1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ---- ) ISCR Case No. 11-08894 ) Applicant for Security Clearance ) Appearances For Government: Alison O’Connell, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ GALES, Robert Robinson, Administrative Judge: Applicant mitigated the security concerns regarding financial considerations. Eligibility for a security clearance and access to classified information is granted. Statement of the Case On March 14, 2011, Applicant applied for a security clearance and submitted an Electronic Questionnaire for Investigations Processing (e-QIP) version of a Security Clearance Application (SF 86).1 On July 6, 2012, the Department of Defense (DOD) issued him a set of interrogatories. He responded to the interrogatories on July 20, 2012.2 On December 12, 2012, the DOD issued a Statement of Reasons (SOR) to him, pursuant to Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended and modified; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended and modified (Directive); and the Adjudicative Guidelines for Determining Eligibility For Access to Classified Information (December 29, 2005) (AG) 1 Item 5 (SF 86), dated March 14, 2011. 2 Item 6 (Applicant’s Answers to Interrogatories, dated July 20, 2012). 2 applicable to all adjudications and other determinations made under the Directive, effective September 1, 2006. The SOR alleged security concerns under Guideline F (Financial Considerations), and detailed reasons why the DOD adjudicators were unable to find that it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. The SOR recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked. Applicant received the SOR on January 14, 2013. In a sworn undated statement,3 Applicant responded to the SOR allegations and elected to have his case decided on the written record in lieu of a hearing. A complete copy of the Government’s file of relevant material (FORM) was provided to Applicant on March 14, 2013, and he was afforded an opportunity, within a period of 30 days after receipt of the FORM, to file objections and submit material in refutation, extenuation, or mitigation. Applicant received the FORM on March 22, 2013, but, as of May 7, 2013, he had not submitted a response to the FORM. The case was assigned to me on May 8, 2013. Findings of Fact In his Answer to the SOR, Applicant admitted five of the factual allegations (¶¶ 1.a., 1.b., 1.d., 1.e., and 1.g.) pertaining to financial considerations of the SOR. Applicant’s admissions are incorporated herein as findings of fact. After a complete and thorough review of the evidence in the record, and upon due consideration of same, I make the following additional findings of fact: Applicant is a 48-year-old employee of a defense contractor who, since February 2011, has been serving as an audio/visual technician.4 He previously worked for other employers as an electronics technician.5 Applicant was born in Uganda in 1964, and he became a naturalized U.S. citizen in 1985.6 Nothing is known about his primary or secondary education. He attended a correspondence school and was awarded a diploma in TV and VCR Repair in May 1987.7 He has never served in the U.S. military,8 and has never been granted a security clearance.9 He was married in 1986, and he and his wife have four children, born in 1988, 1990, 1995, and 1998.10 3 Item 4 (Applicant’s Answer to the SOR, undated). 4 Item 5, supra note 1, at 10. 5 Item 5, supra note 1, at 12. 6 Item 5, supra note 1, at 5-6. 7 Item 6 (Diploma, dated May 11, 1987). 8 Item 5, supra note 1, at 14. 9 Item 5, supra note 1, at 29. 10 Item 5, supra note 1, at 16, 19-21. 3 Financial Considerations Although there was a judgment against Applicant filed in 2006, about which there is further discussion below, there was nothing unusual about Applicant’s finances until mid-2010 when his employer started to lose business and altered Applicant’s pay structure. In August 2010, Applicant was earning between $1,000 and $1,200 per week, but with his altered pay structure, during Applicant’s final week with his employer in February 2011, his income dropped to a little over $100.11 Applicant attempted to reduce his expenses by cutting back on his telephone, satellite television, utilities, and other services.12 Because of the substantial decrease in income, he was unable to continue making his monthly payments, and accounts became delinquent, were placed for collection, charged off, or went to judgment. The SOR identified seven purportedly continuing delinquencies, but several of the accounts alleged are duplicates of other accounts. There is an automobile loan with a credit union with an unpaid balance of $18,098, of which $2,238 was past due, placed for collection, and charged off. The account went to judgment against Applicant and his nephew (who is also referred to