DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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                                                                      )                                                          
           ----------------------------------                  )      ISCR  Case No.   09-05369         
                                                                )
)
Applicant for Security Clearance )
Appearances
For Government: Daniel Crowley, Esquire, Department Counsel
For Applicant: Spouse as Personal Representative
______________
 Decision
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WESLEY, Roger C., Administrative Judge:
Based upon a review of the pleadings, exhibits, and testimony, I conclude that
Applicant mitigated the security concerns regarding his finances. Eligibility for access to
classified information is granted. 
 
Statement of Case
On May 14, 2010, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) detailing reasons why DOHA could not make the
preliminary affirmative determination of eligibility for granting a security clearance, and
DOHA recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. 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 (AGs) implemented by the
Department of Defense on September 1, 2006. 
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Applicant responded to the SOR on July 26, 2010, and requested a hearing. The
case was assigned to me on December 8, 2010, and was initially scheduled for hearing
on December 13, 2010, before being rescheduled for December 14, 2010.  The hearing
was convened on December 14, 2010. The Government's case consisted of six exhibits
(GEs 1-6). Applicant relied on two witnesses (including himself) and seven exhibits (AEs
A-G). The transcript (Tr.) was received on December 29, 2010.
Procedural Rulings
      
Before the close of the hearing, Applicant requested leave to supplement the
record with (a) documentation of his Ford Focus loan consolidation arrangements
(creditor 1.g).  For good cause shown, Applicant was granted seven days to supplement
the record. Department Counsel was afforded six days to respond. Within the time
permitted, Applicant supplemented the record with documentation of his state’s anti-
deficiency statute, his Ford Focus loan consolidation, and his state’s assumed
jurisdiction of his workers’ compensation claims. Department Counsel interposed no
procedural or substantive objections. Applicant’s post-hearing submission is admitted as
AE H.
Applicant faxed additional post-hearing documentation for consideration on
December 29, 2010. His document submissions covered updated claim information
from the state compensation agency handling his workers’ compensation claim.
Department Counsel interposed no procedural or substantive objections to any of the
documents offered by Applicant for consideration. Applicant’s submission is admitted as
AE I.  
On June 9, 2011, Applicant submitted a letter from the State Insurance Fund of
Applicant’s prior state of residence for admission and consideration. In the letter
submission, the State Fund accepted responsibility for the charges covered by
subparagraph 1.d of the SOR.  Department Counsel did not object to the lateness of the
submission or the substance of the letter. For good cause shown, Applicant’s post-
hearing submission is accepted as AE J.
Summary of Pleadings
Under Guideline F, Applicant allegedly (a) petitioned for Chapter 13 protections in
September 2001 (dismissed in July 2002); (b) petitioned for Chapter 7 protections in
September 2002 (discharged in December 2002); and (c) accumulated seven
delinquent debts exceeding $61,000 since his bankruptcy discharge. 
In his response to the SOR, Applicant admitted his bankruptcy petitions and
dispositions.  He admitted two of his debts (creditors 1.d and 1.f) as being unpaid, but
denied responsibility for one of the debts (creditor 1.d) and denied the full amount owing
on the other debt (creditor 1.f).  Applicant denied the remaining five debts, claiming lack
of knowledge of debts claimed by creditors 1.c, 1.e, and 1.i.  He claimed he paid the
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debt covered by creditor 1.g.  He also claimed the absence of any legal responsibility for
any deficiency claimed by creditor 1.h, which foreclosed on his property in May 2009.
                     
Findings of Fact
Applicant is a 46-year-old Unmanned Aerial Vehicle (UAV) crew chief for a
defense contractor who seeks a security clearance. The allegations covered in the SOR
and admitted by Applicant are incorporated and adopted as relevant and material
findings. Additional findings follow.
