DEPARTMENT OF DEFENSE 
  DEFENSE OFFICE OF HEARINGS AND APPEALS 
  
  
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 10-05894 
  ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Braden F. Murphy, Esquire, Department Counsel 
For Applicant: Pro se 
 
 
 
 
______________ 
 
Decision 
______________ 
 
 
HEINY, Claude R., Administrative Judge: 
 
Applicant had approximately $51,000 in charged-off and collection accounts. He 
addressed approximately $9,500 of that debt. Approximately $41,000 remains to be 
addressed. Applicant has failed to rebut or mitigate the security concerns under 
financial considerations. Clearance is denied. 
 
Statement of the Case 
 
 Applicant contests the Department of Defense’s (DoD) intent to deny or revoke 
his eligibility for an industrial security clearance. Acting under the relevant Executive 
Order and DoD Directive,1 the Defense Office of Hearings and Appeals (DOHA) issued 
 
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1 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) effective within the DoD on September 1, 2006. 
 
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a Statement of Reasons (SOR) on December 6, 2010, detailing security concerns under 
Guideline F, financial considerations. 
  
 On December 24, 2010, Applicant answered the SOR and requested a hearing. 
On March 2, 1011, I was assigned the case. On March 21, 2010, DOHA issued a Notice 
of Hearing for the hearing held on April 13, 2011.  
 
 The Government offered Exhibits (Ex.) 1 through 7, which were admitted into 
evidence without objection. Applicant testified and submitted Exhibits A through F, 
which were admitted into evidence without objection. The record was held open to allow 
additional information from Applicant. On May 2, 2011, additional material was 
submitted. Department Counsel had no objection to the material, it was admitted into 
the record as Exs. G through U. On April 22, 2011, DOHA received the hearing 
transcript (Tr.). 
 
Findings of Fact 
 
In Applicant’s Answer to the SOR, he admitted all of the factual allegations, with 
explanations. I incorporate Applicant’s admissions to the SOR allegations. After a 
thorough review of the pleadings, exhibits, and testimony, I make the following 
additional findings of fact: 
 
 Applicant is a 38-year-old senior electronics engineer who has worked for a 
defense contractor since June 2001, and seeks to maintain a top secret security 
clearance. (Tr. 23, Ex. 1) From August 1990 through December 1995, Applicant served 
in the U.S. Navy as a cryptology technician as an E-4, leaving with an honorable 
discharge. (Tr. 24, 43, 44, Ex. 1) Applicant’s co-workers, supervisors, and friends state: 
Applicant has performed his tasks with professionalism and diligence, he is trustworthy, 
reliable, has good judgment, and is a hard worker. (Ex. A - C) He is single and his 
salary was: $72,513 in 2008 (Ex. Q), $77,464 in 2009 (Ex. R), and $78,298 in 2010 (Ex. 
S). His current fiancée is a financial analyst with an annual income of $72,000. (Tr. 57) 
Together their annual household income is $150,000. (Tr. 40) Applicant has been 
married and divorced three times. He was married from 1993 to 1994, 1998 to 2002, 
and 2003 to 2008. (Tr. 45) He has no child support or alimony obligations. (Tr. 45)  
 
 In 2004, staff at Applicant’s company put him in touch with a credit counseling 
service. That counseling company determined he had too much debt and put him in 
touch with Consumer Credit Counseling Service (CCCS). He asserted he made $700 
monthly payments to CCCS for approximately one year. (Ex. 5) His financial problems 
arose when his former spouse was unable to work due to health problems. (Ex. 5) His 
ex-wife had used their joint credit cards excessively. Applicant admits he should have 
done more to curb her spending. Since his divorce in 2008, he has not used credit to 
make purchases. (Ex. 5) In December 2004, Applicant filed for Chapter 7 bankruptcy 
protection and in March 2005, all of his debts with the exception of his two car loans 
were discharged. (Tr. 27, 40) Prior to the bankruptcy, he received financial counseling. 
 