as Applicant’s cousin) in the state district court in the amount of $19,062 (SOR ¶ 1.b.).13 Based on that judgment, the creditor filed a lien against Applicant and his nephew in the state circuit court in the amount of $19,116 (SOR ¶ 1.a.).14 Applicant had previously co-signed on the note financing an automobile for his nephew, with the understanding that the nephew would pay all the payments after the first month. Applicant was unaware that his nephew had failed to make a single payment on the vehicle before he wrecked it. The vehicle was repossessed by the creditor at the junk yard where it was taken after the accident.15 The creditor obtained a garnishment against Applicant’s nephew, and $30.38 is taken from his salary each week.16 As of December 3, 2012, the balance had been reduced to $14,431.23.17 The account is in the process of being resolved. 11 Item 6 (Personal Subject Interview, dated April 15, 2010), at 11. On February 10, 2011, Applicant received a letter from his employer stating: “Due to a lack of service work due to low sales volume of consumer electronics, the economy, and the fact that televisions are not needing major service, your job position will be eliminated until further notice.” See Item 6 (Letter, dated February 10, 2011). 12 Item 6 (Personal Subject Interview), supra note 11, at 11. 13 Item 8 (Combined Experian, TransUnion, and Equifax Credit Report, dated March 23, 2011), at 5, 12; Item 7 (Equifax Credit Report, dated June 8, 2012), at 1; Item 9 (State Judiciary Judgments and Lien Search, dated March 7, 2013). The entry in Item 8, at 5, contains an erroneous statement that the plaintiff in the judgment was “medical.” The information appearing in Item 9 disputes that allegation. 14 Item 9, supra note 13. Applicant contended the two allegations in the SOR (¶ 1.a. and ¶ 1.b.) refer to the same account, and the information appearing in Item 9 supports his contention. 15 Item 6 (Personal Subject Interview), supra note 11, at 8. 16 Item 6 (Judgment Creditor’s Monthly Report, dated June 19, 2012; Item 6 (Account Activity Report, undated); Item 4 (Account Activity Report, undated), attached to Applicant’s Answer to the SOR. 17 Item 4 (Account Activity Report), supra note 16. 4 There is a telephone account with a high credit, unpaid balance, and past due balance of $164 that was placed for collection (SOR ¶ 1.f.).18 The account was eventually transferred or sold to another collection agent, and that collection agent and Applicant agreed to a settlement based on a payment of $81 (SOR ¶ 1.c.).19 That payment was made, and the account was closed with a zero balance.20 The account has been resolved. There is an account for a home security system with a high credit of $1,871, and an unpaid past due balance of $1,590 that was placed for collection (SOR ¶ 1.d.).21 The account was subsequently transferred or sold to another collection agent, but it no longer appears on Applicant’s 2012 Equifax credit report. He contends he contacted the new collection agent in an effort to set up a repayment plan, but he has not submitted any documentation to support his contention. The account has not yet been resolved. There is an airline-affiliated bank credit card account with an unpaid balance of $16,698, of which $3,799 was past due (SOR ¶ 1.e.).22 Applicant contacted the creditor and they agreed to permit him to enroll in their Hardship Program, provided he made a monthly payment of $186.23 He contends he started making monthly payments of $250 in February 2011.24 His minimum monthly payments were increased to $480,25 and as of January 3, 2013, he had a past due amount of $384, and was credited with a payment of $96 and unspecified credits of $300, for the previous month.26 Applicant’s remaining balance as of January 3, 2013, was $14,660.51.27 The account is in the process of being resolved. There is a charge account with a large home improvement retailer with a high credit of $4,384, an unpaid balance of $3,398, and a past due balance of $699 (SOR ¶ 1.g.).28 Applicant initially contended that the account was satisfied in January 2011, but subsequently revised his position and acknowledged that he entered a repayment plan at that time, and he has been making pre-authorized monthly $60 payments under the 18 Item 8, supra note 13, at 12. 19 Item 6 (Disputed Tradelines, dated July 3, 2012). 20 Item 6, supra note 19; Item 4, supra note 3, at 3. 21 Item 8, supra note 13, at 7. 22 Item 8, supra note 13, at 8; Item 4 (MasterCard Statement, dated January 3, 2013). 23 Item 6 (Letter, dated May 29, 2012). 24 Item 6 (Personal Subject Interview), supra note 11, at 7. 25 Item 4 (MasterCard Statement), supra note 22. 26 Item 4 (MasterCard Statement), supra note 22. 27 Item 4 (MasterCard Statement), supra note 22. 28 Item 8, supra note 13, at 13. 