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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
) ISCR Case No. 11-04289
          )
Applicant for Security Clearance )
Appearances
For Government: Raashid Williams, Esq., Department Counsel
For Applicant: John F. Mardula, Esq.
______________
Decision
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CURRY, Marc E., Administrative Judge:
Applicant mitigated the financial considerations security concern. Clearance is
granted.
Statement of the Case
On November 17, 2011, the Defense Office of Hearings and Appeals (DOHA)
issued a Statement of Reasons (SOR) to Applicant detailing security concerns under
Guidelines 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) implemented by the Department of Defense on
September 1, 2006.
Applicant answered the SOR on December 5, 2011, admitting all of the
allegations and requesting a hearing. The case was assigned to me on March 2, 2012.
A notice of hearing was issued on March 26, 2012, scheduling the case for April 12,
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2012. I held the hearing as scheduled and received five Government exhibits, marked
as Government Exhibits (GE) 1 through 5, and eight Applicant exhibits (AE); marked as
AE A through H. Also, I considered the testimony of Applicant and two witnesses.
DOHA received the transcript (Tr.) on April 23, 2012.
Findings of Fact
Applicant is a 39-year-old, married man with two children from a previous
marriage, ages 12 and 8. His first marriage ended in 2004. He remarried in January
2011. He and his current wife cohabited for six years before getting married. 
Since October 2009, Applicant has worked as a software engineer for a defense
subcontractor. His duties include developing software mapping and reporting
capabilities. (Tr. 47) According to Applicant’s supervisor, he is the company’s best
employee, and is always ahead of schedule. (Tr. 22) According to the project leader,
Applicant is an exemplary team member who “always finishes his work and asks for
more to be done.” (Tr. 34) 
Applicant graduated from college in 1998, majoring in computer science. Shortly
after Applicant and his first wife got married, they moved to the Midwest. (Tr. 45) She
completed her medical residency in neurosurgery while Applicant worked as a software
developer. In 2005, Applicant started an online business. (Tr. 45) During its first three
years in operation, it was very successful. By 2006, Applicant was generating $125,000
annually from his business. Together with his full-time job, and the alimony he received
from his ex-wife, he earned approximately $275,000 a year between 2006 and 2008.
(Tr. 51) 
After Applicant and his first wife divorced, she moved from the Midwest to take a
neurosurgeon position at a hospital on the east coast. (Tr. 92) As she had physical
custody of the children, they moved with her. Seeking to maintain a close relationship
with his children, Applicant moved to the same city and arranged to telework with his
employer. (Tr. 51)
In September 2006, Applicant purchased a two-unit “fixer-upper” for $225,000.
(Tr. 73) He financed the purchase through a 30-year, fixed mortgage, and borrowed 100
percent of the purchase cost. (Tr. 113) He lived in it with his girlfriend for the next two -
and-a-half years. During that time, he spent approximately $70,000 renovating it. (Tr.
52) The monthly mortgage payment was approximately $1,700 per month.  (Tr. 100)
In December 2008, Applicant purchased and moved into a single family home.
The purchase price was $414,000 and Applicant financed it with a 30-year fixed
mortgage. (Tr. 112) He made a $44,000 downpayment using money borrowed from his
ex-wife. (Tr. 127) Over the course of the next year-and-a-half, Applicant repaid his ex-
wife. (Tr. 117)
Applicant’s girlfriend got a job shortly after they relocated. (Tr. 102)1
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 The monthly mortgage payment on Applicant’s second real estate purchase was
approximately $2,700 monthly. (Tr. 99) Applicant’s total real estate expenses, counting
utilities, were approximately $12,000 per month. (Tr. 126) After moving, Applicant kept
his first property and rented it for $1,300 per monthly. (Tr. 41) 
In February 2009, the principal investor for Applicant’s online company withdrew
his financial support. Absent this investment capital, the business began to struggle. In
May 2009, Applicant’s employer told him they were laying off all of their remote
employees. They gave Applicant the opportunity to keep his job if he returned to the
company’s Midwest headquarters. Not wanting to live such a long distance from his
children, Applicant chose not to move. (Tr. 58)
Because of Applicant’s unique information technology skill set, he anticipated
finding a new job before the layoff was scheduled to occur. Applicant’s efforts at
obtaining another job before the layoff were unsuccessful. Ultimately, he did not obtain
full-time employment until October 2009, four months after he lost his previous job. (Tr.
