DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of:                                            )
                                                                     )
------------------------- )       ISCR Case No. 08-11137
SSN: ----------------- )
)
Applicant for Security Clearance )
Appearances
For Government: Jennifer Goldstein, Esquire, Department Counsel
For Applicant: Pro Se
______________
 Decision
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WESLEY, Roger C., Administrative Judge:
History of Case
On May 29, 2009, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) detailing reasons why DOHA could not make the
preliminary affirmative determination of eligibility for granting a security clearance, and
recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. 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 (AGs) promulgated by the President
on December 29, 2005, and effective within the Department of Defense for SORs issued
after September 1, 2006.
Applicant responded to the SOR on June 25, 2009, and requested a hearing.  The
case was assigned to me on July 15, 2009, and was scheduled for hearing on August
19, 2009.  A hearing was held on the scheduled date for the purpose of considering
whether it would be clearly consistent with the national interest to grant, continue, deny,
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or revoke Applicant’s security clearance. At the hearing, the Government's case
consisted of seven exhibits; Applicant relied on two witnesses (including himself) and
four exhibits.  The transcript (Tr.) was received on August 27, 2009.  Based upon a
review of the case file, pleadings, exhibits, and testimony, eligibility for access classified
information is denied.
Summary of Pleadings
Under Guideline F, the Government alleges in the SOR that Applicant (a)
accumulated three debts exceeding $2,000 and (b) incurred a federal tax lien for
$84,402 in unpaid federal taxes.
In his response to the SOR, Applicant admitted each of the alleged debts. He
claimed to be making payments on the debts alleged.  
      Findings of Fact
Applicant is a 38-year-old waste management technician and driver for a defense
contractor who seeks a security clearance.  The allegations covered in the SOR and
admitted by Applicant are adopted as relevant and material findings.  Additional findings
follow.
Applicant is married, but currently separated from his spouse (see ex. 1; Tr. 39).
He has no children from his marriage.
Applicant experienced recurrent periods of unemployment between October 2001
and March 2007 (Tr. 25-29).  Some of his layoffs were attributable to job-related injuries
that affected his work. Others were due to the terminations of his employers’ work
contracts (Tr. 22-24).  During these layoffs, he struggled to pay his bills and manage his
finances.
When Applicant was about 14 years of age (sometime in 1985), he received $1.1
million from a trust fund established by his grandmother (Tr. 30-33).  With some of the
trust funds, Applicant bought a mobile home in 1995 (Tr. 32). He repaid all of his existing
debts at the time with other funds he received from the trust.  And with the balance of his
trust funds, he made large gifts to various family members in need.    
Because of his employment conditions, Applicant encountered difficulties paying
his utilities and making his monthly home loan and motorcycle payments (Tr. 22-23, 30).
When he could not make his loan payments on his mobile home, his landlord smashed
the unit with a bulldozer and destroyed the unit (Tr. 32-33).  
Applicant’s inherited trust fund contained mostly stocks and other securities.
Applicant sold penny stocks from the trust to purchase his home (sometime in 1995) and
assist his family members (Tr. 31-32).  Because he incurred taxable gains on his stock
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sales, he incurred tax liabilities (Tr. 31). The IRS initially assessed $86,000 in taxes,
interest and penalties on his gains (Tr. 31).  
Beginning in May 2009, Applicant initiated $25 monthly payments to the IRS (Tr.
33-35). He made two payments to the IRS in May and July 2009, respectively (see ex. A;
Tr. 35).  Not satisfied with his minimal monthly payments, the IRS asked him for a
detailed accounting of his monthly expenses in August 2009 (Tr. 35). Applicant
responded by making a $50 payment to the IRS on the date of the hearing (Tr. 35-36).