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(Tr. 46) Six months after the bankruptcy, his most recent wife lost her employment. (Tr. 
47) 
 
In June 2006, Applicant and his then-wife purchased a home for $100,500 with 
$1,600 monthly mortgage payments. (Ex. 5, 6) At the same time and with the same 
mortgage lender, they received a second loan on the property of $25,150 with monthly 
payments of $279. (Ex. 6) The money from the second loan was used to pay closing 
costs and other expenses related to the home purchase. (Tr. 64) When the house was 
purchased, his former spouse agreed to get a job, but failed to do so. (Tr. 24, 47) In 
November 2008, his mortgages became past due. In April 2009, the house went to 
foreclosure and was sold in May 2009. Applicant asserts he owed no money on the 
initial $100,500 mortgage following the foreclosure. (Ex. T) He acknowledged $24,929 
was outstanding on the second loan. (Ex. T) The creditor would not discuss any 
payment plans on this debt stating the balance had to be paid in full or a lump-sum offer 
could be made. (Ex. T) He believes the passage of time prevents the creditor from suing 
him on his debt. (Ex. T)  
 
The initial $100,000 mortgage does not appear on Applicant’s June 2010 credit 
bureau report (CBR) (Ex. 3). It appears on his November 2009 CBR (Ex. 2), his August 
2010 CBR (Ex. 4), and November 2010 CBR (Ex. 6) with indications that the mortgage 
was in foreclosure. However, the $24,926 debt to the mortgage company does appear 
as a charged-off account on his November 2009 CBR (Ex. 2), his June 2010 CBR (Ex. 
3), and on his August 2010 CBR (Ex. 4). It appears on his November 2010 CBR (Ex. 6) 
with an indication the account was transferred or sold.  
 
In December 2009, Applicant was questioned about his delinquent accounts. (Ex. 
5) In February 2011, he entered into a repayment agreement whereby he settled a 
$4,495 obligation (SOR 1.h) for $2,248. (Ex. D) The debt was for a KIA vehicle 
destroyed in December 2008. He made two $1,124 payments in accord with the 
agreement, one in February 2011 and the second in March 2011. (Exs. D, E, and H)  
 
Prior to the April 2011 hearing, Applicant paid approximately $250 on two 
additional delinquent debts listed in the SOR. In February 2011, Applicant paid the 
telephone collection account ($160) listed in SOR 1.f. (Ex I) and the $91 debt (SOR 1.c) 
(Ex. K). In April 2011, following the hearing, he paid the telephone collection account 
($161) listed in SOR 1.g. (Ex. J); a collection service account ($77.50) (Ex. L); the 
telephone collection account ($275) listed in SOR 1.b $143.76. (Ex. M); and the 
collection account ($155) listed in SOR 1.n. (Ex. N) In April 2011, he also paid $3,150 
on the collection account ($4,459) listed in SOR 1.j. (Ex. P) This charged-off account 
was the result of a repossessed Nissan. (Tr. 35) The creditor agreed to accept $3,150 
on this delinquent obligation.  
 
 In April 2011, Applicant entered into a repayment agreement with a collection 
agency agreeing to make $340 monthly payments on the $16,343 collection accounts 
listed in SOR 1.d and SOR 1.e. (Ex. O) His first payment was to be made approximately 
one month after the hearing. He failed to document any payment in accord with the 
 
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plan. The debt arose from two student loans taken in 2008 in order for Applicant to 
obtain his master’s degree in electrical engineering. He took courses, but never 
obtained his master’s degree. (Tr. 52) His employer would reimburse the cost of 
classes. (Tr. 53) He is current on his $130 monthly payments on his student loans 
related to obtaining his bachelor’s degree. (Tr. 37, 52)  
 
