KEYWORD: Guideline F
DIGEST: Promises to pay off delinquent debts are not a substitute for a track record of paying
debts in a timely manner and acting in a financially responsible manner.  Adverse decision
affirmed.
CASENO: 09-05252.a1
DATE: 12/03/2010
DATE: December 3, 2010
In Re:
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Applicant for Security Clearance
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ISCR Case No. 09-05252
APPEAL BOARD DECISION
APPEARANCES
FOR GOVERNMENT
James B. Norman, Esq., Chief Department Counsel
FOR APPLICANT
Pro se
The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security
clearance.  On December 23, 2009, DOHA issued a statement of reasons (SOR) advising Applicant
1The Judge made favorable formal findings for Applicant under SOR subparagraphs 1.c and 1.d.  These findings
are not at issue in this appeal.
2
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 September 8, 2010, after the hearing, Administrative Judge Edward W.
Loughran denied Applicant’s request for a security clearance.  Applicant appealed pursuant to the
Directive ¶¶ E3.1.28 and E3.1.30.1
Applicant raises the following issue on appeal: whether the Judge’s adverse security
clearance decision is arbitrary, capricious, or contrary to law.  For the following reasons, the Board
affirms the Judge’s unfavorable decision. 
The Judge made the following findings: Applicant purchased House A in February 2006.
He paid $276,000 for the house by putting $5,000 down and financing the remainder through a first
and second mortgage.  Applicant performed renovations on the house costing about $50,000 which
he paid for out of savings and income.  Applicant entered into a rent-to-own agreement with a
prospective buyer who would rent the property for a year and then purchase the property.  Applicant
took out another loan on House A in the amount of $68,000, which covered the amount he had spent
on renovations plus a remainder, which he kept.  In March 2007, Applicant purchased House B for
$277,000.  This would become his residence.  He took out first and second mortgages on the
property.  He bought House C as an investment in March 2007.  He paid $350,000 for the house and
financed the entire amount.  The previous owner remained in the property as a renter with the
agreement that she could repurchase the property in a year.  Four or five months later, the tenant in
House C became sick and was hospitalized for several months.  She stopped paying the rent and
moved out.  Applicant was able to maintain the mortgage payments on House C, and he is current
on the mortgages for the property.  Applicant attempted to sell House A after the tenant vacated the
property in August 2007, but the real estate market collapsed, making it impossible to cover the
mortgages with a sale.  He was also unable to rent House A.  Applicant realized that he could not
maintain the mortgages on all three properties.  He went to the holders of his mortgages and
attempted to modify the interest payments, but the banks were unwilling to change the terms.
Applicant decided to concentrate on paying the mortgages on House B and House C.  When an
attempt at a short sale of House A fell through, Applicant let the property go to foreclosure.  The
first mortgage lender on House A acquired the property in August 2009.  The balance of the
principal on the first mortgage was $272,168, and the fair market value was $187,000, creating a
deficiency of about $85,000.  Applicant misread an IRS document and thought the debt was
cancelled when, in fact, it was not.  The lender has not made any demands for payment of the
deficiency owed.  Applicant attempted to negotiate a settlement of the second mortgage on House
A, which had an outstanding balance of $68,000.  Applicant made three monthly payments of $200
in the spring of 2010 as agreed to with the second mortgage lender.  Applicant testified that the
lender told him that the debt could be settled for 10% of the amount owed.  Applicant stated that he
had the funds to pay that amount, and he planned on settling the debt once he received a written
agreement.  In July 2010, the lender agreed in writing to settle the $72,717 past due amount for
$7,252.  At the close of the record, there was no evidence that Applicant paid the settlement amount.
2“[T]he individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts[.]”
3
Applicant has not received formal financial counseling but has received financial advice.  With the
exception of his real estate purchases, his finances are otherwise in order and do not raise any
security concerns.
The Judge concluded that: Applicant has not resolved the deficiencies owed on the
mortgages on House A.  His financial issues were recent and ongoing.  Applicant bought three
houses in a short period.  Any investment carries an element of risk.  Applicant invested in
properties without the financial resources to handle a downturn in the market.  Applicant refinanced
House A and took out more than $10,000 above the cost of renovating the property.  Applicant
testified that he had the funds to settle the second mortgage on House A.  He submitted a copy of
a settlement agreement, but no proof that he paid it.  The Judge concluded that he could not make
a determination that Applicant acted responsibly under the circumstances.  The evidence did not
support Applicant’s contention that the first mortgage on House A was cancelled by the lender.  The
second mortgage on House A also remained unresolved.  Because of the lingering issues related to
these mortgages on Applicant’s foreclosed property, the Judge concluded that his financial problems
were not resolved and were not under control.  Applicant had not made a good-faith effort to repay
or otherwise resolve the debts resulting from his foreclosed property.  Financial concerns remained
despite the presence of some mitigation.  Under the whole-person analysis, Applicant’s favorable
character evidence and superior job performance did not overcome questions and doubts about his
eligibility and suitability for a security clearance.
