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                           DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 10-10462 
  ) 
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Melvin Howry, Esquire, Department Counsel 
For Applicant: Joseph Testan, Esquire 
 
 
______________ 
 
Decision 
______________ 
 
 
HOGAN, Erin C., Administrative Judge: 
 
On July 19, 2011, the Defense Office of Hearings and Appeals (DOHA) issued a 
Statement of Reasons (SOR) to Applicant detailing security concerns 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 Directive 5220.6, Defense Industrial Personnel Security 
Clearance Review Program (January 2, 1992), as amended (Directive); and the 
adjudicative guidelines (AG) effective within the Department of Defense after 
September 1, 2006.  
  
 On August 25, 2011, Applicant answered the SOR and requested a hearing 
before an administrative judge. Department Counsel was ready to proceed on 
September 28, 2011. The case was assigned to another administrative judge on 
October 5, 2011, and transferred to me on October 25, 2011. That same date, a Notice 
of Hearing was issued, scheduling the hearing for November 17, 2011. The hearing was 
held as scheduled. During the hearing, the Government offered nine exhibits which 
were admitted as Government Exhibits (Gov) 1 – 9. Applicant testified, called two 
witnesses, and offered ten exhibits which were admitted as Applicant Exhibits (AE) A - 
J.  Applicant’s Counsel submitted an additional document after the hearing which is 
 
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admitted as AE K. Department Counsel had no objection. (HE I) The transcript (Tr.) was 
received on November 27, 2011.  Based upon a review of the pleadings, exhibits, and 
testimony, eligibility for access to classified information is granted. 
 
Findings of Fact 
 
 In his response to the SOR, Applicant admitted all the SOR allegations.  
 
 Applicant is a 43-year-old senior engineer employed by a Department of Defense 
contractor, seeking to maintain his security clearance. He has worked for his current 
employer since 2005. He is married and has two children, ages 9 and 12. (Tr. 41-42; 
Gov 1; Gov 3)   
 
In 2005, Applicant purchased a second home as an investment property in 
another state. There was a first and second mortgage on the property. The mortgage 
payment was $1,200. He rented the property to a distant relative. His distant relative 
agreed to pay $1,000 a month rent. In late 2008, the tenant stopped paying rent on the 
property. Applicant evicted the tenant in January 2010. (Tr. 43-44; Gov 5)  
 
Applicant was initially able to afford the property. When his tenant stopped 
paying rent, he was no longer able to afford the property. He stopped making his 
mortgage payments on the property in October 2009. He immediately contacted the 
holder of the first mortgage to inquire about a home retention option. On November 28, 
2009, the holder of the first mortgage sent him forms to complete in order to apply for a 
short sale. Applicant sent the forms to his cousin who was a realtor in the area where 
the property was located. Not much progress was made and the property was never 
sold. In May 2010, Applicant received a notice of foreclosure. (Tr. 43-47; 62-63; Gov 5; 
AE J) The debts alleged in the SOR include the first mortgage with a balance of 
$164,000 (SOR ¶ 1.a) and the second mortgage with a balance of $38,931. (SOR ¶ 1.b)  
 
Upon receiving the foreclosure notice, Applicant hired an attorney to pursue 
alternative resolutions to prevent the foreclosure. The attorney is assisting him in 
applying for a short sale with the lender. His application package is currently being 
reviewed by the company holding Applicant’s first mortgage. In the event that his 
application for a short sale is not approved, Applicant is able to afford the deficiency 
judgment on the property. (Tr. 48, 54; AE B)  
 
On November 8, 2011, Applicant settled the second mortgage account for 
$7,984.34. He paid this amount with a check dated October 16, 2011. (Tr. 51; AE A) 
Aside from this property investment, Applicant has no other delinquent accounts. All of 
his other debts are current. He was financially sound before he invested in the property.  
(Tr. 55; Gov 2; Gov 7; Gov 9) 
 
During the hearing, Applicant provided a copy of his budget which he prepared a 
few days before the hearing. His net monthly income is $9,504. His total monthly 
expenses are $7,553. He has $1,951 in discretionary income each month. (AE J) The 
 
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mortgage on his home is current. He has sound financial investments. (AE F; AE G; AE 
I)  
 
Applicant’s supervisor testified during the hearing. He has known Applicant since 
1996. They met when they were employed by a former employer. When they work on 
the same projects, he sees Applicant on a daily basis. Currently, they are not working 
on the same project, and he sees Applicant once or twice every two weeks. His 
supervisor testified that Applicant is very reliable. He demonstrates very good judgment. 
The supervisor trusts Applicant. He socializes with him outside of work. He knows his 
wife and children. He has been aware of Applicant’s financial issues for six months. He 
recommends that Applicant maintain his security clearance. (Tr. 15-21) 
 
A former co-worker and personal friend of Applicant’s also testified during the 
hearing. He first met Applicant in 2000 when they both worked at an overseas location. 
They worked together until 2003. They remain friends. They have lunch together on a 
monthly basis. He describes Applicant as an honest, hard working man. He is reliable, 
trustworthy and has sound judgment. He is aware of Applicant’s real estate issue. He 
recommends Applicant for a security clearance. (Tr. 23-28)   
 
Additional co-workers and friends provided written statements on behalf of 
Applicant. They said similar favorable things about Applicant. In addition to work, 
Applicant volunteers with a youth soccer program in his local community. (AE H) 
 
Policies 
 
 When evaluating an applicant’s suitability for a security clearance, the 
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, which must be considered when 
determining 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 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.  
 