 In May 2011, Applicant submitted his federal tax returns for tax years 2008 (Ex. 
Q), 2009 (Ex. R), and 2010 (Ex. S)  He anticipates receiving refunds of: $1,208, $1,880, 
and $1,938. He has one credit card with a balance on it of $250. (Tr. 58) He has $6,000 
in his 401(k) retirement plan. (Tr. 65)  
 
 The SOR lists ten delinquent accounts totalling approximately $51,000. He has 
paid approximately $6,000 on seven delinquent accounts addressing approximately 
$9,500 of his delinquent debt. He has provided no documentation as to three additional 
debts totalling approximately $41,000. A summary of Applicant’s judgment, accounts 
charged off, accounts placed for collection, and other unpaid obligations and their 
current status follows: 
 
 Creditor Amount  Current Status 
a Chapter 7 Bankruptcy filed 
in December 2004. Debts 
discharged in March 2005.  
 Applicant asserts the bankruptcy was 
the result of his wife’s unemployed.  
b Telephone collection 
account. 
$275 In April 2011, he paid $143.76. (Ex. M) 
c Collection account. $91 Paid. (Ex. K) 
d Student loan collection 
account. Debt is now 
$16,343. (Ex. O) 
$10,562 The creditor agreed to a repayment plan 
whereby he would make $340 monthly 
payments. (Ex. O) No documentation 
was provided evidencing payment in 
accord with the plan.  
e Student loan collection 
account. 
$5,781 This student loan and the previous 
student loan (d above) have been 
consolidated into a single debt. (Tr. 31) 
f Telephone collection 
account. 
$160 Paid. (Ex. I, Tr. 32) 
g Telephone collection 
account.  
$161 Paid. (Ex J) 
h Vehicle repossession. 
Vehicle was purchased in 
2005 and “totalled” in an 
accident in December 
2008. (Ex. 5) 
$4,175 
 
Settled and Paid. (Exs. D, E, and H) 
 
 
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Creditor 
 
Amount 
 
Current Status 
i Second mortgage on 
foreclosured home. 
 
$25,150 
 
Applicant acknowledges $24,926 
remains outstanding on this debt. He is 
unable to make a lump-sum payment 
and the creditor refused to accept a 
payment plan. (Ex. T) 
j Repossessed vehicle 
account. 
$4,459 Settled and paid. (Ex. P) 
k Collection account. $155 Paid. (Ex. N)   
 Total debt listed in SOR 
 
$50,744 
 
 
    
 
Policies 
 
 When evaluating an applicant’s suitability for a security clearance, the 
administrative judge must consider the adjudicative guidelines. In addition to brief 
introductory explanations for each guideline, the adjudicative guidelines list potentially 
disqualifying conditions and mitigating conditions, which must be considered in 
evaluating an applicant’s eligibility for access to classified information. 
 
These guidelines are not inflexible rules of law. Instead, recognizing the 
complexities of human behavior, these guidelines are applied in conjunction with the 
factors listed in the adjudicative process. The administrative judge’s overarching 
adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 
2(c), the entire process is a conscientious scrutiny of a number of variables known as 
the “whole-person concept.” The 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 interests of 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.  
 
Under Directive ¶ E3.1.14, the Government must present evidence to establish 
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the 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 
applicant has the ultimate burden of persuasion to obtain a favorable security decision.  
 
A person who seeks access to classified information enters into a fiduciary 
relationship with the Government predicated upon 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 
 
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grants access to classified information. Decisions include, by necessity, consideration of 
the possible risk the applicant may deliberately or inadvertently fail to safeguard 
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 interests of interest and shall in no sense be a determination of the loyalty of the 
applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites 
for access to classified or sensitive information).  
 
Analysis 
 
Guideline F, Financial Considerations 
 
 Adjudicative Guideline (AG) ¶ 18 articulates the security concerns relating to 
financial problems: 
 
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. 
 