59) While Applicant was unemployed, his online business failed. Also during this time,
his girlfriend lost her job. (Tr. 97) Before buying the second home, Applicant calculated
that he could pay the mortgage if he lost one of his streams of income. He did not
anticipate losing his job and his business, and his girlfriend losing her job. (Tr. 96-97)
Applicant’s new job was in a different city, prompting him to relocate.  He put his1
primary residence on the market the day he moved. (Tr. 106) He continued to rent the
duplex. 
In October 2009, one month after relocating, Applicant returned to the city from
which he had moved, to visit his children and check on his rental property. He
discovered that the tenant had vacated it without notice. (Tr. 62) Applicant then returned
home. He visited his family again, two weeks later. This time when he inspected the
rental property, he discovered that the garage door had been “kicked in,” and that the
inside of the property was severely water-damaged. Nearly all of the floors and part of
the ceiling were ruined, there was extensive drywall damage, and the inside of the
home was overrun with highly toxic black mold. (Tr.62-63)
After filing a police report for the vandalized door, Applicant contacted his
insurance company and was told that his policy did not cover mold damage. Also, the
insurance company told him its premiums were going to rise if he intended for it to
remain vacant. Applicant then began to obtain cost estimates, and discovered that
repairs were going to cost “tens of thousands of dollars.”  (Tr. 65)
While Applicant was attempting to resolve the problem with the rental property,
his primary residence remained on the market. His efforts at selling it were
Applicant will continue to receive $60,000 per month in alimony through 2021. (Tr. 131)2
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unsuccessful. Applicant gradually began falling behind on the mortgage payments on
both properties. 
After depleting his savings trying to pay the mortgages, Applicant consulted an
attorney. The attorney advised him to stop making mortgage payments to prevent going
further into debt. Also, the attorney told him that he would assist in negotiating either a
short sale or a deed-in-lieu-of-foreclosure of these properties. If these options were
unsuccessful, the attorney told him he would then begin foreclosure proceedings. (Tr.
65-66, 71)
Applicant has three mortgages on the two properties, as listed in subparagraphs
1.a through 1.c. Subparagraph 1.a is the primary mortgage on the duplex, and
subparagraph 1.c is a second mortgage on the duplex. (Tr. 87) The loan balance on the
primary mortgage is approximately $170,000, and the loan balance on the secondary
mortgage is approximately $78,000. Subparagraph 1.b is the mortgage on the home
Applicant  moved to after relocating from the duplex. The approximate loan balance
totals $367,000.
Applicant’s attorney began working to resolve the outstanding mortgages in
December 2009. (AE B)  (Tr. 71) According to the attorney, as of March 2012, “all of the
. . . mortgages have been resolved in the . . . courts by consents by [Applicant]” and
agreements of the mortgagees. (AE B) Moreover, the mortgages were resolved without
“costly motions and trials . . . to the benefit of the mortgagees,” and the results “have
been with the agreement and to the satisfaction of counsel for the mortgagees.” (AE B)
Whether the mortgages were resolved by foreclosures or deed-in-lieu-of-foreclosures is
unclear from the record.
Since October 2009, Applicant has been earning $115,000 per year. (Tr. 77) His
annual household income, which includes his wife’s salary and his ex-wife’s alimony
payments,  is approximately $260,000 per year. (Tr. 124) Applicant and his wife have2
approximately $5,000 of monthly discretionary income.