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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 as to obtaining 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 
grants access to classified information. Decisions include, by necessity, consideration of 
the possible risk the applicant may deliberately or inadvertently fail to protect or 
safeguard classified information. Such decisions entail a certain degree of legally 
permissible extrapolation as to 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.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites 
for access to classified or sensitive information).   
 
Analysis 
  
Guideline F, Financial Considerations 
 
The security concern relating to the guideline for Financial Considerations is set 
out in AG & 18:       
 
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.  
 
The guideline notes several disqualifying conditions that could raise security 
concerns. I find AG &19(a) (an inability or unwillingness to satisfy debts); and AG &19(c) 
(a history of not meeting financial obligations) apply to Applicant’s case. The second 
home he purchased as an investment property in 2005 is now pending foreclosure.  
 
An individual who is financially irresponsible may also be irresponsible, 
unconcerned, or careless in their obligations to protect classified information. Behaving 
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 
 
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evidence is uncovered demonstrating an inability or unwillingness to pay debts under 
agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an 
applicant with a history of serious or recurring financial difficulties is in a situation of risk 
inconsistent with the holding of a security clearance. An applicant is not required to be 
debt free, but is required to manage his finances in such a way as to meet his financial 
obligations.  
 
The Government’s substantial evidence and Applicant’s admissions raise 
security concerns under Guideline F. The burden shifted to Applicant to produce 
evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive ¶ 
E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden 
of disproving it never shifts to the Government. (See ISCR Case No. 02-31154 at 5 
(App. Bd. September 22, 2005))  
 
The guideline also includes examples of conditions that could mitigate security 
concerns arising from financial difficulties. The following mitigating conditions apply:  
 
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) applies. Applicant’s 
decision to purchase an investment property in 2005 did not work out as well as he 
anticipated. This is the only negative mark on his otherwise stellar financial history. 
Applicant is making an effort to resolve this issue. Aside from this debt, he is financially 
stable. The conduct that created this issue is unlikely to recur and does not cast doubt 
on Applicant’s reliability, trustworthiness, or good judgment.   
 
 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) applies. Applicant rented the property to a 
distant relative who stopped paying rent in late 2008 and lived in the property for over a 
year until Applicant was able to evict him in January 2010. Applicant was unable to keep 
up with the mortgage payments during the months that he was not receiving rent. A 
downturn in the real estate market further complicated matters. Applicant’s attempts to 
sell or rent the property were unsuccessful. Upon receipt of the foreclosure notice, 
Applicant retained an attorney and is in the process of attempting to negotiate a short 
sale on the property. He is current on his other financial obligations. He acted 
reasonably under the circumstances.   
 
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) 
applies because Applicant resolved the second mortgage and has taken reasonable 
steps to negotiate a short sale with the owner of the first mortgage. Aside from this 
issue, he has no other delinquent accounts.   
 
 
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AG & 20(d) (the individual initiated a good-faith effort to repay overdue creditors 
or otherwise resolve debts) applies. Applicant settled the second mortgage (SOR ¶ 1.b) 
and his attorney is in the process of negotiating a short sale in lieu of foreclosure on the 
first mortgage (SOR ¶ 1.a). He made a good-faith effort to resolve this issue.  
 
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 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. 
        
I considered the potentially disqualifying and mitigating conditions in light of all 
the facts and circumstances surrounding this case. I considered Applicant’s 
employment history with defense contractors. I considered the favorable testimony of 
his supervisor and the favorable statements of his friends and coworkers. But for this 
distressed property, Applicant is financially stable. He was unable to pay the mortgage 
after his tenant, a distant relative, stopped paying rent. He retained counsel when he 
was notified of the foreclosure action and is attempting to negotiate a short sale. He has 
the means to negotiate a settlement if the application for a short sale is not approved. 
He demonstrated a good-faith effort to resolve the issues with this mortgage. Security 
concerns are mitigated.    
 
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 
 
  Subparagraph 1.b:    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 eligibility for a security 
clearance.  Eligibility for access to classified information is granted. 
 
 
                                                
_________________ 
ERIN C. HOGAN 
Administrative Judge