DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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                                                                     )                                                           
          -----------------------------------                  )     ISCR  Case No.  11-03249           
                                                              )
)
Applicant for Security Clearance )
Appearances
For Government: Jeff Nagel, Esquire, Department Counsel
For Applicant: Alan Hahn, Esquire
______________
 Decision
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WESLEY, Roger C., Administrative Judge:
Based upon a review of the pleadings, exhibits, and testimony, I conclude that
Applicant mitigated the security concerns regarding his finances. Eligibility for access to
classified information is granted. 
 
Statement of Case
On November 10, 2011, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) detailing reasons why DOHA could not make the
preliminary affirmative determination of eligibility for granting a security clearance, and
DOHA recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. 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 (AGs) implemented by the
Department of Defense on September 1, 2006. 
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Applicant responded to the SOR on December 7, 2011, and requested a hearing.
The case was assigned to me on February 21, 2012, and was scheduled for hearing on
March 29, 2012. The hearing was convened on that date. At hearing, the Government's
case consisted of seven exhibits (GEs 1-7). Applicant relied on two witnesses (including
himself) and 12 exhibits (AEs A-L). The transcript (Tr.) was received on April 9, 2012. 
Summary of Pleadings
Under Guideline F, Applicant allegedly accumulated six debts, exceeding
$700,000.  In his answer to the SOR, Applicant admitted the allegations covered by
paragraphs 1.a through 1.c and admitted the allegations covered by subparagraph 1.f.
He denied the allegations covered by subparagraphs 1.d and 1.e, claiming zero
balances.
                  
Findings of Fact
Applicant is a 45-year-old law enforcement professional (LEP II) for a defense
contractor who seeks a security clearance. The allegations covered in the SOR and
admitted by Applicant are incorporated and adopted as relevant and material findings.
Additional findings follow.
Background
Applicant married in April 1988 and has two children from this marriage. (GE 1;
Tr. 27) Both children reside with him. His older son has cerebral palsy, autism, and
mental retardation and cannot communicate with strangers. (Tr. 27-28) Applicant
attended college for one year and has no earned diploma. (GE 1) 
Following high school, Applicant enlisted in the Marine Corps and was assigned
to an infantry battalion. He served deployments in Panama and Korea as a non-
commissioned officer (NCO). Because of his security responsibilities, he held security
clearances during most of his time in military service. (Tr. 29) Applicant never
encountered any security issues while in the military and was honorably discharged in
1990. (AE F; Tr. 29) 
Between 1990 and 1997, Applicant was employed as a police officer for a local
municipality in his home State 1. (GEs 1 and 2; Tr. 30-31) To improve living conditions
for his oldest son, he and his wife relocated to State 2 in 1997. (Tr. 31-32)  Once settled
in State 2, Applicant obtained employment with a local police department and continued
his employment with this department for over eight years (1997-2005). During his police
employment, he earned promotions to detective positions. While still employed, he
established a mortgage business that invested in residential properties with other
partners and resold them after making repairs and renovations. (GE 2; Tr. 43-45)
In 2005, Applicant quit his police job and established a security business. (Tr. 34)
His business concentrated on the marketing of security alarm systems for newly
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constructed homes. (Tr. 34-37) He used a Subchapter S format to start his business.
(Tr. 40)  Under this format, Applicant assumed personal liability for his firm’s debts. At
the peak of the market in 2005, his business employed 15 employees and paid its taxes
and other obligations regularly. (Tr. 35) 
Applicant’s Finances
Construction work slowed between 2006 and 2009, and the work reductions
impacted both his real estate and security licensing businesses. (Tr. 36-39) Records
reflect foreclosures on these business properties and no deficiency liabilities on any of
the foreclosed properties.  The SOR lists only Applicant’s $597,000 mortgage with
creditor 1.e.  and does not include any of the other real estate debts. (GEs 4 through 7) 
Having no business training of his own, Applicant fell behind with his business
debts in 2008. (Tr. 59) He struggled to pay his own bills and provide necessary care for
his family.
By 2009, Applicant could not operate his business anymore and joined a security
contractor company in 2010. (Tr.  40, 52) Before joining this employer, he received
financial counseling from a financial advisor he engaged. (Tr. 59) In his first year as an
advisor for his security contractor, he deployed to Afghanistan. (Tr. 40-41) After he
ceased operating his contracting business, his business retained business liabilities.
