Consisting of the transcript (Tr.), Government exhibits (GE) 1-4, and Applicant exhibits (AE) A-D. Exhibits C1
and D were timely received post hearing.
DOHA acted under Executive Order 10865, Safeguarding Classified Information within Industry (February2
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 1 September 2006. 
1
                                                             
                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
XXXXXX, Xxxxx Xxxxxx )       ISCR Case No. 11-07194
)
Applicant for Security Clearance )
Appearances
For Government: Raashid S. Williams, Esquire, Department Counsel
For Applicant: Pro se
______________
Decision
______________
METZ, John Grattan, Jr., Administrative Judge:
Based on the record in this case,  I deny Applicant’s clearance.1
On 22 May 2012, the Defense Office of Hearings and Appeals (DOHA) issued a
Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline
F, Financial Considerations.  Applicant timely answered the SOR, requesting a hearing.2
DOHA assigned the case to me 1 August 2012, and I convened a hearing 31 August
2012. DOHA received the transcript (Tr.) 11 September 2012.
   
2
Findings of Fact
Applicant admitted SOR allegations 1.c-1.f. He denied allegations 1.a and 1.b,
which are debts he paid. He is a 50-year-old senior associate employed by a defense
contractor since October 2010. He held a clearance while serving in the military from
May 1987 to May 1996. He appears to have been granted an industrial clearance in
August 1999, had it renewed in 2004, and had it reinstated in January 2009. He married
in July 1994 and divorced in March 2007. He and his ex-wife have no children together.
             
Applicant has an extensive history of financial problems, marked by two Chapter
7 bankruptcy discharges. Applicant first filed a Chapter 7 bankruptcy petition in January
1996. In May 1996, he was discharged from about $20,000 debt (SOR 1.e). In an
August 1998 subject interview, Applicant attributed his financial problems to having
overextended himself on his credit cards and to his unemployment. However, at the
time he filed for bankruptcy, he was still serving in the military reserve. Nevertheless, his
income had dropped substantially in 1995, after he left active-duty military service, and
he was using credit cards to meet his living expenses.
Applicant filed for Chapter 7 bankruptcy protection a second time in September
2008. He was discharged from $480,000 in dischargeable debt in January 2009 (SOR
1.f). Applicant attributes this bankruptcy to his March 2007 divorce and a period of
unemployment that began in April 2008.
 Applicant has a $19,000 federal tax lien (SOR 1.d) and a $4,600 state tax lien
(SOR 1.c) because he failed to pay income taxes on an early withdrawal from a
retirement fund in 2006. He paid two medical bills totaling $240 (SOR 1.a-1.b) in April
2012. He had not been aware of them before his most recent background investigation.
Applicant attended college on a Reserve Officer Training Corps scholarship.
Upon graduating in May 1987, he began serving his active-duty military obligation.
Applicant’s chronology is not particularly well documented, but his active-duty obligation
was eight years, which means he would have been released to reserve status in about
May 1995. Applicant’s May 2012 Social Security Administration (SSA) statement
(Answer) reflects $4,300 taxable earnings for 1995, consistent with his leaving active
duty then.
Applicant experienced periods of underemployment and unemployment from
May 1995 to March 1998. He was laid off from a job in March 1997, was self-employed
from April-July 1997, and was fired from a job in February 1998 because he was not
qualified for the position (GE 4). However, in March 1998, he began an extended period
of full-time employment.
In March 1998, Applicant was hired as the business development manager for an
information technology company, and saw a steady rise in his income. By 2000, he was
making a six-figure salary, earning over $300,000 in 2000-2001. He was appointed a
director of the company, and his income soared, largely due to sales commissions he
Applicant variously testified that he moved out of the marital home in December 2005 and December 2006.3
However, the divorce was contentious and finalized in March 2007, suggesting that the move was in
December 2005.
3
earned. He earned over $450,000 in 2002, over $600,000 in 2003, and over $620,000
in 2004, a total of nearly two million dollars. Applicant and his wife enjoyed their good
fortune. They bought a house together. Applicant bought a luxury car, two luxury
motorcycles, two boats, an all-terrain vehicle, and several trailers, paying cash. He also
put $40,000 in a retirement fund.
Although he was earning high amounts, the work schedule required to earn those
commissions took its toll on Applicant. In January 2005, Applicant decided to try his
entrepreneurial skills. He took a two-year job as chief executive officer (CEO) of a start-
up company, agreeing with the two owners that he would leave the company if he could
not turn a profit within two years. Applicant earned $455,000 in 2005, but by 2006, the
company’s finances were declining. Applicant cut his salary to about $134,000, in
addition to lending the company $25,000 to make payroll. In accord with his agreement,
Applicant left the company in January 2007.
