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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)         ISCR Case No. 12-05376
)
)
Applicant for Security Clearance )
Appearances
For Government: Alison O’Connell, Esq., Department Counsel
For Applicant: Alfred A. Lacer, Esq.
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Decision
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MASON, Paul J., Administrative Judge:
When Applicant closed his business in July 2007, he defaulted on two mortgages
and became delinquent on several other accounts including state personal and business
taxes. He has repaid the state tax liens and other delinquent debts. However, given
Applicant’s failure to follow through with a payment plan to resolve the two mortgage
accounts totaling almost $85,000, he has not mitigated the disqualifying evidence under
the financial considerations guideline. Eligibility for access to classified information is
denied. 
Statement of the Case
Applicant completed and signed an Electronic Questionnaire for Investigations
Processing (e-QIP) on September 22, 2010. He was interviewed by an investigator from
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the Office of Personnel Management (OPM) on two occasions: October 6, 2010, and
January 6, 2011. The interview summaries appear in Government Exhibit (GE) 3. Under
question #3 of GE 3, Applicant answered “yes” that the investigator’s interview summaries
(October 6, 2010 and January 6, 2011) accurately reflected information he provided to the
investigator. In response to question #6 of GE 3, Applicant answered “yes” that he agreed
with and adopted the investigator’s interview summaries as accurately reflecting the
interviews.
On June 11, 2012, the Department of Defense (DOD) issued a Statement of
Reasons (SOR) detailing security concerns under financial considerations (Guideline F).
The action was taken pursuant to Executive Order 10865, Safeguarding Classified
Information within Industry (February 20, 1960), as amended; DOD Directive 5220.6,
Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as
amended (Directive), and the adjudicative guidelines (AG) implemented by the DOD on
September 1, 2006. 
Applicant’s answer to the SOR was notarized on July 5, 2012. The Defense Office
of Hearings and Appeals (DOHA) issued Applicant a notice of hearing on October 15, 2012,
for a hearing on November 8, 2012. The hearing was held as scheduled. At the hearing,
without objection, seven exhibits (GE 1 through GE 7) were admitted in evidence in support
of the Government’s case. Applicant and four witnesses testified. Nine exhibits (AE A
through AE I) were entered into evidence in his behalf without objection. DOHA received
the transcript on November 16, 2012. The record in this case closed on November 16,
2012. 
Findings of Fact
The SOR lists six allegations under the financial considerations guideline. SOR 1.a
is a $44,668 deficiency balance following an auction sale of Applicant’s foreclosed home.
SOR 1.b is a delinquent second mortgage of $40,326 on his foreclosed home. SOR 1.c
($185) and SOR 1.d ($125) are two delinquent medical accounts. SOR 1.e and SOR 1.f
are duplicate entries of the same credit card account ($277). See GE 4, 5. The total amount
of delinquent debt is over $85,500. The two mortgage accounts total $84,994. In his answer
to the SOR, Applicant admitted all allegations. 
Applicant is 36 years old and has been married since May 2004. He has two
children, ages eight and four. He attended college for one year. 
