KEYWORD: Guideline E
DIGEST: The Government presented substantial evidence of Guideline E security concerns
arising from Applicant’s multiple job dismissals, false statements, and a threatening
communication.  The deference the Board owes a Judge’s credibility determinations has limits. 
In this case, the record did not support the Judge’s credibility determinations of the three
principal witnesses.  Favorable decision reversed.
CASE NO: 09-08394.a1
DATE: 01/16/2013
DATE: January 16, 2013
In Re:
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Applicant for Security Clearance
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ISCR Case No. 09-08394
APPEAL BOARD DECISION
APPEARANCES
FOR GOVERNMENT
John Bayard Glendon, Esq., Deputy Chief Department Counsel
FOR APPLICANT
Holly Emrick Svetz, Esq.
The Defense Office of Hearings and Appeals (DOHA) declined to grant Applicant a security
clearance.  DOHA issued an undated statement of reasons (SOR) advising Applicant of the basis for
that decision–security concerns raised under Guideline E (Personal Conduct) of Department of
Defense Directive 5220.6 (Jan. 2, 1992, as amended) (Directive).  On February 6, 2012, the
Government amended the SOR, adding another allegation and modifying an existing one.  Applicant
requested a hearing.  On September 24, 2012, after the hearing, Administrative Judge Robert
Robinson Gales granted Applicant’s request for a security clearance.  Department Counsel appealed
pursuant to Directive ¶¶  E3.1.28 and E3.1.30.
2
Department Counsel raised the following issues on appeal: whether the Judge erred in his
application of the Disqualifying Conditions (DC) and whether the Judge’s adverse decision was
arbitrary, capricious, or contrary to law.  Consistent with the following, we reverse the Judge’s
decision.  
Facts
The Judge made the following pertinent findings of fact: Applicant is a president of a
Defense contractor.  He has a doctoral degree in computer science and has held a Top Secret security
clearance.
In 2002, while serving as a sales engineer for a previous employer (C1), Applicant sold
company property through the internet.  He met with an attorney for the company, who demanded
several things, including that Applicant pay the company $1,500 and that he submit his resignation.
Applicant resigned one week later.  
In 2006, Applicant began working for another company (C2), which was certified as a small,
disadvantaged company under the Small Business Act.  C2 had a facility security clearance and had
four classified contracts with the Federal Government.  However, the clearance of the president,
Witness 1 (W1), was withdrawn, with the result that C2's facility clearance was defective.  Attorneys
acting on behalf of C2 submitted a mitigation plan to the Defense Security Service (DSS).  This plan
required that W1 would give up his status as facility security officer and that a subsidiary company
(C3) would be created that was wholly owned by C2 but which would otherwise be a separate
business entity, with its own board of directors, officers, and management.  All of C2's contracts
would be transferred to C3 by way of novation, and the new company would have its own facility
security clearance.  The novations would have to be approved by the contracting officers for the
various contracts.  Applicant was made president of C3. W1 was to have no role in the operations
of C3.  
Subsequently, DSS advised W1 that the mitigation plan was acceptable.  Applicant
undertook certain actions in furtherance of the mitigation plan, such as leasing space for C3.  He and
other C3 officials urged W1 to make the novation of the classified contracts a priority.  At some
point, W1 and the attorneys decided that it was appropriate to focus attention on regaining C2's
facility clearance, although W1 did not advise Applicant of this shift.  The Judge also stated that
Applicant and W1 differed in their interpretations of the mitigation plan, such as the extent to which
the two companies, C2 and C3, could share resources, have common procedures, etc.  W1 was also
concerned that complying with the mitigation plan could imperil C2's status as a small,
disadvantaged business.  Applicant suggested novating the classified contracts to another company
(S), which Applicant had formed prior to beginning employment at C2.  
W1 believed that the mitigation plan was proceeding adequately.  After speaking with a
lawyer, who was also a secretary for C3, he concluded that Applicant’s proposal to novate the
contracts to his own company was inconsistent with Applicant’s fiduciary duties to C3.
