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                           DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 09-04389 
 SSN:   ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Fahryn Hoffman, Esquire, Department Counsel 
For Applicant: Pro se 
 
 
______________ 
 
Decision 
______________ 
 
 
HOGAN, Erin C., Chief Administrative Judge: 
 
Applicant submitted a security clearance application (e-QIP) on January 13, 
2009. On October 21, 2009, the Defense Office of Hearings and Appeals (DOHA) 
issued a Statement of Reasons (SOR) detailing the security concerns under Guideline 
F, Financial Considerations. 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 
adjudicative guidelines (AG) which became effective within the Department of Defense 
on September 1, 2006.  
  
 On December 10, 2009, Applicant answered the SOR and requested a hearing 
before an administrative judge. Department Counsel was ready to proceed on February 
5, 2010. The case was assigned to me on February 19, 2010. On March 11, 2010, a 
Notice of Hearing was issued scheduling the hearing for April 14, 2010. The case was 
heard on that date. The Government offered five exhibits which were admitted as 
Government Exhibits (Gov) 1 – 5. The Applicant and one witness testified and offered 
ten exhibits which were admitted as Applicant Exhibits (AE) A - J. The record was held 
open until May 14, 2010, to allow Applicant to submit additional documents. Applicant 
requested additional time to submit documents. His request was granted until June 1, 
 
 
 
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2010. He submitted ten documents that were admitted as AE K – T. Department 
Counsel’s response to the post-hearing submissions is marked as Hearing Exhibit (HE) 
I. The transcript (Tr.) was received on April 27, 2010.  Based upon a review of the case 
file, pleadings, exhibits, and testimony, eligibility for access to classified information is 
denied. 
 
Findings of Fact 
 
 In his answer to the SOR, Applicant denied the allegations in ¶¶ 1.a, 1.b, 1.d, 1.e, 
1.g, 1.h, and 1.l. He admitted the allegations in ¶¶ 1.c, 1.f, 1.i, 1.j,and 1.k.   
 
Applicant is a 53-year-old employee with a Department of Defense contractor 
seeking to maintain a security clearance. He holds two full-time jobs. He is a contract 
employee for a telecommunications company that works on DOD contracts. He also 
works for another DOD contractor. He disclosed his employment situation to both 
companies. He served in the U.S. Navy from 1978 – 1982. He separated as an E-5. He 
has held a Top Secret clearance since 1999. He has a graduate degree in information 
systems. He separated from his first wife in 1997. They divorced in October 2006. Two 
daughters were born of this marriage, ages 20 and 21. He married his current wife in 
November 2006. She has a daughter, age 22. One of Applicant’s daughters and his 
step-daughter live with him and his wife. (Tr. 6-8, 88-92, 97, 101; Gov 1)  
 
Applicant’s security clearance background investigation revealed that he has 12 
delinquent accounts which total approximately $829,988. Of that amount, $827,212 
involves several mortgages that were foreclosed. (SOR ¶¶ 1.f, 1.i, 1.j, 1.k) The eight 
remaining accounts are medical or consumer debts and total approximately $2,776. 
(SOR ¶¶ 1.a – 1.e, 1.g, 1.h, and 1.l)  
 
During Applicant’s first marriage, he purchased House # 1. After he moved out of 
the home in September 2005 and after the divorce, his ex-wife and two daughters 
continued to live in the home. Applicant agreed to continue to make the $2,500 monthly 
mortgage payments. (Tr. 65, 90, 107; Gov 2 at 7)  
 
Applicant’s current wife owned a townhome when she married Applicant. She 
rents the townhome. The monthly mortgage payment on the townhome is $1,500. The 
current tenant pays $1,750. (Tr. 72, 85, 111) In 2007, previous renters of the townhome 
stopped paying the rent. The rent was $2,200 a month. The tenants did not pay rent for 
six months. Applicant’s wife took the tenants to court and obtained a notice to vacate 
the property. The tenants moved out after receiving the notice to vacate. Applicant’s 
wife anticipates they lost $13,020 in unpaid rent. She did not attempt to collect the rent 
because the judge advised her that the collection efforts would more than likely be futile. 
They also had to repair the property before they rented the townhouse again because of 
the damage the tenants caused to the property before moving out. The mortgage on the 
townhome is current. (Tr. 112-120)   
 