Background
Applicant has a high school diploma and has worked for the same employer
since December 2008. (GE 1)  He married his first wife in August 1988 and divorced her
in February 1991. (GE 1) He has one child from this marriage, age 22. Applicant
remarried his current wife in April 1991, and divorced her in June 2002.  He remarried
her in August 2003 and has one child from this marriage, age 18. (GE 1; Tr. 73-76)  
Applicant enlisted in the Navy in September 1988 and served three years of
active duty. He received an other than honorable discharge from the Navy in August
1991. (GEs 1 and 2) He was discharged after he tested positive for marijuana in a
random urinalysis test. (GE 2) He admitted to inhaling two puffs from a marijuana
cigarette offered to him while he was on liberty. He did not clarify whether he appeared
before an administrative board. (GE 2)  
Applicant’s finances
Applicant filed for Chapter 13 relief in September 2001 after he lost his full-time
job with a motorcycle distributor, and his part time job as well. (GE 2) Prior to the
completion of his Chapter 13 relief petition, he was offered a job in another state. (Tr.
71)  Acting on the advice of his attorney, he asked for his Chapter 13 petition to be
dismissed.  Records document that his Chapter 13 petition was dismissed in July 2002.
(GE 2 and AE G)  
In September 2002 (two months following his relocation), Applicant petitioned for
Chapter 7 protection. (GEs 2 and 6) In his petition, he scheduled $500 in secured
claims and $125,000 in non-priority unsecured claims. (AE 6) Included in his schedule
of unsecured claims were student loans totaling $25,000 and an auto loan for a
surrendered vehicle. (GE 6) Applicant listed net monthly income of $1,639 a month for
himself and $2,203 for his wife for a total of $3,842 in joint family income.  He reported
$3,976 of monthly personal expenses. (GE 6) Applicant received his Chapter 7
bankruptcy discharge in December 2002. (GEs 2 and 6) 
In July 2003, Applicant was involved in a motorcycle accident. (GE 2; Tr. 102-
103) Applicant was en route to a work-related bike show, when his motorcycle slid out
from under him during a monsoon-like rainstorm. (Tr. 37, 101-103, 103, 107-112)  He
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did not have health or accident insurance at the time to cover his injuries, and did not
file any work-related workers’ compensation claims contemporaneously with his
accident. (GE 2; Tr. 108-109) His owner-manager visited him in the hospital and told
him not to worry about his injuries. (Tr. 107-108) But his employer did not have any
health insurance to cover Applicant and did not cover Applicant’s medical bills. (Tr. 115-
116). Based on the negative information his employer provided him at the time,
Applicant did not initially file any workers’ compensation claims with the state agency
responsible for adjudicating them. (AEs H and I)
In July 2007, Applicant accepted a verbal offer of employment to be the service
manager of a local motorcycle retail facility owned by the brother of his former employer
in their current state of residence. (GE 2; Tr. 118-119) Based on the assurances he
received from his prospective employer, Applicant expected to make more than his
monthly salary from his previous employer. (GE 2) His wife, too, received a promised
employment position in the same state. (Tr. 33) Both have earned considerably less
money since relocating.  (GE 2)
Based on the verbal assurances they received from their prospective employers,
Applicant and his wife purchased a home in the area and financed it with a $278,000
first mortgage loan with nothing down. (GE 2; Tr. 66-67) Loan terms included a monthly
principal and interest payment of $2,067 and a monthly escrow payment of $228 to
cover private mortgage insurance (PMI). (AE B)  
Shortly after the loan was purchased by a new lender, Applicant’s wife spoke
with a lender representative about the escrow payment for mortgage insurance and was
told by the representative that they qualified for a lender paid PMI that would obligate
them to just a dollar a month.  How they qualified, and whether they formally applied for
a lender paid PMI is not clear. Shortly thereafter, their loan was transferred to another
lender. (AE C) Records show that in September 2007 Applicant and his wife were billed
for principal and interest charges of $2,067 and PMI escrow charges of $596 to cover
two months. (GE 2 and AE B; Tr. 33-34) 
By May 2008, Applicant and his wife received an escrow account disclosure
statement that reported a $5,660 escrow shortage and a lender intent to increase the
monthly payment to $2,287 (effective July 2008) to make up the shortage. (AE C; Tr.
