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    DEPARTMENT OF DEFENSE 
  DEFENSE OFFICE OF HEARINGS AND APPEALS 
  
  
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 11-03705 
  ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Ray Blank, Esq., Department Counsel 
For Applicant: Ernst M. Martzen, Esq.  
 
 
 
______________ 
 
Decision 
______________ 
 
 
HEINY, Claude R., Administrative Judge: 
 
Applicant contests the Department of Defense’s (DoD) intent to deny his eligibility 
for a security clearance to work in the defense industry. Applicant was $26,000 past due 
on two mortgages and owed an additional $5,000 in collection or charged-off accounts. 
He has paid his past due debts and brought his mortgages to current status. He has 
resolved the financial considerations security concerns. Clearance is granted.  
 
History of the Case 
 
 Acting under the relevant Executive Order and DoD Directive,1 on September 12, 
2012, the DoD issued an SOR detailing security concerns. DoD adjudicators could not 
find that it is clearly consistent with the national interest to grant or continue Applicant’s 
security clearance. On October 10, 2012, Applicant answered the SOR and requested a 
hearing. On January 9, 2013, I was assigned the case. On February 5, 2013, the 
Defense Office of Hearings and Appeals (DOHA) issued a Notice of Hearing for the 
                                                          
1 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) effective within the DoD 
on September 1, 2006. 
 
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hearing convened on February 26, 2013. I admitted Government’s Exhibits (Ex) 1 
through 5 and Applicant’s Exhibit A with attachments 1 through 25, without objection. 
Applicant testified at the hearing as did his wife. The record was held open to allow 
Applicant to submit additional information. Additional material (Ex. B through D2) was 
submitted and admitted into the record without objection. On March 7, 2013, DOHA 
received the hearing transcript (Tr.). 
 
Procedural Matters 
 
 Department Counsel (DC) requested that the debt amount listed in SOR 1.e be 
changed from $69 to $56. (Tr. 7) Applicant’s counsel objected stating a search for the 
$69 medical bill had been made, which was unsuccessful. DC asserted Applicant 
should have known of this $56 debt because he was asked about a debt of that amount 
in the November 2010 written interrogatories, which he answered. (Ex. 3) The change 
was not allowed, but DC was informed he would be allowed to argue Applicant should 
have known of this debt. 
 
Findings of Fact 
 
In Applicant’s Answer to the SOR, he denied the allegations at SOR 1.a, 1.f, 1g, 
and 1.h. He neither admitted nor denied the debt listed at 1.e ($69). He admitted the 
remaining debts, with explanation. I incorporate Applicant’s admissions as facts. After a 
thorough review of the pleadings, exhibits, and testimony, I make the following 
additional findings of fact: 
 
Applicant is a 61-year-old aerodynamicist who has worked for a defense 
contractor since March 1983, and seeks to maintain a security clearance. (Tr. 11, 99) 
He has more than $520,000 in his 401(k) retirement plan and $10,000 in his checking 
account. (Ex. A-21, Ex. A-24, Tr. 106) In April 1977, Applicant married, and he and his 
wife had five children before two died. He and his wife own six rental properties in 
addition to their home. (Tr. 83) He has more than $80,000 in equity in his rental 
property. (Ex. B) Applicant asserts his financial problems resulted from medical 
expenses and failures of the tenants to meet their obligations. He was initially unaware 
of the problems because his wife manages the household’s finances. (Tr. 11, 80-81))  
 
 In 1977, Applicant and his wife purchased their first rental home. (Tr. 21) Three 
years later, they built their home. (Tr. 22) Their goal was to purchase rental real estate 
for each of the children, pay off the property, and by the time the children were in 
college they could use the rental income for college expenses. (Tr. 22) Following 
college, the plan was then to sell the home or give the home to each child when he 
married. The rental property generated good cash flow. (Tr. 23) The monthly mortgage 
payment is approximately $5,400 and their monthly income from the properties is 
$7,600. (Tr. 85) 
 
In April 2003, when Applicant’s third son was a college freshman, it was 
discovered he had a brain tumor. (Tr. 25) Applicant and his wife had good medical 
                                                          
2 The last material (Ex. D) was received on April 8, 2013.  
 
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insurance, but traditional medicine offered little hope. They chose to seek medical 
treatment at a cancer facility. (Ex. A-12) The treatment was considered experimental 
and the insurance company would not pay except for incidental expenses. (Tr. 25) 
Although Applicant had a significant 401(k) retirement fund, he was unable to borrow 
from the fund because he already had a loan from the fund. (Tr. 15) He and his wife 
refinanced some of their real estate and sold two rental homes to obtain funds for the 
treatment. (Tr. 25, 28) One medical bill was $30,000 and other medical bills kept coming 
after their son died. (Tr. 27)  
 