5 plan.29 In July 2012, Applicant claimed the remaining balance had been reduced to $2,498,30 and when he submitted his Answer to the SOR, he contended it had been reduced further to $2,078.31 The account is in the process of being resolved. In July 2012, Applicant submitted a personal financial statement reflecting a family net monthly income of $5,317. He claimed $5,278 in monthly expenses, including debt payments, leaving $39 for discretionary spending or savings. He also indicated $100 in bank savings, $2,000 in cash on hand, and $5,000 in stocks and bonds.32 Applicant has never received financial counseling.33 Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.”34 As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information. The President has authorized the Secretary of Defense or his designee to grant an applicant eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.”35 When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the AG. In addition to brief introductory explanations for each guideline, the AG list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. An administrative judge need not view the guidelines as inflexible, ironclad rules of law. Instead, acknowledging 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. The entire process is a conscientious scrutiny of a number of variables known as the “whole-person concept.” The administrative judge must consider 29 Item 6 (Personal Subject Interview), supra note 11, at 6-7; Item 6 (Letter, dated July 3, 2012); Item 4 (Letter, dated January 3, 2013). 30 Item 6, supra note 2, at 21. 31 Item 4, supra note 3, at 3. 32 Item 6 (Personal Financial Statement, undated). When computing the various figures, Applicant double- counted $2,767 and listed the figure under both monthly expenses and monthly debts. The figures appearing above are the recalculated figures. 33 Item 6, supra note 2, at 30. 34 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 35 Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified. 6 all available, reliable information about the person, past and present, favorable and unfavorable, in making a meaningful decision. In the decision-making process, facts must be established by “substantial evidence.”36 The Government initially has the burden of producing evidence to establish a potentially disqualifying condition under the Directive, and has the burden of establishing controverted facts alleged in the SOR. Once the Government has produced substantial evidence of a disqualifying condition, under Directive ¶ E3.1.15, the applicant has the burden of persuasion to present evidence in refutation, explanation, extenuation or mitigation, sufficient to overcome the doubts raised by the Government’s case. The burden of disproving a mitigating condition never shifts to the Government.37 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 as well. It is because of this special relationship that the Government must be able to repose a high degree of trust and confidence in those 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 as to potential, rather than actual, risk of compromise of classified information. Furthermore, “security clearance determinations should err, if they must, on the side of denials.”38 Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.”39 Thus, nothing in this decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination as to Applicant’s allegiance, loyalty, or patriotism. It is merely an indication the Applicant has or has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the evidence contained in the record. Likewise, I have avoided drawing inferences grounded on mere speculation or conjecture. 36 “Substantial evidence [is] such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all contrary evidence in the record.” ISCR Case No. 04-11463 at 2 (App. Bd. Aug. 4, 2006) (citing Directive ¶ E3.1.32.1). “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4 th Cir. 1994). 37 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 38 Egan, 484 U.S. at 531 39 See Exec. Or. 10865 § 7. 7 Analysis Guideline F, Financial Considerations The security concern relating to the guideline for Financial Considerations is set out 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. . . . The guideline notes several conditions that could raise security concerns. Under AG ¶ 19(a), an inability or unwillingness to satisfy debts is potentially disqualifying. Similarly, under AG ¶ 19(c), a history of not meeting financial obligations may raise security concerns. There is an isolated delinquent account that was charged off and went to judgment in 2006. In mid-2010, Applicant was unable to continue paying his normal monthly bills, and accounts became delinquent, placed for collection, or charged off. AG ¶¶ 19(a) and 19(c) apply. The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. Under