Applicant and his current wife purchased House # 2 in 2005 for $725,000 which 
they use as their primary residence. House # 2 has two mortgages. The primary 
 
 
 
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mortgage is an adjustable rate mortgage. The monthly mortgage payment on the 
primary mortgage started at $2,562. It gradually increased to $5,614. After Applicant 
purchased the home, it declined in value. Its current worth is approximately $398,000. 
They could not sell or refinance the property because the amount of the loan was more 
than the house’s appraisal value.  In 2009, Applicant applied for a loan modification. 
The mortgage payment was reduced to $4,486.62. Applicant’s second mortgage 
monthly payment was $1,188. The second mortgage was charged off in November 
2008. Applicant is currently in the process of applying for another loan modification on 
House #2 to get the payments reduced. He believes the second mortgage and the debt 
owed to the Homeowner’s Association (SOR ¶¶ 1.a, 1.f) will be included in the most 
recent modification. The modification will be complete in July 2010. Applicant provided 
no documentation regarding the loan modification. (Tr. 82-83; AE C; AE D)  
 
Applicant’s current wife was employed full-time with a defense contractor, 
earning $63,000 a year. She quit work in 2007 to care for her mother who has 
significant health problems. Applicant’s mother-in-law lives with him and his wife. 
Applicant’s wife decided to start her own business cleaning apartments. The business 
gives her greater flexibility to care for her mother. (Tr. 40-41, 72)  
 
In the spring of 2007, Applicant’s wife attended a conference about starting a 
business and met an employee of a local bank who told her about real estate 
opportunities in a distressed area. The bank employee told Applicant’s wife that if she 
were to invest in a property in that location, she would receive 100% financing from the 
bank. Applicant’s wife believed that after they purchased a property and made some 
improvements, they could sell the property at an increased value. She believed they 
could make $400,000 from the real estate investment. She found a distressed property 
located in the area mentioned by the bank that was on the market for $173,000. 
Applicant’s wife persuaded him that purchasing the property would be a great 
opportunity to make some money. They purchased the property, House #3, in March 
2007. (Tr. 40-44; AE C) 
 
Applicant and his wife understood that the purchase of House # 3 would be with 
100 % financing. When they purchased the property, bank officials told them they had to 
make upgrades to the property, including building another floor. They were told to hire 
an architect to develop the plan for the upgrade. In June 2007, they hired an architect to 
draw up plans for remodeling the property. The architect cost around $7,000, which they 
paid. After improvements, the property was to be potentially appraised at $600,000. (Tr. 
44-49) 
 
At some point, the bank told Applicant and his wife that they needed to put 
$18,000 in an escrow account. When they told the bank that they had no money, the 
bank suggested they refinance House # 1 to get the money. They refinanced House # 1 
and put the $18,000 in an escrow account. As the construction project progressed, they 
realized the costs were under-estimated. The bank eventually told Applicant and his 
wife that they were not going to give them additional money. In September 2008, the 
bank foreclosed on the property. Applicant maintained that House #3 was sold for more 
than the amount of the loan at the foreclosure sale but did not provide documentation 
 
 
 
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verifying this assertion. Applicant believes that they were victims of mortgage fraud in 
relation to the purchase and financing of House #3. (Tr. 17, 50-59; AE C; AE J) 
 
Applicant and his wife had difficulty making the first and second mortgage 
payments on Home #1 after it was refinanced. In September 2008, Home # 1 was 
foreclosed. Applicant claims that the home was purchased at the foreclosure sale for 
more than the amount of the first and second mortgages on the home. He provided no 
documentation to verify this assertion. (Tr. 63-66; AE I) 
 
