KEYWORD: Guideline F
DIGEST: Even if Applicant was a victim of fraud, the record does not sustain the Judge’s
favorable conclusion as to Financial Considerations Mitigating Condition 20(b). A stranger
proposed to use Applicant’s good credit history as a basis for obtaining real estate.  There is
evidence that she has a college degree, owns two rental properties, and owns investment
accounts.  Applicant failed to perform a prior inspection of the property.   The Judge statement
that Applicant had no indication she was being set up, nor did she have reason to suspect
anything was awry is not consistent with the evidence. The agreement placed a reasonable person
on notice that she could end up with responsibility for the mortgage loan.  The record does not
sustain a conclusion that Applicant’s debt arose from causes outside her control. There is no
evidence to demonstrate what action, other than foreclosure, Applicant proposes to discharge a
facially valid debt.  This paucity of record evidence is significant, since foreclosure could result
in a deficiency. The record does not suggest that she is penurious or otherwise incapable of
arranging a satisfactory means of addressing this debt. Favorable decision reversed.
 
CASENO: 08-08435.a1
DATE: 07/16/2009
DATE: July 16, 2009
In Re:
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Applicant for Security Clearance
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ISCR Case No. 08-08435
APPEAL BOARD DECISION
2
APPEARANCES
FOR GOVERNMENT
Julie R. Mendez, Esq., Department Counsel
FOR APPLICANT
Pro Se
The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security
clearance.  On November 12, 2008, DOHA issued a statement of reasons (SOR) advising Applicant
of the basis for that decision–security concerns raised under Guideline F (Financial Considerations)
of Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive).  Applicant
requested a decision on the written record.  On March 31, 2009, after considering the record,
Administrative Judge Arthur E. Marshall, Jr., granted Applicant’s request for a security clearance.
Department Counsel appealed pursuant to Directive ¶¶  E3.1.28 and E3.1.30.
Department Counsel raised the following issues on appeal: whether the Judge erred in failing
to apply Financial Considerations Disqualifying Condition (FCDC) (b); whether the Judge erred in
his application of the mitigating conditions; and whether the Judge erred in his whole-person
analysis.  Finding error, we reverse.
Whether the Record Supports the Judge’s Factual Findings
A.  Facts 
The Judge made the following pertinent findings of fact: Applicant is a 58-year-old executive
assistant working for a Defense contractor.  She earns around $96,000 a year in salary and retirement
benefits.  She has a degree from an accredited university.
Applicant is in debt resulting from two real estate purchases.  She is indebted to one
mortgagee on an account that is $18,799 past due.  This debt is in foreclosure, the balance on the
loan being $63,750.  She is indebted to a second mortgagee on an account that is $45,399 past due.
This property is also in foreclosure, the balance of the loan being $380,000.  Neither debt has been
paid.  Applicant submitted “no evidence of subsequent payment[.]” Decision at 2.
In late 2005 or early 2006, Applicant answered an ad in a newspaper which she believed
might lead to a career in real estate.  The Judge quoted Applicant: “At that time, everyone was
getting in on making money by flipping real estate.”  As a consequence of answering the ad,
Applicant met with a man (P) who proposed “to use her credit for six months to purchase houses.”
For each house purchased, Applicant would make $10,000.  The houses would be fixed up and
quickly resold “at a competitive price.”  Id.
Item 3, Applicant’s Response to the SOR, contains a copy of this joint venture agreement.  This agreement1
states that P would pay Applicant $5,000 up front and the remaining $5,000 after the property has been transferred
“absolutely” from Applicant’s name to P’s name.  
The joint venture agreement states that P is “the principle party” of LLC.2
“In her response to the SOR, Applicant refers to two separate houses, both of which were apparently worth less3
than the value of the loans.  As stated above, the Judge also found that Applicant and P purchased two houses.  However,
the joint venture agreement appears to reference only one house, listing only one address rather than two.  It is not clear
whether the two SOR allegations refer to two houses or to two mortgages obtained on one house as part of the financing
arrangement.  For example, in Item 3 Applicant states that one house was purportedly valued at $575,000 and the other
at $425,000.  The two SOR allegations refer respectively to two mortgages, one with a balance of $63,750 and the other
with a balance of $380,000.  This apparent discrepancy is not explained in the record.  If the first allegation is supposed
to refer to the first house, there is no explanation as to how the amount of the loan was paid down so significantly.   See
Department Counsel Brief at 4, n. 16: “Note that Applicant discusses that she purchased two homes in this same manner.
Only one property appears to be showing up as a foreclosure.  There is no evidence regarding the status of the other
property.”   
3
In May 2006, Applicant entered into a joint venture with P and his limited liability
corporation (LLC).  The agreement was to be in effect for one year for the purpose of selling property
and, should the property not sell within that year, the agreement was to expire.  The agreement stated
that Applicant would receive $5,000 up front and the remaining $10,000 after purchasing the
property.   The property would be transferred to LLC after six months, and, if that transfer did not1
occur, the LLC would pay Applicant an additional $5,000.   LLC was to make the mortgage2
payments for one year and would lease the properties from Applicant.  The agreement stipulated that
LLC would be named on the deeds while Applicant would be named on the mortgages.  
