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                        DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 10-00614
)
)
Applicant for Security Clearance )
Appearances
For Government: David A. Hayes, Esq., Department Counsel
For Applicant: William Savarino, Esq.
                                                                            
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Decision
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LYNCH, Noreen A., Administrative Judge:
On November 4, 2010, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) alleging security concerns arising 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 (DoD) Directive 5220.6, Defense Industrial
Personnel Security Clearance Review Program (January 2, 1992), as amended
(Directive), and the adjudicative guidelines (AG), implemented in September 2006. 
Applicant timely answered the SOR and requested a hearing. DOHA assigned
the case to me on February 24, 2011. A notice of hearing was issued on March 10,
2011, and the case was heard on March 24, 2011. Department Counsel offered six
exhibits, which were admitted without objection as Government Exhibits (GE) 1-6.
Applicant testified and submitted exhibits AE A through AE K at the hearing, which were
admitted without objection. At Applicant’s request, I kept the record open and Applicant
timely submitted two exhibits that were marked as AE L and AE M. DOHA received the
transcript (Tr.) on April 1, 2011. Based on a review of the pleadings, submissions,
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testimony, and exhibits, I find Applicant met his burden regarding the security concerns
raised. Security clearance is granted.
Findings of Fact
Applicant is a 58-year-old security analyst for a defense contractor, who
graduated from college in 1982. He is married and has two children. He served in the
U.S. Air Force from 1971 until 1995. He has held a security clearance since 1971. He
has worked for his current employer since December 1994. (GE 1)
Applicant’s wife served as an officer in the United States Navy for 20 years. She
retired in October 2007. (AE I) Applicant’s wife owned several rental properties before
they were married. Applicant and his wife decided to engage in real estate investments.
(Tr. 25) Their plan was to invest for four years. Applicant and his wife researched the
housing market and believed they could be successful. 
Applicant and his wife partnered with a real estate agent. They purchased newly
constructed homes in a development. (AE A) After an initial payment on the houses, the
real estate agent would sell the home. Applicant and his wife were successful in their
endeavors. They realized a profit and the turn-around time was normally three to six
months. (Tr. 26) Applicant and his wife sold four or five homes in 2004. (Tr.66)
In 2005, Applicant and his wife purchased a family residence for approximately
$850,000. He and his wife, two children and his mother-in-law reside in the house. They
could easily afford the monthly mortgage based on their incomes. Also, they had each
sold a prior home, and had money to serve as a down payment.
Applicant and his wife also own a retail business. The party store was a
franchise when they bought it in 2005. (Tr. 59) They invested approximately $100,000
in their business. While they do not take any income from the business, the business
income pays its operational costs. 
In May 2006, Applicant and his wife decided to invest in another house. They
were advised that the home was newly constructed and was in the same development
as the other homes they had previously sold. Applicant invested $15,000 in the property
that was due to sell for $450,000. He and his wife obtained a home mortgage. Due to
the economy downturn, the house did not sell. Applicant and his wife paid on the
mortgage ($2,683) for almost two years, but the house did not sell. (GE 3) They
attempted three short sales on several occasions. (AE D, E and F) In fact, they had
several buyers, but due to the lengthy process time with the bank, the buyers lost
interest. They lowered the price; they improved the landscaping; they attempted a loan
modification; (AE D) and they attempted to rent the house with an option to buy. (AE B) 
Applicant contacted the credit union for a loan modification, when the house still
had not sold by February 2008. (AE C) Applicant’s wife, who had a prior account with
the credit union, explained in her February 18, 2008, letter that they did not want to
default on the loan nor did they want to have this property go into foreclosure. Applicant
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and his wife asked that this be considered a hardship request. They again emphasized
that they were amenable to a short sale. The credit union did not respond. (Tr. 34)
Applicant was never delinquent on any accounts for a 30-year period. He always
paid his bills, and he had reserve money in savings accounts. He decided to take
money out of his 401(k) to help pay the mortgage on the property that had not sold.
