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    DEPARTMENT OF DEFENSE 
  DEFENSE OFFICE OF HEARINGS AND APPEALS 
  
  
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 11-06373 
  ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Ray Blank, Esq., Department Counsel 
For Applicant: Pro se 
 
 
 
 
______________ 
 
Decision 
______________ 
 
 
HEINY, Claude R., Administrative Judge: 
 
Applicant had seven charged-off or collection accounts, which totaled 
approximately $48,000. He has paid two, asserts a third has been paid, and is making 
payment on four remaining accounts. Applicant has rebutted or mitigated the financial 
considerations security. Clearance is granted. 
 
History 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 
a Statement of Reasons (SOR) on February 23, 2012, detailing security concerns under 
Guideline F, financial considerations. 
                                                          
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. 
2 
 
  
 On March 16, 2012, Applicant answered the SOR and requested a hearing. On 
March 30, 2012, I was assigned the case. On March 30, 2012, DOHA issued a Notice of 
Hearing for the hearing held on April 13, 2012.  
 
 The Government offered exhibits (Ex.) 1 through 5, which were admitted into 
evidence without objection. Applicant testified and submitted Exhibits A through Z, 
which were admitted into evidence without objection. The record was held open to allow 
Applicant to submit additional information, which was received on May 10, 2012. 
Department Counsel had “limited objections” to the admissibility of the material, and 
asserted the weight given the material be minimal. The material was admitted into the 
record, over the objections2 of Department Counsel, as Ex. AA. On April 23, 2012, 
DOHA received the hearing transcript (Tr.). 
 
Findings of Fact 
 
In Applicant’s Answer to the SOR, he admitted all of the factual allegations in the 
SOR, with explanations. His admissions are incorporated herein. After a thorough 
review of the pleadings and exhibits, I make the following findings of fact. 
 
 Applicant is a 68-year-old program master scheduler who has worked for a 
defense contractor since June 2010, and seeks to maintain a security clearance. In May 
1961, he joined the U.S. Naval Reserve. In May 1969, after having been an enlisted 
service member for eight years, he was commissioned in the U.S. Naval Reserves. (Tr. 
48) In 1993, after 33 years, he retired as a captain (0-6). During the Vietnam conflict, he 
served as a ship’s gunnery officer and went through six months of intensive combat 
during which over 15,000 rounds of ammunition was fired at hostile targets. (Tr. 51) He 
first began working for DoD contractors in 1979, after leaving active duty.3(Tr. 54)  
 
Applicant’s friends and co-workers describe him as: kind, thoughtful, dependable, 
trustworthy, forthright, and honest. He is a dependable employee with a strong work 
ethic and pride in doing assignments well, a dedicated family man, an ethical, moral, 
and very dedicated Christian believer. He is a critical thinker with a very analytical mind. 
(Ex. B)  
 
 In December 2004, Applicant’s first wife passed away from the complications of 
tongue and throat cancer. Medical bills of two million dollars had been incurred, of which 
his insurance paid 90% and he was responsible for 10% which equaled to 
approximately $200,000. (Ex. 1) He paid this debt through the use of retirement funds, 
                                                          
2
 Department Counsel argued that Applicant’s “Rebuttal to Statements” was additional argument and 
testimony for which Government was denied the opportunity for cross-examination. Additionally, it was 
argued the submission did “not contain evidence which reliably corroborates their relation to a SOR 
account.” The objections were overruled and the material was admitted for the appropriate weight 
warranted. 
 
3
 During that time the ship was struck by an enemy land battery which killed one and wounded seven 
others on the ship. (Tr. 51) 
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credit cards, home refinancing, and other income. (Tr. 115) All of the medical bills have 
been paid. (Tr. 102)  
 
 Applicant remarried in March 2006. In June 2006, he sold his home and in 
August 2006, he and his wife decided to purchase a home, which they did with a loan of 
over one million dollars. (Exs. H and I, Tr. 65) His and his wife’s adjusted gross income, 
as shown on their 2006 federal tax return, was $201,000. (Ex. D) His annual salary was 
$87,000 and his retirement was $42,000. (Exs. F and G) His monthly first and second 
mortgages totaled approximately $6,200, with interest rates of 7.25% and 11%. (Exs. Q 
and X) After closing on the house, he learned his annual real estate property tax was an 
unanticipated $12,000. (Ex. K)  
 
