DEPARTMENT OF DEFENSE 
DEFENSE OFFICE OF HEARINGS AND APPEALS 
 
         
 
 
 
In the matter of: 
 
             
            SSN:  
 
Applicant for Security Clearance 
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ISCR Case No.   07-15622 
 
Appearances 
 
For Government: Eric H. Borgstrom, Esquire, Department Counsel 
For Applicant: Pro Se 
 
 
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Decision 
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WESLEY, Roger C. Administrative Judge: 
 
 On February 3, 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 March 6, 2009, and elected to have his case  
decided on the basis of the written record. Applicant received the File of Relevant 
Material (FORM) on September 1, 2009, and responded within the time permitted with 
supplemental documentation. The case was assigned to me on October 15, 2009. 
Based upon a review of the case file, pleadings, and exhibits, eligibility for access to 
classified information is granted. 
 
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Summary of Pleadings 
 
 Under Guideline F, the government alleges that Applicant was ordered to pay a 
judgment of $75,000 to a corporation.  The SOR alleges that a judgment was formally 
entered against Applicant in July 2005, in the approximate amount of $75,000, and 
remains unsatisfied.   
 
 In his response to the SOR, Applicant admitted the allegations and explained the 
circumstances that gave rise to litigation between himself and his partners on one side, 
and the corporate entity who sued them over a naming rights dispute associated with 
the building of a local hockey rink, and who ultimately prevailed with a judgment, holding 
Applicant and his co-obligors jointly and severally liable. Applicant claims he appealed 
the judgment and was unsuccessful. He claimed he was a well-regarded engineering 
professional with his employer and an active civic member of his community. He 
claimed he had been unsuccessful in trying to settle or arrange a payment resolution of 
the judgment with the judgment creditor. 
 
Findings of Fact 
 
 Applicant is a 57-year-old senior engineer 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. 
 
Background 
 
 Applicant is married and has one 12-year-old son. He earned a bachelor's 
degree in industrial engineering in 1984, and a master’s degree in industrial engineering 
from accredited universities (see Item 1). Applicant was employed in the engineering 
field from 1996 to October 2004 and in February 2005.  
 
 In 2001, Applicant and two individuals formed a partnership (A Group) for the 
sole purpose of constructing and operating an ice skating facility in their state. Each of 
the individuals committed different amounts of capital to the enterprise (with Applicant 
committing the largest monetary share: $100,000, as compared to $25,000 each for the 
other individuals), but shared equal percentages of ownership in the venture (see Item. 
3). Applicant and his partners all shared a lifelong interest in ice hockey and were 
actively involved in the sport at both the youth and adult levels, as participants, 
coaches, and referees (Items 3 and 5).  
 
 
2 
 
 
 
 To fund his portion of the funds needed to capitalize A Group, Applicant arranged 
a second mortgage on his home from B Bank. With the $150,000 in raised capital, A 
Group was able to acquire (subject to a senior mortgage) the land necessary for the 
facility, secure the necessary construction plans and engineering studies, and complete 
market studies that reflected the need and viability of the project. While the forming A 
Group partners were able to secure other financial investors during this start-up phase, 
the contributions of these prospective investors were deferred pending receipt of the 
necessary approvals to proceed with the project.  
 
 After protracted negotiations, A Group reached agreement with RA that 
extended, inter alia, exclusive naming and broadcasting rights to RA with respect to the 
proposed ice skating facility (see Items 5 and 6). In return, RA committed to paying A 
Group $2 million in six installments. After the initial $300,000 in RA outlays to A Group 
under their agreement, RA committed to paying the remaining $1.7 million upon 
achievement of certain construction goals (e.g., ground-breaking, completion of exterior 
walls and roof, 30 days preceding the first scheduled event, and the date the first public 
event was held). Several contingencies were included in the agreement as well, 
including a ground-breaking date of September 2001 (Items 5 and 6). 
 
 Applicant and his partners each executed separate personal guaranty 
agreements with RA (see Item 5). Each partner guaranteed A Group's obligations under 
the terms of their agreement with RA up to $75,000, and permitted RA to take judgment 
against each partner in the event of a default. Each of the guarantors, in turn, were 
entitled to release from their guaranty obligations when A Group obtained a loan 
commitment which obligated RA to pay A Group the final installment called for under 
their agreement (see Item 3).  
 
 Soon after finalization of A Group's agreement with RA, A Group obtained a loan 
commitment from its lender (B Bank) in the amount of $4.4 million. When A Group 
forwarded the loan commitment to RA, RA paid the last installment ($125,000) to A 
Group but refused to satisfy a condition set by B Bank that RA either escrow its 
obligations or provide a letter of credit. RA also failed to agree to several alternative 
(and more moderate) security provisions suggested by A Group and B Bank.  As a 
result, B Bank withdrew its loan commitment, and A Group forfeited a $50,000 loan 
application fee (Item 3).  
 
