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                        DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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        )
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)       ISCR Case No. 11-09790
Applicant for Security Clearance  )
Appearances
For Government: Philip J. Katauskas, Esq., Department Counsel
For Applicant: Pro se
                                                                            
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Decision
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LYNCH, Noreen, A., Administrative Judge:
On April 4, 2013, the Department of Defense (DOD) issued Applicant a
Statement of Reasons (SOR) alleging security concerns arising under Guideline F
(Financial Considerations). The action was taken under 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 in September 2006. 
Applicant timely answered the SOR and requested a hearing before an
administrative judge. The case was assigned to me on June 21, 2013. A notice of
hearing was issued on July 1, 2013, scheduling the hearing for August 8, 2013.
Government Exhibits (GX) 1-4 were admitted into evidence, without objection. Applicant
testified, presented the testimony of three witnesses, and submitted Applicant Exhibit
(AX) A, which was admitted without objection. The transcript (Tr.) was received on
August 18, 2013. At Applicant’s request, I kept the record open until September 16,
2013, but no additional documents were received. Based on a review of the pleadings,
testimony, and exhibits, eligibility for access to classified information is denied.
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Findings of Fact
In his answer to the SOR, Applicant denied the factual allegation under
Guideline F (Financial Considerations), with explanations. 
Applicant is a 57-year-old operations research analyst who is sponsored by a
defense contractor.  He received his undergraduate degree from a military academy in
1979, and his graduate degree in 1989. Applicant served on active duty in the U.S.
Army for 26 years and was honorably discharged in 2005. He obtained a security
clearance in 1984. (GX 1) He left his sponsoring employer, with whom he had been
employed since 2006,  to continue doctoral studies.
The SOR alleges a single debt which is for an overdue mortgage in the amount
of $242,000, with a total balance due of $893,000. He admits that he owes the debt.
In 2005, Applicant agreed to involvement in a business venture. Based on a
proposition from an unknown person, he invested and bought a house for
approximately $1 million dollars. The plan was to buy the house, and rent the house for
events, etc. for conferences. At the time the property was to be renovated and also
have renters to help defray costs. He believed he was investing with three other
persons. However, on the day of settlement, Applicant learned that only he and another
friend were on the mortgage loan. Applicant admitted that he had concerns, but was on
his way out of the country and decided to sign the loan. He also stated that he knew the
person who had originally organized the business venture had poor credit and that
should have been a signal to him.
Applicant and one partner obtained two mortgages on the property. The first
mortgage loan was $800,000 and the second mortgage loan was $180,000. The notes
were from two different banks.  Applicant and his partner decided to split the
mortgages. (GX 1) Applicant made monthly payments of $2,500 and $1,000. 
Applicant explained a series of events that occurred shortly after the purchase.
He claims that he was defrauded by the organizer of the venture who did not
rehabilitate the property as promised. He also explained that his partner moved into the
house but did not pay rent.  His partner stopped paying the mortgage in 2007. Applicant
continued to pay until 2009. He believes he contacted the bank by phone when he
started missing payments but then just panicked. (Tr. 109)
Applicant described another convoluted set of events that occurred. There were
two lawsuits filed between the partners. (Tr. 32)  He claimed that he did not know what
to do. He stated that he stopped paying the mortgage because he realized that he
would be spending all his savings and be in debt in a short time. (Tr. 30) He also stated
that he was paying legal bills based on two lawsuits. (Tr. 31)
Another friend of Applicant’s, who is an attorney, told him to stop making
payments to the bank. He claims he was told that if the loan went into default, that the
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banks would agree to work with him on a modified payment plan.  At the same time,
Applicant stated that he was withholding payments from the bank pending a lawsuit. He
disclosed in his SF86 that he was in “litigation over the property” and was advised to not
make payments on the mortgage loan. (GX 1) He could not articulate a nexus between
the lawsuit and withholding payments. 
Applicant moved into the property in 2009. However, he has not paid any money
to the banks on the mortgages. He also explained that there were renters in the house
who refused to move and did not pay rent. (Tr. 44) 
Applicant decided to sell the house. In May 2013, he listed the house with a
realtor for $1,200,000. He submitted a sales contract for $915,000. (AX A) He did not
know whether the sale would materialize. Applicant also applied for a loan modification
so that the outstanding payments might be forgiven and the loan rate reduced. 