Applicant also used his credit cards to meet medical expenses and incurred a 
$10,000 debt on one card. (Tr. 27) When the credit cards were used for medical bills, he 
assumed the bills would be paid following the sale of a house. (Tr. 28) This was the first 
time in his marriage that he was experiencing financial problems. (Tr. 29) He was able 
to maintain payment on the rental properties and was negotiating with the credit card 
companies. (Tr. 30) The plan was to address a credit card debt fully before addressing 
the other debt. (Tr. 31)  
 
 When Applicant’s youngest son was a high school freshman, he began having 
problems in school. (Tr. 31) He had suffered a severe head injury while skateboarding, 
which greatly altered his personality. (Tr. 32) He started skipping school and became 
involved with illegal drugs. A treatment program was found to help his son with his 
problems. Applicant’s insurance company stated it would pay 70 percent of mental 
health treatment at an inpatient facility. (Tr. 34) However, the insurance company later 
denied3 coverage for the treatment. (Ex. A-19) Applicant also used money he had set 
aside to make balloon payments on his real estate. He chose to use the money to pay 
for his son’s treatment. (Tr. 34)  
 
Following the death of his grandfather, Applicant’s son’s mental problems 
increased due to schizophrenia or drug-induced psychosis. (Tr. 39) His son was 
improving until June 2011, when his brother died in an aircraft crash. (Ex. A-11, Ex. A-
13, Tr. 11, 13, 30, 40) Applicant’s youngest son was present when his older brother died 
in the plane crash and was asked to help remove his brother’s body from the wreckage. 
This event impacted greatly on his younger son’s mental state. His youngest son’s drug 
addiction became worse following his brother’s death. His son was committed for one 
week of treatment due to the danger of possibly harming himself. (Tr. 41) His son’s 
medical condition caused significant medical expenses. (Tr. 42) His son’s condition has 
now improved, but his son still has memory problems. (Tr. 42) He has stopped using 
illegal drugs. (Tr. 43)  
 
 While Applicant’s son was in treatment, he missed six weeks of school. The 
school district where they lived had no way to address the missed schooling, but 
another school had an accelerated recovery program. (Tr. 36) Applicant rented a home 
in the school district with the program and attempted to sell his home. (Ex. A-14, A-15, 
                                                          
3 After a year of trying to obtain the promised payment, an external review determined the insurance 
company had misled Applicant and should have stated that pre-approval was necessary. Due to the 
misleading statement, the insurance company paid half of the treatment cost. (Tr. 36)  
 
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Tr. 14, 37) Their home remained on the market for more than one year. He and his wife 
eventually moved from the rental property back into their main home. (Tr. 14) 
 
 Starting in September 2010, Applicant began experiencing problems with the 
tenants in his rental property. That month, he had to evict tenants in one property for 
nonpayment of rent and theft of stored furniture. (Tr. 44) Following eviction, he 
discovered the tenants had trashed the home, spray-painted the window and furniture, 
and taken the appliances. (Tr. 44) He kept making the mortgage payments and 
attempted to rent the property. In October 2011, it finally rented. (Tr. 45)  
 
 In another rental house, in September 2010, the tenant got behind on the rent 
following the death of her husband. (Tr. 47) Starting in February 2010, the tenants could 
only pay $600 of the $1,350 monthly lease. The monthly mortgage on the property was 
$1,100. (Tr. 49) In September 2011, the tenant was evicted. (Tr. 48) Cleaning and fix-up 
costs were incurred. In December 2011, the house rented. On occasion, tenants would 
leave without paying the last month of various utility bills. (Tr. 61) Applicant would then 
have to pay the bill (SOR 1.a, $69), which he did in January 2013. (Ex. A-5, Tr. 61, 115) 
Judgments have been obtained against some of the former tenants, but he has not 
pursued collection due to the financial status of the former tenants. (Tr. 90)  
 
 Over the years, Applicant obtained a number of loans from his credit union. The 
loans were timely paid. Sometimes loans were obtained to fix up their rental properties. 
A $3,371 loan (SOR 1.b) was obtained for this purpose that had been charged off and 
has now been settled and paid. (Ex. A-2, Ex. A-24, Tr. 62, 65)  
 
 In September 2010, Applicant applied for mortgage loan modifications. (Tr. 50) 
He attempted to use the Home Affordable Modification program (HAMP). (Tr. 51) To 
qualify for HAMP, the mortgage had to be two months past due. He found it 
counterintuitive to fall behind on his payments in order to qualify, but made the decision 
to do so in order to qualify. (Tr. 52, 104) In November 2011, he became eligible to apply 
for loan modification. (Ex B, Tr. 54) Pursuant to the program, the creditor paid the tax 
loans on the properties, loans that were not in default. (Tr. 57) The monthly payment 
had been $2,400. The creditor wanted him to pay the $2,400 monthly, with an additional 
$3,000 monthly for the tax escrow account. (Tr. 58) In retrospect, applying for the loan 
modification was a mistake. (Tr. 59) Instead of lowering their monthly payment, the 
amount doubled.  
 