34) The disclosure statement advised that if Applicant and his wife did not pay the
claimed shortage in the escrow account, their monthly payment would increase to
$3,359. (GE 2; AE C) Applicant’s wife’s telephonic requests for lender clarification of its
adjustments in the escrow charges were not heeded, and the lender continued to bill
Applicant and his wife for the increased escrow charges to cover the claimed $5,841
shortage. (Tr. 34) Further efforts of Applicant and his wife, through their retained
attorney, to convince the lender to drop the increased escrow charges were not
successful. (GE 2 and AE C; Tr. 79-80)
After struggling to meet their mortgage payments, Applicant and his wife
defaulted on their loan in August 2008. The lender notified them of the default in
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October 2008 and advised them of intended foreclosure proceedings. (AE D; Tr. 34-35),
Upon receiving the notice, Applicant and his wife listed their property for sale (at a price
range between $225,000 and $260,000) and attempted to arrange either a short sale or
a deed-in-lieu of foreclosure with the lender. (GE 2; Tr. 34) They were unsuccessful in
both attempts and were notified by the lender in December 2008 that it had sold the
loan to another lender. (AE D; Tr. 34-35, 57-58) 
Applicant’s efforts to complete a deed-in-lieu of foreclosure or approved short
sale with the new lender were unsuccessful, too. And in November 2008, the lender
mailed them a notice of foreclosure sale to be scheduled in February 2009. (AE E)
Records document that Applicant’s property was sold at a public sale in May 2009 for
$248,387. (AE E; Tr. 36, 61-64) This left a deficiency balance in Applicant’s outstanding
loan of around $30,000. To date, Applicant and his wife have not made any payments
towards eliminating the deficiency (creditor 1.h), and claim they are not obligated to do
so under their state’s anti-deficiency law.  (AE E; Tr. 65-66)
Besides their home loss to foreclosure, Applicant and his wife have encountered
other debt delinquencies since 2003. Applicant was billed $15,750 for medical bills
following his treatment for injuries incurred in his 2003 motorcycle accident.(Tr. 37, 107-
108) Applicant has since been in contact with the state’s workers’ compensation
agency, and in June 2011 received confirmation from the state’s compensation
insurance fund that the state fund had accepted responsibility for the medical charges
billed Applicant on July 28, 2003 for ambulance service and the university medical
center of another state.  In this letter, the state fund assured that the two providers
referenced would be paid “as soon as possible.” See AE J
Applicant’s signature loan with creditor 1.g is still outstanding. However,
Applicant has been able to consolidate this loan with his other car loan. (AEs H and I)
His  documentation confirms the consolidation of his loan payments on both loans, as
well as the current status of the loan in his credit reports. (AEs H and I) The current loan
balance on his consolidated creditor 1.g loan is $17,973, and the loan is in reported
good standing.                                                                                                         
Of the remaining three listed creditors in the SOR (creditors 1.c, 1.e, and 1.i),
Applicant recognized only one account as his own. He recognized creditor 1.i as a
medical account covering ambulance services associated with his 2003 motorcycle
accident. (GE 2) He acknowledged the creditor 1.e account as one of the consolidated
debts he arranged to pay for but otherwise does not recognize the account. He also
recognized the creditor 1.c account as a likely bill for ambulance services associated
with his motorcycle accident.  Each of these three accounts appear in Applicant’s credit
reports as medical accounts (inferentially associated with Applicant’s 2003 motorcycle
accident). Reimbursement of these medical accounts by Applicant’s state’s
compensation insurance fund is imminent.
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Endorsements
Applicant is well regarded by one of his supervisors and two of his former
coworkers. (AE A)  His supervisor lauded his responsible efforts as an instructor, training
young enlistees in the use of unmanned aircraft systems. (AE A) This supervisor
considers Applicant to be one of his most trusted and valued employees. 
Policies
         The AGs list guidelines to be used by administrative judges in the decision-making
process covering DOHA cases. These guidelines take into account factors that could
create a potential conflict of interest for the individual applicant, as well as considerations
that could affect the individual’s reliability, trustworthiness, and ability to protect classified
information. 
