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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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[NAME REDACTED] )       ISCR Case No. 10-03420
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Applicant for Security Clearance )
Appearances
For Government: D. Michael Lyles, Esquire, Department Counsel
For Applicant: Pro se
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Decision
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MALONE, Matthew E., Administrative Judge:
Applicant obtained eight mortgages totaling in excess of $780,000 for four
investment properties as part of a fraudulent investment opportunity. The mortgages
were foreclosed, but mortgage delinquencies totaling approximately $711,892 are still
attributable to the Applicant. Even though state law may preclude enforcement of those
debts, Applicant’s participation in the investment opportunity and his failure to try to pay
or otherwise resolve his debts in the past five years reflect an unacceptable degree of
poor judgment. Based upon a review of the pleadings, exhibits, and transcript,
Applicant’s request for a security clearance is denied.
Statement of the Case
On May 12, 2009, Applicant submitted an Electronic Questionnaire for
Investigations Processing (e-QIP) to obtain a security clearance required for his job with
a defense contractor. After reviewing the results of the ensuing background
investigation, adjudicators for the Defense Office of Hearings and Appeals (DOHA)
1 Authorized by DoD Directive 5220.6 (Directive), Section E3.1.2.2.
2 Required by Executive Order 10865, as amended, and by DoD Directive 5220.6 (Directive), as amended.
3 The adjudicative guidelines were implemented by the Department of Defense on September 1, 2006. These
guidelines were published in the Federal Register and codified through 32 C.F.R. § 154, Appendix H (2006).
Pending official revision of the Directive, they take precedence over the guidelines listed in Enclosure 2 to the
Directive.
4 I overruled Applicant’s objection to the admission of Gx. 3. (Tr. 22 - 27) 
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issued to Applicant interrogatories1 to clarify or augment information obtained in his
background investigation. Based on the results of the background investigation and
Applicant’s responses to the interrogatories, DOHA adjudicators could not make a
preliminary affirmative finding2 that it is clearly consistent with the national interest to
continue Applicant’s access to classified information. On November 30, 2010, DOHA
issued to Applicant a Statement of Reasons (SOR) alleging facts which, if proven, raise
security concerns addressed in the adjudicative guidelines (AG)3 for financial
considerations (Guideline F).
Applicant timely answered the SOR and requested a hearing. The case was
assigned to me on February 11, 2011. Pursuant to a Notice of Hearing issued on March
16, 2011, I convened a hearing in this matter on April 6, 2011. The parties appeared as
scheduled. DOHA received a transcript (Tr.) of the hearing on April 14, 2011. The
Government presented five exhibits identified as Government Exhibits (Gx.) 1 - 5, all of
which were admitted into the record.4 Applicant testified and submitted one exhibit that
was admitted without objection as Applicant Exhibit (Ax.) A.
Findings of Fact
Under Guideline F, the Government alleged that Applicant owed $711,892 for
five unpaid mortgages (SOR 1.a - 1.e). In response, Applicant denied all of the SOR
allegations (Answer). Attached to his Answer were a three-page explanatory statement
by the Applicant and four other pages of related information. All of his attachments were
included in the record without objection. (Tr. 10) Having reviewed Applicant’s response
to the SOR, the transcript, and exhibits, I make the following findings of relevant fact.
Applicant is 36 years old and is employed by a defense contractor in an
information systems technology (IT) position that requires him to have a security
clearance. He has worked for his current employer since April 2009. Since May 2000,
he has worked in IT for various employers, including state and county government
agencies. Applicant graduated from college in 1997 with a bachelor’s degree in
electronics and computer technology. When Applicant was in high school, he joined the
U.S. Army Reserve as a way to pay his college tuition. He served in the Army Reserve
from December 1991 until December 2000. (Answer; Gx. 1) 
Applicant and his wife were married in June 2000. They have two children, ages
six and four. (Gx. 1) Applicant’s wife runs a medical supply company they opened in
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2010. The company realized about $17,000 in profits last year, but no income was
taken from the business. (Tr. 34, 64, 68 - 69)
From 1998 until 2002, Applicant was a client of a financial planner (Ms. A) who
he knew as a fellow alum of the university he attended. Applicant was happy with the
services she provided and did well financially during their business relationship.
