DOHA acted under Executive Order 10865, Safeguarding Classified Information within Industry (February1
20, 1990), as amended; Department of Defense (DoD) Directive 5220.6, Defense Industrial Personnel Security
Clearance Review Program  (January 2, 1992), as amended (Directive), and the revised adjudicative
guidelines (RAG) effective within DoD on September 1, 2006. 
1
                                                             
                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
 )       ISCR Case No. 08-07615
SSN: )
)
Applicant for Security Clearance )
Appearances
For Government: Eric N. Borgstrom, Esquire, Department Counsel
For Applicant: Pro se  
______________
Decision
______________
METZ, John Grattan, Jr., Administrative Judge:
On 15 May 2009, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F
(Financial Considerations).  Applicant answered the SOR 7 July 2009, requesting a1
hearing. DOHA assigned the case to me 31 August 2009, and I convened a hearing 6
October 2009. DOHA received the transcript (Tr.) 14 October 2009.
 
Findings of Fact
Applicant admitted the SOR allegations. He is a 31-year-old access control
manager employed by a defense contractor since September 2007. He seeks to retain
the clearance he obtained in December 2002.
The amounts alleged in the SOR are the totals of the three outstanding mortgages, not all of which are2
delinquent. Nevertheless, the houses were foreclosed and Applicant lacks the means to satisfy the mortgages.
2
The SOR alleges, government exhibits confirm, and Applicant admits, four
delinquent accounts totaling over $1.2 million.  Three accounts (SOR 1.b., 1.c., and2
1.d.) are for first and second mortgages on two properties Applicant bought through an
investment program that turned out to be a Ponzi scheme. The fourth account (SOR
1.a.) is a $200 electric bill for one of the properties that Applicant has since paid. This
debt was incurred by tenants living in the property who were responsible for paying the
electric bill. He was unaware of this bill until the Ponzi scheme began to unravel.
Applicant received his undergraduate degree in May 2002. He has been
employed by a series of defense contractors since September 2002, and obtained his
first clearance in December 2002. He has never had a security violation or had his
clearance suspended. He bought his own home in December 2005, and his first and
second mortgages on this home have never been delinquent. His credit reports show
that the vast majority of his credit accounts are current or paid satisfactorily. His net
monthly income is approximately $4,400. He lives within his means.
The debts alleged in the SOR arose when Applicant was led into what he
believed was a legitimate investment opportunity through more seasoned and
experienced colleagues at work and at his church. Applicant was raised to respect the
judgment of his elders, and in this case the elders themselves believed the program
was a legitimate enterprise. Broadly described, the program involved Applicant (and
others) buying houses in his name with the assistance of the company, and then hiring
the company to manage the properties for five years—at which point the properties
would conceivably be sold at a profit that Applicant and the company would share.
Applicant bought two properties, in May and June 2007.
The program turned out to be a Ponzi scheme, the kind that generates news
headlines and criminal charges against the proponents. The scheme began to fall apart
in August 2007, when state agencies acted to shut down the program and pursue
securities violations and investment fraud charges against the program’s principals. The
assets of the company have been seized, but the “investors” are stuck with mortgages
on properties that they generally cannot pay.
In Applicant’s case, his two properties were foreclosed, and he has attempted
with varying degrees of success to work with the lenders and real estate agents to
resolve the debts through short sales. The final disposition of the properties remains
unsettled, but it is unlikely Applicant can pay any deficiency remaining after the
properties are sold. It is also unlikely that the creditors will pursue any deficiency. There
is the possibility of individual suits or class action suits against the perpetrators.
However, any recovery is unlikely to be enough to cover any remaining debt on the
properties.
¶ 19.(a) inability or unwillingness to satisfy debts; (c) a history of not meeting financial obligations.3
3
Policies
The Revised Adjudicative Guidelines (RAG) list factors to be considered in
evaluating an applicant’s suitability for access to classified information. Administrative
judges must assess both disqualifying and mitigating conditions under each issue fairly