Two houses were purchased in Applicant’s name.  The rent checks owed by P/LLC bounced.
Subsequently, Applicant went to view the properties for the first time.  She discovered that they were
in substantial need of repair.  One had extensive water damage; the other had a flooded basement
“and the garage was pulling away from the house.  A contractor working across the street told
[Applicant] that [P] had a bad reputation and that he would not deal with him.”   Decision at 3.  3
Applicant believed the appraiser had submitted a false report concerning the properties.  She
later discovered that she could not make contact with P, so she began investigating him.  She
discovered that he had been fired from a previous real estate company for “shady dealing.”  “She has
since filed charges against the man for bad checks.  She is helping her mortgage company investigate
the matter as fraudulent and is helping another victim in her legal suit against the man.”  Id.  The
Judge found that Applicant has taken responsibility for the mortgages but that they are too much for
her.  The properties have gone into foreclosure, which she believes was her only option, bankruptcy
being “the coward’s way out.”  Id.  
B.  Discussion
4
The Appeal Board’s review of the Judge’s findings of fact is limited to determining if they
are supported by substantial evidence–“such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion in light of all the contrary evidence in the same record.”
Directive  ¶ E3.1.32.1.  “This is something less than the weight of the evidence, and the possibility
of drawing two inconsistent conclusions from the evidence does not prevent an administrative
agency’s finding from being supported by substantial evidence.”  Consolo v. Federal Maritime
Comm’n, 383 U.S. 607, 620 (1966).  In evaluating the Judge’s findings, we defer to the Judge’s
credibility determinations.  Directive ¶ E3.1.32.1.
Throughout Department Counsel’s brief she asserts that the Judge’s decision is unsupported
by the weight of the record evidence.  The Board will address this concern in the discussion below.
Whether the Record Supports the Judge’s Ultimate Conclusions
 A Judge is required to “examine the relevant data and articulate a satisfactory explanation
for” the decision, “including a ‘rational connection between the facts found and the choice made.’”
Motor Vehicle Mfrs. Ass’n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983)(quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)).  “The
general standard is that a clearance may be granted only when ‘clearly consistent with the interests
of the national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988).  The Appeal
Board may reverse the Judge’s decision to grant, deny, or revoke a security clearance if it is arbitrary,
capricious, or contrary to law.  Directive ¶¶ E3.1.32.3 and E3.1.33.3.  
Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong
presumption against the grant or maintenance of a security clearance.  See Dorfmont v. Brown, 913
F. 2d 1399, 1401 (9  Cir. 1990), cert. denied, 499 U.S. 905 (1991).  After the Government presentsth
evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those
concerns.  See Directive ¶ E3.1.15.  “The application of disqualifying and mitigating conditions and
whole person factors does not turn simply on a finding that one or more of them apply to the
particular facts of a case.  Rather, their application requires the exercise of sound discretion in light
of the record evidence as a whole.”  See, e.g., ISCR Case No. 05-03635 at 3 (App. Bd. Dec. 20,
2006).
In deciding whether the Judge's rulings or conclusions are arbitrary or capricious, the Board
will review the Judge's decision to determine whether:  it does not examine relevant evidence; it fails
to articulate a satisfactory explanation for its conclusions, including a rational connection between
the facts found and the choice made; it does not consider relevant factors; it reflects a clear error of
judgment; it fails to consider an important aspect of the case; it offers an explanation for the decision
that runs contrary to the record evidence; or it is so implausible that it cannot be ascribed to a mere
difference of opinion.  In deciding whether the Judge's rulings or conclusions are contrary to law,
the Board will consider whether they are contrary to provisions of Executive Order 10865, the
Directive, or other applicable federal law.  See ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2,
2006).
5
The security concern under Guideline F is as follows: “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.”  Directive ¶
E2.18.  Department Counsel agrees that the evidence supports the Judge’s conclusion that the
circumstances of Applicant’s case raise FCDCs.  However, Department Counsel contends that the
Judge’s favorable application of the Financial Conditions Mitigating Conditions (FCMC) is not
supported by record evidence.  Department Counsel’s argument has merit.  The Judge applied FCMC
20(b), which mitigates security concerns when “the conditions that resulted in the financial problem
were largely beyond the person’s control . . . and the individual acted responsibly under the
circumstances[.]”  Directive ¶ E2.20(b).  Department Counsel contends that the record is not
sufficiently developed to sustain the Judge’s conclusion that Applicant was a victim of fraud.  The
Board notes this argument.  While there is evidence to demonstrate that P has been charged with
fraud arising out of numerous real estate ventures, there is little evidence to resolve reasonable
questions as to the nature of Applicant’s involvement.   However, even assuming that Applicant was
a victim of fraud, the record evidence does not sustain the Judge’s favorable conclusion as to FCMC
20(b).  For example, record evidence demonstrates that a stranger proposed to use Applicant’s good
credit history as a basis for obtaining real estate.  This alone could have prompted a reasonable
person not to participate in the venture.  Furthermore, Applicant failed to perform a prior inspection
of the property, the address of which was listed in the written agreement.   The Judge’s decision does
not seriously address the significance of this evidence; rather, he states, without sufficient analysis,
that Applicant “had no indication she was being set up, nor did she have reason to suspect anything
was awry.”  Decision at 6.  This statement is not consistent with the evidence described above, nor
is it even consistent with the plain terms of the joint venture agreement, which obligate P, after six
months, only to “start the process” of transferring the purchased property to his name, and to pay
Applicant the full balance owed under the agreement only “[w]henever the transference is
complete[.]”  However, the agreement also provides that if the subject property has not been sold
within a year, the agreement will expire, which could have placed a reasonable person on notice that
he or she could well end up with ultimate responsibility for the mortgage loan.  Item 3, Response to
SOR.  The record does not sustain a conclusion that Applicant’s debt arose from causes outside her
control.  