Additionally, an individual who is financially irresponsible may also be 
irresponsible, unconcerned, negligent, or careless in properly handling and 
safeguarding classified information. Behaving responsibly or irresponsibly in one aspect 
of life provides an indication of how a person may behave in other aspects of life.  
 
A person’s relationship with his creditors is a private matter until evidence is 
uncovered demonstrating an inability or unwillingness to repay debts as agreed. Absent 
substantial evidence of extenuating or mitigating circumstances, an applicant with a 
history of serious or recurring financial difficulties is in a position of risk that is 
inconsistent with holding a security clearance. An applicant is not required to be debt 
free, but is required to manage his finances to meet his financial obligations. 
 
Applicant has a history of financial problems. Applicant had to resort to 
bankruptcy protection in 2004, which discharged all of his debt with the exception of his 
two car loans. Even with the fresh start, he accumulated approximately $51,000 in 
collection and charged-off accounts. Disqualifying Conditions AG ¶ 19(a), “inability or 
unwillingness to satisfy debts” and AG ¶ 19(c), “a history of not meeting financial 
obligations,” apply.  
 
 
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 Five Financial Considerations Mitigating Conditions under AG ¶ 20 are potentially 
applicable: 
 
(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; 
 
(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; 
 
(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; 
 
(d) the individual initiated a good-faith effort to repay overdue creditors or 
otherwise resolve debts; and 
 
(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. 
 
None of the mitigating factors for financial considerations are sufficient for a 
determination in Applicant’s favor. His financial difficulties are both recent and multiple. 
In 2006, when he and his then-wife purchased a home, she agreed to get a job, which 
she failed to do. He was divorced in 2008, but has been working for the same employer 
since June 2001 with a current annual salary of $78,000. He received some credit or 
financial counseling prior to his bankruptcy and has addressed $9,500 of his delinquent 
debt. However, his three remaining obligations amounting to approximately $41,000 
remain unpaid. Applicant has failed to act timely or responsibly under the circumstances 
as to these remaining delinquent accounts.  
 
Under AG ¶ 20(a), Applicant=s financial problems were contributed to by his ex-
wife’s spending prior to his 2008 divorce. I do not find the divorce, his third, to have 
occurred under such circumstances that such an event is unlikely to recur accompanied 
by the associated financial difficulties. Additionally, the size of the unpaid delinquent 
debt is such that it casts doubt on Applicant’s current reliability, trustworthiness, or good 
judgment. “Even if Applicant’s financial difficulties initially arose, in whole or in part, due 
to circumstances outside his or her control, the Judge could still consider whether 
Applicant has since acted in a reasonable manner when dealing with those financial 
difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. January 12, 2007) (citing ISCR 
Case No. 03-13096 at 4 (App. Bd. November 29, 2005); ISCR Case No. 99-0462 at 4 
 
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(App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. December 1, 1999). 
AG ¶ 20(a) has limited application.  
 
Applicant receives partial application of the mitigating conditions listed in AG ¶ 
20(b). He divorced in 2008 together with the financial burden associated with the 
divorce. Other than being required to pay part of the marital bills, he failed to establish 
how his divorce prevented him from addressing his delinquent accounts. AG & 20(b) 
has limited application.  
 
AG & 20(c) requires there be financial counseling, or clear indications that the 
problem is being resolved or is under control, which are not present. Applicant asserted 
he has entered into an agreement to pay $340 monthly on this two student loans 
totaling approximately $16,000. However, he has provided no documentation he has 
made any payment in accord with this agreement. His first payment was to be made a 
month after the hearing. Offers of settlement are insufficient proof the debt is being 
resolved is necessary. An offer without proof of payment in compliance with that offer 
fails to prove the debt is being addressed.  
 
The mitigating conditions listed in & 20(d), applies to the seven delinquent 
accounts Applicant has paid. However, the majority of his delinquent debt remains 
unpaid. He has failed to show he has initiated a good-faith effort to repay overdue 
creditors or otherwise resolve these remaining debts. Good-faith requires a showing 
that a person acts in a way that shows reasonableness, prudence, honesty, and 
adherence to duty or obligation. 
 