(Answer; Gx. 2; Tr. 33 - 34) In 2005, Ms. A approached Applicant with a real estate
investment proposal in which Applicant was asked to obtain mortgages for the purchase
of four investment properties. Ms. A could not obtain the mortgages herself as she
already owned as many as 12 such properties and her credit was “maxed out.” (Answer;
Gx. 2; Tr. 35)
In exchange for the use of Applicant’s then-excellent credit, and for his
agreement not to sell the properties for one year, Applicant and his wife would receive
$5,000 from the sale of each property for a total return of $20,000. Applicant also
averred that they wanted to get into the real estate investment business. Ms. A agreed
that if they entered into this venture with her, she would teach them what they needed to
know so they could get rich. (Id.)
To purchase the properties, Applicant obtained eight mortgages – a first and
second mortgage on each – totaling in excess of $780,000. When they applied for these
loans, they overstated their income, but the record does not show by how much. (Gx. 2;
Tr. 79 - 82) In September 2005, less than a month after applying for financing, Applicant
and his wife closed on all four properties in one day. At the closing, Applicant signed all
of the papers that Ms. A and the title company representative presented, even though
there was information missing. (Tr. 36, 41 - 46) Applicant and his wife were not on the
title to any of the properties. Ms. A’s name was not on any of the promissory notes for
the eight mortgages. Applicant knew that he and his wife had “no legal claim” to any of
the properties, which they have never seen. (Answer; Gx. 2) Applicant thought that Ms.
A would make the payments on the promissory notes from funds received from rental
income, and that she would sell them a year later.
About 30 days after closing on the properties, Applicant began receiving calls
from the lenders seeking payments on the mortgages. Applicant tried working with Ms.
A to determine why the payments had not been made, but it soon became apparent to
him that Ms. A had duped Applicant and left him as the sole party responsible for paying
eight mortgages. (Answer; Gx. 2; Tr. 51 - 52) Applicant’s income has never been
enough for him to make any of the required payments. The eight mortgages in
Applicant’s name have since been foreclosed, and five of those delinquencies (SOR 1.a
- 1.e) are listed on Applicant’s credit history. Applicant also disclosed those
delinquencies on his e-QIP. (Gx. 1; Gx. 3; Gx. 4; Gx. 5)
At the time of her dealings with Applicant, Ms. A held state and national
certifications from the Certified Financial Planners Board. However, after a disciplinary
and ethics hearing in March 2008, her certifications were revoked because she advised
a client (not the Applicant) to invest his 401(k) retirement account in her company’s real
estate investment interests without disclosing the risks involved or her own conflict of
interest in the transaction. (Attachment to Applicant’s Answer)
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Applicant has not paid or otherwise attempted to resolve his mortgage
obligations. He and his wife called the FBI to report the fraud perpetrated by Ms. A, but
they were advised that nothing could be done because the evidence consisted of loan
applications signed only by Applicant and his wife. They inquired of private attorneys
about suing Ms. A, but were told that it would cost about $30,000 to pursue legal action
with a low probability of success. (Answer to SOR; Tr. 53, 58 - 61) Applicant and his
wife were also the victims of identification theft around the time of their dealings with
Ms. A. They reported that matter to the local police, but there was no further action
taken. (Tr. 61 - 63)
After the SOR was issued, Applicant sought legal advice in the state where these
transactions occurred and where the properties are located. His attorney opined that the
applicable statute of limitations for commencing a civil action to enforce Applicant’s
debts has expired. (Tr. 39 - 40; Ax. A) My review of the state statute cited by Applicant’s
attorney supports that opinion and shows that Applicant may not be legally obligated to
pay the mortgage debts cited in the SOR.