When Applicant and his first wife divorced in 2006, he had approximately
$60,000 in credit card debt. When he purchased the duplex, he used approximately
$30,000 of unsecured credit for renovations. He continued to satisfy these debts, along
with the loan from his ex-wife, while his attorney was attempting to resolve the
delinquent mortgages.  (Tr. 126)
Applicant has satisfied all of the aforementioned debts, in addition to his student
loans. Moreover, he has replenished his savings accounts. As of March 2012, he had
approximately $45,000 in a money market account and $3,700 in a savings account.
(AE F at 8 and AE G at 2) Since July 2011, he has deposited between $5,000 and
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$9,000 per month into his money market account. (AE F) He also has approximately
$49,000 in his 401k account. (Tr. 124) He is current on all of his bills. (AE  H) 
Policies
The adjudicative guidelines list potentially disqualifying conditions and mitigating
conditions. These guidelines are not inflexible rules of law. Instead, recognizing the
complexities of human behavior, they are applied together with the factors listed in the
adjudicative process. 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.” 
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 for obtaining a favorable security
decision.
Analysis
Guideline F, Financial Considerations
Under this guideline, “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”
(AG ¶ 18). Applicant’s delinquent mortgages trigger the application of AG ¶ 19(a),
“inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a history of not meeting
financial obligations.
The following mitigating conditions are potentially applicable:
(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
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(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts
Applicant’s financial difficulties occurred over a six-month period when he and his
girlfriend lost their jobs, his business failed, the tenant vacated his rental property, and
extensive damage rendered it uninhabitable. Moreover, upon finding a job and
relocating, Applicant was unable to sell his home, the second property he purchased
after moving from the Midwest. Applicant then consulted an attorney who advised him
not to pay the mortgages. The attorney has been working toward resolving them
through the state court. 
Citing ISCR Case No. 09-08462 (App. Bd. May 31, 2011), Department Counsel
characterized Applicant’s decision to stop paying the mortgages as a strategic default.
Further, he argues that Applicant’s decision to spend more than $100,000 on unsecured
debt payments when that money could have been applied to the mortgages reflected
negatively on his security-clearance worthiness. 
I reject this argument. Applicant was not acting irresponsibly or in bad faith when
he stopped paying the mortgages. He was simply following the advice of his attorney.
Consequently, his satisfaction of all of his other debts while his attorney worked with the
banks to resolve the outstanding mortgages constituted “concomitant conduct” that
Applicant was acting responsibly under the circumstances. (Id. at 4) 
In reaching this conclusion, I considered the surrounding circumstances of the
purchases. Specifically, Applicant’s real estate investments were neither capricious nor
poorly planned. He financed them with traditional fixed-rate loans, making a 10 percent
downpayment on the second purchase.  Also, he was not engaging in speculation when
he made the purchases. Moreover, he purchased them anticipating that he could
continue to make payments if he lost his job. It was not reasonably foreseeable that his
girlfriend would lose her job too, his business would fail, and his rental property would
incur colossal damages all within a short time period.
Applicant’s real estate attorney’s letter was ambiguous concerning the legal
consequences of the resolution of the mortgages, such as whether Applicant may
conceivably owe deficiencies after the foreclosure processes are concluded. Applicant
had never had any financial problems before the ones that triggered the mortgage
defaults. He prudently sought legal counsel, and while his counsel was negotiating the
resolution of the delinquent mortgages, Applicant was satisfying all of his other debt,
and replenishing his savings, depositing between $5,000 and $9,000 each month into a
money market account. I conclude any negative inference generated by the possibility
that Applicant may owe deficiencies is outweighed by these positive facts.  
I conclude that all of the mitigating conditions, listed above, apply.
  
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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 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. 
Applicant is an industrious employee. His financial difficulties were caused by
circumstances beyond his control, and he has been addressing them responsibly,
resolving his mortgages with the help of an attorney, satisfying all of his other debts,
and replenishing his savings. Upon considering this case in the context of the whole-
person concept, I conclude Applicant has mitigated the security concern. 
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
Subparagraphs 1.a - 1.d: For Applicant
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.
                                             
MARC E. CURRY
Administrative Judge