1 
 
    DEPARTMENT OF DEFENSE 
            DEFENSE OFFICE OF HEARINGS AND APPEALS 
          
             
 
In the matter of: ) 
 ) 
 ----------------- )  ISCR Case No. 08-07602 
 SSN: ----------- ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Kathryn D. MacKinnon, Esquire, Department Counsel 
For Applicant: Pro Se 
 
 
 
__________ 
 
Decision 
__________ 
 
HARVEY, Mark W., Administrative Judge: 
 
Applicant failed to mitigate the financial considerations security concerns. 
Although he settled and paid, paid or otherwise resolved 14 of 21 statement of reason 
(SOR) debts, and two debts are in payment plans, five large debts totaling about 
$350,000 were not resolved. There is insufficient information about his overall financial 
situation and these five debts to mitigate security concerns. Access to classified 
information is denied at this time.  
 
Statement of the Case 
 
On August 21, 2007, Applicant submitted an Electronic Questionnaires for 
Investigations Processing (e-QIP) (SF 86) (Government Exhibit (GE) 1). On September 
18, 2008, the Defense Office of Hearings and Appeals (DOHA) issued an SOR detailing 
the basis for its preliminary decision to deny Applicant eligibility for access to classified 
information, citing security concerns under Guideline F (Financial Considerations). The 
action was taken under Executive Order 10865, Safeguarding Classified Information 
within Industry (February 20, 1990), 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) 
 
 
2 
 
                                           
promulgated by the President on December 29, 2005, and effective within the 
Department of Defense for SORs issued after September 1, 2006. The SOR 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 his 
security clearance, and recommended referral to an administrative judge to determine 
whether his clearance should be granted, continued, denied, or revoked. 
 
On October 9, 2008, Applicant responded to the SOR and requested a hearing 
before an administrative judge. Department Counsel was prepared to proceed on 
October 16, 2008. The case was assigned to me on January 22, 2009. On February 6, 
2009, DOHA issued a hearing notice. The hearing was held on March 4, 2009. At the 
hearing, Department Counsel offered four exhibits (GE 1-4) (Transcript (Tr.) 27), and 
Applicant offered 17 exhibits (AE A-R). There were no objections, and I admitted GEs 1-
4 (Tr. 27), and AE A-R. Additionally, I admitted the SOR, response to the SOR, the 
hearing notice, and the amended hearing notice (GEs 5-8). I attached Department 
Counsel’s closing argument as hearing exhibit (HE) I. I received the transcript on March 
23, 2009. I initially held the record open until April 10, 2009 (Tr. 18-19). At Applicant’s 
request I held the record open until May 11, 2009. After the hearing Applicant submitted 
29 exhibits (AE S-AT). I received Department Counsel’s closing argument on May 6, 
2009 (GE 9; HE I), and her response to Applicant’s final exhibit (HE II; AE AT). I 
attached emails from Applicant, Department Counsel, and me, to the record as HE III. 
These emails discuss setting the date for the hearing, holding the record open for 
additional documents, jurisdiction, and the absence of objections to documents (HE III). 
I closed the record on May 11, 2009.     
   
Findings of Fact1 
 
In his SOR response, Applicant admitted responsibility for the SOR debts in ¶¶ 
1.a to 1.g, 1.i, 1.k to 1.p, and 1.r to 1.u; and he denied responsibility for SOR debts in ¶¶ 
1.h, 1.j and 1.q. He said SOR ¶¶ 1.n and 1.i are duplications.   
 
Applicant is 37 years old network engineer with 13 years of information 
technology experience (Tr. 8-9). He is a high school graduate, and attended two years 
of college (Tr. 8). He has an interim Secret clearance (Tr. 8-9). In 1996, he discharged 
his unsecured debts using a Chapter 7 bankruptcy (Tr. 169-170). In 1999, he married 
(AE R). In 2000 and 2003, his two children were born (AE R). He separated from his 
spouse in 2004, and moved in with his parents (Tr. 55). He had a job from 1999 to 
2006; however, he was discharged from this employment because he spent so much 
time trying to resolve family problems (Tr. 55-56, 132). The family court records relating 
to his divorce list 16 pages of meetings, hearings, motions, orders and arbitrations, 
mostly concerning disputes over property, support, allegations of abuse and obstruction 
of visitation (AE Q, R). The court granted his divorce in January 2008 (AE A at 5). 
 
 
1Some details have not been included in order to protect Applicant’s right to privacy. Specific 
information is available in the cited exhibits. 
 
 
3 
 
After losing his seven-year employment in June 2006, he was intermittently 
unemployed for brief periods of time (Tr. 134-137). Applicant started his employment 
with his current employer in April 2007 (Tr. 138). In January 2008, he became a 
subcontractor (Tr. 150). He is the sole employee of his company (Tr. 151). 
 
In 2005, Applicant took money out of his 401K account and he began to invest in 
real estate (Tr. 56, 131, 132, 135). He purchased five houses (Tr. 56, 129, 131, 132, 
136). His spouse and Applicant ended their separation, and their family moved into one 
of the investment houses (Tr. 56-57, 129-130). He sold two houses for a profit (Tr. 131-
132). He refinanced his mortgages or obtained second mortgages to raise money (Tr. 
131-132). He was able to pay the mortgages on the three houses until 2007 (Tr. 130-
131). Those three houses subsequently were foreclosed, resulting in substantial 
deficiencies. 
 