Meanwhile, Applicant’s marriage had begun to deteriorate. In December 2005,
Applicant moved out of the marital home and bought a historic home into which he put
about $200,000 of renovations.  The purchase price plus renovations left him with a3
$3,000 monthly mortgage payment. The property settlement with his ex-wife gave her
the marital home; he got the vehicles and trailers, and paid all the attorneys’ fees.
Sometime in 2006, he took $40,000 out of his retirement fund. He paid the early-
withdrawal fee, but did not include the distribution as income on his 2006 taxes.
     After Applicant left his CEO job, he was quickly rehired as a program manager at
an annual salary of $150,000. However, he was fired from this job in March 2008,
because the company owner wanted Applicant to work from the office five days per
week, and Applicant wanted to work from home two days per week because of the long
commute between home and office. Consequently, Applicant only earned about
$93,000 in 2007-2008. He remained unemployed until December 2008, precipitating his
September 2008 bankruptcy filing.
In February 2009, the Internal Revenue Service (IRS) filed a $19,308 tax lien on
Applicant for unpaid 2006 taxes. In September 2009, his state tax division filed a $4,623
tax lien for unpaid 2006 state taxes. In March 2009, he hired a tax resolution company
to pursue an offer in compromise (OIC) with the IRS. Between March and July 2009,
Applicant paid $4,800 for the company’s services. The services were never delivered,
and in August 2011, Applicant revoked the power of attorney he had given the company
and began dealing directly with the IRS. He also contacted the state tax division to
arrange a repayment plan. Several states’ attorneys-general sued the tax resolution
company for deceptive practices. At least one of the states obtained a civil judgment
against the company, whereupon it filed for bankruptcy in 2012.
4
From December 2008 to May 2010, Applicant was employed as a senior
infrastructure architect, and earned about $207,000 in 2009-2010. The job ended in
May 2010, when the contract he was working on expired, and he remained unemployed
until obtaining his current job.
Once in his current job, Applicant began pursuing repayment plans on his IRS
and state tax liens in August 2011. By December 2011, Applicant had established a
repayment plan with the IRS, and had paid the necessary fees for establishing the plan.
He was supposed to start $300 monthly payments in December 2011. However, he was
laid off in December 2011 because his interim clearance had been revoked due to his
financial problems, and the company did not have any unclassified contracts for
Applicant to work on.
Applicant was rehired by his company in March 2012 to work on unclassified
contracts, and he re-contacted both the IRS and the state tax division about
reestablishing repayment plans. He claims to be paying the IRS $300 monthly and
claims to be paying the state $200 monthly. However, he has not documented the terms
of the agreements, or any of the claimed monthly payments. The IRS seized his income
tax refunds for 2010 and 2011 and applied those amounts (totaling $2,759) to his 2006
tax liability. Notwithstanding those payments, Applicant’s IRS tax liability has risen to
over $21,000 including interest and penalties. The IRS lien remains on his credit report,
and under IRS policy the lien cannot be removed from his credit report until he enters
into a direct debit agreement with the IRS. Applicant has provided no documentation
that the IRS reinstated the December 2011 agreement in March 2012, or that Applicant
has made the direct debit payments as required. There is no evidence of the current
value of the state tax liability.
Since Applicant left his CEO job in January 2007, his employment has been
more than usually subject to the vagaries of employment in federal contracting. He is
not a regular full-time employee, but remains employed only as long his company has
contracts that he can work on. If the contract expires or is not renewed, or his clearance
is revoked and the company has no unclassified contracts for him to work on, he loses
his job. Applicant has experienced all these circumstances since 2007.
Applicant received financial counseling as required for his 2008 bankruptcy, and
his current budget shows enough positive monthly cash flow to make the claimed, but
uncorroborated, tax payments. His character and work references (AE D) consider him
honest and trustworthy, and recommend him for reinstatement of his clearance.
Policies
The adjudicative guidelines (AG) list factors to evaluate a person’s suitability for
access to classified information. Administrative judges must assess disqualifying and
mitigating conditions under each issue fairly raised by the facts and situation presented.
