DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 09-02781 
  ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Fahryn Hoffman, Esq., Department Counsel 
For Applicant: Pro se 
 
 
 
______________ 
 
Decision 
______________ 
 
 
RICCIARDELLO, Carol G., Administrative Judge: 
 
Applicant failed to mitigate the security concerns under Guideline F, Financial 
Considerations. Applicant’s eligibility for a security clearance is denied. 
 
On October 9, 2009, the Defense Office of Hearings and Appeals (DOHA) issued 
to Applicant a Statement of Reasons (SOR) detailing the security concerns under 
Guidelines F. 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 (AG) promulgated by the President on December 29, 2005, and effective 
within the Department of Defense for SORs issued after September 1, 2006.  
  
 Applicant answered the SOR in writing on November 2, 2009, and requested a 
hearing before an administrative judge. The case was assigned to another 
administrative judge on January 15, 2010, and reassigned to me on February 1, 2010. 
DOHA issued a Notice of Hearing on February 4, 2010. I convened the hearing as 
 
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scheduled on February 22, 2010. The Government offered Exhibits (GE) 1 through 5. 
Applicant did not object and they were admitted. Applicant testified and offered Exhibits 
(AE) A through D, which were admitted without objection. The record was held open 
until March 4, 2010, to allow Applicant to submit additional documents, which he did. 
They were marked as AE E through Q and admitted without objection. DOHA received 
the hearing transcript (Tr.) on March 2, 2010.  
 
Findings of Fact 
 
 Applicant admitted SOR ¶ 1.a and denied ¶ 1.b. After a thorough and careful 
review of the pleadings, exhibits, and testimony, I make the following findings of fact. 
 
 Applicant is 37 years old. He married in 1998 and divorced in 2005. He has an 
11-year-old son from the marriage. He remarried in 2008. He has worked as a design 
engineer for a federal contractor since March 2008. He has been employed 
continuously since 1997. He has an associate’s degree and is currently attending 
college. He hopes to complete his bachelor’s degree in 2011. He obtained student loans 
to pay for his tuition.1   
 
 Applicant disputes the debt alleged in SOR ¶ 1.a. In approximately 2006, 
Applicant consolidated his debts and obtained a loan for approximately $26,000.2 The 
interest rate was 12%, and he made monthly payments of $400 until he could not afford 
the payments. He had been working overtime, but when he obtained joint custody of his 
son, it was difficult for him to work the extra hours due to his obligations and 
responsibility for caring for his son. He also was making car payments and could not 
meet his obligations. He contacted the creditor and advised them he could not make the 
payments. It is Applicant’s position that he was told by the creditor that after six months 
of delinquent payments the creditor would charge-off the debt. He stated he was 
informed by the original creditor that he qualified for a program that he could either pay 
a lump sum of $15,000 to settle the debt, or he could make six consecutive payments of 
$506 and the interest rate on the balance of the debt would be reduced to 2%. Applicant 
accepted the latter option. He stated he made the six payments and believed his 
subsequent monthly payments were to be $485. The debt was sold after it was 
charged-off and the new creditor sent him a statement that showed a higher interest 
rate than what was agreed to by the original creditor. Applicant disputed the debt with 
the original creditor, who refused to acknowledge the agreement. He has disputed the 
debt with the collection company also. He has sent numerous letters to the collection 
company. Applicant did not have a written agreement to modify the terms of the loan to 
prove he had a binding contract with the original creditor. He provided phone logs that 
1 Tr. 108-109, 117. 
 
2 Tr. 84-86. Applicant originally testified that he secured the loan in 2003 while married to his first wife, 
and it became delinquent in 2004, when he and his wife separated. He was shown GE 2, which was his 
statement to an Office of Personnel Management investigator. In the statement he said he obtained the 
loan in 2006 and it went delinquent in March 2008 because of his divorce and he had fallen behind in 
making the payments. In GE 1, Applicant lists that he was divorced in 2005. Applicant corrected his 
testimony and confirmed the written statement was correct.  
 