 Unable to obtain bank financing, A Group could not continue on with its project 
and meet the other time-lines agreed to with RA. A Group and RA ultimately resolved 
their stalemate in February 2002 with an amendment to their agreement, which 
postponed A Group's ground-breaking deadline until September 2002. Their 
amendment also conditioned A Group's next installment payment ($200,000) on A 
Group's obtaining new financing without additional security provisions (Item 3). 
 
3 
 
 
 
 
 Despite A Group's obtaining new financing, RA gave notice to A Group in 
September 2002 that it was terminating the agreement for A Group's failure to meet the 
September 2001 ground-breaking dead-line (disputed by A Group) and demanded 
return of the $300,000 total payments RA had made to A Group under its agreement. 
Brief negotiations ensued between the parties, but ultimately failed to produce any new 
amendments to the agreement.  
 
 In October 2002, RA notified A Group of its intent to terminate the agreement and 
repeated its demand for reimbursement of the $300,000 in total payments it had 
previously made to A Group (ex. 3). Without any financing option available to it, A 
Group was forced to sell the land it had acquired for the ice skating facility. Records 
document that the buyer (C Realty) of the land ultimately developed the property as an 
ice skating facility, which is currently operating.  
 
Litigation between the parties 
 
 Following C Realty's closing of its purchase of the project’s land from A group, 
RA (in  March 2003), A Group was able to settle with most of its creditors and received 
about $40,000 in cash and a $100,000 installment note in net proceeds from the sale, 
payable to Applicant and the other remaining member (Item. 3).  Approximately $25,000 
of the cash proceeds were paid to a withdrawing member of A Group to cover his 
capital investment, in accordance with the A Group agreement’s terms.  Applicant 
received $10,000 of the remaining cash proceeds; while the remaining member 
received $5,000 (see Item 3). 
 
 In March 2003, RA filed suit against A Group, its three individual members, and 
C Realty, claiming A Group breached its naming rights agreement and was obligated, 
along with C Realty, to repay the $300,000 previously paid to it by RA (Items 3 and 6).  
The complaint claimed Applicant and the three investors of A Group were obligated, 
jointly and severally, to RA under their $75,000 guaranty (see Items 3 and 6). 
 
 Applicant and the other named defendants in RA’s suit denied liability and 
counterclaimed, claiming they were not obligated to RA in any way because the 
guaranty agreement they executed released them from any obligations under the 
guaranty upon their obtaining a bank loan commitment that required RA to pay the 
required $125,000 installment (see Items 3, 7, and 9). A Group’s obtained bank loan 
commitment, in turn, triggered RA’s requirement to pay the $125,000 installment called 
for in their agreement with RA.   
 
 While the district court hearing the case dismissed C Realty from the 
proceedings (holding it not liable to any RA claims), it held A Group liable to RA in the 
 
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amount of $300,000 plus interest, and Applicant and the other investors liable on their 
guaranties, jointly and severally (holding the bank’s loan proposal was not the type of 
loan commitment contemplated by the naming rights agreement between A group and 
RA (see ex. 3). 
 
 Judgments were entered against A Group and the individual guarantors 
(inclusive of Applicant) in February 2006 (see Items 3 and 7). These judgments were 
sustained on appeal, and Applicant was determined to be jointly and severally liable to 
RA in the amount of $75,000 (Item 8). RA ultimately recovered $85,000 from C Realty 
on the separate garnishment action it initiated against C Realty to recover monies owed 
under the assigned $100,000 note A Group received from Applicant (Item 3).  
 
Settlement initiatives 
 
 Initial settlement efforts between Applicant and RA to settle the latter’s claims 
against A Group and the individual guarantors were unsuccessful.  Without sufficient 
funds of his own at the time to satisfy the judgment, Applicant was not able to make any  
payments. more recently, Applicant satisfied his personal judgment liability with RA 
(Item 3).  In July 2009, a local mortgage company approved Applicant’s refinancing 
application with conditions. These conditions included the release of Applicant from his 
judgment liability.  RA supported Applicant’s refinancing application and agreed to 
accept $20,000 from Applicant from the proceeds of Applicant’s proposed mortgage 
refinance, as full settlement of its claims against him pursuant to its judgments against A 
Group and Applicant personally. 
 
 Applicant’s mortgage company accepted RA’s settlement proposal and 
completed its refinancing of Applicant’s home in August 2009.  Applicant, in turn, 
satisfied the settlement terms specified by RA, and RA filed its satisfaction of judgment 
in August 2009 (see Applicant’s response to FORM). 
 