In the coming week (i.e., the week of August 24, 2009), the IRS scheduled the
commencement of garnishment action on Applicant’s wages (Tr. 36).  Under the terms of
the IRS garnishment letter, the IRS will take $2,000 a month out of Applicant’s wages,
leaving him with just $800 a month to live on (Tr. 67-68). Without identifying the tax
years, the garnishment letter confirmed that Applicant owed $100,000 in back federal
taxes, interest, and penalties (Tr. 69).  He has no tax advocate or tax professional to
assist him with his taxes.
To date, Applicant has made just three payments (totaling $100) towards
satisfying his tax debt (see ex. A; Tr. 35-36, 54-55, 58).  He has received no tax or other
financial counseling and has no viable employment options to supplement his income
and address his other debts (Tr. 46, 68).  
Besides his tax delinquencies, Applicant accrued three smaller delinquent debts:
a utility debt (creditor 1.a), a veterinarian bill (creditor 1.b), and an ambulance bill
(creditor 1.c).  Two of these debts (creditors 1.a and 1.c) were purchased by the same
collection firm and have been consolidated into one monthly payment of $50.00 (see ex.
C). To date, Applicant documents two payments to creditors 1.a and 1.c in the respective
amounts of $50 each (see exs. B through D; Tr. 52-53, 59-60). Applicant has not
provided any documented payments to his remaining creditor (creditor 1.b), despite his
stated commitment to satisfy this disputed debt (Tr. 22-23).
Applicant nets approximately $2,000 a month (Tr. 39). His monthly expenses
include his rent ($250), utilities ($75 to $100), cell phone ($125), car payments ($200),
car insurance ($25), and gas for his truck ($100 to $150).  He currently has no health
insurance or medical expenses; his medical bills are all covered by his employer (Tr. 41).
He has no bank account or 401(k) retirement account (Tr. 44, 47). His spouse
contributes nothing to his monthly expenses.  By contrast, he has provided material
financial support to her, albeit nothing since January 2009 (Tr. 39-41).
In 2007 Applicant was involved in an employment-related accident (Tr. 45-46).
He incurred medical bills in connection with the accident that his employer covered,
except for the ambulance bill identified in the SOR (Tr. 46). 
Applicant has encouraging endorsements from members of his employer group.
His direct supervisor has known him since 1997 and describes his life as a “little
scattered” (Tr. 63).  She credited him with making earnest efforts to reconcile his tax
problems with the IRS (Tr. 63).  She described Applicant as a very important asset to
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their company, which is located in a very small rural town that has limited labor
resources (Tr. 70).  
Policies
The AGs list guidelines to be considered by judges in the decision-making
process covering DOHA cases. These guidelines take into account factors that could
create a potential conflict of interest for the individual applicant, as well as considerations
that could affect the individual’s reliability, trustworthiness, and ability to protect classified
information. These guidelines include "[c]onditions that could raise a security concern
and may be disqualifying” (disqualifying conditions), if any, and all of the "[c]onditions
that could mitigate security concerns,” if any. These guidelines must be considered
before deciding whether or not a security clearance should be granted, continued, or
denied.  Although, the guidelines do not require judges to place exclusive reliance on the
enumerated disqualifying and mitigating conditions in the guidelines in arriving at a
decision. 
In addition to the relevant AGs, judges must take into account the pertinent
considerations for assessing extenuation and mitigation set forth in 2(a) of the AGs,
which are intended to assist the judges in reaching a fair and impartial, commonsense
decision based upon a careful consideration of the pertinent guidelines within the context
of the whole person. The adjudicative process is designed to examine a sufficient period
of an applicant’s life to enable predictive judgments to be made about whether the
applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered together with the following 2(a) factors: (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 chances; (7) the motivation for the conduct; (8) the potential for
pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
Viewing the issues raised and evidence as a whole, the following individual
guidelines are pertinent herein:
Financial Considerations
The Concern: Failure or inability to live within one’s means, satisfy
debts and meet financial obligations may indicate poor self-control, lack of
judgment, or unwillingness to abide by rules and regulations, all of which
can raise questions about an individual’s reliability, trustworthiness and
ability to protect classified information. An individual who is financially
overextended is at risk of having to engage in illegal acts to generate
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funds.  Compulsive gambling is a concern as it may lead to financial
crimes including espionage.  Affluence that cannot be explained by known
sources of income is also a security concern. It may indicate proceeds
from financially profitable criminal acts. AG, ¶ 18.