Furthermore, Department Counsel argues persuasively that the record does not support the
second clause of FCMC 20(b), that Applicant has acted responsibly in regard to the debt.  In the first
place, the fact of incurring this debt under the circumstances of this case is not consistent with
responsible behavior.  Second, there is no evidence, other than the fact that the property is subject
to foreclosure, to demonstrate what action Applicant proposes to discharge a facially valid debt to
the mortgagee.  This paucity of record evidence is significant, insofar as it is foreseeable that the
foreclosure sale could result in a deficiency, given Applicant’s admission that the property is not
See Item 3, Response to SOR, Letter to Attorney General.  “When I went to see [the house] there were water4
stains in the living room from upstairs and there was water damage in the basement.  A lady was living in the house.  This
lady was the previous owner of the house. [P] had told her she could rent the house for a year and then buy it back.  She
took me around and showed me all the damage.”  Referring to a second house, Applicant stated that it “was in worse
shape than the first one.  This house was valued at $425,000.00.  When I first saw it I was shocked.  I would not have
paid $200,000 for it.  The garage was pulling away from the house.”  See note 3 above regarding the apparent
discrepancies in the record concerning whether there were two houses or one that were the subject of the agreement
contained in Item 3.    
Applicant introduces new evidence in her reply brief.  The Board cannot consider Applicant’s new evidence5
on appeal.  Directive ¶ E3.1.29.
See also the Judge’s finding, referenced above, and record evidence that  P or his LLC were to be placed on6
the deed.  However, the record demonstrates that his name was not on the mortgage document, which remains in
Applicant’s name alone.  Decision at 3; Item 3, Response to SOR, Joint Venture Agreement.        
6
worth the value of the loan.   Department Counsel cites evidence that Applicant has a college degree,4
that she owns two rental properties, and that she owns investment accounts.  The record does not
suggest that she is penurious or otherwise incapable of arranging a satisfactory means of addressing
this debt.  
The Judge also states that FCMC 20(a) “partially applies.”  This provision of the Directive
mitigates security concerns when the behavior that gave rise to the debts happened a long time ago,
was infrequent, or not likely to recur and which “does not case doubt on the individual’s current
reliability, trustworthiness, or good judgement.”  Directive ¶ 20(a)  The Judge does not provide
analysis of this provision.   In light of the discussion above, however, the Board concludes that
Applicant has not met her burden of persuasion that her case casts no doubt on her good judgment.
Furthermore, the Board has considered the Judge’s whole-person analysis and also concludes that
it is not sustainable on this record.   The Judge states that P’s proposed venture “was sufficiently5
simple as to make sense [however, it] was sufficiently complex in its execution as to obfuscate a less
than experienced real estate investor.”  Decision at 8.   However, the Judge’s findings and the record
as a whole suggest a plan not daunting in its complexity but unreasonable on its face, especially to
a person like Applicant who apparently has some experience in real estate matters, as demonstrated
by her response to the SOR.  The record contains a number of assertions that raise serious questions
about Applicant’s good judgement.  For example, Applicant’s response to the SOR includes a letter
she wrote to the state attorney general, complaining about P’s activities.  This letter states that “the
loan officer that handled my loan said there was something wrong about my loan and she did not like
it.  She soon after that quit that company.” Item 3.  This reinforces previously discussed record
evidence as to the facial unreasonableness of Applicant’s undertaking with P.   As Department6
Counsel argues, the questions raised by the evidence are not resolved by the matters Applicant has
submitted in her behalf.  The Judge’s whole-person analysis is not supported by the record.
Accordingly, the Judge’s favorable decision is not sustainable.  In light of this conclusion the Board
need not address Department Counsel’s argument that the Judge failed to apply FCDC 19(b).  
Order
7
The Judge’s favorable security clearance decision is REVERSED.  
  
Signed: Michael Y. Ra’anan         
Michael Y. Ra’anan
Administrative Judge
Chairman, Appeal Board
Signed: Jean E. Smallin                 
Jean E. Smallin
Administrative Judge
Member, Appeal Board
Signed: James E. Moody                 
James E. Moody
Administrative Judge
Member, Appeal Board