 In December 2009, Applicant retired from his DoD contractor job and he and his 
wife moved to a different state. Within 45 days of retirement, he decided he was too 
young to retire and started working for another contractor. (Tr. 59)  
 
 In 2009, shortly after moving to a different state, Applicant’s wife’s employer 
informed her that she was terminated when the company chose to employ in-house 
personnel. By March 2010, her contracting work was ending. His wife’s monthly income 
declined from $5,500 to $6,000 monthly to $1,500 monthly. (Exs. N and W) After the 
contract to purchase the home was signed, Applicant’s wife lost her job when her 
company went bankrupt. She received nothing of the approximate $32,000 she was 
owed for work performed. (Ex. R) State reciprocity accreditation in the new state has 
prevented his wife from working as a nurse practitioner. Being unable to work in the 
nursing field, at the new location, has resulted in the loss of approximately $85,000 
annually. (Ex. 2) Her salary was reduced to $12,000 annually and has further lowered to 
$5,000 annually. (Tr. 71, 76)  
 
 The real estate market went into decline leaving Applicant owing $350,000 more 
than the home was worth. In 2008, he attempted, but was denied, a reduction in value 
review by his lender. (Exs. S and T) At the same time, he provided $20,000 to his son, 
which has not been repaid. (Tr. 110) The money was to pay traffic tickets and prevent 
repossessions of vehicles. (Tr. 110) His daughter started college adding another 
$10,000 annually to their expenses. When his mother-in-law4 moved in with them, 
several thousand dollars were spent renovating their home to accommodate her.  
 
 Applicant paid a real estate attorney $2,500 to assist them in negotiating a lower 
interest rate and paid $3,500 to a mortgage foreclosure consulting service. (Exs. L and 
M, Tr. 136) He was unable to negotiate a lower interest rate or monthly payment. 
Additionally, he did not qualify for any government mortgage relief assistance. (Ex. N, 
O, and P) In 2007, he also hired a credit assistance company to help resolve his credit 
problems. (Ex. V) After paying the company $5,892, and receiving no results, he 
stopped further payments to the credit repair company. (Ex. AA, Tr. 133) The company 
                                                          
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 His mother-in-law died in August 2011. (Tr. 2) 
 
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had assured Applicant that the interest on his debts would stop accruing. This did not 
occur. (Tr. 134)  
 
 In June 2009, Applicant’s monthly mortgage payment increased. The primary 
lender agreed to a short sale, but the sale did not occur due to objections by the holder 
of the second mortgage. In January 2010, he provided a deed-in-lieu-of-foreclosure. (Tr. 
65) Following the deed-in-lieu-of-foreclosure, the lenders have made no demand for 
payment on the second mortgage5 (Tr. 65) None of the SOR obligations relate to the 
home’s purchase or foreclosure. 
 
 As of September 2011, Applicant’s net monthly income was approximately 
$11,900, his monthly expenses and debt payment was $11,700, and his net remainder 
approximately $200. (Ex. 2, Tr. 139) Since that time, his rent has been reduced by $700 
monthly. He has reduced his monthly horse costs, his stepdaughter has moved to 
another state with her horse, and the additional cost incurred related to his mother-in-
law ended with her death. (Tr. 141) They are selling their truck, tractor, and farm 
equipment. (Tr. 141)  
 
 Applicant owed an apartment complex (SOR 1.a) $1,313. The lease allowed for 
early termination if Applicant or his wife were terminated from work. The apartment 
management refused to honor the termination clause when his wife lost her job. (Ex. 2) 
The creditor agreed to accept a $663 settlement offer and the account has been settled 
in full. (Ex. A) Applicant made $150 monthly payments on the department store account 
(SOR 1.b, $1,461) in March and April 2012. (Ex. Z) He is also paying $150 monthly on 
the credit card debt (SOR 1.c, $4,829). (Tr. 87) The collection agency offered to settle 
the matter for $2,897. (Ex. Z, Tr. 126) The creditor in a second obligation (SOR 1.d, 
$9,055) offered to settle the debt for $5,673. He is paying $100 monthly on a charged-
off credit card. (Ex. Z, Tr. 88)  
 