While he was able to pay off his vehicle liabilities (GEs 2-6; Tr. 38), he could not satisfy
all of his company-related credit card debts (i.e., creditors 1.a through 1.c).
Applicant engaged an attorney to explore bankruptcy options and stopped paying
on his credit cards in 2009. (Tr. 39, 59)  But when this attorney did not follow through as
expected with his bankruptcy suggestions, Applicant requested a refund of his retainer.
(Tr. 39) With the help of State 2's state bar, he was successful in obtaining a refund.
(AE J; Tr.  39-40)  
After relocating to his current state of residence (State 3), Applicant encountered
difficulties selling his previous residence in State 2. Records show Applicant purchased
this property in September 2007 with a $597,375 purchase money mortgage with
creditor 1.e.  (GE 2; Tr. 54-55) Applicant ceased making payments on his mortgage in
2009, and the first mortgage holder foreclosed on the property non-judicially the same
year. (Tr. 63) His account statement with the creditor reflects a zero balance on his
mortgage. (AE E) Should Applicant be taxed for any deficiency relief, he will bear
responsibility. (Tr. 54-55) But he believes it is unlikely he will ever be assessed for tax
liability on a deficiency that is barred under State 2's anti-deficiency law. (Tr. 55, 63)
In December 2011, Applicant entered into a debt consolidation agreement. (AE
B) His plan covered his debts with creditors 1.a through 1.c, and called for monthly
payments of $1,008. (AE B; Tr. 51-52) He added his creditor 1.f debt to his plan in
March 2012. (AE B; Tr. 59) The added debt increased his monthly consolidated loan
payment to $1,229 a month. (AE B) Not included in Applicant’s plan is his $8,995
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creditor 1.d debt (a personal credit card), which he paid off in December 2011. (AE D)
Now in the fourth year of his consolidation plan, he is on a regular payment schedule
and expects to fulfill the payment terms of his plan within five years. (AE C; Tr. 59-62)  
Once he moved to State 3, Applicant joined the Air Force Reserves. (Tr. 41-42)
Even if he were to lose his clearance, he will be able to take care of his debt
consolidation payments. He currently earns $2,100 a month from his unemployment
insurance and Air Force Reserve pay.  (Tr. 47) With his wife’s supplemental income of
$2,732 a month (AEs F and G; Tr. 47), he nets almost $5,000 a month. And he receives
an additional $3,518 a month in federal disability income for his disabled son. (AE H; Tr.
48) Applicant is up to date with his current credit cards (AE I) and has no debts
outstanding besides the ones included in his debt consolidation plan. 
Endorsements
Applicant is highly regarded by former Marines who served with him in service.
(AE K; Tr. 75-76) A fellow Marine who served with him, and has stayed in contact with
him, considers him to be very reliable and trustworthy. (Tr. 75-77) Other colleagues in
LEP status who have served with Applicant in combat with the same defense contractor
credit him with strong instructional skills. He has has earned the trust and respect of
fellow law enforcement advisors embedded in a Marine battalion engaged in combat
and training missions in Afghanistan. (AE K)
Policies
         The AGs list guidelines to be used by administrative judges in the decision-making
process covering DOHA cases. These guidelines take into account factors that could
create a potential conflict of interest for the individual applicant, as well as
considerations that could affect the individual’s reliability, trustworthiness, and ability to
protect classified information. 
These guidelines include "[c]onditions that could raise a security concern and
may be disqualifying” (disqualifying conditions), if any, and many of the "[c]onditions that
could mitigate security concerns.” They must be considered before deciding whether or
not a security clearance should be granted, continued, revoked, or denied. The
guidelines do not require administrative judges to place exclusive reliance on the
enumerated disqualifying and mitigating conditions in the guidelines in arriving at a
decision. Each of the guidelines is to be evaluated in the context of the whole person in
accordance with AG ¶ 2(c) 
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a)
of the AGs. AG ¶ 2(a) is intended to assist the judges in reaching a fair and impartial
commonsense decision based upon a careful consideration of the pertinent guidelines
within the context of the whole person. The adjudicative process is designed to examine
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a sufficient period of an applicant’s life to enable predictive judgments to be made about
whether the applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered together with the following AG ¶ 2(a) factors: 
(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 chances; (7) the
motivation for the conduct; (8) the potential for pressure, coercion,
exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
       Viewing the issues raised and evidence as a whole, the following adjudication policy
factors are pertinent herein:
Financial Considerations
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.  Compulsive gambling is a concern as it may lead to financial
crimes including espionage.  Affluence that cannot be explained by
known sources of income is also a security concern.  It may indicate
proceeds from financially profitable criminal acts.” 