Accordingly, he terminated Applicant’s employment.  As a result of this termination, C2 lost
1Directive, Enclosure 2 ¶ 16(c): “credible adverse information in several adjudicative issue areas that is not
sufficient for an adverse determination under any other single guideline, but which, when considered as a whole, supports
a whole-person assessment of questionable judgment, untrustworthiness, unreliability, lack of candor, unwillingness to
comply with rules and regulations, or other characteristics indicating that the person may not properly safeguard
protected information[.]”   
2Directive, Enclosure 2 ¶ 16(d): “credible adverse information that is not explicitly covered under any other
guideline and may not be sufficient by itself for an adverse determination, but which, when combined with all available
information supports a whole-person assessment of questionable judgment, untrustworthiness, unreliability, lack of
candor, unwillingness to comply with rules and regulations, or other characteristics indicating that the person may not
properly safeguard protected information.”  
3Directive, Enclosure 2 ¶ 16(e): “personal conduct, or concealment of information about one’s conduct, that
creates a vulnerability to exploitation, manipulation, or duress, such as . . . engaging in activities which, if known, may
affect the person’s personal, professional, or community standing . . .”   
3
between 60 and 70 per cent of its business.  W1 also stated that, after the termination, he discovered
other incidents of wrongdoing by Applicant, including his having submitted a DD Form 254, a
request for a facility security clearance, which contained numerous false statements.  
W1 sued Applicant, S, and other individuals, alleging that the defendants had attempted
wrongfully to appropriate contracts and business opportunities, proprietary information, etc.  The
defendant’s counterclaimed, alleging lack of compliance with labor laws and failure to provide
consideration.  The parties settled the lawsuit, each side releasing the other from all claims.  W1 had
to pay Applicant substantial reimbursement.  Additionally, the parties were required to refrain from
disparaging each other.  
In late 2008, W1's security clearance was restored following a DOHA hearing.  In the case
presently before us, the Judge found that W1 and the attorneys had intentionally failed to implement
the mitigation plan.  The Judge stated that the plan had “purportedly” been approved by DSS, that
W1 had exercised control over both companies in contravention of the plan, that no contracts were
novated from C2 to C3 as required by the plan, and that W1 made an inconsistent statement during
the hearing concerning his activities in managing the companies in question.  Applicant presented
character witnesses at the hearing who testified that he enjoyed an excellent reputation for honesty
and trustworthiness.  One of these witnesses testified that Applicant did not believe that it was
appropriate to take shortcuts in the performance of company activities.
In the Analysis, the Judge summarized the evidence that the Government had presented in
its case in chief, stating that Guideline E DC 16(c),1 16(d)2, and 16(e)3 “have seemingly been
established by these situations and actions.”  Decision at 25.  However, he stated that the
Government’s case rested upon the testimony of two witnesses, W1 and Witness 2 (W2), who was
Applicant’s successor as CEO of C3.  The Judge stated that their interpretations of Applicant’s
conduct were sometimes supported by documentation but sometimes not, that W1 made statements
that were mutually inconsistent and/or that were contradicted by other evidence, and that W1 was
motivated not by business judgment in his actions regarding Applicant but by ill will.  The Judge
also stated that it “is of substantial significance that [W1] settled the lawsuit he filed against
4
Applicant and was required to pay Applicant; Applicant was not required to pay [W1] any sum of
money.”  Decision at 26.  He stated that W1 lied during the course of the implementation of the
mitigation plan in order to keep himself in control.  The Judge stated that Applicant did submit a DD
254, and that he had received guidance from DSS in preparing the form.  The Judge stated that
Applicant had acted in his capacity as facility security officer for C3 in doing so and that he had
intended to use his own company to control classified contracts.  He stated that the evidence did not
support a conclusion that this was an effort to steal a contract.  The Judge found that W2 was not
credible, insofar as he had been a party to the lawsuit and had settled, as had W1.  He stated that W2
ignored documentation that undercut his testimony that Applicant was not trustworthy.  He stated
that he had given W2's testimony “reduced weight” because W2 was biased against Applicant.  The
Judge concluded that Applicant had succeeded in demonstrating that the Government witnesses were
not reliable and that Applicant had the personal characteristics worthy of a security clearance.  