Between May 2005 and July 2007, Applicant operated an audio-video business,
contracting primarily with one builder to sell and install audio and video equipment in the
builder’s new homes. He employed his wife and two other individuals. He and his wife
earned a total of about $85,000 to $90,000 a year from the business. (Tr. 62-64; GE 3 at
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2) Applicant testified that he purchased a home in 2005 that he had been renting since
2003. (Tr. 66) The credit bureau reports show the first mortgage (SOR 1.a) on the home
was opened in May 2006 and defaulted in October 2007. (GE 4, 5, 6, 7) 
Some time in 2007, Applicant testified that the sale of houses in the area decreased
dramatically because of a faltering economy. His primary builder, who supplied him with
potential customers, was forced to close his business. (Tr. 27) Applicant testified that he
took out a second mortgage (SOR 1.b) to keep his business operating and to pay two
employees. (Tr. 27-28) The credit reports show the second mortgage was opened in May
2006, and defaulted in February 2007. (GE 4, 5, 6, 7) 
Applicant testified that by the end of 2007, he determined the housing market was
not going to turn around, so he accepted employment with a defense contractor. (Tr. 31-32)
After two brief periods of employment as a low voltage technician and as a full-time sales
consultant, Applicant began working for a defense contractor as an electronics engineer
in November 2007. (e-QIP at 19-21) He received a security clearance in March 2008. From
November 2009 to July 2010, Applicant’s job position was electronic systems technician
for another defense contractor. Since July 2010, he has been employed as a senior
consultant for a defense contractor. (Tr. 18; e-QIP at 15)
As noted above, Applicant’s wife worked in Applicant’s business from May 2005 to
July 2007. She has been employed by defense contractors continuously since November
2007 except for a seven-month period of disability ending in July 2009 when she developed
complications associated with the birth of their second child. During the disability period,
the family income was reduced by a third. (Tr. 33-35, 65) Applicant has been consistently
employed since November 2007. (e-QIP, Second 13A) Currently, he has a salary of
approximately $75,000 and his wife’s salary is $70,000. (Tr. 64-65) On April 20, 2012, his
personal financial statement indicated that he had a net monthly remainder of $1,175. (GE
2)
After Applicant closed his audio-video business in July 2007, the state tax agency
filed two tax liens against him for failure to pay business and personal taxes in 2006.
Applicant did nothing to address the mortgage debts after his home foreclosure in 2008
until June 2012 because he did not have the money. In his view, the tax liens were more
significant in that they were resolvable with the extra money he was earning from his
current employer. (Tr. 68) Applicant paid the July 2009 business tax lien of $10,448 in 10
monthly garnishment payments, with the last payment in October 2011. (Tr. 64; AE C) He
believes he satisfied the May 2008 state personal tax lien of $2,356 with his tax return for
2009 or 2010. (Tr. 73; AE E) 
Applicant indicated that resolution of the two state tax liens impeded his efforts to
negotiate a settlement with the mortgage lenders. (Tr. 51) After the state tax 
 Applicant did not have a copy of the certified statement to submit into evidence. (Tr. 76)1
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lien was satisfied in October 2011, he did not start to address SOR 1.a and 1.b because
he had not devised a plan or discussed the matter with counsel. (Tr. 69)
In June or July 2012, Applicant consulted an attorney about the SOR 1.a and 1.b
debts. This attorney was unresponsive so Applicant contacted a second attorney in
September 2012. Applicant indicated he received a $6,000 settlement offer from the
second mortgage lender, but he decided not to accept the offer after talking with the
second attorney about how to resolve the two mortgages simultaneously. After drafting a
certified financial statement with the second attorney,  and in trying to avoid bankruptcy1
while keeping any repayment proposal inside the parameter of his discretionary income of
$590, he was going to propose paying each mortgage lender $250 a month for five years.
The payments would cover the $6,000 settlement offer from the second creditor. (Tr. 51-56,
76) Applicant’s plan to repay both mortgage lenders is not in writing and the lenders are not
aware of his plan. Except for the $500 portion of his discretionary income, he has not set
any money aside to apply to the mortgage accounts. (Tr. 70-71) After repaying the
business tax lien in October 2011, Applicant could have applied money toward SOR 1.a
and 1.b, but chose not to because “it was a very difficult period of time.” (Tr. 72-73)
Applicant submitted documentation verifying that he paid the remaining delinquent
accounts in the SOR. He provided proof that on August 15, 2012, he paid a medical
account identified in SOR 1.c. (AE A). This debt had been delinquent since June 2007. He
paid another medical account identified in SOR 1.d on August 16, 2012. (AE A) This debt
had been delinquent since August 2011. The delinquent accounts identified in SOR 1.e and
1.f are the same. (GE 4) Applicant paid off this account on August 15, 2012. (AE A) This
account had been delinquent since September 2007. (GE 4)
Applicant has never had financial counseling of any kind. (Tr. 76)
Character Evidence
Witness A, an electronics engineer for the Government, has supervised Applicant
for the past two ½ years. Applicant designs the systems that witness A produces. Their
regular contact with each other consists of e-mails, phone calls, and direct interchange.