Adjudication Guidelines, ¶ 18.
Burden of Proof
By virtue of the principles and policies framed by the AGs, a decision to grant or
continue an applicant's security clearance may be made only upon a threshold finding
that to do so is clearly consistent with the national interest.  Because the Directive
requires administrative judges to make a commonsense appraisal of the evidence
accumulated in the record, the ultimate determination of an applicant's eligibility for a
security clearance depends, in large part, on the relevance and materiality of that
evidence. See Kungys v. United States, 485 U.S. 759, 792-800 (1988).  As with all
adversarial proceedings, the judge may draw only those inferences which have a
reasonable and logical basis from the evidence of record.  Conversely, the judge cannot
draw factual inferences that are grounded on speculation or conjecture.
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The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the
facts proven have a material bearing to the applicant's eligibility to obtain or maintain a
security clearance. The required materiality showing, however, does not require the
Government to affirmatively demonstrate that the applicant has actually mishandled or
abused classified information before it can deny or revoke a security clearance. Rather,
the judge must consider and weigh the cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
By virtue of the principles and policies framed by the AGs, a decision to grant or
continue an applicant's security clearance may be made only upon a threshold finding
that to do so is clearly consistent with the national interest. Because the Directive
requires administrative judges to make a commonsense appraisal of the evidence
accumulated in the record, the ultimate determination of an applicant's eligibility for a
security clearance depends, in large part, on the relevance and materiality of that
evidence. See Kungys v. United States, 485 U.S. 759, 792-800 (1988).  As with all
adversarial proceedings, the judge may draw only those inferences which have a
reasonable and logical basis from the evidence of record. 
The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the
facts proven have a material bearing to the applicant's eligibility to obtain or maintain a
security clearance. The required materiality showing, however, does not require the
Government to affirmatively demonstrate that the applicant has actually mishandled or
abused classified information before it can deny or revoke a security clearance. Rather,
the judge must consider and weigh the cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the evidentiary burden shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation, or
mitigation.  Based on the requirement of  Exec. Or. 10865 that all security clearances be
clearly consistent with the national interest, the applicant has the ultimate burden of
demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations should
err, if they must, on the side of denials.” See Department of the Navy v. Egan, 484 U.S.
518, 531 (1988).  And because all security clearances must be clearly consistent with the
national interest, the burden of persuasion must remain with the Applicant.
Analysis  
Applicant is a well regarded LEP II  for a defense contractor whose credit reports
list six delinquent debts.  Three of the debts (creditors 1.a through 1.c) were charged off.
One (a personal credit card debt) is listed as in collection; another represents a
foreclosed mortgage (creditor 1.e); and the last one (creditor 1.f) represents an adverse
judgment taken against Applicant.  Four of these debts are covered by Applicant’s debt
consolidation plan (creditors 1.a through 1.c and creditor 1.f). While the largest debt
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(creditor 1.e) reflects a foreclosed mortgage in the amount of $597,375 and recites no
deficiency balance.  
Applicant disputes only two of the listed debts, claiming payment in full of the
creditor 1.c debt and the absence of any available deficiency enforcement in State 2 with
respect to the creditor 1.d debt due to State 2’s anti-deficiency statute. 
       Security concerns are raised under the financial considerations guideline of the AGs
where the individual applicant is so financially overextended as to indicate poor self-
control, lack of judgment, or unwillingness to abide by rules and regulations, which can
raise questions about the individual’s reliability, trustworthiness, and ability to protect
classified information, and place the person at risk of having to engage in illegal acts to
generate funds. Applicant’s accumulation of presumptively valid delinquent debts (based
on produced credit reports) and his past inability to resolve these debts by the disputes
process available to him warrant the application of two of the disqualifying conditions (DC)
of the Guidelines¶ DC 19(a), “inability or unwillingness to satisfy debts,” and ¶19(c) “a
history of not meeting financial obligations.”
Holding a security clearance involves the exercise of important fiducial
responsibilities, among which is the expectancy of consistent trust and candor.  Financial
stability in a person cleared to access classified information is required precisely to inspire
trust and confidence in the holder of the clearance. While the principal concern of a
clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in financial cases.