 The collection agency collecting for the department store account (SOR 1.e, 
$4,418) agreed to settle the debt for $1,069 with six payments of $194 each. (Tr. 88) On 
April 11, 2012, a $433 electronic payment was made on this account. (Ex. Z) The 
collection firm collecting the $10,303 (SOR 1.f) obligation agreed to settle for $2,000. 
(Tr. 88) He is making $150 monthly payments on the debt. (Tr. 89) The collection 
agency on the SOR 1.g ($16,395) obligation has agreed to settle the matter for $3,254. 
(Ex. Z) Applicant pays $200 monthly on this debt. (Ex. Z, Tr. 90, 132)  
 
 The credit union offered a $10,000 loan, which Applicant intends to use to settle 
his three largest obligations: SOR 1.d ($9,055), SOR 1.f ($10,303), and SOR 1.g 
($16,395). (Tr. 90) The three creditors have offered to settle for $10,927.  
 
                                                          
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 The house was located in an anti-deficiency state wherein the lenders can only look to the value of the 
property for repayment of any outstanding mortgage.  
 
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 In January 2012, Applicant’s wife had a hip replacement. Even though the 
hospital assured them, prior to the surgery, that their total cost would be $40, they 
received a $1,300 bill. (Tr. 104) 
 
Four of the creditors have offered to settle their accounts for $13,820. A 
summary of Applicant’s eight charged-off and accounts placed for collection and the 
current status of each follows: 
 
 Creditor Amount  Current Status 
a Collection account. $1,313 Paid. Settlement in Full. Wife was terminated from 
work which should have released them from the 
last month of their lease. (Ex. 2, A, and SOR 
Answer) 
b Collection account.  
 
$1,461 
 
Paid. Creditor agreed to 12 monthly payments of 
$131.00 each. Since December 2011, Applicant 
has paid $1,400 on this account. (Ex. AA) He 
asserted, but failed to document, he had paid the 
creditor an additional $600 and the creditor agreed 
to close the account. (Ex. AA)  
c Collection account.  
 
$4,829 
 
Paying. Account closed in August 2008 and the 
credit bureau report (CBR) shows a zero balance. 
Between May 2009 and May 2012, Applicant paid 
$1,200 on this account. (Exs. Z and AA) The 
collection agency offered to settle this debt for 
$2,897. (Ex. Z, Tr. 126)  
d Charged-off 
account. 
 
 
$9,055 Paying. The creditor offered to settle this debt for 
$5,673. (Ex. Z, Tr. 88) Since October 2011, 
Applicant has made eight monthly payments of 
$100 each. (Exs. Z and AA) 
e Collection account. $4,418 Since March 2012, Applicant has paid $1,433 on 
this account. (Exs. Z and AA) He asserts it has 
now been paid in full. 
f Collection account.  $10,303 Paying. Creditor offered to settle for $2,000. (Tr. 
88) Applicant agreed to monthly automatic debits. 
In April 2012, he paid $150. 
g Collection account.  
 
 
 
$16,395 Paying. In September 2011, creditor agreed to 
accept $3,254 to settle this debt. (Ex. Z) In April 
2012 and May 2012, Applicant made $200 
monthly payments on this account. (Exs. Z and 
AA) 
  $47,774 Total debt listed in SOR 
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 Applicant and his wife have chosen to downsize from their current location. (Tr. 
66) When he moved into their home he anticipated financial support from his step-
daughter and her boyfriend. At one time, five people were living in the house. Now there 
are just Applicant and his wife. They have decided the size of the house and property is 
too large and the cost to maintain the place too great. (Tr. 67) The lease has been 
terminated and they are moving to a less costly home. He has a debit card and a credit 
card with a $300 limit. (Tr. 100) He now has a clear picture of how to handle his 
finances. (Tr. 101) He listens to financial planners on the radio and has attended a 
financial course through his church. (Tr. 137)  
 
 
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 
grants access to classified information. Decisions include, by necessity, consideration of 
the possible risk the applicant may deliberately or inadvertently fail to safeguard 
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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 (EO) 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 
 
 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 owed approximately 
$48,000 on seven past-due obligations. Disqualifying Conditions AG ¶ 19(a), “inability or 
unwillingness to satisfy debts” and AG ¶ 19(c), “a history of not meeting financial 
obligations,” apply.  
 