Financial Considerations 
 
Applicant attributed his financial problems to his divorce and the downturn in the 
real estate market (Tr. 25-26). His September 29, 2007, credit report showed his 
accounts were in good standing (Tr. 140; GE 4). The total payments on his mortgages 
were about $13,000 to $17,000 per month, and without tenants he had a major financial 
problem (Tr. 141). Due to the neglect of his tenants, two of his houses were in shambles 
(one had serious water damage) and could not be rented (Tr. 141, 143). His main debts 
resulted from three houses that were into foreclosure. Those three houses had a total of 
five mortgages (AE S at 1-2).  
 
Applicant paid or satisfactorily disputed 14 debts, which are the debts in SOR ¶¶ 
1.a to 1.g, 1.k, 1.p to 1.u. Two debts are in current payment plans, which are the debts 
in SOR ¶¶ 1.h and 1.j. There is insufficient evidence to resolve five debts, which are the 
debts in SOR ¶¶ 1.i, 1.l, 1.m, 1.n, and 1.o. The source, status, and amount of his 
individual SOR debts are more specifically described as follows (paragraph letters 
correspond with the SOR subparagraphs): 
  
(a) Credit card debt of $12,216 was settled for $3,665 and paid on January 28, 
2009 (Tr. 59-65; GE 3; AE B and C; AE S at 2); 
 
(b) Bank debt of $1,470 was settled for $642 and paid on January 29, 2009 (Tr. 
66-69; AE D and E at 4; AE S at 2); 
 
(c) On February 27, 2009, Applicant and creditor reached a settlement 
agreement to resolve his share trading debt of $11,349 (Tr. 69-73; AE F; AE V). The 
settlement agreement with the creditor required Applicant to make three payments of 
$1,891 (totaling $5,674), with a payment required every thirty days (Tr. 72; AE F). The 
first payment was required along with a signed settlement agreement (AE F). At his 
hearing, he said on February 28, 2009, or March 1, 2009, he made one payment of 
$1,891 (Tr. 72). However, he noted the payment was not reflected in his monthly bank 
statement (AE E). On March 20, 2009, the creditor offered to settle the $11,349 debt for 
 
 
4 
 
$3,404 (AE V). The March 20, 2009, settlement agreement did not indicate any 
payments were made, and the balance owed was the same as on the February 27, 
2009, settlement agreement. He provided his customer copy of a MoneyGram, dated 
April 3, 2009, showing payment of $3,404 to the creditor, resolving this debt (Tr. 73; AE 
S at 2; AE U). 
 
(d) Credit card debt of $3,997 was settled for $1,400 and paid on February 13, 
2009 (Tr. 74-77; AE E at 3; AE G; AE S at 2). 
 
(e) Department store credit card debt of $3,868 was settled for $1,547 on 
January 29, 2009, and paid (Tr. 78-79; AE E at 4; AE H; AE S at 2; AE O at 47).  
 
(f) Debt of $22,320 with a payment plan, dated February 11, 2009, with payments  
to be made on February 28, March 30, and April 29, 2009 (Tr. 80-81; AE E at 7; AE I). 
He provided a settlement for an account, dated April 8, 2009, showing three monthly 
payments of $3,720 required to resolve the debt (AE AA, AE AB). He provided proof 
that he paid $3,720 on March 31, 2009, and April 29, 2009 (Tr. 81; AE S at 2; AE AB). 
On May 11, 2009, I received a receipt from creditor indicating Applicant paid the creditor 
$11,160 on April 30, 2009, settling and resolving this debt (AE AT). 
 
(g) Credit card debt of $6,018 was settled for $1,806 on January 28, 2009, and 
paid on February 28, 2009 (Tr. 81-83; AE E at 4; AE J; AE S at 2; AE AC; AE AD).   
 
(h) Child support debt of $6,312—payment summary shows he made every 
monthly payment of $1,300 starting in February 2008 (Tr. 83-87; AE K). According to 
the statement, he is paying $278 monthly towards his arrears (AE K; AE S at 3). 
According to his credit report of April 29, 2009, in April 2009, arrears were down to 
$6,097 (AE AO at 84). His account is current in so far as the collection agency is 
satisfied that he is making progress reducing his arrearage (AE K, AE S at 3). 
 