Four of Applicant’s debts are covered by Applicant’s debt consolidation plan and
show good promise of being satisfied under his payment arrangements. Another (creditor
1.c) has been paid and is fully mitigated. And the largest listed debt (creditor 1.e) reflects
a potential deficiency balance that is not enforceable in State 2 under the State’s anti-
deficiency statute.  
What is presently known about Applicant’s foreclosure in State 2 is that the first
lien holder did not retain any identifiable deficiency rights under the non-judicial
foreclosure procedures it invoked in 2009. State 2's anti-deficiency statutes prevent a
lender from successfully suing for any losses on a home after non-judicial foreclosure. As
outlined in State 2's statutes ((§ 33-729), a person may not be sued by his lender for a
deficiency if the property is located on 2.5 acres or less and is a single family residence or
duplex. A companion State 2 statute (§ 33-814) precludes a  trustee of a deed of trust
covering trust property 2.5 acres or less from maintaining an action for a deficiency under
the trustee’s power of sale.
Each of these State 2 statutory restrictions assumes the owner was not
responsible for the property’s decrease in value due to his or her neglect. There is nothing
in the record to suggest either Applicant or his spouse damaged or neglected their State 2
residence in any way prior to the lender’s foreclosure of the home in 2010. Any retained
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deficiency enforcement rights against Applicant are tenuous and unlikely to materialize in
any tangible way.
In recognition of the array of extenuating circumstances that impacted Applicant’s
business interests in State 2 and the considerable good-faith efforts Applicant made to
identify and satisfy his creditors with valid outstanding debts, both extenuation and
mitigation credit are available to him. All of his debts but one reflect documented, good-
faith payment efforts on applicant’s part. And the only remaining debt is barred from
collection by State 2's anti-deficiency law.
Applicant’s counseling sessions and good-faith efforts to resolve his debts merit
the application of three of the mitigating conditions for financial considerations: ¶ MC
20(a), “the behavior happened so long ago, was so infrequent, or occurred under
circumstances that it is unlikely to recur and does not cast doubt on the individual’s
reliability, trustworthiness, or good judgment;” MC ¶ 20(b), “the conditions that resulted in
the behavior 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,; and MC ¶ 20(c), “the
person has received counseling for the problem and/or there are clear indications that the
problem is being resolved or is under control.” They have considerable applicability to
Applicant’s accumulated delinquent debts and loss of his home to foreclosure. 
                                               
Consideration of Applicant’s background and circumstances surrounding his debt
disputes, his steady income and good credit for most of his personal and business
career, and the concerted efforts he has made to obtain financial counseling and  resolve
his debts reflect positively on Applicant and demonstrate his overall good judgment,
reliability, and trustworthiness. Applicant’s proofs provide credible indicators of  his ability
to be trusted in times of stress and enable him  to meet his own evidentiary burden of
mitigating the covered debts. 
From a whole-person standpoint, the evidence is substantial that Applicant has
mounted good-faith efforts to resolve his debts. Since joining his current employer and
becoming a member of the Air Force Reserves, he has paid one of listed debts in full and
established a debt consolidation plan to pay off four other debts. He has made regular
payments on his consolidation plan and shows considerable promise in completing his
repayment plan. And he is at no risk to any deficiency enforcement on his foreclosed
residence in State 2. Should Applicant ever be assessed taxes on any of his covered
debts, he has ample resources available to resolve them.  
Applicant has a record of outstanding military service and benefits from the trust he
has earned from other Marines who have served with him in combat. He is consistently
credited with strong instructional skills and respect from his fellow Marines. Applicant has
also shown to be a good father to his children and one who looked first to taking care of
his employees before compensating himself when he operated his businesses.
All of the extenuating facts and circumstances surrounding Applicant’s listed
delinquent debts and the good-faith efforts he has mounted to complete counseling and
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resolve his outstanding debts under difficult circumstances enable Applicant to
successfully mitigate judgment, reliability and trustworthiness concerns related to his
debts. Favorable conclusions warrant with respect to the allegations covered by the
financial considerations guideline. 
        
Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F: (FINANCIAL CONSIDERATIONS): FOR APPLICANT
Subparagraphs 1.a through 1.f: For Applicant
Conclusions
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 Applicant’s security clearance.
Clearance is granted.
                                          
Roger C. Wesley
Administrative Judge