These guidelines include "[c]onditions that could raise a security concern and may
be disqualifying” (disqualifying conditions), if any, and many of the "[c]onditions that
could mitigate security concerns.” They must be considered before deciding whether or
not a security clearance should be granted, continued, revoked, or denied. The
guidelines do not require administrative judges to place exclusive reliance on the
enumerated disqualifying and mitigating conditions in the guidelines in arriving at a
decision. Each of the guidelines is to be evaluated in the context of the whole person in
accordance with AG ¶ 2(c) 
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a)
of the revised AGs, which are intended to assist the judges in reaching a fair and
impartial commonsense decision based upon a careful consideration of the pertinent
guidelines within the context of the whole person. The adjudicative process is designed
to examine a sufficient period of an applicant’s life to enable predictive judgments to be
made about whether the applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered together with the following AG ¶ 2(a) factors: 
(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 chances; (7) the
motivation for the conduct; (8) the potential for pressure, coercion,
exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
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       Viewing the issues raised and evidence as a whole, the following adjudication policy
factors are pertinent herein:
Financial Considerations
The Concern: “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.  Compulsive gambling is a concern as it may lead to financial
crimes including espionage.  Affluence that cannot be explained by
known sources of income is also a security concern.  It may indicate
proceeds from financially profitable criminal acts.” 
Adjudication Guidelines, ¶ 18.
Burden of Proof
By virtue of the precepts framed by the AGs, a decision to grant or continue an
applicant's security clearance may be made only upon a threshold finding that to do so is
clearly consistent with the national interest. Because the Directive requires
Administrative Judges to make a common sense appraisal of the evidence accumulated
in the record, the ultimate determination of an applicant's eligibility for a security
clearance depends, in large part, on the relevance and materiality of that evidence.  As
with all adversary proceedings, the Judge may draw only those inferences which have a
reasonable and logical basis from the evidence of record.  Conversely, the Judge cannot
draw factual inferences that are grounded on speculation or conjecture.
The Government's initial burden is twofold: (1) It must prove any controverted
facts alleged in the Statement of Reasons and (2) it must demonstrate that the facts
proven have a material bearing to the applicant's eligibility to obtain or maintain a
security clearance. The required showing of material bearing, however, does not require
the Government to affirmatively demonstrate that the applicant has actually mishandled
or abused classified information before it can deny or revoke a security clearance.
Rather, consideration must take account of cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the burden of persuasion shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation or
mitigation of the Government's case.
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Analysis  
Applicant is a well regarded crew chief for a defense contractor who encountered
financial problems associated with underemployment between 1999 and 2002 that
prompted him to petition for Chapter 13 relief in 2001 in his home state, and then for
Chapter 7 protections following his relocation. After a brief period of marital
estrangement, and medical outlays associated with a motorcycle accident in 2003, he
and his wife remarried and enjoyed renewed financial stability for several years.  
Anticipating new jobs with increased compensation, Applicant and his wife
relocated to their current state of residence in July 2007 and purchased a home.  As the
result of lower income returns, some misunderstandings about their mortgage insurance
obligations, and a falling real estate market, they could not avert foreclosure of their loan.
A deficiency balance following the foreclosure sale of Applicant’s home is the only
remaining debt of any material significance, and it is covered by his state’s anti-
deficiency law.
By defaulting on their home mortgage, Applicant and his wife exposed themselves
to non-judicial foreclosure and potential deficiency claims by the first mortgagee. Without
resolution, the approximate $30,000 mortgage balance with creditor 1.h posed a potential
deficiency liability for Applicant and his wife. 
In November 2008, the first mortgagee initiated non-judicial foreclosure
proceedings against Applicant and his wife.  Proceeds from the public sale of the property
produced $248,000, which left an approximate $30,000 deficiency balance.  However,
this  balance is covered by the state’s anti-deficiency statute that bars any enforcement
actions for the recovery of a deficiency, unless a suit is commenced within 60 days of the
public sale of the underlying property.  Because the foreclosing lender never availed itself
of the judicial remedy to recover its deficiency balance, Applicant and his wife do not have
any legal exposure to enforcement actions to recover the deficiency. See Title 33,
Chapter 6.1 of the A Rev. Stats. 