Each decision must also show a fair, impartial, and commonsense consideration of the
factors listed in AG ¶ 2(a). The applicability of a disqualifying or mitigating condition is
See, Department of the Navy v. Egan, 484 U.S. 518 (1988).4
¶19 (a) inability or unwillingness to satisfy debts; (c) a history of not meeting financial obligations; (f) financial5
problems that are linked to . . . gambling problems . . . ; (I) compulsive or addictive gambling as indicated by
an unsuccessful attempt to stop gambling, “chasing losses” (i.e. increasing the bets or returning another day
in an effort to get even), concealment of gambling losses, borrowing money to fund gambling or pay gambling
debts, family conflict or other problems caused by gambling.
¶ 20 (a) the behavior happened so long ago, was so infrequent, or occurred under such circumstances that6
it is  unlikely to recur . . . ;
5
not, by itself, conclusive. However, specific guidelines should be followed when a case
can be measured against them, as they are policy guidance governing the grant or
denial of a clearance. Considering the SOR allegations and the evidence as a whole,
the relevant adjudicative guideline is Guideline F (Financial Considerations).
Security clearance decisions resolve whether it is clearly consistent with the
national interest to grant or continue an applicant’s security clearance. The Government
must prove, by substantial evidence, disputed facts alleged in the SOR. If it does, the
burden shifts to applicant to refute, extenuate, or mitigate the Government’s case.
Because no one has a right to a security clearance, the applicant bears a heavy burden
of persuasion.
Persons with access to classified information enter into a fiduciary relationship
with the Government based on trust and confidence. Therefore, the Government has a
compelling interest in ensuring each applicant possesses the required judgement,
reliability, and trustworthiness of those who must protect national interests as their own.
The “clearly consistent with the national interest” standard compels deciding any
reasonable doubt about an Applicant’s suitability for access in favor of the Government.4
Analysis
The Government established a case for disqualification under Guideline F, and
Applicant did not mitigate the security concerns. Applicant’s tax liability for state and
federal taxes exceeds $26,000.  Moreover, Applicant has a January 2009 bankruptcy5
discharge that seems as much the result of his financial irresponsibility as his divorce.
Between tax years 2000 and 2006, Applicant earned over 2.6 million dollars. But his
spending over that period was, if not profligate, at least imprudent. He appears to have
saved little beyond the $40,000 he put in a retirement account, but later prematurely
withdrew. If he was not over-leveraged, he was at least illiquid.
The mitigating factors for financial considerations provide mixed help to
Applicant. His financial difficulties are recent, not infrequent, and because of the
variability of his employment, the circumstances under which his financial problems
occurred are likely to recur.  Applicant’s divorce is a circumstance beyond his control,6
but having little in financial reserves is not. Nor is buying and renovating a historic
home, resulting in a $3,000 monthly mortgage while your divorce is pending. Finally, his
¶ 20 (b) the conditions that resulted in the financial problem were largely beyond the person’s control . . . and7
the individual acted responsibly under the circumstances;
¶ 20 (d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts;8
S¶ 20 (c) the person has received or is receiving counseling for the problem and there are clear indications9
that the problem is being resolved or is under control;
6
April 2008 dismissal—the immediate precipitant of his 2009 bankruptcy—was
completely within his power to prevent, by the simple expedient of coming to work when
the owner wanted him to. Consequently, he cannot be considered to have acted
responsibly in addressing his debts under the circumstances because the debts and
resulting bankruptcy were due to his own conduct.  Further, while his 2011 efforts to7
make repayment plans on his state and federal tax debt shows some good faith in
attempting to resolve those debts, his failure to document any follow-through after his
re-employment in March 2012 undercuts his claim to rehabilitation.  8
The concern with Applicant is that while he credibly states his intent to resolve
these debts, his financial situation remains in flux. His employment fluctuates. He
appears able to address his delinquent taxes, but has not documented repayment plans
with a history of payments. Thus, there are too many unknowns to conclude that his
financial problems are headed for resolution.  He has undertaken the minimum financial9
counseling required by his bankruptcy filing, and has a budget that provides for the tax
payments he has claimed. But the lack of demonstrated progress fails to show a clear
path for resolving his delinquent debts. Without such a path, I cannot conclude that
financial problems are unlikely to recur. Further, while he has favorable character and
employment records, those records are insufficient to establish a “whole-person”
analysis supporting a favorable clearance action. I conclude Guideline F against
Applicant.
Formal Findings
Paragraph 1. Guideline F: AGAINST APPLICANT
Subparagraphs a-b: For Applicant
Subparagraphs c-f: Against Applicant
Conclusion
Under the circumstances presented by the record in this case, it is not clearly
consistent with the national interest to grant or continue a security clearance for
Applicant. Clearance denied.
                                              
                                             
JOHN GRATTAN METZ, JR
Administrative Judge