In October 2006, Applicant was laid off from his current employer. He was given 
severance pay. In May 2007, his employer rehired him. His salary was reduced from 
$83,000 a year to $65,000 a year. He currently earns $73,500. During the period that 
Appellant was laid off, he continued to work full-time for the other Department of 
Defense contractor. His annual salary at the other company is between $75,000 to 
$79,000. (Tr. 99-104)  
 
The status of the delinquent accounts are:  
 
1.a: $1,822 judgment filed against Applicant in February 2009 on behalf of the 
Homeowner’s Association in the neighborhood of Applicant’s current residence – House 
#2. The judgment is related to a fine for a shed on their property that is too close to the 
property line. Applicant testified the previous owners built the shed. He anticipates the 
judgment will be incorporated into the mortgage loan modification that he is working on 
for his primary residence. (Tr. 122-128; Gov 3 at 1) 
 
1.b: $193 judgment filed against Applicant in 2007 on behalf of the Homeowner’s 
Association in the neighborhood of Applicant’s former residence – House #1. Applicant 
believes this debt is resolved. He believes the settlement was paid off when the home 
foreclosed. (Tr. 129-135; Gov 2 at 8; Gov 4 at 3; AE G) 
 
1.c: $199 Direct TV account placed for collection. Applicant believes this was 
paid off in July 2007 and in October 2009. He paid the account off when he separated 
from his first wife. He claims his ex-wife opened the account again in his name. The 
record was held open for him to provide proof of payment. He provided proof the debt 
was paid. (Tr. 136-138; Gov 2 at 8; Gov 3 at 1; Gov 4 at 4; AE P; AE S) 
 
1.d: $186 medical account placed for collection in February 2009. Applicant 
testified this debt was paid off over the telephone in October or November 2009. The 
record was held open for him to provide proof of payment. Nothing was submitted. (Tr. 
139; Gov 3 at 1; Gov 4 at 21) 
 
1.e: $19 charged off account. Applicant claims his ex-wife opened this account in 
his name. He paid the account once he discovered it. He was going to look for a receipt. 
Nothing was submitted after the hearing. (Tr. 140-144; Gov 2 at 8; Gov 3 at 1-2; Gov 4 
at 14) 
 
 
 
 
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1.f: $206,762 home equity loan that was placed for collection in November 2008 
for House # 2. This is the second mortgage on Applicant’s current residence. He 
requested that he be allowed to pay a lesser payment. He hopes the second mortgage 
will be combined with his primary mortgage when he modifies his current mortgage. (Tr. 
145-150; Gov 2 at 8; Gov 4 at 16) 
 
1.g: $209 discount department store account that was placed for collection in 
August 2008. Applicant testified the account was paid and intended to provide proof of 
payment after the hearing. Proof was provided that the account is paid in full. (Tr. 151; 
Gov 2 at 8; Gov 3 at 3; Gov 4 at 21; AE R) 
 
1.h: $88 charged off cell phone account. Applicant paid this account.  (Tr. 152-
153; AE H; Gov 2 at 9; Gov 3 at 3; Gov 4 at 19) 
 
1.i: $360,000 charged off first mortgage owed after Applicant’s Home # 1 was 
foreclosed in September 2008. Applicant testified that the home sold for more than the 
mortgage amount. He provided no documentation verifying this assertion. He intends to 
pursue this issue with a real estate attorney. (Tr. 155-156; Gov 3 at 4; Gov 4 at 5,14; AE 
C; AE I) 
 
1.j: $233,000 charged off account related to the investment property – House # 3, 
which foreclosed in December 2007. Applicant claims the property was sold for more 
than its value. No documentation was provided. (Tr. 161-163, 167; Gov 3 at 4; AE J) 
 
i.k: second mortage on home # 1 that is 120 days or more past due in the 
amount of $5,289, balance $27,450. Applicant claims the home was sold for more than 
the mortgage amount and both mortgages should have been paid off as a result of the 
foreclosure sale. No documentation was provided. (Tr. 157-159, 164; Gov 2 at 8; Gov 4 
at 17; AE I) 
 