In evaluating Applicant’s remaining delinquent accounts the concept of 
“‘meaningful track record’ necessarily includes evidence of actual debt reduction 
through payment of debts.” An applicant is not required to establish that he has paid off 
each debt listed in the SOR. All that is required is that an applicant demonstrate that he 
has established a plan to resolve his financial problems and taken significant actions to 
implement that plan. The entirety of an applicant’s financial situation and actions in 
evaluating applicant’s plan for the reduction of his outstanding indebtedness must be 
considered. There is no requirement that a plan provide for payments on all outstanding 
debts simultaneously. A reasonable plan (and concomitant conduct) may provide for the 
payment of such debts one at a time. Likewise, there is no requirement that the first 
debts actually paid in furtherance of a reasonable debt plan be the ones listed in the 
SOR.  
 
Applicant has failed to establish he has taken significant actions to implement the 
repayment plan as to his student loans. Additionally, his $24,926 loan obligation 
remains unpaid. He believes the passage of time prevents the creditor from suing him 
on his debt. He has failed to establish recovery of the delinquent account is so barred.  
 
Applicant’s financial problems have continued for several years. In December 
2009, he was interviewed about his delinquent accounts. In the 16 months from the 
interview until the hearing, he had paid approximately $2,500 addressing two of the 
 
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SOR debts. He should have been more diligent and made greater efforts to resolve his 
delinquent debts. He has failed to carry his burden of proving his financial responsibility. 
Based on my evaluation of the record evidence as a whole, no mitigating conditions fully 
apply to the remaining delinquent financial obligations.  
 
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 the applicant’s 
conduct and all relevant 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.  
 
I considered the potentially disqualifying and mitigating conditions in light of all 
the facts and circumstances surrounding this case. In 2005, all of his debts, with the 
exception of his two car loans, were discharged. Within five years of that discharge, he 
had incurred more than $51,000 in delinquent accounts. He addressed seven of the 
debts by paying approximately $6,000. The $16,000 in student loans debt and the 
approximately $25,000 loan remain unpaid. Of course, the issue is not simply whether 
all his debts are paid—which they are not—it is whether his financial circumstances 
raise concerns about his fitness to hold a security clearance. (See AG & 2 (a)(1).) It is 
the three unaddressed debts which provided concern.  
 
Overall, the record evidence leaves me with questions and doubts about 
Applicant’s eligibility and suitability for a security clearance. This decision should not be 
construed as a determination that Applicant cannot or will not attain the state of true 
reform and rehabilitation necessary to justify the award of a security clearance. The 
awarding of a security clearance is not a once in a lifetime occurrence, but is based on 
applying the factors, both disqualifying and mitigating, to the evidence presented. Under 
Applicant=s current circumstances, a clearance is not presently warranted. Should 
Applicant be afforded an opportunity to reapply for a security clearance in the future, 
having paid the delinquent obligations, established compliance with a repayment plan, 
or otherwise addressed the obligations, he may well demonstrate persuasive evidence 
of his security worthiness. However, at this time, Applicant has not mitigated the 
 
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security concerns arising from his financial considerations. A clearance at this time is 
not warranted.  
 
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, Financial considerations: AGAINST APPLICANT 
 
  Subparagraphs 1.a – 1.c:  For Applicant 
  Subparagraphs 1.d and 1.e: Against Applicant    
  Subparagraphs 1.f – 1.h:  For Applicant 
  Subparagraph 1.i:   Against Applicant 
  Subparagraphs 1.j and 1.k: For Applicant 
   
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is not 
clearly consistent with the interests of interest to grant Applicant eligibility for a security 
clearance. Eligibility for access to classified information is denied.  
 
 
 
_______________________ 
CLAUDE R. HEINY II 
Administrative Judge