DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
   
In the matter of: )
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--------------------------------- )       ISCR Case No. 11-02257
)
)
Applicant for Security Clearance )
Appearances
For Government: Jeff A. Nagel, Department Counsel
For Applicant: Pro se
February 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 September 27, 2010.  (Government Exhibit 1.)  On August 3, 2011, 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 August 18, 2011, and he requested an
administrative hearing before a DOHA Administrative Judge.  This case was assigned
to the undersigned on November 30, 2011.  A notice of hearing was issued on
December 7, 2011, and the hearing was scheduled for January 19, 2012.  At the
hearing the Government presented four exhibits, referred to as Government Exhibits 1
through 4 that were admitted without objection.  The Applicant presented five exhibits,
referred to as Applicant’s Exhibits A through E that were admitted without objection.  He
also testified on his own behalf.  The Applicant requested that the record remain open to
submit additional documentation.  The record remained open until close of business on
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January 30, 2012.  The Applicant submitted four Post-Hearing Exhibits consisting of
twenty-six pages, referred to as Applicant’s Post-Hearing Exhibits F through I.  The
official transcript (Tr.) was received on January 25, 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 48 years old and has a Ph.D. in Physics.  He is employed as a
Systems Engineer with a defense contractor and is seeking to obtain a security
clearance in connection with his 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 denies each of the allegations set forth in the SOR.  (See
Applicant’s Answer to SOR.)  However, he admits that he was at one time indebted to
the respective lenders for two delinquent loans on real property.  Credit Reports of the
Applicant dated October 19, 2010 and May 18, 2011, collectively reflect that the
Applicant was indebted to these creditors.  (Government Exhibits 2 and 4.)
The Applicant graduated from college in 1999.  He joined the defense industry in
2002, and has held a security clearance since then.  He has been married for thirty-
three years and has two children.  
In 2006, the Applicant’s wife was a real estate agent and came across a condo
for sale that was in probate that the Applicant thought would be a good short term
investment.  (Tr. p. 49.)  He thought they could purchase the house for a good price,
use the money from their home equity loan to fix it, and then sell it for a profit.  (Tr. p.
33.)  Unexpectedly, the housing market crashed, and he was unable to sell the condo.
Although it was difficult, for the next two and a half years, from 2006 to mid 2009, the
Applicant continued to make the monthly mortgage payments of $1,200.  He rented the
condo out until July 2008, but was several hundred dollars short of the mortgage
payment.  In the fall of 2008, his son started college and the Applicant had extra
expenses for tuition.  It was at  this time that his wife lost her job due to the lack of sales
in the housing market. The Applicant tried to refinance the mortgage on the house but
was unsuccessful.  Since he was current on his payments the bank would not entertain
a loan modification.  
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In 2010, upon the advice of the bank, the Applicant stopped making payments on
the mortgage and tried to short sale the house.  The short sale was approved in
October 2010.  Applicant’s loan history shows that he kept current with the mortgage
payments until he was advised by the bank to allow the account to fall into arrears.      
The first loan on the property placed into collection in the amount of $413,000
was settled in the short sale.  (Applicant’s Post-Hearing Exhibit B and E.)  The second
loan on the property in the amount of $86,000 went into collection.  The Applicant
recently settled the debt in the amount of $15,000. (Tr. p. 70 and Applicant’s Post-
Hearing Exhibit F.)  
The Applicant believes that he may also have a tax break because of the money
he invested in the property.  (Tr. p. 52.)  In the event that he has any tax liability as a
result of the transaction, he has sufficient monies in his 401(K) that he can pay the debt.
(Tr. p. 55, 73, and Applicant’s Post-Hearing Exhibits G and H.)  His tax accountant told
him that he will not have a tax liability from settling the second loan on the property. 
The Applicant has no other delinquent debt.  (Tr. p. 64.)  He pays $3,000 monthly
on his mortgage for his personal residence that remains current.  He takes home after
taxes approximately $7,000 monthly.  
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
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 obligations. 
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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; 
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
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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.
The evidence shows that circumstances largely beyond the Applicant’s control,
namely, the collapse in the housing market, coupled with the Applicant’s poorly timed
real estate investment decision, caused his financial indebtedness.  The problems that
surfaced were completely unforeseeable and isolated.  However, throughout the real
estate transaction, the Applicant exercised good judgment.  When the mortgage
payments adjusted and he could no longer make his payments, he tired to rent it.  He
then tried to refinance the mortgage to be able to afford it.  When that was not
successful, he tried to short sale it, and was eventually successful.  As a result of this
experience, he has  learned that he will never engage in a real estate investment again
without doing the proper research.  Throughout this period of financial hardship, he was
and continues to be extremely diligent in doing his part to prevent foreclosure.  He acted
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responsibly and with integrity under the circumstances.  He did the best he could under
the circumstances, and as much as humanly possible to resolve his financial problems.
In regard to his primary residence, he is current on his payments. 
Under the particular circumstance of this case, the Applicant has made a good
faith effort to resolve his past due indebtedness.  He has a stellar record demonstrating
that he has always paid his bills on time.  But for his investment short sale, his record is
unblemished.  He understands the importance of paying his bills on time and living
within his means.  He also knows that he must remain fiscally responsible in the future.
There is sufficient evidence of financial rehabilitation.  The Applicant has demonstrated
that he can properly handle his financial affairs and that he is fiscally responsible.
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.  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, including the Applicant’s
favorable testimony, recommendations, and dedicated work history.  They mitigate 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.
    Subpara.  1.b.: 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