 Four 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 
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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; and 
 
(d) the individual initiated a good-faith effort to repay overdue creditors or 
otherwise resolve debts. 
 
 Applicant has paid two of the delinquent accounts (SOR 1.a and 1.b). He 
asserted, but did not document, that he had paid a third (SOR 1.e), but did show 
payments were made on this debt. He has received settlement offers on the remaining 
four debts. The creditors have offered to settle the delinquent accounts for 
approximately $14,000. He is making monthly payments on these four remaining 
accounts.  
 
Under AG ¶ 20(a), Applicant=s financial problems were contributed to by his first 
wife’s cancer that required him to pay 10% of the medical charges, which was 
approximately $200,000. He paid this debt. He is making payment on his remaining four 
collection accounts. His current actions do not cast doubt on his reliability, 
trustworthiness, or good judgment. However, because he has multiple delinquent debts 
and his accounts are still being paid, he does not receive full application of the 
mitigating condition listed in AG ¶ 20(a). 
 
Under AG & 20(b), Applicant’s first wife’s unexpected medical condition was 
beyond his control. When his second wife moved to her current location, her nursing 
credentials did not immediately transfer. Her annual income decreased from $85,000 to 
less than $10,000. Applicant has acted responsibly in contacting the creditors and 
establishing repayment plans with them following their settlement offers. AG & 20(b) 
applies. 
 
Applicant has received financial counseling and there are clear indications the 
problem is under control. The $48,000 of outstanding SOR obligations has been 
reduced to a $14,000 obligation. The creditors might revoke their offers in compromise, 
but once having made such offers; most creditors honor their offers believing it is in their 
best business interest to accept the settlement amount the offered. Applicant makes 
monthly payments on the four remaining accounts. There are clear indications that the 
problem is being resolved or is under control. AG & 20(c) applies. 
 
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Applicant has settled and paid two of the delinquent accounts and documented 
he paid $1,433 on the third account (SOR 1.c, $4,418) Since March 2012, he has made 
monthly payments to the remaining creditors establishing a good-faith effort to repay 
overdue creditors or otherwise resolve debts. AG & 20(d) applies. 
 
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. Applicant joined the U.S. Navy in 
1961 and served honorably until his retirement as a captain. He has provided 
outstanding service to government contractors. His financial burden was increased 
when the number of individuals in his household increased. His household has now 
been reduced to just Applicant and his wife. Additionally, his wife’s delay in receiving 
her state medical credentials at her new location has cost the household approximately 
$75,000 annually in lost income. Even with these difficulties, the amount yet owed by 
Applicant is approximately $14,000.  
 
The amount of debt yet to be paid does not indicate poor self-control, lack of 
judgment, or unwillingness to abide by rules and regulations. Applicant incurred sizable 
medical bills for the medical treatment during his first wife’s medical treatment, which he 
has paid. Having paid $200,000 in medical bills gives assurance he will pay the $14,000 
yet owed to his creditors.  
 
The issue is not simply whether all Applicant’s debts have been paid – it is 
whether his financial circumstances raise concerns about his fitness to hold a security 
clearance. (See AG & 2(a)(1).) Overall, the record evidence leaves me without 
questions or doubts that the delinquent debt yet to be paid will be paid. For all these 
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reasons, I conclude Applicant has mitigated the security concerns arising from his 
financial considerations.  
 
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, F, Financial Considerations: FOR APPLICANT 
 
  Subparagraphs 1.a – 1.g:   For Applicant 
   
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is 
clearly consistent with the interests of national security to grant Applicant a security 
clearance. Eligibility for access to classified information is granted.  
 
 
 
_______________________ 
CLAUDE R. HEINY II 
Administrative Judge