Discussion
A Judge is required to “examine the relevant data and articulate a satisfactory explanation
for” the decision, “including a ‘rational connection between the facts found and the choice made.’”
Motor Vehicle Mfrs. Ass’n of the United States v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43
(1983)(quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168 (1962)).  “The
general standard is that a clearance may be granted only when ‘clearly consistent with the interests
of the national security.’” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988).  “Any doubt
concerning personnel being considered for access to classified information will be resolved in favor
of the national security.”  Directive, Enclosure 2 ¶ 2(b).  The Appeal Board may reverse the Judge’s
decision to grant, deny, or revoke a security clearance if it is arbitrary, capricious, or contrary to law.
Directive ¶¶ E3.1.32.3 and E3.1.33.3.  
Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong
presumption against the grant or maintenance of a security clearance.  See Dorfmont v. Brown, 913
F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991).  After the Government presents
evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those
concerns.  See Directive ¶ E3.1.15.  “The application of disqualifying and mitigating conditions and
whole person factors does not turn simply on a finding that one or more of them apply to the
particular facts of a case.  Rather, their application requires the exercise of sound discretion in light
of the record evidence as a whole.”  See, e.g., ISCR Case No. 05-03635 at 3 (App. Bd. Dec. 20,
2006).
In deciding whether the Judge's rulings or conclusions are arbitrary or capricious, the Board
will review the Judge's decision to determine whether:  it does not examine relevant evidence; it fails
to articulate a satisfactory explanation for its conclusions, including a rational connection between
the facts found and the choice made; it does not consider relevant factors; it reflects a clear error of
judgment; it fails to consider an important aspect of the case; it offers an explanation for the decision
that runs contrary to the record evidence; or it is so implausible that it cannot be ascribed to a mere
difference of opinion.  In deciding whether the Judge's rulings or conclusions are contrary to law,
the Board will consider whether they are contrary to provisions of Executive Order 10865, the
4This impression is bolstered by the Judge’s comments under the whole-person analysis.  He stated that “there
is some evidence against mitigating Applicant’s conduct,” acknowledging that Applicant submitted the DD Form 254
based on a “‘bona fide procurement requirement for access to classified information,’ and listed a particular contract
number, when there apparently was no such ‘bona fide procurement requirement,’ and there was no contractual
relationship between the two companies listed.”  Decision at 28-29.
5
Directive, or other applicable federal law.  See ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2,
2006).
Department Counsel argues that the Judge erred in concluding that the Government had
failed to meet its burden of production regarding SOR ¶¶ (a), as amended, and (b).  These two
paragraphs alleged respectively that Applicant had been terminated for cause from the employ of
C2 and that Applicant had completed a facility security clearance request which contained false
statements.  In a DOHA proceeding, the Government’s task is to produce substantial evidence
regarding allegations that have been controverted, as was the case with these two allegations.
Directive ¶ E3.1.14.  See also ISCR Case No. 09-07219 at 4, n. 1 (App. Bd. Sep. 27, 2012).  It is not
obvious that the Judge actually concluded that the Government had failed to meet its burden of
production.  As noted above, he stated that the evidence “seemingly” established three DCs and then
proceeded to list and address the Mitigating Conditions.  Accordingly, it would appear that he had
found the evidence sufficient to support these two allegations.4  To the extent that Department
Counsel’s reading of the Decision is accurate, however, we note that the Government submitted
numerous documents, to include copies of e-mail transmissions concerning material issues in the
case; Applicant’s request for a facility security clearance for his own company, which includes the
DD 254, and which the record establishes contained statements that were not factually correct; the
mitigation plan; the complaint in the lawsuit involving W1 and Applicant; and the settlement
agreement that resolved the suit.  The Government also called two witnesses, W1 and W2, whose
testimony was not materially impeached upon cross-examination.  Viewed in light of the entire
record, the testimony and documents cited above constitute substantial evidence that Applicant had
been fired from C2 and that he had made false statements in the facility clearance application.
Under the facts of this case, these allegations set forth security concerns under Guideline E, insofar
as a reasonable person could conclude that the evidence raises questions about Applicant’s
judgment, candor, honesty, and/or willingness to comply with rules and regulations.  See Directive,
Enclosure 2 ¶ 15.  The Government has met its burden of production regarding the two challenged
SOR allegations.     