raised by the facts and circumstances presented. Each decision must also reflect a fair
and impartial commonsense consideration of the whole-person factors listed in RAG ¶
2(a). The presence or absence of a disqualifying or mitigating condition is not
determinative for or against applicant. However, specific adjudicative guidelines should
be followed where a case can be measured against them, as they represent policy
guidance governing the grant or denial of access to classified information. Considering
the SOR allegations and the evidence as a whole, the relevant, applicable, adjudicative
guideline is Guideline F (Financial Considerations).
Security clearance decisions resolve whether it is clearly consistent with the
national interest to grant or continue an applicant’s security clearance. The government
must prove, by something less than a preponderance of the evidence, controverted
facts alleged in the SOR. If it does so, it establishes a prima facie case against access
to classified information. Applicant must then refute, extenuate, or mitigate the
government’s case. Because no one has a right to a security clearance, an applicant
bears a heavy burden of persuasion.
Persons with access to classified information enter into a fiduciary relationship
with the government based on trust and confidence. Therefore, the government has a
compelling interest in ensuring each applicant possesses the requisite judgement,
reliability, and trustworthiness of those who must protect national interests as their own.
The “clearly consistent with the national interest” standard compels resolution of any
reasonable doubt about an applicant’s suitability for access in favor of the government.
Analysis
The government established a case for disqualification under Guideline F. On
paper, Applicant owes an enormous amount of money that he cannot repay. However,
this inability, not unwillingness, to pay does not constitute a history of financial
problems.  Applicant’s personal finances have been, and remain, solid. He was the3
victim of a Ponzi scheme that left him solely responsible for debts on two properties that
he never reasonably expected to bear. He entered the scheme on the recommendation
of more seasoned and experienced colleagues, who themselves appear to have been
victimized by the scheme.
Applicant satisfies important aspects of the mitigating factors for financial
concerns. While his financial difficulties were both recent and multiple, they were
confined to a relatively short period. They certainly occurred under circumstances not
¶ 20.(a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that4
it is unlikely to recur .
¶ 20.(b) the conditions that resulted in the financial problem were largely beyond the person’s control . . . and5
the individual acted responsibly under the circumstances.
¶ 20.(c)  the person has received or is receiving counseling for the problem and there are clear indications6
that the problem is being resolved or is under control.
¶ 20.(d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts. For7
this factor to apply, there must be an “ability” to repay the debts, the “desire” to repay, and evidence of a good-
faith effort to repay. A systematic, concrete method of handling his debt, which is present here as to the
electric bill.
4
likely to recur.  The debts were largely due to circumstances beyond his control, but he4
acted responsibly in addressing his debts. Under the circumstances of this case,
keeping his personal finances straight while the Ponzi-scheme-related properties are
resolved is the responsible course of action.  Similarly, credit counseling is not an issue5
in this case, his personal finances are under control, and the ultimate resolution of the
Ponzi-scheme-related properties is unlikely to effect his personal finances.  Finally, he6
paid the one debt that was reasonably within his ability to pay, one he was not aware of
until the scheme began to unravel.7
The disqualifying and mitigating factors under financial conditions do not really
contemplate the kind of financial circumstances Applicant found himself in. The real
security concern in this case boils down to a whole-person issue. Despite the size of the
debt, the circumstances surrounding it are such that there is no reasonable risk that
Applicant would resort to illegal activity to obtain funds to pay it. I conclude Guideline F
for Applicant.
Formal Findings
Paragraph 1. Guideline F: FOR APPLICANT
Subparagraph a-d: For Applicant
Conclusion
In light of all the circumstances presented by the record in this case, it is clearly
consistent with the national interest to grant or continue a security clearance for
Applicant. Clearance granted.  
                                              
                                             
JOHN GRATTAN METZ, JR
Administrative Judge