In 2003, Applicant and his wife bought their own home for about $180,000.
Applicant acknowledged at the hearing that the loan application and purchase closing
process they experienced when they closed on the four investment properties was
significantly different than what they experienced with their own home mortgage.
Applicant also acknowledged that he understood the lending process and the
importance of protecting one’s personal credit. (Tr. 43 - 44) The process through which
he bought his own home took several months for financing approval, inspections, and
preparation of the title and financing documents. Also, Applicant did not overstate his
income when he applied for his home mortgage. (Tr. 50 - 52) 
Applicant and his wife sold their home at a loss and, in August 2007, he moved
his family in with his in-laws, with whom they lived until about May 2008. At that time,
they moved into their current residence. When Applicant was interviewed in July 2009
by a Government investigator, Applicant and his wife made about $6,800 each month.
After expenses, they still had about $3,700 remaining each month. (Gx. 2)
Applicant currently earns about $2,400 monthly, which is the sole income for his
family while they grow their medical supply business. Applicant and his wife decided to
change locations and jobs to have more time with their children. (Tr. 63 - 69) Applicant
and his wife are meeting their current obligations, and they have incurred no new
unpayable debts. They have very little money remaining each month. Applicant had no
significant unpaid debt or other financial problems before he embarked on his real
estate investment scheme in 2005 and 2006.
5 See Department of the Navy v. Egan, 484 U.S. 518 (1988).
6 Directive. 6.3.
7 Directive, E3.1.14
8 See Egan, 484 U.S. at 528, 531.
9 See Egan; Adjudicative Guidelines, ¶ 2(b).
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Policies
A security clearance decision is intended to resolve whether it is clearly
consistent with the national interest5 for an applicant to either receive or continue to
have access to classified information. Each decision must be a fair, impartial, and
commonsense determination based on examination of all available relevant and
material information,6 and consideration of the pertinent criteria and adjudication policies
in the adjudicative guidelines. Decisions must also reflect consideration of the factors
listed in ¶ 2(a) of the new guidelines. Commonly referred to as the “whole-person”
concept, those factors are:
(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. 
The presence or absence of a disqualifying or mitigating condition is not, by itself,
conclusive. However, specific applicable guidelines should be followed whenever a case
can be measured against them as they represent policy guidance governing the grant or
denial of access to classified information.
The Government bears the initial burden of producing admissible information on
which it based its preliminary decision to deny or revoke an applicant’s security
clearance. Additionally, the Government must be able to prove controverted facts
alleged in the SOR.7 If the Government meets its burden, it then falls to the applicant to
refute, extenuate, or mitigate the Government’s case. Because no one has a “right” to a
security clearance, an applicant bears a heavy burden of persuasion.8 A person who
has access to classified information enters into a fiduciary relationship with the
Government based on trust and confidence. Thus, the Government has a compelling
interest in ensuring each applicant possesses the requisite judgment, reliability, and
trustworthiness of one who will protect the national interests as his or her own. The
“clearly consistent with the national interest” standard compels resolution of any
reasonable doubt about an applicant’s suitability for access in favor of the Government.9
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Analysis
Financial
The security concern about Applicant’s finances, as stated in AG ¶ 18, is that:
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.
Applicant’s denials required the Government to present substantial admissible
evidence to prove the SOR allegations as controverted issues of fact. The
Government’s information was sufficient to do so. The facts established showed that
Applicant obligated himself to pay about $780,000 in mortgage loans for four properties.
He did not do so, and it is not controverted that the mortgages became delinquent and
were foreclosed in 2005 or 2006. In the ensuing five years, Applicant did not  act to pay
or otherwise resolve his mortgage obligations. The debts alleged in the SOR are still
attributable to the Applicant in his credit reports, and they most likely represent
remainders due after the properties were resold. Thus, available information requires
application of the disqualifying conditions listed at AG ¶ 19(a) (inability or unwillingness
to satisfy debts), and AG ¶ 19(c) (a history of not meeting financial obligations).