(i) Applicant had a mortgage past due debt of $48,450 with a loan balance of 
$398,000 (Tr. 87-89; SOR ¶ 1.i). In February 2005, Applicant purchased a property to 
use as a rental (AE A at 1-2). In January 2007, his tenants moved out and Applicant 
unsuccessfully attempted to sell the property (AE A at 2). His credit report, dated August 
21, 2008, indicates he initiated a mortgage on the property in October 2006 (GE 3 at 3). 
According to his August 21, 2008, credit report, the initial amount of the October 2006 
mortgage was $351,000; the monthly payment was $3,165; and the current balance 
was $398,000 (GE 3 at 3). The lender foreclosed on the loan (Tr. 88). At the time of his 
hearing, Applicant said he did not have any documentation from the foreclosure sale 
(Tr. 87-88). Applicant thought the property was sold for a sufficient amount to cover the 
mortgage (Tr. 88; AE C at 1; AE S at 3). He stated, “So, it’s foreclosed on, but I believe 
they got the full value for the property.  .  .  . But regardless, they got their money that 
was owed.” Department Counsel asked, “So if I understand your testimony, you believe 
it was sold for the full amount of the mortgage and you owe nothing?” He responded, 
“That’s correct.” (Tr. 88). His basis for believing he did not owe anything was a credit 
report that did not indicate he owed anything on the debt (AE C at 1). After his hearing, 
 
 
5 
 
he provided documentation showing he executed a mortgage for $351,500 on 
September 12, 2007 (AE AE at 18). The auction on September 17, 2008, resulted in a 
sales price of $174,250 (AE AE at 3). He did not provide a recitation or summary of the 
costs and the amount of the deficiency on this property. This property did not have a 
second mortgage (AE S at 2). Applicant’s April 29, 2009, credit report indicates, “Credit 
grantor reclaimed collateral to settle defaulted mortgage account information disputed 
by consumer” (AE AO at 16). It also shows amount past due as $0 (AE AO at 16). 
However, there is no court document or letter from the credit grantor agreeing to accept 
the property to settle the debt or declining to seek a deficiency judgment against 
Applicant. There is insufficient evidence to conclude Applicant does not owe about 
$224,000 plus costs and interest on this property (based on the difference between the 
current loan balance (about $398,000) and the amount received from the foreclosure 
($174,250)). Auction and trustee costs as well as interest may add to the $224,000 
potential deficiency.  
 
(j) From January 9 to February 18, 2009, Applicant made payments of $1,317, 
$1,327, $1,327 and $1,307 on his automobile BMW lease debt of $3,940 (Tr. 90-92; AE 
E at 2-3, 6). The BMW-lease originated in February 2006, and the lease amount was 
$80,725 (AE T at 21, AE AO at 23, 25). He is current on his BMW-lease payments (Tr. 
92; AE S at 3). 
 
(k) Credit card debt of $12,024 was settled for $4,000 on February 4, 2009, and 
the debt was paid on April 7, 2009 (Tr. 93-97; GE 2 at 2; AE L; AE S at 3; AE T at 5; AE 
AF). 
 
(l) Real estate mortgage loan with $27,339 in arrears on the $276,000 mortgage 
that was foreclosed (Tr. 98-105; AE M). On November 19, 2008, the property was sold 
for $301,400 (Tr. 100; AE M; AE Y). Applicant had previously purchased the property on 
February 14, 2005, for $273,800 (AE M at 2, state tax record). Applicant’s credit report 
of April 9, 2009, showed the amount of the overdue interest as $47,844, with monthly 
payments of $2,278 (AE AO at 11, 74, 82). The sale resulted in a deficiency of $20,816, 
which includes a Trustee Commission of $15,070 and accrued interest of $13,640 (AE 
Z). Applicant did not receive any proceeds from the sale (Tr. 102). The debt in SOR ¶ 
1.n of $69,000 is the debt owed on the second mortgage account, which Applicant still 
owes (Tr. 106; AE S at 3). For the debt in SOR ¶ 1.l, I conclude Applicant owes the 
deficiency amount of approximately $21,000.  
 
(m) Truck loan debt of $27,339 involved Applicant’s purchase of a used truck on 
January 5, 2007 (Tr. 107-116; AE AG). The truck was damaged by vandalism and had 
mechanical trouble (Tr. 107-116). In December 2008, Applicant signed an agreement to 
have the vehicle repaired with an estimate of $6,673 (AE N). However, another portion 
of the estimate indicates the total job will cost $13,174 (AE N). Applicant signed that 
portion of the estimate and agreed to be responsible for paying $6,500 (AE N). Some 
repairs were made and Applicant thought the vehicle repair company may have placed 
a mechanic’s lien for $6,000 on the vehicle (Tr. 109, 113; AE N). The estimate also 
shows monthly storage costs of $1,000 (AE N). Applicant said he paid his deductible 
 
 
6 
 
and his insurance was disputing the amount of the repairs (Tr. 165). Applicant agreed 
with Department Counsel’s statement that he paid $6,500 and the insurance company 
was supposed to pay the remainder of $13,173 bill (Tr. 165). He said he had proof of 
the $6,500 payment, Department Counsel asked for proof of it, and Applicant agreed to 
provide it (Tr. 166; AE S at 3). Applicant financed $30,212 (AE AG). Applicant’s credit 
report of April 29, 2009, showed a balance of $28,990 and a past due amount of $3,202 
(AE AO at 31). An undated document indicates the vehicle repair firm is undertaking a 
non-judicial sale of the truck (AE AG). Applicant did not provide any documentation 
showing he paid any of the repair bill. I conclude Applicant owes about $28,000 on this 
debt. 
 