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appear to be from the original creditor that are cryptic at best.3 It is unclear what exactly 
was orally proposed and it is also unclear if Applicant complied with all of the 
requirements of the proposal. It appears Applicant made some payments at the time on 
the loan. It also appears when Applicant defaulted on the loan he was paying court 
ordered child support, had other expenses, and was unable to meet the original terms of 
the loan. He was then attempting to negotiate a payment plan with the original creditor 
that was to begin when his finances improved. He did not continue to make payments of 
$485 a month or any other monthly payments after the loan was sold. He acknowledged 
he used the $485 to pay for other debts.4  
 
Applicant has sent numerous letters to the collection company attempting to 
enforce an oral agreement he believed he had with the original creditor. His letter of 
January 29, 2009, to the collection company stated:  
 
• The Subject account is closed with regard to [original creditor]. 
• [Original creditor] offered several program options to [Applicant], 
including 0% and extremely reduced balance if paid in an agreed 
short-term payment plan. 
• [Original creditor] unethically closed the account prior to completion 
of the mutually agreed program.  
• [Collection company] has purchased the subject account from 
[original creditor]. 
• [Collection company] buys packages of non-performing debts from 
major credit card companies, and typically pays only 2.6% of the 
total amount owed.  
 
Applicant further stated in the letter: 
 
Considering these facts, [collection company] has claimed the total debt 
owed is $28,253.51 as identified in [letter from collection company to 
Applicant dated September 12, 2008]. Again, this amount is under dispute. 
However, assuming [collection company] purchased the subject account 
at 2.6%, then [it is] reasonable to assume [collection company] has 
purchased the subject account for approximately $734.60. 
 
Considering facts known above, [Applicant] proposes a settlement amount 
of $1,470.00. In turn, [collection company] shall agree in writing that upon 
the complete payment of $1,470.00, the subject account will be satisfied in 
its entirety.5 
 
3 AE E. 
 
4 Tr. 21-38, 64. 
 
5 AE A, letter dated January 29, 2009.  
 
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Applicant has not received a response to any of his letters or his settlement offer. 
Applicant admitted he owes the delinquent debt, but he was concerned that if he began 
making the payments with the new higher interest rate, he would be constructively 
agreeing to the increased rate. He admitted he came to this conclusion based on his 
own research and did not seek financial counseling. He has not made any recent 
payments on this debt. He has not contacted the creditor by telephone because he is 
concerned about keeping a record and because of the previous problems he has had 
with the debt. He stated he is attempting to negotiate a settlement with the collection 
company, but has only done it in writing and the offer was for a small amount in 
comparison to the total original debt. His last contact with the collection company was in 
February 2009. He admitted the collection company contacted him at work and he told 
them not to. He did not provide a home phone number because he did not have one. 
Applicant believes the account continues to accrue interest. The collection company has 
not responded to his offer to pay $1,450 on the current balance of $28,000. He believes 
he owes about $25,000.6  
 
Applicant stated he intends to pay this debt. He has not been saving money in 
anticipation of having to resolve the debt. He recently moved residences, due to a 
separation from his wife, and has reduced his rent and utilities by approximately $1,600 
a month. He stated he is willing to negotiate a settlement and pay a reasonable amount. 
His last correspondence with the creditor was in February 2009. He admitted he could 
offer a more reasonable settlement in the range of $10,000 over six months, but has 
not.7  
 
After his hearing, Applicant provided his handwritten notes presumably taken 
while speaking with a consumer credit counseling service. He also provided a typed 
summary of his notes. The financial advisor recommended he contact the collection 
company and “make arrangements as soon as possible.”8 His notes also reflect the 
following advice: “She recommends negotiating the interest rate, as this carries impact 
of thousands of dollars and represents my core dispute originating with [original 
creditor]. However, she recommended arranging payments as soon as possible.”9 
Applicant also presumably took handwritten notes when he met with a financial 
educator/counselor from a credit union. His notes stated: “She noted that [subject debt] 
was the only tarnished history on the recent credit report she reviewed. [Counselor] 
understood disputing the percentage rate, but recommended establishing regular 
payments as soon as possible.”10 Applicant did not provide any proof he has started to 
make payments to resolve this debt. He provided handwritten notes that he left phone 
6 Tr. 38-49, 57-60, 62; GE 2. 
 
7 Tr. 37-43, 49-57, 60-70; AE C 
 
8 AE I, L. 
 
9 Id. 
 
10 AE I, M. 
 
 
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messages with the [collection company] and comments that he will continue to contact 
the collection company “until an agreement in writing is finalized.”11 He also notes “A 
payment to [collection company] is anticipated for April 2010.”12 
 