 In October 2011, Applicant hired a nonprofit organization to assist him because 
the bank (SOR 1.c, $16,588 past due) kept losing the loan modification documents he 
sent. (Tr. 60-61) Between November 2011 and February 2012, the bank reassigned the 
loan several times between their legal department and the loan modification 
department. (Tr. 66) Finally, a bank employee was assigned the case and approved the 
loan within two weeks. (Ex. A-3, Tr. 67) Applicant started making the required monthly 
payments. He had a similar experience with an additional mortgage (SOR 1.d, $9,421 
past due). He has a repayment plan and is making his payments. (Ex. A-4, tr. 68)  
 
 Applicant disputed a telephone company bill. He was told there would be no 
charge for local long distant calls, but received a large bill for such calls. (Tr. 70) He 
 
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disputed the amount with the company stating he did not receive what he had been 
promised. He has paid this bill. (Ex. A-23)  
 
In September 2012, Applicant hired a credit repair company to assist him in 
tracking down and paying his debts. (Ex. A-8, SOR Answer, Tr. 71, 117) When the 
company verified the debt, Applicant would then pay it. (Tr. 115) The company’s search 
was unable to locate any debt of $69 owed on a medical account (SOR 1.e). (Tr. 72) 
The debt does not appear on his current credit report. Applicant’s wife called the 
creditor listed in SOR 1.g ($268) and was told the company’s records listed no account 
for Applicant. (Tr. 71) If he could verify he owed this debt, he would pay it. (Tr. 108) 
 
Applicant initially disputed a $60 medical debt (SOR 1.h), but paid it. (Ex. A-5) He 
was billed $35 when his son failed to show up for a dermatologist appointment. (Tr. 73) 
However, his son had a different dermatologist and never had an appointment with the 
doctor’s office charging the fee.  
 
Applicant incurred a $690 timeshare maintenance fee (SOR 1.i). With his son’s 
medical expenses, the fee went unpaid. (Tr. 75) The fee has now been paid. (Ex. A-6) 
Applicant’s wife paid off a $9,182 credit card debt and closed the account. (Tr. 77) Upon 
closing the account the creditor charged $210 (SOR 1.j). The amount has now been 
paid. (Ex A-7, A-22, Tr. 105) He was unsuccessful in his attempt to identify a $69 
medical debt (SOR 1.e). (Tr. 108) The SOR alleged the account is owed, but does not 
allege it is past due or in collection.  
 
Applicant does not believe he will have financial problems in the future because 
he is 61 years old, which allows him to withdraw from his 401(k) plan without paying a 
penalty. (Tr. 125) He has been working for the company since March 1983. He has 
recently received a promotion with an additional $8,000 annual salary. (Tr. 127) His 
rental properties are in good shape and are currently rented. He and his wife have 2005 
vehicles, which are paid off, as is their son’s 2003 vehicle. (Tr. 125)  
Applicant’s co-worker states Applicant is trustworthy, has high moral and ethical 
character, and is a man of strong faith. (Ex. A-17) He received a $3,000 individual 
achievement award for this 2012 work. (Ex. A-20) 
 
 A summary of Applicant’s judgment, accounts charged off, accounts placed for 
collection, and other unpaid obligations and their current status follows: 
 
 Creditor Amount  Current Status 
a Electricity utility charged-off account. $69 Paid. (Ex. A-1) 
b Credit union charged off account. $3,371 Settled and paid. (Ex. A-2, 
A-24) 
c Mortgage $16,588 past-due on a 
balance of $253,000. 
$16,588 Loan modification. Paying 
as agreed. (Ex. A-3) 
 
 
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 Creditor Amount  Current Status 
d Mortgage past-due $9,421 on a 
balance of $101,000. 
$9,421 Being paid. (Ex. A-4, A-7) 
e Unpaid medical account. $69 Applicant is unable to locate 
the holder of this debt. 
f Telephone service collection 
account. 
$169 Paid. (Ex. A-23) 
g Collection account. Applicant 
believes it to be a scam and a fraud. 
$268 Applicant disputes this 
account.  
h Unpaid medical account. $60 Paid. (Ex A-5) 
i Time share fees collection account. $690 Paid. (Ex A-6) 
j Charged-off account; $210 charged 
after Applicant paid $9,182 and 
closed the account. 
$210 Paid. (Ex A-7, A-22) 
 Total debt listed in SOR $30,915  
 
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, 
 
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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 
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 following the death of his oldest son 
and the medical treatment of his youngest son. He was $26,000 past due on two 
mortgages and owed approximately $5,000 on other collection and charged-off 
 
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accounts. Disqualifying Conditions AG ¶ 19(a), “inability or unwillingness to satisfy 
debts” and AG ¶ 19(c), “a history of not meeting financial obligations,” apply.  
 