 Applicant contends that the Judge erred in not applying Guideline F mitigating conditions.
He states that his submission into evidence of a settlement agreement with the lender on the second
mortgage, coupled with his payment of the agreed amount, constituted a good faith effort to repay
or otherwise resolve the debt.  Applicant claims he is continuing to receive counseling.  Applicant
asserts that he provided evidence of a “balance sheet” insolvency which had the effect of wiping out
his indebtedness on the first mortgage.  He also asserts that any business venture involves risks and
that he was not negligent in his financial dealings.  Applicant’s arguments do not establish error on
the part of the Judge.
Applicant argues that the record evidence supports application of Guideline F Mitigating
Condition ¶ 20(d).2  He points to Applicant’s Exhibit M, which evidences a settlement agreement
between Applicant and the holder of his second mortgage for the payment of $7,252.00.  Applicant
combines this agreement with evidence of the actual payment of the debt, which was submitted after
the close of the record.  The evidence of repayment is new evidence, which cannot be considered
by the Board.  Directive, ¶ E3.1.29.  The Board has stated that promises to pay off delinquent debts
in the future are not a substitute for a track record of paying debts in a timely manner and otherwise
acting in a financially responsible manner.  See, e.g., ADP Case No. 07-13041 at 4 (App. Bd. Sep.
19, 2008); ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999).  The Judge’s conclusion that
Guideline F, Mitigating Condition ¶ 20(d) is not applicable is supported by the record evidence.
3“[T]he 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[. . .]” 
4“[T]he 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[.]”
4
In concluding that Guideline F Mitigating Condition ¶ 20(c)3 was partially applicable to the
case, the Judge noted that Applicant may have received some financial counseling from the company
he retained to dispute items in his credit report, that Applicant is current on the mortgages on his two
remaining properties, and the rest of his finances do not raise any concerns.  Applicant claims the
Judge should have applied the mitigating condition in his favor, citing the fact that he continues to
receive credit and debt counseling and the fact that his large first mortgage debt has been cancelled
through a “balance sheet” insolvency.  Applicant’s arguments do not establish error on the part of
the Judge.  Applicant’s assertion that he continues to receive counseling is a proffer of new
evidence, which the Board cannot consider.  Applicant’s insistence that he no longer owes the large
first mortgage debt is also based in part on matters outside the record evidence and does not detract
from the Judge’s supportable findings that the IRS Form 1099-A Applicant received is not evidence
of a cancellation of the first mortgage debt.  The Judge’s ultimate conclusion that Guideline F
Mitigating Condition ¶ 20(c) was entitled to some consideration, but did not eliminate security
concerns, is supported by the record.
In arguing for the favorable application of Guideline F Mitigating Condition ¶ 20(b),4
Applicant asserts that he took reasonable risks as an investor, was not negligent, was the victim of
a market downturn and the loss of tenants, and has gotten out of the real estate business.  Despite
Applicant’s assertions, the Judge’s conclusions that he overextended himself, did not act responsibly
under the circumstances, and he has yet to resolve his outstanding indebtedness are supported by the
evidence. 
As the trier of fact, the Judge has to weigh the evidence as a whole and decide whether the
favorable evidence outweighs the unfavorable evidence, or vice versa.  See, e.g., ISCR Case No. 06-
10320 at 2 (App. Bd. Nov. 7, 2007).  A party’s disagreement with the Judge’s weighing of the
evidence, or an ability to argue for a different interpretation of the evidence, is not sufficient to
demonstrate the Judge weighed the evidence or reached conclusions in a manner that is arbitrary,
capricious, or contrary to law.  See, e.g., ISCR Case No. 06-17409 at 3 (App. Bd. Oct. 12, 2007).
In this case, the Judge weighed the mitigating evidence offered by Applicant against the seriousness
of the disqualifying conduct and considered the possible application of relevant conditions and
factors.  He adequately discussed why the disqualifying conduct established under Guideline F was
not completely mitigated.  
The Board does not review a case de novo.  The favorable evidence cited by Applicant is not
sufficient to demonstrate the Judge’s decision is arbitrary, capricious, or contrary to law.  See, e.g.,
ISCR Case No. 06-11172 at 3 (App. Bd. Sep. 4, 2007).  After reviewing the record, the Board
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concludes that the Judge examined the relevant data and articulated a satisfactory explanation for
his 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 general
standard 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).  Therefore, the
Judge’s ultimate unfavorable security clearance decision is sustainable.
Order
The decision of the Judge denying Applicant a security clearance is AFFIRMED.
Signed: Jeffrey D. Billett       
Jeffrey D. Billett
Administrative Judge
Member, Appeal Board
Signed: Michael D. Hipple        
Michael D. Hipple
Administrative Judge
Member, Appeal Board
Signed: William S. Fields         
William S. Fields
Administrative Judge
Member, Appeal Board