They also took money out of their thrift savings account, and Applicant’s wife sold one
of her other properties. (Tr. 69) Eventually, Applicant and his wife exhausted their
financial resources. Applicant managed to stay current on all expenses, except the
investment property. His credit reports confirm that he had numerous accounts noted
as “paid as agreed.” (AE J)
Despite Applicant’s attempts to present the credit union with several short sales,
in 2009, the credit union took the home in lieu of the remainder of the mortgage. The
amount of the property value was $460,000. Applicant received a cancellation of debt
from the credit union. The case is now closed. (AE I) The SOR alleges the
indebtedness of the mortgage account as the only debt. 
At the hearing, Applicant explained that this was a hard decision to make. He felt
morally obligated to pay all his bills including the mortgage. However, there is no
deficiency judgment owed. The case is closed. Applicant explained the situation in
detail on his 2009 security clearance application. At no time was Applicant shirking his
responsibility to his creditors. Applicant acknowledged that this is the only blemish on
his credit report. 
Applicant was also candid that his wife purchased properties before they were
married. She has the responsibility for those properties. Applicant’s name is not on
those properties. Currently both properties have tenants in them. His wife also holds a
security clearance, and is now working for a defense contractor. The foreclosure is also
listed on her credit report.
Applicant’s monthly net income is $6,363. His wife also has an income of
approximately $8,200 per month. Applicant has a budget. Applicant received informal
financial counseling. They have bank accounts and some savings. Applicant is current
on his daily expenses. He has no car loan. They have a net monthly remainder of
approximately $3,420. 
Applicant’s employer describes him as an exemplary employee, who conducts
himself with professionalism and is highly regarded by his peers. (AE K) He is a great
asset to the company. His employer is aware of the financial issue concerning the
investment property. He has never known Applicant to be in any financial difficulty in the
time he has known him since 1991.
 See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995).      1
 Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).      2
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      3
 See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive      4
information), and EO 10865 § 7.
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Policies
When evaluating an applicant’s suitability for a security clearance, an
administrative judge must consider the adjudicative guidelines (AG). In addition to brief
introductory explanations for each guideline, the adjudicative guidelines list potentially
disqualifying conditions and mitigating conditions. These guidelines are not inflexible
rules of law. Instead, recognizing the complexities of human behavior, they are applied
in conjunction with the factors listed in the adjudicative process. An administrative
judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision.
Under AG ¶ 2(c), this process is a conscientious scrutiny of a number of variables
known as the “whole-person concept.” An 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.
The Government must present evidence to establish controverted facts alleged
in the SOR. 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. . . .”  The burden of proof is something less than a1
preponderance of evidence.  The ultimate burden of persuasion is on the applicant.  2 3
A person seeking access to classified information enters into a fiduciary
relationship with the Government based on 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 of 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.”  “The clearly consistent standard indicates that security clearance4
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      5
 Id.      6
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determinations should err, if they must, on the side of denials.”  Any reasonable doubt5
about whether an applicant should be allowed access to sensitive information must be
resolved in favor of protecting such information.  The decision to deny an individual a6
security clearance does not necessarily reflect badly on an applicant’s character. It is
merely an indication that the applicant has not met the strict guidelines the President
and the Secretary of Defense established for issuing a clearance.
Analysis
Guideline F, Financial Considerations
The security concern for Financial Considerations is set out in AG ¶ 18:
Failure or an 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.” It also states that “an individual who
is financially overextended is at risk of having to engage in
illegal acts to generate funds.
Applicant had a delinquent debt in the approximate amount of $450,000 for a
home mortgage foreclosure in 2008. This debt occurred after Applicant’s wife ended
her military career and decided to invest in real estate. Although the only delinquent
debt that Applicant has had in a 30-year period, it was delinquent over a course of  time
when he could no longer pay the mortgage. Consequently, Financial Considerations
Disqualifying Condition (FC DC) AG ¶ 19(a) (inability or unwillingness to satisfy debts),
and FC DC AG ¶ 19(c) (a history of not meeting financial obligations) apply. With such
conditions raised, it is left to Applicant to overcome the case against him and mitigate
security concerns.  