       At the outset, security concerns are raised under the financial considerations
guideline of the AGs where the individual applicant is so financially overextended as to
indicate poor self-control, lack of judgment, or unwillingness to abide by rules and
regulations, which can raise questions about the individual’s reliability, trustworthiness,
and ability to protect classified information, and place the person at risk of having to
engage in illegal acts to generate funds. Applicant’s accumulation of delinquent debts and
his past inability to pay these debts warrant the application of two of the disqualifying
conditions (DC) of the Guidelines: DC ¶ 19(a), “inability or unwillingness to satisfy debts,”
and ¶19(c) “a history of not meeting financial obligations.”
Based on his evidentiary showing, extenuating circumstances certainly contributed
to Applicant’s financial difficulties that necessitated his seeking first Chapter 13 relief, and
then Chapter 7 protections in 2001 and 2002, respectively.  Extenuating conditions also
affected his ability to resolve his medical, vehicle, and mortgage obligations in a timely
way. Available to Applicant is MC ¶ 20(b) of the financial considerations guideline, “the
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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 responsibility.” While some judgment
problems persist over Applicant’s taking on so much debt under the circumstances
preceding his filing for bankruptcy, and again in 2007 before he and his wife achieved a
good track record of earnings in their current state of residence, his actions are
considerably extenuated by unforeseen economic and marital conditions and his inability
to timely cure the defaults with the resources available to him and his wife.
In recognition of the considerable good-faith efforts Applicant made to resolve his
medical, vehicle, and mortgage debts, mitigation credit is available to him. Applicant’s
debts have been mitigated by a confluence of considerations: consolidation of his car
loans that have enabled him to bring his creditor 1.g account current; reimbursement of
the medical debts owed to creditors 1.c, 1.e, and 1.i; and the absence of any deficiency
liability on his first mortgage debt by virtue of the state’s anti-deficiency statute. 
Applicant’s good-faith repayment efforts to date certainly merit the application of
two of the mitigating conditions for financial considerations: MC ¶ 20(a), “the behavior
happened so long ago, was so infrequent, or occurred under circumstances that it is
unlikely to recur and does not cast doubt on the individual’s reliability, trustworthiness, or
good judgment,” and MC ¶ 20(d), “the individual initiated a good-faith effort to repay
overdue creditors or otherwise resolve debts. Applicant’s mitigation efforts reflect
responsible steps to address all of his remaining debts and restore his finances to stable
levels consistent with access to classified information.
                                                    
Holding a security clearance involves the exercise of important fiducial
responsibilities, among which is the expectancy of consistent trust and candor.  Financial
stability in a person cleared to access classified information is required precisely to inspire
trust and confidence in the holder of the clearance. While the principal concern of a
clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in financial cases (as here).
From a whole-person standpoint, there is ample evidence presented that Applicant
has mounted good-faith efforts to resolve his remaining debts, either through payment
arrangements, or deficiency protections through his state’s anti-deficiency statute. He and
his wife currently live frugally and responsibly and are able to maintain a small surplus
every month. In his favor are the responsible efforts he has taken to date to identify and
resolve the debts of creditors holding medical, vehicle, and mortgage debts against him. 
Taking into account all of the extenuating facts and circumstances surrounding
Applicant’s bankruptcy history, post-discharge debt accruals, and the good-faith efforts he
has mounted to resolve his outstanding debts, Applicant successfully mitigates judgment,
reliability and trustworthiness concerns related to his debts. Favorable conclusions
warrant with respect to the allegations covered by the financial considerations guideline. 
        
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Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F: (FINANCIAL CONSIDERATIONS): FOR APPLICANT
Subparagraphs 1.a through 1.i: For Applicant
Conclusions
In light of all the circumstances presented by the record in this case, it is clearly
consistent with the national interest to grant or continue Applicant’s security clearance.
Clearance is granted.
                                          
Roger C. Wesley
Administrative Judge