(n) Real estate mortgage loan of $69,000 is in settlement negotiations (Tr. 106-
107; AE S at 3). This is the same creditor as in SOR ¶ 1.l (AE S at 3). Applicant’s credit 
report of April 29, 2009, shows this account in delinquent status (AE AO at 73). I 
conclude Applicant owes about $69,000 on this debt. 
 
(o) Mortgage loan of $359,650 pertained to Applicant’s personal residence (Tr. 
116). His former wife stayed in their residence after the divorce (Tr. 116-117). The 
mortgage was not paid and the house went into foreclosure (Tr. 117). On August 29, 
2005, Applicant purchased the property for $499,000 (AE P at 1). On December 17, 
2007, the sale price was $374,808 and notification of the owner was by newspaper (AE 
P at 1; AE AJ). A 2008 IRS Form 1099-A shows a fair market value of $372,165 (AE O). 
Applicant has a taxable gain in income of about $12,000; however, he can offset that 
with expenses on his transaction. The court issued a final order on the foreclosure on 
April 29, 2008 (AE P at 7). The expenses of sale were $22,540 (AE P). On April 29, 
2008, the court issued a final order (AE P). On September 15, 2008, Applicant 
challenged the sale (AE P at 3-6). On January 16, 2009, the court issued an order 
denying Applicant’s requested exceptions (AE P at 2). Ultimately, he had a remaining 
deficiency of $17,856 (AE P at 8). This deficiency included a “Trustee’s Commission” of 
$18,740 (AE P at 8). However, Applicant thought he did not owe the creditor on the first 
mortgage anything (Tr. 122). There was a second mortgage on the property of 
$158,616 (AE P at 12), which Applicant settled for $5,000 (Tr. 121-122; AE P at 12). 
The $5,000 from Applicant was due on March 6, 2009 (Tr. 122; AE P at 12). A letter 
from the creditor, dated April 2, 2009, shows the $5,000 was paid, resolving this debt 
(AE AK, AL). Applicant understands that he will still owe a substantial federal tax bill as 
a result of the release of liability for this second mortgage (the savings is about 
$153,000) (Tr. 167-168). Of course, he will be able to offset most of the tax liability with 
his loss on the investment property. In sum, Applicant currently owes the first 
mortgagee about $17,000.    
 
(p) Utility debt of $230 was unresolved because the creditor could not locate 
information on the account (Tr. 125-128). Applicant thought it might be a debt from one 
of the tenants in one of Applicant’s houses (Tr. 141; AE S at 3). On April 7, 2009, the 
creditor wrote and requested that the credit reporting agency remove the debt from 
Applicant’s report (AE AI). 
 
 
 
7 
 
(q) Applicant said a home improvement loan of $944 was paid, and Applicant 
promised to provide proof of the payment (Tr. 122). However, no proof of payment was 
provided. Applicant’s credit report of April 29, 2009, shows a credit card account to a 
different creditor with an amount of $949 with a zero balance, and paid as agreed (AE 
AO at 34).  It is listed in the closed accounts section of the report (AE AO at 43-44).  
 
(r) Insurance debt of $225 was unresolved until after his hearing because 
Applicant forgot about this debt (Tr. 127-128). On April 7, 2009, Applicant received a 
letter indicating the debt was paid on June 18, 2007 (AE AH, AM). 
 
(s)-(u) Traffic ticket debts of $100, 105 and 100, respectively (Tr. 28; GE 4 at 20). 
At his hearing, Applicant said these tickets were unresolved (Tr. 129). However, he 
promised to check into the tickets and to pay if they were his responsibility (Tr. 129). He 
paid two tickets of $105 each on March 18, 2009 (AE AN). The ticket-debts did not 
appear on his March 3, 2009, credit report (GE 2). I find For Applicant on these three 
alleged debts.   
 
Applicant contended that the only mortgage account he still owed was listed in 
SOR ¶ 1.n ($69,000) (Tr. 159-160).  
 
Applicant disclosed a non-SOR, second mortgage debt of about $47,000 that he 
disputed (GE 2 at 3; GE 4 at 18; AE AO at 5, 78, 86-87). The loan was made in 
February 2006 (GE 4 at 18). By August 2007, the past due amount was $1,189 (GE 4 at 
8). The dispute is noted in his April 29, 2009 credit report (AE AO at 78). On his April 
29, 2009, credit report, the past due amount was listed at $9,973 (AE AO at 5, 78, 86-
87). Applicant provided a warranty deed dated November 16, 2006, in which he 
promises clear title on the property (AE AP). Applicant did not provide a copy of the 
agreement between himself and the creditor, or explain how the warranty deed resolved 
the delinquent debt. Because this document was not listed in the SOR, I decline to 
make an adverse finding based on this debt.  
 
Applicant does not receive any rent income (Tr. 161). He has not bought any new 
cars or taken out any new credit cards in the last year (Tr. 161). He has not recently 
purchased any expensive items (Tr. 162). He believed he would have all of his 
remaining debt paid in five months (Tr. 162). After he eliminates his delinquent debt, he 
plans to move out of his mother’s residence (Tr. 163, 164). He promised to resolve the 
debts in SOR ¶¶ 1.n and 1.m (Tr. 164).  
 