AG ¶ 20(a), the disqualifying condition may be mitigated where 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. Also, under AG ¶ 20(b), financial security concerns may be mitigated where 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. Evidence that 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 is potentially mitigating under AG ¶ 20(c). Similarly, AG ¶ 20(d) applies where the evidence shows the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.40 In addition, it is potentially mitigating under AG ¶ 20(e) when the individual has 40 The Appeal Board has previously explained what constitutes a good-faith effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good-faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term ‘good-faith.’ However, the Board has indicated that the concept of good-faith ‘requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.’ Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy [or statute of limitations]) in order to claim the benefit of [the “good-faith” mitigating condition]. 8 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. AG ¶¶ 20(b), 20(c), 20(d), and 20(e) apply. AG ¶ 20(a) does not apply. The nature, frequency, and relative recency of Applicant’s purported financial difficulties since 2006, with special emphasis since mid-2010, and continuing for several years thereafter, make it difficult to conclude that they occurred “so long ago” or were “so infrequent.” His initial financial problem, related to the co-signed motor vehicle loan and the subsequent judgment and lien, were essentially the result of the actions of his nephew in failing to make agreed payments and then wrecking the vehicle. The nephew’s actions exposed Applicant to financial liability. The subsequent financial problems were attributed to the abrupt loss of his business income due to the poor economy and a lack of service work. Both circumstances were clearly largely beyond his control. There is a substantial risk when one accepts, at face value, the contents of a credit report without obtaining original source documentation to verify entries. Credit bureaus collect information from a variety of sources, including public records and “other sources,” and it is these other unidentified sources that are the cause for concern. Likewise, when accounts are transferred, reassigned, sold, or merely churned, an individual’s credit history can look worse than it really is. In this particular instance, the credit reports referred to several accounts that were either incorrectly reported or no longer accurate after the status of the account had changed. The Appeal Board has previously held that “adverse information from a credit report can normally meet the substantial evidence standard.” However, when the information in the credit report is refuted by documentation from the actual creditor, and the credit reporting company is furnished the correct information but still refuses or fails to correct its entries in a timely manner, one can conclude that the information in the credit report – actually a summary or secondary evidence pertaining to an account – is less accurate, trustworthy, or reliable than the other evidence of record.41 Applicant reduced his expenses in an attempt to remain current on a number of his accounts. In an effort to address and resolve his accounts, he contacted his creditors and collection agents regarding the alleged delinquent accounts. He managed to pay off one account, and he is in the process of resolving two other accounts under agreed repayment plans. His nephew is in the process of resolving the lien under a garnishment of his wages. The sole remaining account is no longer on Applicant’s 2012 (internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 41 In ISCR Case No. 08-12184 at 7 (App. Bd. Jan. 7, 2010), the Appeal Board explained: It is well-settled that adverse information from a credit report can normally meet the substantial evidence standard and the government’s obligations under [Directive] ¶ E3.1.14 for pertinent allegations. At that point, the burden shifts to applicant to establish either that [he or] she is not responsible for the debt or that matters in mitigation apply. 