Character references 
 
 Applicant is highly regarded by his supervisors and colleagues.  He has been an 
active member of his community.  He continues to teach in his community, and has 
refereed ice hockey for more than 25 years.  He has been a boy scout/cub scout leader 
for the past seven years and has been an excellent role model for his own 12-year-old 
son. 
 
Policies 
 
 The AGs list guidelines to be used by administrative judges in the decision-
making process covering DOHA cases. These guidelines take into account factors that 
 
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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 many 
of the "[c]onditions that could mitigate security concerns.” These guidelines must be 
considered before deciding whether or not a security clearance should be granted, 
continued, or denied. The guidelines do not require administrative judges to place 
exclusive reliance on the enumerated disqualifying and mitigating conditions in the 
guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the 
context of the whole person in accordance with AG ¶ 2(c). 
            
 In addition to the relevant AGs, administrative judges must take into account the 
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a) 
of the revised 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 AG ¶ 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 adjudication 
policy concerns 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 
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 
 
 Under the Directive, a decision to grant or continue an Applicant's request for 
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. 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 showing of material bearing, 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 burden of proof shifts to the applicant for the purpose of 
establishing his or his security worthiness through evidence of refutation, extenuation or 
mitigation of the government's case.  Because Executive Order 10865 requires that all 
security clearances be clearly consistent with the national interest, “security-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 trained and experienced industrial engineer for a defense 
contractor who had an adverse judgment (joint and several) entered against him in 2006 
following efforts to resolve a business dispute between his venture group and the 
financing entity who financed his ice skating project. Unable to resolve its dispute with 
Applicant and his investment group amicably, this creditor filed suit and ultimately 
prevailed on its complaint in court.  The $75,000 joint and several judgments it obtained 
against Applicant and members of his venture group remained unsatisfied until recently 
and raised security concerns. 
 
7 
 
 
 
 
 Applicant’s accrued judgment debt warrants the application of two of the 
disqualifying conditions (DC) of the financial consideration guideline: DC ¶ 19(a), 
“inability or unwillingness to satisfy debts,” and DC ¶ 19(c) “a history of not meeting 
financial obligations.” 
 
 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 impose 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).  
 
 Based on his evidentiary showing, Applicant’s proofs are sufficient to establish 
some extenuating circumstances associated with the circumstances surrounding his 
business venture, ensuing disputes with RA over compliance with his contractual 
obligations, and the judgment that RA was ultimately able to obtain against Applicant 
and his A Group venture.  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 partial application to Applicant’s circumstances.  
 
 More important, though, in evaluating Applicant’s clearance eligibility are his 
concerted good-faith efforts to resolve his judgment debt after exhausting  all appellate 
avenues available to him to reverse or remand the judgment. In his response to the 
FORM, he provided proof he satisfied the judgment with the aid of refinancing of his 
home mortgage. Applicant’s documented judgment satisfaction entitles him to 
application of MC ¶ 20(d), “the individual initiated a good-faith effort to repay overdue 
creditors or otherwise resolve debts.”  
  
 From a whole-person perspective, Applicant’s disputes with RA over compliance 
with construction conditions in the naming rights agreement he and his venture 
members signed with RA were manifestly waged in good-faith.  In the end, RA prevailed 
and obtained a $75,000 judgment in 2006 that was sustained on appeal.  
 
 For several years, Applicant did not have the resources to satisfy the joint and 
several judgment entered against him and his co-guarantors. As a consequence, 
interest continued to accrue on the judgment at the legal rate in his state.  However, 
with the aid of mortgage refinancing of his home, he was recently able to settle his 
portion of the judgment debt with RA and obtain a documented satisfaction of judgment. 
This was a considerable achievement for Applicant, considering the size of the 
judgment and the limited amount of negotiating leverage he retained with the judgment 
creditor after the judgment was finalized. Full mitigation credit is available to Applicant 
based on his demonstrated judgment satisfaction.   
Page 8 
 
Page 9 
 
 Taking into account all of the extenuating facts and circumstances surrounding 
Applicant’s business venture, ensuing litigation with RA, his ultimate resolution of his 
only delinquency, and his overall professional and community standing, safe predictive 
judgments may be made about Applicant’s ability to repay his accrued debts as they 
materialize in the future and maintain his finances at stable levels commensurate with 
his holding a security clearance.  Favorable conclusions warrant with respect to the 
allegations covered by SOR subparagraph 1.a.    
 
 In reaching my 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):       FOR APPLICANT 
 
   Subpara 1.a:              For Applicant 
     
Conclusions 
    
 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 Applicant's security clearance.  
Clearance is granted.  
 
                                   
Roger C. Wesley 
Administrative Judge