Applicant is an excellent team player who produces a quality product. (Tr. 80-86)
Witness B, a second engineer, who has been employed by the Navy for a year and
has seven years of previous job experience working for a defense contractor, was
Applicant’s supervisor from July 2010 to July 2011. Witness B watched Applicant deliver
a solid performance that met or exceeded all review categories in Applicant’s performance
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evaluation. (AE G) In witness B’s opinion as project engineer, Applicant is a team player
who warrants a position of trust. (Tr. 89-94)
Witness C was discharged from the Navy after serving 10 years as an electronics
technician. After his discharge, he was employed by a defense contractor for 21 years. For
the last two years, witness C has been a lead associate and Applicant’s supervisor. In the
integrated product team model, Applicant’s job function is to develop designs for systems,
do research and oversee production. After the systems are put together, Applicant travels
to the location to put the systems together, ensure that they are tested, with adequate
training at the site. In witness C’s view, Applicant does an outstanding job and is respected
by the clients because of his expertise and communication skills. On May 23, 2012, witness
C received an email from a civilian employee of the U.S. Air Force. In the email, the
employee praised Applicant’s work product over the last year and commended Applicant’s
professional competence and team player attitude. (Tr. 99-106; AE I)
Witness D, a 14-year employee at Applicant’s employer, is the senior manager for
the contract Applicant is currently assigned. As the third level manager, he is responsible
for the performance of the entire staff. He has known Applicant for two ½ years and
provided input into his performance evaluation. (AE H) Witness D is aware that Applicant
has developed a respected reputation with the Government client because of his
performance, particularly in abbreviating the time needed to set up systems without
affecting the quality of the system. Witness D recommends Applicant for a position of trust.
(Tr. 113-122)
Policies
When evaluating an applicant's suitability for a security clearance, the administrative
judge must consider the AG. Each guideline lists potentially disqualifying conditions and
mitigating conditions that are useful in evaluating an applicant's eligibility for access to
classified information.
The disqualifying and mitigating conditions should also be evaluated in the context
of nine general factors known as the whole-person concept to bring together all available,
reliable information about the person, past and present, favorable and unfavorable, in
making a decision for security clearance eligibility. Decisions include, by necessity,
consideration of the possible risk the applicant may deliberately or inadvertently fail to
protect or safeguard classified information. Such decisions entail a certain degree of legally
permissible extrapolation as to the potential, rather than actual, risk of compromise of
classified information.
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
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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 of establishing that it is clearly consistent with the
national interest to grant him a security clearance. 
Analysis
Financial Considerations 
The security concern for financial considerations is set forth in AG ¶ 18:
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.
The two potentially pertinent disqualifying conditions are:
AG ¶ 19(a) inability or unwillingness to satisfy debts; and 
AG ¶ 19(c) a history of not meeting financial obligations. 
The Government has the responsibility of presenting sufficient information to support
all allegations of the SOR. Based on the four credit reports, Applicant’s October 2010 and
January 2011 interview summaries, his April 2012 interrogatory answers, and the record,
the Government’s evidence supports all allegations of the SOR. In May 2005, Applicant
opened an audio-visual business that he closed in July 2007 when the economy forced his
primary builder to shutter his business. Applicant defaulted on his first and second
mortgages and became delinquent on several other debts in 2007. By the time the SOR
was issued in June 2012, Applicant had five delinquent accounts totaling more than
$85,500, with the two delinquent mortgage accounts totaling approximately $84,994. AG
¶¶ 19(a) and 19(c) apply. 
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Five mitigating conditions under AG ¶ 20 are potentially pertinent: 
AG ¶ 20(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 doubt on the individual's reliability, trustworthiness, and good judgment;
AG ¶ 20(b) the conditions that resulted in the financial problem were largely
beyond the person's control and the individual acted responsibly under the
circumstances;
AG ¶ 20(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
AG ¶ 20(d) the individual initiated a good-faith effort to repay overdue
creditors or otherwise resolve debts. 