Department Counsel has challenged the Judge’s treatment of the mitigating conditions and
the whole-person factors.  We find Department Counsel’s arguments to be persuasive.  The Judge
relied in large measure upon his credibility determinations regarding the two Government witnesses
and the Applicant.  The deference that we owe to a Judge’s credibility determination is not without
limits.  For example, the coherence of a witness’s testimony with other evidence; the internal
consistency of such testimony, or the lack thereof; and extent to which testimony is plausible or
implausible can significantly affect the extent to which we can defer to the Judge’s credibility
determination.  See, e.g., ISCR Case No. 10-03886 at 3 (App. Bd. Apr. 26, 2012).  In this case, the
Judge found W1 to be lacking credibility, based upon a number of factors.  He stated, for example,
5The Judge stated that, at one point in the hearing, W1 testified “that the mitigation plan did not prohibit his
management of [C3] through at least February 2008.  He essentially denied that comment later in the hearing.”  Decision
at 18.  The Judge cited to testimony concerning a meeting W1 had called between Applicant and other parties regarding
things that needed to be done by C3 to effectuate the mitigation plan.  W1 was then asked the following by Department
Counsel: “Q: Did the mitigation plan prohibit your management of [C3], the subsidiary?  A: Not at that point, no.”  Tr.
at 69.  Applicant’s counsel asked the following question on cross examination: “Q: Doesn’t that document [mitigation
plan] say that you were to have no role in [C3] . . . ?  A: Yes.  Q: But then you just earlier testified that you didn’t have
any limits on your role in managing [C3]?  A: I don’t believe that’s what I said.”  Tr. at 90-91.  Whether or not W1 was
correctly interpreting the mitigation agreement, and given his qualified answers to the questions, these two answers are
not inconsistent with one another, as the Judge found them to be.  
6The Judge’s negative credibility determination of W1 was influenced by the Judge’s conclusion that W1 was
out for revenge as evidenced by what the Judge termed W1's “campaign of constantly disparaging Applicant.”  Decision
at 29.  While W1 did make negative comments about Applicant during the course of an official OPM investigation
interview, there is no record evidence to support the Judge’s characterization of W1's actions as a campaign of constant
disparagement.  
7The record establishes that W1 fired Applicant on or about May 1, 2008.  W2 testified that Applicant had told
him, one or two months prior to the job termination–that is, in March or April 2008–that Applicant intended to transfer
C3's government contracts to Applicant’s own company and that W1 was aware of this.  W2 testified that he came to
believe that Applicant had not been truthful in stating that he had discussed this matter with W1.  The Judge questioned
W2, showing him an e-mail from Applicant to W1, sent on April 29, 2008, about two days prior to the firing.  In this
e-mail Applicant advised W1 of his plans to transfer government contracts to Applicant’s company.  The Judge then
asked: “Does that change your opinion of whether or not he was telling you the truth then or whether he was lying?  A:
No, sir. [Judge]: So based on the fact that you read a document dated 2008, where he’s telling [W1] what he should be
6
that W1 had made inconsistent statements during the hearing.  However, after considering the
transcript, we do not conclude that the statements in question were obviously inconsistent.5  The
Judge also relied upon evidence that W1 had agreed to settle the lawsuit he had filed against
Applicant, apparently concluding that the settlement in some way demonstrated that the lawsuit was
frivolous, thereby evidencing W1's unfounded ill-will against Applicant.  However, a settlement
does not, in and of itself, suggest that the underlying lawsuit was groundless.  See, e.g., Ford Motor
Company v. Mustangs Unlimited, Inc., 487 F.3d. 465, 469-470 (6th Cir. 2007) for a discussion of the
strong public policy in favor of settlement, in the interests of justice to the parties, economy of
judicial resources, and the saving of tax dollars.  See also Ismert and Associates, Inc., v. New
England Mutual Life Insurance Co., 801 F.2d 536 (1st Cir. 1986).  Moreover, the Judge’s apparent
belief that W1 did not receive an economic benefit from Applicant in the settlement is belied by the
settlement’s own terms, which provide that the parties will enter into a teaming agreement for
purposes of mutual economic advantage, with significant profit sharing among them.  It is not
reasonable to conclude that the fact of a settlement, or the terms of this particular agreement,
demonstrate that W1 was motivated by unjustified ill-will toward Applicant.6
The Judge also concluded that W2 was not credible.  One reason he gave was W2's having