Applicant provided a receipt showing a non-SOR credit card account with a 
balance of $2,598 was paid on March 10, 2009 (AE X).  
 
Applicant did not maintain a formal budget of his accounts (Tr. 145). After taxes, 
his current income is about $14,000 (Tr. 146).  In December 2008, he moved back in 
with his mother and he pays her $1,500 a month for rent (Tr. 147). He also pays for 
groceries (Tr. 147). He pays $1,300 a month for his BMW lease (Tr. 148). In April 2009, 
 
 
8 
 
the lease is up and he intends to obtain a less expensive vehicle (Tr. 148). His child 
support payment is $1,300 per month (Tr. 149).  
 
On November 1, 2007, an Office of Personnel Management (OPM) investigator 
interviewed Applicant (AE A). Applicant disclosed his gross monthly income was 
$10,000, and his monthly expenses totaled $6,674 (AE A at 3). Four expenses were 
$500 or more: (1) $3,000 for rent; (2) $500 for utilities; (3) $650 for car expenses; and 
(4) $1,574 for alimony/child support/day care (AE A at 3). His monthly debt payments 
total $12,377, and six debts required monthly payments exceeding $300: (1) creditor in 
SOR ¶ 1.o plus a home equity loan for $36,000 (see AE T at 22) ($3,000 monthly 
payment); (2) SOR ¶ 1.i ($3,165 monthly payment); (3) SOR ¶¶ 1.l and 1.n ($2,858 
monthly payment); (4) SOR ¶ 1.j ($1,316 monthly payment); (5) SOR ¶ 1.m debt ($640 
monthly payment on $28,890 debt-see AE T at 9; AE AO at 31); and (6) non-SOR debt 
($475 monthly payment on $47,500 debt-see AE T at 8). Once Applicant divests himself 
of the three homes, his monthly expenses would only exceed his income by $28 (AE A 
at 3). Department Counsel requested an updated personal financial statement, and 
Applicant agreed to provide one (Tr. 158-159, 171). However, Applicant did not 
subsequently provide an updated personal financial statement.  
 
Applicant provided a checking account statement for January 2, 2009, to March 
3, 2009 (AE E). This statement lists more than $30,000 in debits, and several deposits 
are crossed out (AE E). When asked about how he had so much money in his account, 
Applicant explained that when he became a contractor “it freed up more money” (Tr. 
172). He also raised the possibility of third-party, private real estate investors providing 
funds, and then concluded, “So I didn’t get a lump sum from anywhere. It’s just that 
more money was available to me because of the way I was getting paid from [ ] my 
current [ ] employer.” (Tr. 172).   
  
Applicant has not received financial counseling (Tr. 172). He agreed to seek 
financial counseling (Tr. 173). He did not provide evidence that he completed financial 
counseling. 
 
Character evidence 
 
Applicant’s fiancé has known Applicant since 2006 (Tr. 31, 51). She explained 
that Applicant’s divorce and court-ordered child support took a toll on Applicant’s 
finances (Tr. 31, 42, 48). The judge ordered him to pay his arrearage in child support, 
even though he had paid quite a large amount of the children’s expenses (Tr. 48-49). 
He had to pay for daycare, and medical insurance (Tr. 33). His former spouse stopped 
making car payments and he was legally responsible for the car loan (Tr. 33). He hired 
a company to recover the car (Tr. 46-48). The car was recovered and sold (Tr. 53). His 
tenants moved out of his two houses for various reasons (Tr. 32). They left the 
properties in poor condition and Applicant could not afford repairs (Tr. 32, 46-47). One 
had significant water damage (Tr. 46). She attended Applicant’s court hearings, relating 
to his divorce (Tr. 35, 44-45). She assisted Applicant in the organization of his financial 
records (Tr. 43). He worked some extra hours to increase his income (Tr. 51). Applicant 
 
 
9 
 
is loyal, very reliable and responsible (Tr. 33-34). He has excellent work habits and is 
very trustworthy (Tr. 34).   
 
Policies 
 
The U.S. Supreme Court has recognized the substantial discretion of the 
Executive Branch in regulating access to information pertaining to national security 
emphasizing, “no 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 have access to such information.” Id. 
at 527. The President has authorized the Secretary of Defense or his designee to grant 
Applicants eligibility for access to classified information “only upon a finding that it is 
clearly consistent with the national interest to do so.”  Exec. Or. 10865, Safeguarding 
Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified.    
 
Eligibility for a security clearance is predicated upon the Applicant meeting the 
criteria contained in the revised adjudicative guidelines (AG). These guidelines are not 
inflexible rules of law. Instead, recognizing the complexities of human behavior, these 
guidelines are applied in conjunction with an evaluation of the whole person. An 
administrative judge’s over-arching adjudicative goal is a fair, impartial and common 
sense decision. An administrative judge must consider all available, reliable information 
about the person, past and present, favorable and unfavorable.  
 