Although the record shows that Applicant satisfied three of the five delinquent
accounts listed in the SOR, as discussed under AG ¶ 20(d), he has done little to nothing
to resolve the two mortgage accounts that have been delinquent since 2007. His only
action was to consult two attorneys, consider and reject one plan to resolve the second
mortgage, and then consider a plan to pay both mortgages. Applicant’s failure to implement
the plan continues to cast doubt on his reliability and good judgment. AG ¶ 20(a) does not
apply.
In 2007, the reduction in house sales had a rippling effect throughout the industry
and economy. The primary builder of Applicant’s audio-video business could not survive
the economic downturn and closed his business. Applicant closed his business and
defaulted on two mortgages. Between January and July 2009, the total income of Applicant
and his wife was reduced by a third when his wife encountered medical issues related to
the birth of their second  child. These conditions were beyond his control and raise the
application of AG ¶ 20(b). 
However, in order for AG ¶ 20 (b) to be fully applicable, an applicant must act
responsibly under the circumstances. The record indicates that Applicant has still not
addressed the two mortgage accounts which became delinquent in 2007. While he
resolved the two state tax problems (not listed in the SOR), he did not take action until after
the state filed business and personal tax liens against him in 2008 and 2009. AG ¶ 20(b)
has limited application. 
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Applicant has never had financial counseling. Because the two delinquent mortgage
accounts have not been resolved, there is no basis to conclude that Applicant’s financial
problems are under control. AG ¶ 20(c) is inapplicable. 
AG ¶ 20(d) only partially applies to Applicant’s documented resolution of SOR 1.c,
1.d, and 1.e before the hearing, but after he received the SOR. AG ¶ 20(d) clearly is
inapplicable to the unresolved mortgage accounts in SOR 1.a and 1.b. Given Applicant’s
failure to act on the two delinquent mortgage accounts, his evidence in mitigation, including
his praiseworthy job performance, does not overcome the disqualifying evidence presented
under AG ¶¶ 19(a) and 19(c) of the financial considerations guideline. 
Whole-Person Concept 
I have examined the evidence under the disqualifying and mitigating conditions of
the financial considerations guideline. I have also weighed the circumstances within the
context of nine variables known as the whole-person concept. In evaluating the relevance
of an individual's conduct, the administrative judge should consider the following factors:
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 the participation was 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 a commonsense judgment based on careful consideration of
the guidelines and the whole-person concept.
Applicant’s financial problems in 2007 were caused by a general economic downturn
in the housing market that forced his primary builder to close his business. Without an
important source for potential customers of audio-video equipment, Applicant had to close
his business. He found employment quickly, and he and his wife have been continuously
employed since November 2007. Between January and July 2009, his wife could not work
for medical reasons and their income was reduced by a third. The character witness
testimony and supporting documentary evidence indicate that for the last 2 ½ years
Applicant has demonstrated an outstanding job performance for his employer as well as
Government clients. 
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The DOHA Appeal Board has held that an applicant must establish a meaningful
track record of payment that represents actual debt reduction through payment of debts.
An applicant need not show, as a matter of law, that he has paid off each debt listed in
SOR. However, he is required to demonstrate he has a plan and has taken significant steps
to implement the plan. ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) Although
Applicant paid three of the accounts listed in the SOR and other unlisted debts, he has
initiated inadequate action on the mortgage accounts that have been in default for at least
five years. Considering a settlement agreement that the mortgage lenders are not aware
of does not constitute a significant effort to implement a plan to repay. Having weighed and
balanced the disqualifying and mitigating conditions under the financial considerations
guideline, and considering the entire record in the context of the whole-person concept, I
conclude that Applicant has not mitigated the security concerns under Guideline F.
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): AGAINST APPLICANT
Subparagraph 1.a and 1.b: Against Applicant
Subparagraphs 1.c through 1.f: For Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is not
clearly consistent with national interest to grant Applicant eligibility for a security clearance.
Eligibility for access to classified information is denied. 
Paul J. Mason
Administrative Judge