DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
--------------------------------- )      ISCR Case No. 10-09890
 )
Applicant for Security Clearance )
Appearances
For Government: Jeff A. Nagel, Department Counsel
For Applicant: Pro Se
November 29, 2012
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Decision
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LOKEY ANDERSON, Darlene D., Administrative Judge:
Applicant submitted his Electronic Questionnaires for Investigations Processing
(E-QIP) on May 26, 2010.  (Government Exhibit 1.)  On March 22, 2012, the Defense
Office of Hearings and Appeals (DOHA), pursuant to Executive Order 10865 and
Department of Defense Directive 5220.6 (Directive), dated January 2, 1992, (as
amended), issued a Statement of Reasons (SOR) to the Applicant, which detailed
reasons why DOHA could not make the preliminary affirmative finding under the
Directive that it is clearly consistent with the national interest to grant or continue a
security clearance for the Applicant and recommended referral to an Administrative
Judge to determine whether clearance should be denied or revoked.
The Applicant responded to the SOR on April 12, 2012, and he initially requested
an administrative determination without a hearing.  After discussions with Department
Counsel and his FSO, the Applicant requested a hearing.  Accordingly, Department
Counsel requested that the matter be converted to a hearing before a DOHA
Administrative Judge.  This case was assigned to the undersigned Administrative Judge
on October 16, 2012.  A notice of hearing was issued on October 23, 2012, and the
hearing was scheduled for November 7, 2012.  At the hearing the Government
presented seven exhibits, referred to as Government Exhibits 1 through 7, which were
admitted without objection.  The Applicant called one witness and presented nine
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exhibits, referred to as Applicant’s Exhibits A through I, which were also admitted into
evidence.  He also testified on his own behalf.  The official transcript (Tr.) was received
on November 14, 2012.  Based upon a review of the pleadings, exhibits, and testimony,
eligibility for access to classified information is granted.
 FINDINGS OF FACT
The Applicant is 40 years old and married.  He has an Associates Degree in
Architecture.  He is employed with a defense contractor as a Computer Aided Drafting
Specialist and is seeking to obtain a security clearance in connection with this
employment.
The Government opposes the Applicant's request for a security clearance, on the
basis of allegations set forth in the Statement of Reasons (SOR).  The following findings
of fact are entered as to each paragraph and guideline in the SOR:
Paragraph 1 (Guideline F - Financial Considerations)  The Government alleges that the
Applicant is ineligible for clearance because he is financially overextended and at risk of
having to engage in illegal acts to generate funds.      
The Applicant denied each of the allegations set forth in the SOR under this
guideline.  (See Applicant’s Answer to SOR).  Credit Reports of the Applicant dated
June 15, 2010; October 11, 2011; September 13, 2012; and November 7, 2012, indicate
that the Applicant was at one time indebted to a bank for a mortgage loan set forth in
the SOR, in an amount totaling about $500,000.  (Government Exhibits 3, 4 , 5 and 6.)
 Prior to 2008, the Applicant had good credit.  At that time, he worked full time as
a self-employed private contractor, as an architectural draftsmen.  He had several
clients who hired him to help them out with projects and earned about $70,000 annually.
He paid his bills on time, lived within his means, and had no financial problems.  
In 2007, the Applicant and his partner decided to engage in their own real estate
development project.  As an investment, they decided to renovate a single family
residence.  At that time the economy was doing well and the real estate industry was
skyrocketing.  To finance the project, they had two private investors.  One of them had
the first and third liens on the property for $250,000, the other one had the second lien
on the property for $18,000.  At some point it was determined that to finish the project,
the Applicant and his partner needed more money.  Since the Applicant had good
credit, he took out a loan for $250,000.  The lender wrapped both loans together for a
total of $500,000. 
During 2008 and 2009, for a year and a half, while the economy continued to
decline, the Applicant was unable to find work of any sort and had no income.  He
managed financially by reducing his expenses to the bare minimum.  He utilized his
savings, sold his possessions, and borrowed money from family to make ends meet.