Burden of Proof
By virtue of the principles and policies framed by the revised AGs, a decision to
grant or continue an applicant's security clearance may be made only upon a
threshold finding that to do so is clearly consistent with the national interest.  Because
the Directive requires administrative judges to make a commonsense appraisal of the
evidence accumulated in the record, the ultimate determination of an applicant's
eligibility for a security clearance depends, in large part, on the relevance and
materiality of that evidence. See Kungys v. United States, 485 U.S. 759, 792-800
(1988).  As with all adversarial proceedings, the judge may draw only those inferences
which have a reasonable and logical basis from the evidence of record.  Conversely,
the judge cannot draw factual inferences that are grounded on speculation or
conjecture.
The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that
the facts proven have a material bearing  to the applicant's eligibility to obtain or
maintain a security clearance. The required materiality showing, however, does not
require the Government to affirmatively demonstrate that the applicant has actually
mishandled or abused classified information before it can deny or revoke a security
clearance. Rather, consideration must take account of cognizable risks that an
applicant may deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted
or controverted facts, the evidentiary burden shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation,
or mitigation.  Based on the requirement of  Exec. Or. 10865 that all security
clearances be clearly consistent with the national interest, the applicant has the
ultimate burden of demonstrating his clearance eligibility. “[S]ecurity-clearance
determinations should err, if they must, on the side of denials.” See Department of the
Navy v. Egan, 484 U.S. 518, 531 (1988). 
Analysis
Applicant is a respected employee of a defense contractor who accumulated
delinquent debts associated with (a) his making trust distributions to his family
members from a trust created by his grandmother without making provision for
corresponding tax payments to the IRS and (b) his experiencing recurrent periods
unemployment without any retained monetary resources to cover his debts during
periods of financial stress.  
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Applicant’s pleading admissions of the debts covered in the SOR (sometimes
referred to as judicial admissions) negate the need for any independent proof (see
McCormick on Evidence, § 262 (3d ed. 1984)). Each of his listed debts are fully
documented in his latest credit reports and provide ample independent proof of his
debts. Applicant and his immediate supervisor each confirmed the IRS’s latest
enforcement demands and garnishment intentions. Applicant’s accumulation of
delinquent debts and his past inability to pay these debts warrant the application of
two of the disqualifying conditions (DC) of the Guidelines: DC ¶ 19(a), “inability or
unwillingness to satisfy debts,” and DC ¶19(c)) “a history of not meeting financial
obligations.”
Without any documented payment history or tangible plan to resolve his major
tax debt, Applicant cannot be credited with any more than minimal  progress to date in
regaining control of his finances and provides no hard assurances of any commitment
to resolve his IRS debt (by far the largest of his four accumulated debts).  To date, he
has made just three small payments on his federal tax lien, and faces almost certain
garnishment in the very near future. 
Applicant has made some tangible progress on two of his smaller debts: his
utility and ambulance debts.  He documented payments to creditors 1.a and 1.c in the
aggregate amount of $100, and can be expected to fulfill his commitments to
discharge these two small debts in the foreseeable future.  However, he has not made
any headway in addressing his veterinarian bill to date. 
Applicant’s progress to date in regaining control of his finances is encouraging,
but is still a considerable work in progress that is only recently being addressed.  He
still is working on addressing his major IRS debt and finalizing repayment efforts with
his three other creditors. At this time, he can provide no predicable estimates as to
when he will be able to make any significant headway on his IRS debt and satisfy his
smaller debts. 
Based on his evidentiary showing, Applicant’s proofs are sufficient to establish
some extenuating circumstances associated with his debt accumulations.  As a result,
MC  ¶ 20(b) of the financial considerations guideline, “the conditions that resulted in
the behavior were largely beyond the person’s control (e.g., loss of employment, a
business downturn, unexpected medical emergency, or a death, divorce, or
separation, and the individual acted responsibly,” has some application to Applicant’s
circumstances. 