9 credit report, and he contends he has attempted to set up a repayment plan, but has not yet received any documentation from the creditor or collection agent. Applicant successfully disputed two accounts, furnishing sufficient documentation to conclude that those two accounts are actually duplicates of other accounts alleged in the SOR. While Applicant never received financial counseling, there are clear indications that his financial problems are being resolved and are under control.42 Applicant’s actions under the circumstances confronting him do not cast doubt on his current reliability, trustworthiness, or good judgment.43 Whole-Person Concept Under the whole-person concept, the administrative judge must evaluate an applicant’s eligibility for a security clearance by considering the totality of the applicant’s conduct and all the 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. Moreover, I have evaluated the various aspects of this case in light of the totality of the record evidence and have not merely performed a piecemeal analysis.44 There is some evidence against mitigating Applicant’s conduct. He allowed several accounts to become delinquent, placed for collection, charged off, or to become a judgment and a lien. The mitigating evidence under the whole-person concept is more substantial. As a good and perhaps overly trusting uncle, Applicant co-signed on a motor vehicle loan 42 “Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances outside his [or her] control, the Judge could still consider whether Applicant has since acted in a reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99-0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03- 13096 at 4 (App. Bd. Nov. 29, 2005)). A component is whether he or she maintained contact with creditors and attempted to negotiate partial payments to keep debts current. 43 See ISCR Case No. 09-08533 at 3-4 (App. Bd. Oct. 6, 2010). 44 See U.S. v. Bottone, 365 F.2d 389, 392 (2d Cir. 1966); See also ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006). 10 for his nephew and received the brunt of the financial liability created when that nephew failed to make any agreed payments and wrecked the vehicle. Applicant’s indebtedness was not caused by his frivolous or irresponsible spending, and he did not spend beyond his means. Instead, his financial problems were caused several years later when Applicant was laid off with no notice because of a poor economy and a lack of work. He struggled to continue making his payments, but eventually was unable to continue doing so. He contacted his creditors, developed a repayment plan, gathered his available assets, and started paying his creditors. With one exception, Applicant’s delinquent accounts have either been settled, paid off, or are in the process of being paid. The one exception is the account that is next in line to be resolved. Applicant’s financial problems are in the process of being resolved and his finances are under control. Applicant’s actions under the circumstances confronting him do not cast doubt on his current reliability, trustworthiness, or good judgment. The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating:45 In evaluating Guideline F cases, the Board has previously noted that the concept of “‘meaningful track record’ necessarily includes evidence of actual debt reduction through payment of debts.” However, an applicant is not required, as a matter of law, to establish that he [or she] has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he [or she] has “. . . established a plan to resolve his [or her] financial problems and taken significant actions to implement that plan.” The Judge can reasonably consider the entirety of an applicant’s financial situation and his [or her] actions in evaluating the extent to which that applicant’s plan for the reduction of his [or her] outstanding indebtedness is credible and realistic. See Directive ¶ E2.2(a) (“Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.”) There is no requirement that a plan provide for payments on all outstanding debts simultaneously. Rather, a reasonable plan (and concomitant conduct) may provide for the payment of such debts one at a time. Likewise, there is no requirement that the first debts actually paid in furtherance of a reasonable debt plan be the ones listed in the SOR. Applicant has demonstrated a “meaningful track record” of debt reduction and elimination. Overall, the evidence leaves me without questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all of these reasons, I conclude Applicant has mitigated the security concerns arising from his financial considerations. See AG ¶¶ 2(a)(1) through AG 2(a)(9). 45 ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted). 11 Formal Findings Formal findings for or against Applicant on the allegations set forth in the SOR, as required by section E3.1.25 of Enclosure 3 of the Directive, are: Paragraph 1, Guideline F: FOR APPLICANT Subparagraph 1.a: For Applicant Subparagraph 1.b: For Applicant Subparagraph 1.c: For Applicant Subparagraph 1.d: For Applicant Subparagraph 1.e: For Applicant Subparagraph 1.f: For Applicant Subparagraph 1.g: For Applicant Conclusion In light of all of the circumstances presented by the record in this case, it is clearly consistent with the national interest to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is granted. ________________________ ROBERT ROBINSON GALES Administrative Judge