By contrast, none of the AG ¶ 20 mitigating conditions apply. In what was
essentially an affirmative defense to the Government’s information, Applicant relied on
his assertion that he was deceived by Ms. A, on his claim that the mortgages on the four
properties were not his obligation, and on his claim that the statute of limitations has
relieved him of these obligations. However, available information shows that Ms. A
convinced Applicant to obtain mortgages far in excess of what he could afford; that he
knowingly misrepresented his income to obtain the mortgages; that he did not exercise
any due diligence in assessing the properties or reviewing the papers he signed; that he
did not insist on any collateral for the use of his good credit; and that Ms. A was not
obligated to repay the loans or to give anything in return to the Applicant. 
Given the disciplinary actions against her, it appears likely that Ms. A deceived
Applicant. However, Applicant did not present any information to show that Ms. A
received any money or other benefit from their relationship. Further, Applicant
presented nothing to support his claim that the mortgages were not his obligation. At the
same time, he admitted that only he and his wife signed the promissory notes but were
not named in the titles. None of these circumstances presented here were beyond
Applicant’s control, as it was his own bad judgment that caused him to enter into this
arrangement. Thus, the mitigating condition at 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) does not
apply. 
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I have also considered the mitigating condition at 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). While it is not likely that Applicant will venture into
such an arrangement in the future, the adverse impact on his judgment and reliability
continues through his failure to try to resolve these financial problems sooner, and by
his reliance on the statute of limitations to avoid his obligations. Accordingly, AG ¶
20(a), as well as the mitigating conditions at AG ¶ 20(c) (the 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) and AG ¶ 20(d) (the individual initiated a good-faith
effort to repay overdue creditors or otherwise resolve debts) do not apply. 
Applicant also did not support his claim that the debts alleged are not his. Thus,
the mitigating condition at 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) does not apply.
Applicant is likely no longer obligated to repay the debts alleged. Thus, his
current finances do not put him at risk of engaging in illegal or other inappropriate
conduct to resolve his past-due delinquencies. However, poor judgment that leads to
financial problems may also indicate defective judgment and reliability in other facets of
one’s suitability for access to classified information. That is the case here. Applicant
engaged in reckless decision making when he ignored overt warning signs about the
legitimacy of his agreement with Ms. A. He has not presented sufficient information to
mitigate the security concerns raised by his conduct in this regard.
Whole-Person Concept
I have evaluated the facts presented and have applied the appropriate
adjudicative factors under Guidelines F. I have also reviewed the record before me in
the context of the whole-person factors listed in AG ¶ 2(a). 
Applicant is 36 years old and has been steadily employed in the IT industry since
at least May 2000. He also served in the Army Reserve between 1991 and 2000.
Applicant is also a dedicated husband and father who provides for his family. All of this
information suggests that Applicant is a mature adult living a steady and responsible
lifestyle. Available information also showed, however, that his attempt to make money
through real estate investing was born of carelessness and a willingness to take
shortcuts. The totality of the information bearing on what happened suggests that
Appellant was deceived by Ms. A, and he claims that he should not be held accountable
for her actions. But the same information also shows that Applicant knew or should
have known that what he was agreeing to was a poorly-considered venture. Applicant
was either exceedingly naive, or he tried and failed to make a fast dollar through his
own improper conduct. Either interpretation raises a security concern Applicant was
required to mitigate. He did not do so and significant doubts remain about his judgment
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and reliability. Because protection of the national interest is the principal aim of security
clearance decisions, those doubts must be resolved against the Applicant. 
Formal Findings
Formal findings 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.e: Against Applicant
Conclusion
In light of all of the foregoing, it is not clearly consistent with the national interest
for Applicant to have access to classified information. Request for security clearance is
denied.
                                         
MATTHEW E. MALONE
Administrative Judge