 Five 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 
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; 
 
(d) the individual initiated a good-faith effort to repay overdue creditors or 
otherwise resolve debts; and 
 
(e) the individual has a reasonable basis to dispute the legitimacy of the 
past-due debt which is the cause of the problem and provides 
documented proof to substantiate the basis of the dispute or provides 
evidence of actions to resolve the issue. 
 
 Following the death of Applicant’s oldest son and after his youngest son 
experienced head injuries in a skateboarding accident, his youngest son required 
medical treatment. His insurance initially said it would pay 70 percent of the treatment 
cost, later denied coverage, and then after more than a year, was required to pay half of 
the cost. Applicant was unsuccessful in his attempts to sell some of his rental property 
to meet the medical expenses. He also borrowed against the properties and on his 
credit cards to pay for the treatment. He has repaid all monies borrowed on his credit 
cards for medical treatment. 
 
 Following his son’s treatment, Applicant moved to a new school district to assist 
his son in making up the time lost. He rented a home in the new school district and 
attempted to sell his home. He was unsuccessful in his attempts at sale. Maintaining his 
home mortgage and renting a house in the new school district added to his financial 
problems, as did some problems with various tenants on his rental property. His attempt 
to refinance some of his mortgages met with mixed results. He was able to renegotiate 
two loans, which required him to be two months or more past due on the loans to 
qualify. Even though he found this to be counterintuitive, he allowed the two mortgages 
to become past due.  
 
 
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Additional problems with the loan were created by the long processing time to 
obtain the modifications and due to the bank paying off a $30,000 tax liability, which 
was added to his monthly repayment amount. Instead of lowering the monthly payment 
amounts, these amounts increased with the addition of the tax liability repayment.  
 
 The two past-due mortgages are now current and the majority of Applicant’s 
other debt has been paid. He disputes one debt (SOR 1.g, $268) and has been unable 
to locate a medical debt (SOR 1.e, $69) The size of these two obligations is so small 
they do not raises concerns about his current reliability, trustworthiness, or good 
judgment. He has $10,000 in his checking account and more than $500,000 in his 
401(k) retirement account. 
 
Applicant’s financial difficulties resulted from circumstances beyond his control, 
and he acted responsibly in addressing his debts. In 2003, Applicant’s middle son died 
of brain cancer. In 2011, his oldest son died, which greatly affected his youngest son’s 
mental state. His youngest son required medical treatment not covered by Applicant’s 
insurance and Applicant changed school districts to aid his son, which increased his 
monthly expenses when he rented a house in the new school district and was unable to 
sell his home. The financial difficulties were incurred under unusual circumstances 
unlikely to repeat themselves. AG ¶ 20(a) applies. Not only the medical treatment costs, 
but also his inability to sell his home, were factors beyond his control. AG & 20(b) 
applies. 
 
Under AG & 20(c) and & 20(d), Applicant has paid six of the debts and brought 
his two past-due mortgages current. He and his wife drive 2005 vehicles. He is living 
within his means, paying his debts, has received an increase in salary, and paid his 
credit card accounts used to pay for medical treatment. AG & 20(c) and & 20(d) apply. 
 
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.  
 
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I considered the potentially disqualifying and mitigating conditions in light of all 
the facts and circumstances surrounding this case. The debts incurred were not the 
type that indicates poor self-control, lack of judgment, or unwillingness to abide by rules 
and regulations. Money was not spent frivolously. The majority of his unaddressed 
financial obligations resulted from medical treatment costs and being past due on two 
mortgages in order to qualify for loan modifications.  
 
The issue is not simply whether all his debts are paid—it is whether his financial 
circumstances raise concerns about his fitness to hold a security clearance. (See AG & 
2 (a)(1).) Applicant has paid his debts and is current on his mortgages. He has more 
than $80,000 equity in his six rental properties, has more than $500,000 in his 
retirement account, and $10,000 in his checking account. He has had steady 
employment with his company for 30 years, received a $3,000 award for his work last 
year, and has recently been promoted with an $8,000 annual increase in his salary.  
 
Overall, the record evidence leaves me without questions or doubts about 
Applicant’s eligibility and suitability for a security clearance. For all these reasons, I 
conclude Applicant 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, Financial Considerations:  FOR APPLICANT 
 
  Subparagraphs 1.a —1.j:   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 a security clearance. 
Eligibility for access to classified information is granted.  
 
 
 
_______________________ 
CLAUDE R. HEINY II 
Administrative Judge