KEYWORD: Guideline K
DIGEST: Record does not support Judge’s conclusion that Applicant did not owe three of four
alleged debts.  Judge erred in mitigating security concerns when Applicant’s mortgage payments
exceeded his income.  Favorable decision reversed.
CASE NO: 08-11940.a2
DATE: 12/02/2010
DATE: December 2, 2010
In Re:
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Applicant for Security Clearance
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ISCR Case No. 08-11940
APPEAL BOARD DECISION
APPEARANCES
FOR GOVERNMENT
Kathryn D. MacKinnon, Esq., Deputy Chief Department Counsel
FOR APPLICANT
Alan V. Edmunds, Esq.
The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security
clearance.  On June 22, 2009, DOHA issued a statement of reasons (SOR) advising Applicant of the
basis for that decision–security concerns raised under Guideline F (Financial Considerations) of
Department of Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive).  Applicant
requested a hearing.  On December 15, 2009, after the hearing, Administrative Judge Richard A.
Cefola granted Applicant’s request for a security clearance.  Department Counsel appealed pursuant
to Directive ¶¶  E3.1.28 and E3.1.30.  On April 2, 2010, we remanded case to the Judge for a new
decision.  On August 27, 2010, the Judge issued a Decision on Remand, in which he again granted
Applicant a security clearance.  Department Counsel appealed, in accordance with the Directive.
Department Counsel raised the following issues on appeal: whether the Judge failed to
address the issues raised in the prior Appeal Board remand order and whether the Judge’s decision
is arbitrary, capricious, or contrary to law.  Consistent with the following discussion, we reverse the
decision of the Judge.
Facts
The Judge made the following pertinent findings of fact: Applicant purchased Property 1 as
a residence in 2003 for $410,000.  He financed Property 1 with two mortgages.  There was later
found to have been fraud involved in the appraisal for the original lender.  In 2005 Applicant
purchased Property 2 for $710,000 as a residence and financed it with two more mortgages.  He
converted Property 1 to a rental.  Applicant made no down payment on either property.  Applicant
earns about $82,000 a year.  In 2008 the real estate market collapsed, Applicant’s fiancé who had
been earning $31,800 a year lost her job, their monthly mortgage payments doubled, and Applicant
lost the tenant for Property 1.  Both properties were the subject of foreclosure actions.  Applicant
owed on mortgages respectively: $344,000, $86,000, $567,000, and $140,000, for a total of  over
$1,100,000.  Applicant no longer owes anything on the debts.
Applicant now has $27,000 in savings bonds, an investment portfolio worth $9,800, and two
IRAs valued at $2,255 and $6,331 respectively.  He is current with all his debts.
Discussion 
Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong
presumption against the grant or maintenance of a security clearance.  See Dorfmont v. Brown, 913
F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991).  After the Government presents
evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those
concerns.  See Directive ¶ E3.1.15.  In rendering a final decision, an “agency must examine the
relevant data and articulate a satisfactory explanation for” the decision, “including a ‘rational
connection between the facts found and the choice made.’” Motor Vehicle Mfrs. Ass’n of the United
States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983)(quoting Burlington Truck Lines,
Inc. v. United States, 371 U.S. 156, 168 (1962)).  The standard applicable in security clearance
decisions “is that a clearance may be granted only when ‘clearly consistent with the interests of the
national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 
In deciding whether the Judge's rulings or conclusions are erroneous, the Board will review
the Judge's decision to determine whether:  it does not examine relevant evidence; it fails to
articulate a satisfactory explanation for its conclusions, including a rational connection between the
facts found and the choice made; it does not consider relevant factors; it reflects a clear error of
judgment; it fails to consider an important aspect of the case; it offers an explanation for the decision
that runs contrary to the record evidence; or it is so implausible that it cannot be ascribed to a mere
difference of opinion.  See, e.g., ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006).
Department Counsel contends that the Judge did not comply with the Board’s Remand Order.
In its prior decision, the Board concluded that the Judge’s decision was not sufficiently clear so as
to allow the parties and the Board to discern with confidence all of the Judge’s findings and
1Directive Enclosure 2¶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 judgement[.]”
2Directive, Enclosure ¶ 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[.]”  
3To the extent that the Judge relied on such analysis it is important to note that the purpose of the current
adjudication is to determine security eligibility rather than to collect debts.  See, e.g., ISCR Case No. 07-16841 at 4 (App.
Bd. Dec. 19, 2008) and ISCR Case No. 07-16427 at 4 (App. Bd. Feb. 4, 2010).  