Applicant’s repayment efforts with creditors 1.a, and 1.c entitle him to some
mitigation credit under both  MC ¶ 20(d), “the individual initiated a good-faith effort to
repay overdue creditors or otherwise resolve debts,” and MC ¶ 20(c), “the person has
received or is receiving counseling for the problem and/or there are clear indications
that the problem is being resolved or is under control.” Both of these mitigating
conditions have partial application to Applicant’s situation, given his tight financial
circumstances.
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Full mitigation credit is not available to Applicant, however, based on the facts
of this case. Neither Applicant’s oral nor written evidence reflect any significant
voluntary repayment efforts on his major tax debt and one of his smaller debts. His
payment receipts do reflect some modest repayment efforts in recent months. These
efforts, although very limited, are encouraging. They are not enough, though, at this
time to warrant full application of any of the mitigating conditions covered in the
financial guideline.
Moreover, even if Applicant’s debt delinquencies did arise due to circumstances
outside of his control, he could have been reasonably expected to have exerted more
responsible efforts in addressing his debts once the conditions that contributed to the
delinquencies had passed or eased, and his finances had improved. See ISCR Case
03-01059 at 3 (App. Bd. Sep. 24, 2004). Not only are his listed debt delinquencies
ongoing, but he has failed to address them in any material way.  
Holding a security clearance involves a fiduciary relationship between the
Government and the clearance holder. Quite apart from any agreement the clearance
holder may have signed with the Government, the nature of the clearance holder’s
duties and access to classified information necessarily imposes important duties of
trust and candor on the clearance holder that are considerably higher than those
typically imposed on government employees and contractors involved in other lines of
government business.  See Snepp v. United States, 444 U.S. 507, 511 n.6 (1980). 
Financial stability in a person cleared to access classified information is
required precisely to inspire trust and confidence in the holder of the clearance.  While
the principal concern of a clearance holder’s demonstrated financial difficulties is
vulnerability to coercion and influence, judgment and trust concerns are explicit in
financial cases.  Failure of the applicant to make concerted efforts to pay or resolve
his debts when able to do so raises security-significant concerns about the sufficiency
of the applicant’s demonstrated trust and judgment necessary to safeguard classified
information.
Whole-person assessment does not enable Applicant to surmount the judgment
questions raised by his accumulation of delinquent debts.  His positive endorsement
from his management team merit considerable praise and commendation.  In balance,
though, he has not shown enough tangible effort in addressing his tax and veterinarian
accounts to mitigate his still delinquent debts and credit him with restored control over
his finances. 
Taking into account all of the extenuating facts and circumstances surrounding
Applicant’s debt accumulations, the limited resources he has had to address them,
and the modest steps he has mounted to address his old debts, it is still too soon to
make safe predictive judgments about Applicant’s ability to repay his largest debts and
restore his finances to stable levels commensurate with his holding a security
clearance. Unfavorable conclusions warrant with respect to the allegations covered by
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subparagraphs 1.b and 1.d.  His demonstrated repayment efforts are sufficient to
mitigate the allegations contained in subparagraphs 1.a and 1.c.
In reaching my recommended decision, I have considered the evidence as a
whole, including each of the factors and conditions enumerated in 2(a) of the AGs.
Formal Findings 
In reviewing the allegations of the SOR in the context of the findings of fact,
conclusions, and the factors and conditions listed above, I make the following
separate formal findings with respect to Applicant's eligibility for a security clearance.
GUIDELINE F (FINANCIAL CONSIDERATIONS):       AGAINST APPLICANT
Sub-paras: 1.b and 1.d:           Against Applicant
Sub-paras. 1.a and 1.c: For Applicant
Conclusions
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 security
clearance.   Clearance is denied.
                                  
Roger C. Wesley
Administrative Judge