1.l $60 medical account placed for collection in November 2007. Applicant 
disputes this account. His last contact with the creditor was in March 2009. Status of the 
debt is uncertain. (Tr. 169-172; Gov 2 at 8; Gov 4 at 8)  
 
During the hearing, Applicant indicated that he and his wife’s total net monthly 
income is $12,027. Their current mortgage payment is $4,557.  They pay $940 a month 
for the rent on their daughter’s townhome where she attends college. Other monthly 
expenses include: groceries $600; Gas utility $525; Electric $619; Water $135; Gas for 
Cars $475; other expenses $800; and car loans $1,125. His wife’s credit cards have a 
balance of $7,000. His credit cards have a balance of $18,000.  Combined they pay 
$1,000 towards their credit cards each month. His approximate total monthly expenses 
are $10,776. He has approximately $1,251 after expenses each month. (Tr. 179 – 191; 
AE B: The monthly expenses are estimates. Applicant was given the opportunity to 
submit a more accurate budget after the hearing. He did not submit one.)   
 
Applicant and his wife admit that they had a lot of debt when they married. They 
did not have the income to maintain the properties they purchased. Most of the 
 
 
 
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properties are worth less than the amount they owed. They would have sold the 
properties if they could. They do not want to file bankruptcy and intend to pay their 
debts. (Tr. 76-77)  
 
Applicant provided several references from co-workers, superiors, and two 
ministers. All of Applicant’s references think highly of him and state that he has an 
excellent character. (AE L- AE 0) 
 
Policies 
 
 When evaluating an applicant’s suitability for a security clearance, the 
administrative judge must consider the revised adjudicative guidelines. In addition to 
brief introductory explanations for each guideline, the adjudicative guidelines list 
potentially disqualifying conditions and mitigating conditions, which must be considered 
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.  
 
Under Directive ¶ E3.1.14, the government must present evidence to establish 
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is 
responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, 
or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The 
applicant 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 or safeguard classified 
information. Such decisions entail a certain degree of legally permissible extrapolation 
as to potential, rather than actual, risk of compromise of classified information. 
  
 
 
 
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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 
  
The security concern relating to the guideline for Financial Considerations is set 
out in AG & 18:       
 
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 disqualifying conditions that could raise security 
concerns. I find AG &19(a) (an inability or unwillingness to satisfy debts); AG &19(c), (a 
history of not meeting financial obligations); and AG ¶ 19(e) (consistent spending 
beyond one’s means, which may be indicated by excessive indebtedness, significant 
negative cash flow, high debt-to-income ratio, and/or other financial analysis) apply to 
Applicant’s case. Applicant incurred a significant amount of debt; most of the debt is the 
result of over-extending himself by purchasing numerous real estate properties that he 
could not afford. The SOR alleges 12 delinquent debts, a total approximate balance of 
$829,988. Of that amount, $827,212 consists of mortgages.  
 
The Government’s substantial evidence and Applicant’s own admissions raise 
security concerns under Guideline F. The burden shifted to Applicant to produce 
evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive ¶ 
E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden 
of disproving it never shifts to the government. (See ISCR Case No. 02-31154 at 5 
(App. Bd. Sept. 22, 2005))  
 
The guideline also includes examples of conditions that could mitigate security 
concerns arising from financial difficulties. 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) does not apply. While Applicant claims that the two properties that went into  
foreclosure were sold for more than the amount of the mortgages, he provided no proof 
verifying this assertion. Applicant demonstrated poor judgment when he purchased 
House #2 and House #3. At the time of those purchases, Applicant and his wife were 
already responsible for two mortgages. They had three children attending college. His 
wife quit her full-time job to open her own business. The renters of his wife’s townhome 
defaulted on their rent payments. Applicant had been laid off from one his jobs for eight 
months. Overall, Applicant’s circumstances were such that it was not prudent to 
 
 
 
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purchase more real estate. Applicant’s financial situation raises questions about his 
reliability, trustworthiness, and good judgment.  
 