been a co-plaintiff in the above described lawsuit and having agreed to the settlement.  For reasons
set forth above, we conclude that evidence of this lawsuit and settlement does not support the
Judge’s credibility determination.  He also stated that W2 ignored documentation that impeached
W2's testimony that Applicant had not been truthful.  However, after examining the transcript, we
do not find that the record evidence supports this conclusion by the Judge.7  In addition to these
doing, you still deny that he was telling you the truth?  The Witness: Because the conversations in which he told us that
he was communicating with [W1] were a month or two prior to his termination.  This was two days prior to the
termination   . . . [Judge]: Okay.  So you’re still of the opinion that [Applicant] was telling something other than the
truth?  The Witness: At that time yes, yes sir.”  Tr. at 351-352.  Evidence that Applicant had announced his intention
to W1 on April 29 does not undermine W2's opinion that Applicant’s statements made one to two months prior to that
date were false.  The cited evidence does not support the Judge’s conclusion about W2's credibility.  
8The argument in Applicant’s Reply Brief that it would not have been possible for Applicant surreptitiously to
have novated C2 contracts to his own company rather than C3 without approval of all parties does not call into question
record evidence that Applicant’s conduct was not consistent with the mitigation plan.  Neither does it undermine W1's
testimony that he found this conduct to be inconsistent with Applicant’s fiduciary duties as CEO of C3. 
9“Q: But you recognize that saying that you left voluntarily is quite a different explanation that you’ve given
today . . . that an attorney flies out from California and . . . asks for your resignation? . . . He . . . confronted you about
what you did, and asked for your resignation; correct?  A: That’s what I said.  That’s what I said.”  Tr. At 243.  
7
matters, the Judge also found that W1 was a person interested in maintaining control of his company
and that he did not devote time and energy to implementing the mitigation plan.  Rather, W1 shifted
his attention, at some point, to regaining his security clearance, and with it the facility clearance of
C2.  Were that to have occurred (and the evidence demonstrates that it did in fact) it would have
obviated the need for a mitigation plan.  The Judge’s view appears to be that Applicant’s desire to
implement the plan was contrary to W1's desire to exercise control over his own company, thereby
serving as a basis for W1 to feel unjust hostility toward Applicant.  Again, however, evidence that
W1 shifted his attention to regaining his own clearance and that of his company would likely appear
to a disinterested party to be a business decision, whether wise or not.    Evidence that W1 did not
act expeditiously in executing the mitigation plan, even if true, does not necessarily impeach the
testimony of W1 regarding the impropriety of Applicant’s attempt to transfer the contracts to his
own company, conduct that was not consistent with the terms of the mitigation agreement and which
formed the basis of Applicant’s dismissal.8  We note in this regard ISCR Case No. 10-03886, supra,
at 3, which states that an employer’s decisions are entitled to some deference.  The Judge’s failure
to extend the appropriate deference to the business judgments of W1 undercuts the Judge’s adverse
credibility determination concerning him.  
Department Counsel further argues that the Judge ignored record evidence that impugns
Applicant’s credibility.  We find this argument to be persuasive.  A Judge is presumed to have
considered all the evidence in the record.  See, e.g., ISCR Case No. 11-05512 at 2 (App. Bd. Oct.
24, 2012).  However, he should be expected to discuss significant evidence that has a material
bearing on the case.  Department Counsel contends that Applicant made unexplained inconsistent
statements that the Judge failed to address.  Department Counsel notes record evidence, from
Applicant himself, that he had resigned from C1 in 2002 after having been advised to do so by a
company attorney, due to Applicant’s having improperly sold company property.  However, at the
hearing Applicant stated that he had left that company because it had given him an unrealistic sales
quota.  He also stated that no action had been taken against him due to the investigation regarding
his disposition of company property, but that he had been advised that his future in the company,
along with that of others, was limited.  Tr. at 190.  On cross-examination, Applicant did not provide
a reasonable explanation for these inconsistencies.9  Department Counsel points to inconsistencies
10Department Counsel cites to evidence that Applicant variously stated that he had paid the company for the
value of the property, that the company had not cashed the check, and that the company had in fact returned the check,
which are not totally consistent. 