The government reposes a high degree of trust and confidence in persons with 
access to classified information. This relationship transcends normal duty hours and 
endures throughout off-duty hours. 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. Clearance decisions must be “in terms of the national interest and shall in 
no sense be a determination as to the loyalty of the [A]pplicant concerned.”  See Exec. 
Or. 10865 § 7. See also Executive Order 12968 (Aug. 2, 1995), Section 3. Thus, 
nothing in this decision should be construed to suggest that I have based this decision, 
in whole or in part, on any express or implied determination as to Applicant’s allegiance, 
loyalty, or patriotism. It is merely an indication the Applicant has not met the strict 
guidelines the President and the Secretary of Defense have established for issuing a 
clearance. 
 
Initially, the government must establish, by substantial evidence, conditions in the 
personal or professional history of the Applicant that may disqualify the Applicant from 
being eligible for access to classified information. The government has the burden of 
establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531.  
“Substantial evidence” is “more than a scintilla but less than a preponderance.”  See v. 
Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines 
presume a nexus or rational connection between proven conduct under any of the 
 
 
10 
 
                                           
criteria listed therein and an Applicant’s security suitability. See ISCR Case No. 95-0611 
at 2 (App. Bd. May 2, 1996).      
 
Once the government establishes a disqualifying condition by substantial 
evidence, the burden shifts to the Applicant to rebut, explain, extenuate, or mitigate the 
facts. Directive ¶ E3.1.15. An Applicant “has the ultimate burden of demonstrating that it 
is clearly consistent with the national interest to grant or continue his security 
clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of 
disproving a mitigating condition never shifts to the government. See ISCR Case No. 
02-31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, 
if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b).   
 
Analysis 
 
  Upon consideration of all the facts in evidence, and after application of all 
appropriate legal precepts, factors, and conditions, I conclude the relevant security 
concern is under Guideline F (Financial Considerations). AG ¶ 18 articulates the 
security concern relating to financial problems: 
 
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. 
  
  AG ¶ 19 provides two Financial Considerations Disqualifying Conditions that 
could raise a security concern and may be disqualifying in this case, “(a) inability or 
unwillingness to satisfy debts,” and “(c) a history of not meeting financial obligations.”  
ISCR Case No. 03-20327 at 3 (App. Bd. Oct. 26, 2006) provides, “Applicant’s credit 
report was sufficient to establish the Government’s prima facie case that Applicant had   
[ ] delinquent [SOR] debts that are of security concern.” Applicant’s history of delinquent 
debt is documented in his credit reports, his SOR response and at his hearing. Because 
Applicant’s 1996 Chapter 7 bankruptcy was not listed in the SOR, I decline to consider it 
under AG ¶ 19(c).2 However, 21 delinquent debts were listed in the SOR, and in 
Applicant’s SOR response he admitted responsibility for all except three of them. He 
failed to ensure his creditors were paid as agreed. The government established the 
disqualifying conditions in AG ¶ 19(a) and further inquiry about the applicability of 
mitigating conditions is required. 
   
  Five Financial Considerations Mitigating Conditions under AG ¶¶ 20(a)-(e) are 
potentially applicable:  
 
2 His 1996 bankruptcy is considered under the whole person concept, at pages 14-15, infra.  
 
 
11 
 
(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; 
 
(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’s conduct does not warrant full application of AG ¶¶ 20(a), 20(b) or 
20(e) because he did not act more aggressively and responsibly to resolve his 
delinquent debts. His delinquent debts are “a continuing course of conduct” under the 
Appeal Board’s jurisprudence. See ISCR Case No. 07-11814 at 3 (App. Bd. Aug. 29, 
2008) (citing ISCR Case No. 01-03695 (App. Bd. Oct. 16, 2002)).  
 
Applicant receives partial credit under AG ¶¶ 20(a) and 20(b) because his 
financial problems initially resulted because of his acrimonious divorce and his brief 
intermittent periods of unemployment. The real estate downturn was even more 
important and damaging to his financial situation. He receives substantial mitigating 
credit because he established these unforeseeable events and linked them to his 
financial predicament. However, I am not convinced his financial problems occurred 
under such circumstances that they are unlikely to recur and do not cast doubt on his 
current reliability, trustworthiness, or good judgment.  
 
Applicant’s financial problems began in 2007, and by 2008 almost all of the SOR 
debts were delinquent. The SOR was issued in October 2008. Nevertheless, he did not 
begin paying his SOR debts until January 2009. From January to April 2009, he 
aggressively endeavored to resolve his delinquent debts. He settled and paid, paid or 
otherwise resolved 14 of 21 SOR debts, and two debts are in payment plans, which are 
apparently satisfactory to the creditors. His actions on these 16 SOR debts show he 
 
 
12 
 
                                           
acted responsibly under the circumstances for those 16 debts.3 AG ¶ 20(e) applies to 
SOR ¶¶ 1.p, 1.q and 1.s to 1.u. Those five debts were either paid, or the creditor could 
not locate the account. I consider them to be successfully disputed. 
 