4Applicant Exhibit (AE) C is a Form 1099-A, Acquisition or Abandonment of Secured Property.  This form
states that, regarding one of the four mortgage debts, Applicant was not liable for repayment.  This document is
consistent with AE J, Credit Report, which makes no reference to the creditor for this particular loan.  There is no
comparable Form 1099  pertaining to the remaining three mortgage debts.  The three remaining mortgages do appear
on the credit report which shows past due amounts of $44,197, $10,101, and $86,000.    
conclusions.  The Board mentioned various aspects of the case where additional detail and
explanation from the Judge were necessary to allow it to review the errors alleged.  Department
Counsel now sets forth numerous instances in which the Judge allegedly did not comply with the
Board’s instructions.  Without providing a detailed discussion of the various points raised by
Department Counsel, the Board concludes that the Judge’s remand decision is sufficiently detailed
to enable the Board to address the issues raised on appeal. 
Regarding Department Counsel’s assertion that the Judge’s decision is arbitrary, capricious,
or contrary to law, we have considered the Judge’s decision in light of the record as a whole.  The
Judge favorably applied two Financial Considerations Mitigating Conditions (FCMC) : Directive,
Enclosure 2 ¶20(a)1 and ¶20(b).2  The Judge relied in large measure upon his finding that Applicant
no longer owed the debts alleged in the SOR and that the financial problems in this case were caused
by circumstances outside Applicant’s control.    
Concerning 20(a), the record evidence does not support the conclusion that Applicant no
longer owed three of the four alleged debts and, therefore, that they are not recent.  We note the
argument in Applicant’s reply brief to the effect that state law protects Applicant from liability on
deficiency judgments.3  On the other hand, the corroborating evidence supplied by Applicant is
speculative and appears to be contradicted by the contents of a credit report dated one day prior to
the hearing, an exhibit offered by Applicant himself.  In light of this exhibit and the other record
evidence, the Judge’s conclusion that Applicant no longer owed anything arising from the
foreclosure sale of his two houses is not sustainable.4      
    
The Judge also noted Applicant’s testimony regarding the collapse of the real estate market
and his wife’s loss of employment, in support of the view that the circumstances of the debts were
unusual.  This was evidence which the Judge was required to consider, along with all the other
record evidence.  However, the Judge’s reliance upon this circumstance is vitiated by evidence that
Applicant did not marry his wife until after the properties went into foreclosure, thereby
undermining the effect her subsequent unemployment would have exerted upon his real estate
5In Government Exhibit (GE) 1, Security Clearance Application, dated September 2, 2008, Applicant states that
he is not married and had never been married.  GE 2, Answers to Interrogatories, contains a summary of Applicant’s
personal interview.  In this interview he described the circumstances of the foreclosures of both properties.  He stated
that his fiancé was aware of his financial problems, demonstrating that he was not married at the time of the foreclosures.
In this interview he did not attribute his financial problems to his fiance’s employment situation.  Compare this interview
with Tr. at 51: “Q: So when you ran out of money and your wife lost her job, what happened to property number two?
A: It went into foreclosure.”     
6In  GE 2, Applicant stated that the combined payments for Property 1 were $4,000 per month.  The combined
payments for Property 2 were also $4,000.  Applicant further advised that his gross monthly salary was around $7,000
and his net salary was $4,212.  He stated that his financial problems began in June 2007, when his mortgage payment
on Property 1 increased to $7,000.  
7AE A, Stipulation for Settlement, indicates that Applicant accepted $30,000 in settlement of a lawsuit based
upon fraudulent over-appraisal of one of the properties.  
difficulties.5  It is further undermined by record evidence that Applicant entered into the purchase
of two properties at 100% financing, the combined amounts of the adjustable rate mortgages
exceeded $1,000,000, and the payments for these mortgages were more than his salary.6  There is
no basis in the record to conclude that the amount of these combined debts would have been
significantly less even had the first property not been over-appraised, as Applicant contended.7
Under the circumstances, Applicant’s purchase of these properties raises serious questions about his
reliability and good judgement, questions which the Judge does not address in his decision.  Even
assuming that state law protects Applicant from deficiency judgments, the totality of the record
evidence does not support a conclusion that Applicant has met his burden of persuasion under
FCMC 20(a).
For similar reasons, the evidence will not support a favorable conclusion under FCMC 20(b).
No doubt Applicant’s problems were aggravated by a downturn in the market.  However, the fact
of entering into such transactions at all, given his financial circumstances and the foreseeable
eventuality that the mortgage payments would rise (given their adjustable nature), undermines a
conclusion that the circumstances of the financial problems were largely beyond Applicant’s control.
The record does not support the Judge’s conclusion that Applicant has met his burden of
persuasion as to mitigation, either under the mitigating conditions or the whole person factors, in
light of the standard set forth in Egan.  The Judge’s Decision on Remand is not sustainable.  
Order
The Judge’s favorable security clearance decision is REVERSED.
Signed: Michael Y. Ra’anan          
Michael Y. Ra’anan
Administrative Judge
Chairperson, Appeal Board
Signed: Jeffrey D. Billett                
Jeffrey D. Billett
Administrative Judge
Member, Appeal Board
Signed: James E. Moody               
James E. Moody
Administrative Judge
Member, Appeal Board