he was in the process of filing his delinquent tax 
returns. His post-hearing submission is not a substitute for his failure to abide by the 
law. Rather it is another instance of Applicant defying rules and applying them as he 
sees fit, a dangerous trait when dealing with national security. 
 
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 security 
clearance 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 all 
the facts and circumstances surrounding this case. Applicant is a mature person who 
worked in an industry where he earned a good salary. He chose to live off his savings 
and use his credit cards to pay his expenses for a period of 32 months. When he chose 
to return to work the market had changed and Applicant had difficulty finding a job 
similar to what he had before he stopped working. He did contractual work and 
experienced periods of unemployment. Applicant continued to make minimum 
payments on his credit cards and decided in November 2003 that he would stop paying 
them. Two years later he sent letters to his some of his creditors with $100 payments to 
totally resolve his debts. Applicant has not made any other payments, nor has he made 
any other effort to resolve these delinquent debts. Applicant’s attitude toward his 
financial responsibility is troubling. He believes he is not responsible for all the debt he 
incurred. He does not accept the collection companies’ claims. Applicant also failed to 
 
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file his 2006 and 2007 tax returns, believing the IRS does not care because he believes 
he is entitled to a refund. Applicant’s attitude towards following rules, acting responsibly, 
and exercising good judgment is troubling and a serious security concern. Overall, the 
record evidence leaves me with serious questions and doubts as to Applicant’s eligibility 
and suitability for a security clearance. For all these reasons, I conclude Applicant failed 
to mitigate the security concerns arising from financial considerations.  
 
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 
 
  Subparagraphs 1.a-1.e:   Against Applicant 
    
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is not 
clearly consistent with the interests of national security to grant Applicant eligibility for a 
security clearance. Eligibility for access to classified information is denied. 
 
 
                                                     
_____________________________ 
Carol G. Ricciardello 
Administrative Judge