AG ¶ 20(c) does not fully apply. Applicant did not receive financial counseling 
and there are not “clear indications that the problem is being resolved or is under 
control.” However, he receives some credit because he has a sophisticated knowledge 
of debts, settlements, mortgages, and finances. He understands the security 
implications of delinquent debt. He has also established some, but not full mitigation 
under AG ¶ 20(d) because he showed some good faith4 in the resolution of his SOR 
debts through his negotiation and settlement of other resolution of 16 of his 21 SOR 
debts. He also has shown good faith in the restoration of currency for two of his SOR 
debts that are in payment plans. However, he cannot receive full credit because five 
large debts totaling about $350,000 were not sufficiently established as resolved.  He 
lived beyond his means (as indicated, for example, by his February 2006 BMW lease, 
totaling $80,725) and he did not show financial responsibility when he refinanced his 
properties, and took out second mortgages in order to pull more cash out of the 
properties. He did not provide sufficient information about what he did with the funds he 
borrowed on those mortgages. There is insufficient documentary evidence of his 
financial actions over the last four years to fully establish mitigating under AG ¶¶ 20(c) 
or 20(d).       
 
The lack of sufficient financial information was emphasized as a possible security 
concern in ISCR Case No. 06-20964 at 4-7 (App. Bd. Apr. 10, 2008), where the Appeal 
 
3“Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances 
outside his [or her] control, the Judge could still consider whether Applicant has since acted in a 
reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. 
Bd. Jan. 12, 2007) (citing ISCR Case No. 99-0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 
at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03-13096 at 4 (App. Bd. Nov. 29, 2005)). A component is 
whether the Applicant maintained contact with his or her creditors and attempted to negotiate partial 
payments to keep debts current. 
 
4The Appeal Board has previously explained what constitutes a “good faith” effort to repay 
overdue creditors or otherwise resolve debts: 
 
In order to qualify for application of [the “good faith” mitigating condition], an applicant 
must present evidence showing either a good-faith effort to repay overdue creditors or 
some other good-faith action aimed at resolving the applicant’s debts. The Directive does 
not define the term ‘good-faith.’ However, the Board has indicated that the concept of 
good-faith ‘requires a showing that a person acts in a way that shows reasonableness, 
prudence, honesty, and adherence to duty or obligation.’ Accordingly, an applicant must 
do more than merely show that he or she relied on a legally available option (such as 
bankruptcy [or statute of limitations]) in order to claim the benefit of [the “good faith” 
mitigating condition]. 
 
(internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting 
ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 
 
 
13 
 
Board focused on the judge’s responsibility to determine where an Applicant obtained a 
large sum of money to pay debts listed in the SOR stating: 
 
.  .  .  the Judge has significantly undercut the validity of his analysis of 
matters in mitigation in this case by focusing only on the current status of 
the debt owed the IRS and by not considering Applicant’s overall debt 
picture. While it is true that the outstanding debt to the IRS has been 
substantially reduced through refund intercepts and payments made by 
Applicant and his wife, Applicant and his wife have made most of this 
progress by incurring new debt in the form of a $30,000 loan and $6,200 
worth of credit card charges. The record evidence clearly indicates that 
Applicant has, in effect, done little more than transfer a large part of his 
outstanding IRS debt to new, apparently current, debts with private 
lenders. Any comprehensive evaluation of Applicant’s current financial 
status (which includes a determination of just how mitigating Applicant’s 
partial satisfaction of his IRS debt is in the context of the totality of the 
record evidence) must contain an acknowledgment of this fact along with 
some analysis of how it affects Applicant’s security worthiness. Yet the 
“Conclusions” section of the Judge’s decision contains no such analysis, 
and the Judge instead restricts his comments solely to the reduction of the 
IRS debt and the plan to retire the debt in the future. By failing to discuss 
the significance of the debts incurred to reduce the IRS debt, including 
some evaluation of Applicant’s future ability to repay the private debts in 
addition to the remaining IRS debt, the Judge ignored an important aspect 
of the case. This was error. 
 
Id. at 4.  From January to April 2009, Applicant paid $48,946 as indicated below 
to resolve most of his SOR debts:  
 
(1) January 2009 ($8,471): 1.a ($3,665), 1.b ($642), 1.e ($1,547), 1.h 
($1,300); 1.j ($1,317); 
 
(2) February 2009 ($4,027): 1.d ($1,400), 1.h ($1,300), 1.j ($1,327);  
 
(3) March 2009 ($11,557): 1.f ($3,720), 1.h ($1,300), 1.j ($1,327), 1.o (2nd 
mortgage $5,000); 1.s to 1.u ($210); and  
 
(4) April 2009 ($24,891): 1.c ($3,404), 1.f ($3,720), 1.f ($11,160), 1.h 
($1,300), 1.j ($1,307), 1.k ($4,000).   
 
Applicant agreed to provide a personal financial statement, indicating his income, 
all of his expenses, and debt payments each month (Tr. 158-159). I reinforced the 
importance of including every debt on his personal financial statement, especially in 
light of his negative income statement provided to the OPM investigator (Tr. 170-171). 
However, Applicant did not provide a personal financial statement.  He did not provide 
proof that he paid his share of the repairs on his truck (SOR ¶ 1.m). He erroneously 
 
 
14 
 
stated he had a payment plan and made the initial $1,891 payment on the debt in SOR 
¶ 1.c.  He said he thought the sale price on one property was sufficient to cover the 
mortgage when the actual sale price was $224,000 less than the mortgage plus interest. 
See discussion relating to SOR ¶ 1.i, supra at page 4.  I do not intend to imply Applicant 
is dishonest, but point out these mistakes to emphasize the importance of receiving 
complete documentation in this case so that I can better understand the flow of financial 
transactions and better determine the issue of financial responsibility.  
 