 AG & 20(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) partially applies. Applicant was laid off from 
one of his full-time jobs from October 2006 to May 2007. His wife quit her job in early 
2007 to start a business which would provide more flexible hours for her to care for her 
ailing mother. The tenants in Applicant’s wife’s townhome defaulted on their rent, 
leaving them responsible for three mortgage payments for over a six-month period. 
Admittedly, there were circumstances beyond Applicant’s control which contributed to 
his inability to pay his bills. However, when Applicant remarried in 2006, he owned a 
home, and his wife owned a townhome. They purchased House #2 for $725,000. 
Purchasing House #2 added a significant burden to his household finances. He 
financed the property with an adjustable rate mortgage which resulted in an increase in 
his monthly payments. In the spring 2007, he and his wife decided to purchase House 
#3 as an investment property, which further added to the burden. The decision to invest 
in this property was irresponsible considering Applicant’s circumstances at the time of 
the purchase. Applicant’s financial problems were mostly caused by factors within his 
control. He over-extended himself with real estate investments that he was unable to 
pay. While circumstances beyond Applicant’s control contributed to his financial 
situation, Applicant did not act responsibly under the circumstances.         
 
AG & 20(d) (the individual initiated a good-faith effort to repay overdue creditors 
or otherwise resolve debts) applies with respect to the debts alleged in SOR ¶¶ 1.c, 1.g, 
and 1.h.  Applicant did not provide sufficient evidence to verify the other debts were 
resolved. While Applicant claims that he owes no outstanding amounts related to the 
two homes that were foreclosed (House #1 and House #3), he did not provide proof to 
verify his assertions. Applicant testified that his second mortgage modification would be 
complete in July 2010. He anticipates the charged off $206,762 second mortgage on 
the home will be included in the loan modification. He provided no additional 
documentary evidence verifying the terms of the second loan modification and whether 
it was to be approved.    
 
AG ¶ 20(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) potentially applies with regard to the debts Applicant disputes. However, he did 
not provide documented proof to substantiate the basis of the dispute. Applicant claims 
he was the victim of mortgage fraud with respect to the purchase of House #3. I am 
unable to determine whether the transaction involved fraud. Applicant did not exercise 
due diligence when purchasing House #3. He and his wife decided to purchase House 
#3 because they thought they would make a lot of money on the investment.  They did 
not research the transaction thoroughly before entering into the contract to purchase 
House #3 and did not realize the costs involved with renovating the property.  
  
 
 
 
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Applicant’s financial problems resulted from over-extending himself in the real 
estate market. While some factors aggravated his financial situation, most of the 
problems were within his control. He should have exercised more due diligence when 
deciding to purchase the real estate properties to make sure he understood the terms of 
the mortgages and whether he could afford to pay the expenses on all of his properties.  
He did not mitigate the concerns raised under Guideline F.  
 
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. I considered that Applicant works 
diligently at two full-time jobs to support his family. I considered the favorable comments 
of his references. I considered his mother-in-law’s health problems as well the eight- 
month period when he was laid off from one of his full-time jobs.  However, beginning in 
2006, Applicant made several unwise real estate purchases which resulted in the 
foreclosure of two of his properties. He is struggling to keep his primary residence and 
hopes to be approved for a loan modification. While Applicant claims he owes no money 
as a result of the two properties that were sold at a foreclosure sale, he provided no 
documentation verifying this assertion. Questions remain about the status of his real 
estate properties. I find Applicant did not meet his ultimate burden of persuasion to 
obtain a favorable clearance decision.   
 
 
 
 
 
 
 
 
 
 
 
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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 – 1.b:   Against Applicant 
  Subparagraph 1.c:    For Applicant 
  Subparagraphs 1.d – 1.f:   Against Applicant 
  Subparagraphs 1.g – 1.h:   For Applicant 
  Subparagraphs 1.i – 1.l:   Against Applicant  
  
     Conclusion 
 
In light of all of the circumstances presented by the record in this case, it is not 
clearly consistent with the national interest to grant Applicant eligibility for a security 
clearance.  Eligibility for access to classified information is denied. 
 
 
                                                
_________________ 
ERIN C. HOGAN 
Administrative Judge