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The Applicant had no income as his real estate clients had no money to pay him.  One
of his clients that owed him $25,000 failed to pay him, which caused serious financial
difficulties.  The Applicant testified that had the client paid him, the Applicant would
avoided the financial problems he encountered.  The Applicant was forced to stop
making the loan payments as he could no longer afford them.  About this time, the value
of the property significantly dropped and the real estate market plunged.  One of the
private investors holding the second wanted to foreclose on the property to get his
money back.  His interest was bought out by the investor holding the first lien.  The
investor holding the first lien then foreclosed on the property and took possession.  The
bank that loaned the Applicant the $250,000 went bankrupt and the debt was bought by
another bank.  This bank then went after the Applicant civilly under their title insurance
policy.  
Since the Applicant was indebted to the bank for a mortgage account that was
past due in the amount of $15,658; and the house was eventually foreclosed upon, the
total balance of the debt was $519,004.  To rectify the situation, on April 13, 2012, the
Applicant filed for bankruptcy and discharged the debt owed to the bank that included
two $250,000 mortgages, interest at 10%, and attorney’s fees.  (Applicant’s Exhibit B.)
The debt was discharged on July 31, 2012.  (Applicant’s Exhibit A.)  The Applicant
testified that he has contacted tax professionals and he has no tax implications
regarding the house.  
In June 2010, the Applicant began working for his current employer.  He has
received two pay raises and his employer is pleased with his work performance.  The
Applicant has no interest in ever getting involved in a real estate investment situation
again.  He and his wife are renting a home.  
Letters of recommendation from the Applicant’s Branch Manager, Program
Manager, Project Team Leader, a coworker, and a long time friend, collectively reveal
that the Applicant is a most responsible, reliable, trustworthy, professional that is well
respected and admired.  He is also a valuable community volunteer for the local police
department and neighborhood watch.  He is recommended for a security clearance.
(Applicant’s Exhibits C, D, E, F, G and I.) 
   
POLICIES
Enclosure 2 of the Directive sets forth adjudication policies divided into
"Disqualifying Factors" and "Mitigating Factors."  The following Disqualifying Factors
and Mitigating Factors are found to be applicable in this case:
Guideline F (Financial Considerations)
18.  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
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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. 
Conditions that could raise a security concern:
19.(a) inability or unwillingness to satisfy debts; and
19.(c) a history of not meeting financial obligation. 
Conditions that could mitigate security concerns:
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;
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 
20.(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
In addition, as set forth in Enclosure 2 of the Directive at pages 18-19, in
evaluating the relevance of an individual’s conduct, the Administrative Judge should
consider the following general factors:
a. The nature, extent, and seriousness of the conduct and surrounding
circumstances;
    b. The circumstances surrounding the conduct, to include knowledgeable
participation;
c.  The frequency and recency of the conduct;
d.  The individual’s age and maturity at the time of the conduct;
e.  The extent to which participation is voluntary;
f.  The presence or absence of rehabilitation and other permanent behavior
changes;
g.  The motivation for the conduct; 
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h. The potential for pressure, coercion, exploitation or duress; and
 i.  The likelihood of continuation or recurrence.
The eligibility criteria established in the DoD Directive identify personal
characteristics and conduct, which are reasonably related to the ultimate question,
posed in Section 2 of Executive Order 10865, of whether it is “clearly consistent with the
national interest” to grant an Applicant’s request for access to classified information.
The DoD Directive states, “The adjudicative process is an examination of a
sufficient period of a person’s life to make an affirmative determination that the person is
an acceptable security risk.  Eligibility for access to classified information is predicated
upon the individual meeting these personnel security guidelines.  The adjudicative
process is the careful weighing of a number of variables known as the whole-person
concept.  Available, reliable information about the person, past and present, favorable
and unfavorable should be considered in reaching a determination.” The Administrative
Judge can draw only those inferences or conclusions that have reasonable and logical
basis in the evidence of record.  The Judge cannot draw inferences or conclusions
based on evidence which is speculative or conjectural in nature.  Finally, as emphasized
by President Eisenhower in Executive Order 10865, “Any determination under this order
. . . shall be a determination in terms of the national interest and shall in no sense be a
determination as to the loyalty of the Applicant concerned.”