In sum, Applicant should have been more diligent and made greater efforts 
sooner to resolve his delinquent debts. His actions to date are insufficient to fully apply 
any of the mitigating conditions.   
 
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.  
 
The ultimate determination of whether to grant eligibility for a security clearance 
must be an overall commonsense judgment based upon careful consideration of the 
guidelines and the whole person concept. AG ¶ 2(c). I have incorporated my comments 
under Guideline F in my whole person analysis. Some of the factors in AG ¶ 2(a) were 
addressed under that guideline, but some warrant additional comment. 
 
Some mitigating evidence under the whole person concept tends to support 
approval of a security clearance. Applicant is 37 years old with an established 
employment record. There is no evidence of any security violation. He is a law-abiding 
citizen. Applicant has demonstrated his loyalty, patriotism and trustworthiness through 
his service to the Department of Defense as a contractor and through his hard work in 
the private sector for a well known and widely respected corporation. His current 
financial problems were caused by three factors beyond his control: (1) his divorce, (2) 
the real estate downturn, and (3) intermittent, brief periods of unemployment. Ultimately, 
he settled and paid, paid or otherwise resolved 14 of 21 SOR debts, and two debts are 
in current payment plans. He also resolved several other non-SOR debts. He made 
dramatic progress on debt resolution from January through April 2009. He documented 
expenditures of $48,000 in January through April 2009 to resolve his delinquent debts. 
 
 
15 
 
Several SOR debts were resolved earlier or were properly disputed. He is a patriotic 
U.S. citizen and I have no concern that he would jeopardize national security for 
pecuniary gain.   
The evidence against mitigating Applicant’s conduct is more substantial at this 
time. Applicant has a long history of financial problems. His debts were discharged in 
1996 through a Chapter 7 bankruptcy. The significance of his Chapter 7 bankruptcy is 
low because it is temporally remote, except to show his current financial problems are 
not isolated. In 2007 to 2009, he generated about 20 delinquent SOR debts. He 
admitted responsibility for 18 delinquent SOR debts. He failed to obtain financial 
counselling. He received the SOR in October 2008, and did not establish significant 
effort to resolve his debts until January 2009. Although he showed excellent effort over 
the last four or five months to resolve his delinquent debts, he could have acted more 
aggressively to avoid delinquent debt, to seek debt repayment or resolution, and to 
better document his remedial efforts over the past two years. He failed to clearly and 
convincingly explain how he raised $48,000 to satisfy his delinquent debts from January 
through April 2009. He failed to provide an updated personal financial statement. These 
factors show some financial irresponsibility and lack of judgment. Applicant will have a 
significant tax debt because of his resolution of some of his debts without making full 
payment. For example, on April 2, 2009, he paid a creditor $5,000 to resolve a debt of 
about $158,000. He will owe at least $50,000 federal taxes as a result of the release of 
liability for this second mortgage (the savings is about $153,000 and I assume his 
marginal tax rate will be about 30%). This tax debt will be offset from the losses resulting 
from the decrease in value of his real estate investments. Most importantly, the five 
debts in SOR ¶¶ 1.i ($224,000), 1.l ($21,000), 1.m ($28,000), 1.n ($69,000), and 1.o 
($17,000) were not sufficiently proven to be satisfactorily resolved. There was simply not 
enough documentary evidence for me to be confident that Applicant would not have 
future deficiency judgments issued on these five debts. Moreover, he is likely to have a 
substantial federal tax problem, assuming he does not repay these debts in full when 
they are finally resolved.  Because “[f]ailure 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,” I 
have lingering doubts about Applicant’s worthiness to hold a security clearance at this 
time.  
After weighing the disqualifying and mitigating conditions, and all the facts and 
circumstances, in the context of the whole person, I conclude Applicant has failed to 
provide sufficient evidence to fully mitigate the financial considerations security 
concerns at this time.    
 
I take this position based on the law, as set forth in Department of Navy v. Egan, 
484 U.S. 518 (1988), my careful consideration of the whole person factors and 
supporting evidence, my application of the pertinent factors under the Adjudicative 
Process, and my interpretation of my  responsibilities under the Guidelines. Applicant 
has failed to provide sufficient evidence to mitigate or overcome the government’s case. 
 
 
16 
 
For the reasons stated, I conclude he is not eligible for access to classified information 
at this time. 
 
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 to 1.h:  For Applicant 
Subparagraph 1.i:   Against Applicant 
Subparagraphs 1.j and 1.k: For Applicant 
Subparagraph 1.l to 1.o:  Against Applicant 
Subparagraphs 1.p to 1.u: For Applicant 
 
Conclusion 
 
In light of all the circumstances presented by the record in this case, it is not 
clearly consistent with the national interest to grant or continue Applicant’s eligibility for 
a security clearance. Eligibility for a security clearance is denied. 
 
 
 
____________________________ 
Mark W. Harvey 
Administrative Judge