Applicant admitted that the debt in SOR ¶ 1.b is very old. The original amount of 
the loan was for approximately $18,000 to $19,000. When he married his first wife she 
had many debts. Applicant took out a loan to consolidate the debts and admitted he 
knew he was ultimately responsible for the payment of this debt. He admitted the loan is 
legally in his name. They paid the debt for a period and the balance is now 
approximately $9,100. When he and his wife divorced, he stated they orally agreed that 
she would pay this loan. She did not. He believes the enforcement of the loan is barred 
by the statute of limitations. He stopped making payments on the loan sometime in 
2004. He has not taken any action on this debt. When questioned further, he admitted 
that the right thing to do would be to contact the creditor and make arrangements to 
settle the debt. He did not provide any subsequent information that he has made 
arrangements to pay the debt. In his written statement, provided after the hearing, he 
stated the debt would be resolved after he had an agreement with the creditor in SOR ¶ 
1.a.13 
 
Applicant is making payments on four other debts that are not delinquent. Three 
are credit cards and one is a loan. He has a 401(k) account that he contributes to and 
has a balance of approximately $6,000. He stated he is a reliable responsible person.14 
After his hearing, Applicant enrolled in a workshop to “build a strong credit report.”15 He 
also provided confirmation from his employer that his salary increased on March 1, 
2010, by $2,523.16 In addition, Applicant provided a copy of a budget. It does not 
include payments for the delinquent debts included in the SOR.17 I have considered 
Applicant’s excellent performance appraisals for 2008 and 2009.18  
 
Policies 
 
 When evaluating an applicant’s suitability for a security clearance, the 
administrative judge must consider the revised adjudicative guidelines (AG). In addition 
11 AE I. 
 
12 Id. 
 
13 Tr. 70-82. 
 
14 Tr. 90. 
 
15 AE P. 
 
16 AE Q. 
 
17 AE G, H, I, J, K. 
 
18 Tr.114; AE B. 
 
 
6 
 
 
to brief introductory explanations for each guideline, the adjudicative guidelines list 
potentially disqualifying conditions and mitigating conditions, which are used in 
evaluating an applicant’s eligibility for access to classified information. 
 
These guidelines are not inflexible rules of law. Instead, recognizing the 
complexities of human behavior, these guidelines are applied in conjunction with the 
factors listed in the adjudicative process. The administrative judge’s overarching 
adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 
2(c), the entire process is a conscientious scrutiny of a number of variables known as 
the “whole-person concept.” The administrative judge must consider all available, 
reliable information about the person, past and present, favorable and unfavorable, in 
making a decision. 
 
The protection of the national security is the paramount consideration. AG ¶ 2(b) 
requires that “[a]ny doubt concerning personnel being considered for access to 
classified information will be resolved in favor of national security.” In reaching this 
decision, I have drawn only those conclusions that are reasonable, logical and based on 
the evidence contained in the record. Likewise, I have avoided drawing inferences 
grounded on mere speculation or conjecture. 
 
Under Directive ¶ E3.1.14, the Government must present evidence to establish 
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, an “applicant is 
responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or 
mitigate facts admitted by applicant or proven by Department Counsel and has the 
ultimate burden of persuasion as to obtaining a favorable security decision.”  
 
A person who seeks access to classified information enters into a fiduciary 
relationship with the Government predicated upon trust and confidence. This 
relationship transcends normal duty hours and endures throughout off-duty hours. The 
Government reposes a high degree of trust and confidence in individuals to whom it 
grants access to classified information. Decisions include, by necessity, consideration of 
the possible risk the applicant may deliberately or inadvertently fail to protect classified 
information. Such decisions entail a certain degree of legally permissible extrapolation 
as to potential, rather than actual, risk of compromise of classified information. 
 
Section 7 of Executive Order 10865 provides that decisions shall be “in terms of 
the national interest and shall in no sense be a determination as to the loyalty of the 
applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites 
for access to classified or sensitive information).  
 
Analysis 
 
Guideline F, Financial Considerations 
 
The security concern for Financial Considerations is set out in AG & 18:  
 
7 
 
 
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.  
 
The guideline notes several conditions that could raise security concerns. I have 
considered all of the disqualifying conditions under AG & 19 and especially considered: 
 
(a) inability or unwillingness to satisfy debts; and 
 
(c) a history of not meeting financial obligations. 
 
Applicant owes two large debts that are delinquent and have been for a 
significant period. He has not made any recent payments to resolve the debts. I find 
there is sufficient evidence to raise the above disqualifying conditions.  
 
The guideline also includes examples of conditions that could mitigate security 
concerns arising from financial difficulties. I have considered the following mitigating 
conditions under AG ¶ 20: 
 
(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. 
 