11“Q: I’m showing you your second answer to the Statement of Reasons, page six.  Bottom of page six, right
before paragraph four . . . Did you write that? . . . A: Yes.  That’s it’s not accurate.  I do know that this is my document.
I don’t remember writing that.”  Tr. at 268. 
12Applicant testified that, in preparing the facility clearance application, he had the assistance of a DSS field
representative.  “He came out, he showed me, he helped me fill out the form.  We went through our security binder.  We
selected the appropriate DD-254.  We . . . sat down and did multiple versions of this until we got it correct . . . So he
actually helped me fill this out . . .”  Tr. at 222.  After Applicant submitted the application, he received a letter from DSS
advising that it could not approve the request.  The letter noted, among other things, a discrepancy concerning whether
Applicant’s company would have a safeguarding requirement.  Applicant apparently sent an updated copy of the form
to the field representative, who identified other errors.  The number and apparent significance of these errors are not
consistent with Applicant’s claim to have had the advantage of expert help.  Moreover, there is nothing in the field
representative’s e-mail to indicate that he believed himself to bear responsibility for these errors.  See Attachment G to
Applicant Answer to Amended SOR.  
8
in Applicant’s various statements concerning the disposition of the check that he gave to C1 in
response to a demand by the attorney.  The inconsistencies pertain to the amount of the
check–whether it was valued at $1,500 or $2,500–as well as C1's subsequent actions in regard to the
check.10  We also note that, at the hearing, Applicant acknowledged that a statement he had made
in his Answer to the SOR concerning his activities after his second job termination was not true.11
Department Counsel cites to evidence of the facility security clearance application that Applicant
prepared on behalf of his own company.  Department Counsel notes that the application contained
numerous statements that were factually untrue, and also contained certain errors in the attached DD
Form 254.  Applicant claimed that he had been assisted by a security expert from DSS, who had
visited Applicant at home and had guided him in the preparation of the application.  Department
Counsel notes that the Judge did not discuss various aspects of these documents which undermine
Applicant’s claim that he had expert assistance in preparing them.  For example, Department
Counsel argues that, if an expert had actually provided line by line assistance as Applicant claimed,
it is unlikely that Applicant would have made errors on the form that were later corrected by that
same expert.12  This evidence,  on its face, undercuts the credibility of Applicant.  The Judge’s
failure to address it undermines his credibility determination.  All in all, we conclude that the
Judge’s credibility determinations regarding the Government witnesses and Applicant are not
supported by the record and that they do not support the Judge’s favorable application of the
mitigating conditions or the whole-person factors.
In summary, the record contains substantial evidence that Applicant was twice terminated
for cause from the employ of two different companies; that he submitted a facility security clearance
application that contained false statements, the number of which could persuade a reasonable person
to believe that they were deliberately false, given Applicant’s status and experience as a facility
security officer; and that he had sent a threatening text message to W1, who had provided
information to OPM in the course of Applicant’s clearance investigation.  We also note that, as
stated above, the record contains evidence of inconsistent statements by Applicant that he did not
9
reasonably explain, that diminish his credibility, and that are pertinent in evaluating his state of mind
regarding the false statements alleged in the SOR.  After considering all of the evidence and the
briefs of both parties, we conclude that the Decision fails to consider important aspects of the case
and runs contrary to the weight of the record evidence.  Viewed as a whole, the record does not
support a favorable decision in light of the Egan standard. 
Order
The decision is REVERSED.   
Signed: Michael Y. Ra’anan           
Michael Y. Ra’anan
Administrative Judge
Chairperson, Appeal Board
Signed: Jeffrey D. Billett                 
Jeffrey D. Billett
Administrative Judge
Member, Appeal Board
Signed: James E. Moody                  
James E. Moody
Administrative Judge
Member, Appeal Board