Applicant incurred the debt when he and his wife decided to invest in a home
property in 2006 after they had successfully invested in a prior year. They researched
the market and believed they would sell the home for a profit in a reasonable time.
Despite many efforts, the home did not sell. They documented their many efforts to sell
the home. They depleted their savings trying to pay the mortgage on this home. Prior to
2006, Applicant had no financial difficulties. Applicant consistently used sound
judgment in his finances. The past-due mortgage situation is unlikely to recur. Applicant
and his wife are no longer in the investment business  Consequently, Financial
Considerations Mitigating Condition (FCMC) AG ¶ 20(a) (the behavior happened so
long ago, was so infrequent, or occurred under such circumstances that it is unlikely to
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recur and does not cast doubt on the individual’s current reliability, trustworthiness, or
good judgment) applies.
Financial Considerations Mitigating Condition (FC MC) AG ¶ 20(b) (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 under the circumstances)
applies. Applicant was successful in the military. He was successful in his second
career. He bought and sold four homes successfully. He and his wife decided to buy a
last property, but due to the housing market, the home did not sell. They paid the
mortgage on the house for two years. They acted reasonably under the circumstances. 
FC MC AG ¶ 20(d), (the individual initiated a good-faith effort to repay overdue
creditors or otherwise resolve debts) applies. Applicant provided evidence of attempts
to sell the property that he bought in 2006. He tried reducing the price, short sales, and
a loan modification. He and his wife paid the mortgage for two years. He did not waver
in his efforts. 
The home was foreclosed and the debt was forgiven. Applicant completed
financial counseling, developed a budget, and pays his monthly expenses. FC MC AG ¶
20(c) (the person has received or is receiving counseling for the problem and there are
clear indications that the problem is being resolved or is under control) applies.
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 an 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. As noted above, the
ultimate burden of persuasion is on the applicant seeking a security clearance. 
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I considered the potentially disqualifying and mitigating conditions in light of all
the facts and circumstances surrounding this case as well as the whole-person factors.
Applicant is 58 years old. He served honorably in the U.S. Air Force for more than 20
years. He is praised for his dedication to his country. He is described by his employer
as an outstanding employee. He is a responsible parent and had no financial difficulties
before 2008. Applicant was successful in the military and after leaving the military, in his
employment with a contractor. 
Applicant and his wife had a plan of investment strategies. After their military
careers, they decided to enter the real estate market. They were successful. Applicant
sold four homes. He purchased a new home for his family in 2005. He and his wife also
bought a business. They invested their money after researching the market.
Applicants’s wife had previously purchased properties that she now rents. They had
sufficient income to purchase the 2006 property with the expectation that it would sell in
a short time and realize a profit.
The unexpected failed investment, combined with the housing market crisis in
2008, left Applicant with an inability to maintain his home mortgage and the monthly
mortgage on the 2006 investment property. He documented and testified credibly that
he did everything possible to sell the house. He worked to get the mortgage modified.
He paid the mortgage for two years. At no time did he act in an unreasonable manner.
Applicant was candid and forthright in the entire security clearance process. He
disclosed his financial delinquency on his security clearance application. He was
organized at the hearing and has shown that he is responsible with his finances.
Applicant impressed me as a professional who is ethical and trustworthy. I have no
doubts about his sincerity and find that it is clearly consistent with the national interest
to grant him a security clearance. 
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: FOR APPLICANT
Subparagraph 1.a: For Applicant
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Conclusion
In light of all of the circumstances presented by the record in this case, it is
clearly consistent with the national interest to grant Applicant a security clearance.
Clearance is granted.
                                                     
NOREEN A. LYNCH.
Administrative Judge