 
8 
 
 
                                                          
 Applicant’s behavior is recent because his delinquent debts are ongoing. He 
does not have a payment plan with either creditor, nor has he made any payments on 
either debt for a long period. Although he disputes the interest rate on the debt in SOR ¶ 
1.a, he admitted he owed about $25,000, and has not paid it. The debt in SOR ¶ 1.b is 
not paid, and Applicant did not provide a plan for resolving it. His position is it is barred 
by the statute of limitations. He provided a written statement, after his hearing, stating 
he would address it after he had an agreement with the other creditor. I find mitigating 
condition (a) does not apply. Applicant has not addressed paying his delinquent debts. 
Despite his dispute, he is aware he owes the debt and has not made payments on it in 
years. The second debt remains unpaid. Although he stated his ex-wife was responsible 
for it, he is aware he is legally obligated to pay the debt, and has taken no action to 
resolve it. I find his actions cast doubt on his reliability, trustworthiness, and judgment. 
  
 I have considered mitigating condition (b) and find that Applicant’s finances were 
impacted by his divorce. For mitigating condition (b) to be fully applicable, he must have 
acted responsibly under the circumstances. I find he did not. He understands he 
incurred a legal obligation to pay the debt in SOR ¶ 1.b. The debt is very old and it has 
not been resolved. He knew he was ultimately responsible for it, and has taken no 
action on the debt. He also knew he was responsible to pay the debt in SOR ¶ 1.a, and 
even though he disputed the interest rate, he did not set aside money to pay the debt 
nor made any payments. He offered to pay $1,450 on the $28,000 debt. I do not 
consider this a reasonable good-faith offer to settle the debt. I find mitigating condition 
(b) only partially applies. I find mitigating conditions (c) and (d) do not apply. Applicant 
sought financial counseling after his hearing. The counselors recommended he begin 
repaying his debts as soon as possible. He promises to do so, but showed no 
documented proof that he made one payment. Applicant has had years to address 
resolving both of these debts. I do not find him credible in believing he will pay them in 
the future. There are not clear indications the problem is being resolved. Although the 
statute of limitation may bar enforcement of the debt in SOR ¶ 1.b, I do not give full 
credit under mitigating condition (d) for relying on it as a defense to paying this debt.19  
19 The 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 Financial Considerations Mitigating Condition 6, 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) in order to claim the benefit of Financial Considerations 
Mitigating Condition 6.  
 
(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)). 
 
 
9 
 
 
 Applicant has provided documentation that he disputes the debt in SOR ¶ 1.a. 
He does not dispute that he received a loan for $25,000 and defaulted on the loan. He 
does not dispute that he believes he owes approximately $25,000 on the loan. He has 
not made payments on the loan in a few years. His complaint is that he believed he had 
an agreement that the interest rate on his defaulted loan would be reduced if he made 
good-faith payments for six months. He does not have a written agreement with the 
original creditor. He was negotiating an agreement on a loan that he already had 
defaulted on and has not paid the debt. There are only cryptic notes that Applicant 
provided, but it remains unclear as to what was agreed upon, by whom, whether 
Applicant complied with the oral agreement. This information does not negate that he 
owes this debt. I do not find he has a reasonable basis to dispute the legitimacy of the 
debt. He agrees he owes it. He is merely unhappy that he did not receive a lower 
interest rate on it after he defaulted. He is unhappy that the defaulted loan was sold to a 
collection company that buys loans at a fraction of the amount of the loan. He has not 
made any recent payments on the principal of the loan. I find mitigating condition (e) 
does not apply.   
  
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. 
 
 Under AG ¶ 2(c), 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.        
 
I considered the potentially disqualifying and mitigating conditions in light of all 
the facts and circumstances surrounding this case. Applicant has been employed 
consistently since 1997. He experienced financial problems when he and his wife 
divorced. He has two debts that he acknowledges he is responsible to pay. He has not 
made payments on either of the debts. He has ignored the debt in SOR ¶ 1.b because it 
is old and may be barred by the statute of limitations. The other debt he has delayed 
paying because he disputes the interest rate. Overall, the record evidence leaves me 
with questions and doubts as to Applicant’s eligibility and suitability for a security 
 
10 
 
 
clearance. For all these reasons, I conclude Applicant failed to mitigate the security 
concerns arising under the guideline for Financial Considerations.  
 
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-1b:   Against Applicant 
 
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is not 
clearly consistent with the interests of national security to grant Applicant eligibility for a 
security clearance. Eligibility for access to classified information is denied. 
 
 
                                                     
_____________________________ 
Carol G. Ricciardello 
Administrative Judge