CONCLUSIONS
In the defense industry, the security of classified industrial secrets is entrusted to
civilian workers who must be counted upon to safeguard such sensitive information
twenty-four hours per day, seven days per week.  The Government is therefore
appropriately concerned when available information indicates that an Applicant for
clearance may be involved in instances of financial irresponsibility, which demonstrates
poor judgment or unreliability.
It is the Government’s responsibility to present substantial evidence to support
the finding of a nexus, or rational connection, between the Applicant’s conduct and the
holding of a security clearance.  If such a case has been established, the burden then
shifts to the Applicant to go forward with evidence in rebuttal, explanation or mitigation,
which is sufficient to overcome or outweigh the Government’s case.  The Applicant
bears the ultimate burden of persuasion in proving that it is clearly consistent with the
national interest to grant him or her a security clearance.
In this case the Government has met its initial burden of proving that the
Applicant has been financially irresponsible (Guideline F).  This evidence indicates poor
judgment, unreliability and untrustworthiness on the part of the Applicant.  Because of
the scope and nature of the Applicant's conduct, I conclude there is a nexus or
connection with his security clearance eligibility.
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The evidence shows that the Applicant had good credit and paid his bills on time
until he became involved in a real estate investment project that went bad. Through no
fault of his own, but due to the bad economy, the real estate market plunged and he
could not afford to pay for his investment.  Since gaining employment in 2010, he has
resolved his delinquent debts.  He filed for bankruptcy and discharged his debt.  He
actions have been reasonable and responsible under the circumstances.           
This was an isolated incident that will not recur since the Applicant is now
working full time, has no real estate investments, and understands that he must remain
fiscally responsible if he is to hold a security clearance.  He has made a good-faith effort
to resolve his past due indebtedness.  He has resolved his delinquent debts.  He has
not incurred any new debt that he cannot afford to pay.  He has clearly demonstrated
that he can properly handle his financial affairs.  There is clear evidence of financial
rehabilitation.  Considering all of the evidence, the Applicant has introduced persuasive
evidence in rebuttal, explanation or mitigation that is sufficient to overcome the
Government's case. 
Under Guideline F (Financial Considerations), Disqualifying Conditions 19.(a)
inability or unwillingness to satisfy debts; and 19.(c) a history of not meeting financial
obligations, apply.  However, Mitigating Conditions 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; 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 20.(d) the
individual initiated a good-faith effort to repay overdue creditors or otherwise resolve
debts also apply.  Accordingly, I find for the Applicant under Guideline F (Financial
Considerations).    
I have also considered the “whole-person concept” in evaluating the Applicant’s
eligibility for access to classified information.  I have considered his favorable character
reference letters and employment pay raises (Applicant’s Exhibit E.)  Under the
particular facts of this case, the totality of the conduct set forth above, when viewed
under all of the guidelines as a whole, support a whole-person assessment of good
judgement, trustworthiness, reliability, candor, and a willingness to comply with rules
and regulations, and/or other characteristics indicating that the person may properly
safeguard classified information.
  I have considered all of the evidence presented.  It mitigates the negative effects
of his financial indebtedness and the effects that it can have on his ability to safeguard
classified information.  On balance, it is concluded that the Applicant has overcome the
Government's case opposing his request for a security clearance.  Accordingly, the
evidence supports a finding for the Applicant as to the factual and conclusionary
allegations expressed in Paragraph 1 of the SOR.   
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     FORMAL FINDINGS
Formal findings For or Against the Applicant on the allegations in the SOR, as
required by Paragraph 25 of Enclosure 3 of the Directive are:
Paragraph 1: For the Applicant.
        Subpara.  1.a.: For the Applicant.
  DECISION
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 a security clearance for the
Applicant.
  Darlene Lokey Anderson
Administrative Judge