Applicant also mentioned that if the contract falls through, he could pursue a
short sale. He does not want to do that because he would be responsible for the
deficiency. (Tr. 55) He admitted that he has the monetary reserves to cash out his
savings and resolve the debt. (Tr. 56)
Applicant admits that this venture has been the biggest mistake of his life. His
interest and work with relief services overseas has led him to trust. He now says he
does not care about money. 
In the interim, Applicant has had a loan forgiveness from the bank for the
$180,000 amount. (GX 2) He believes the reason for the forgiveness is part of a
government program. (Tr. 63)
Applicant acknowledged that he did not know what to do about the property for a
long while. He also admitted that he knew he had to do something when the issue of his
security clearance arose. (Tr. 101) He remained in the house but has not paid anything
on the mortgage loans. 
 Applicant has never had any financial difficulties in the past. He even pays cash
for his cars. Applicant has a history of paying all obligations in a timely manner for the
past 35 years. (GX 3-4 ) He has a total net monthly income of $8,864 and a net
remainder of $3,560. He has significant savings and stocks. (GX 2)
Applicant was candid in his explanation that he also might not sell the house, but
continue to rehabilitate the house and rent it out. He believes he would have no
problem in renting the house.  He knows it will take some time to pay the amount that is
in arrears. (Tr. 112) He also noted that he could try to sell his home in another state to
pay the amount due on the mortgage loan. (Tr. 115) He did not submit any information
after the hearing to substantiate a plan of action. 
A close friend of Applicant testified that he knew the details of the investment
property purchase in 2005. Originally, three other men, one unknown to Applicant
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decided to purchase a property. The unknown person took advantage of the situation
and in essence defrauded Applicant of money. He believes it went on from 2005 until
2008. The unknown party did not renovate the property as promised nor was he taking
care of the renters in building. He would rent rooms, but would keep the money for
himself. The other partner went bankrupt, which left Applicant the sole person
responsible for the mortgages. (Tr. 69) 
Applicant’s friend, who is a defense contractor, praised Applicant for his integrity.
He has known him since 1992. Applicant had a respected military career and has
excellent judgment. (Tr. 72) Applicant’s friend also believes that Applicant has tried to
remedy the situation by dealing with banks and possible resale of the house. 
The second witness, who is  a colleague, and a former Army chaplain, describes
Applicant as trustworthy and honest. He recommends him for a security clearance. He
knows of Applicant’s work in other countries. He has known Applicant for about ten
years. (Tr.86)
The third witness, who has known Applicant for about one year testified that
Applicant has shown due diligence in this matter. (Tr. 92) He praises Applicant’s
integrity, and reliability as a human being and a fellow officer.  
Policies
When evaluating an applicant’s suitability for a security clearance, an
administrative judge must consider the adjudicative guidelines (AG). In addition to brief
introductory explanations for each guideline, the adjudicative guidelines list potentially
disqualifying conditions and mitigating conditions. These guidelines are not inflexible
rules of law. Instead, recognizing the complexities of human behavior, they are applied
in conjunction with the factors listed in the adjudicative process. An administrative
judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision.
Under AG ¶ 2(c), this process is a conscientious scrutiny of a number of variables
known as the “whole-person concept.” An 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 national 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. Likewise, I have avoided drawing inferences
grounded on mere speculation or conjecture.
The Government must present evidence to establish controverted facts alleged
in the SOR. An applicant is responsible for presenting “witnesses and other evidence to
rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by
 See also ISCR Case No. 94-1075 at 3-4 (App. Bd. Aug. 10, 1995).      1
 Department of the Navy v. Egan, 484 U.S. 518, 531 (1988).      2
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      3
 See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive      4
information), and EO 10865 § 7.
 ISCR Case No. 93-1390 at 7-8 (App. Bd. Jan. 27, 1995).      5
 Id.      6
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Department Counsel. . . .”  The burden of proof is something less than a1
preponderance of evidence.  The ultimate burden of persuasion is on the applicant.  2 3
A person seeking access to classified information enters into a fiduciary
relationship with the Government based on 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 protect 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 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.”  “The clearly consistent standard indicates that security clearance4
determinations should err, if they must, on the side of denials.”  Any reasonable doubt5
about whether an applicant should be allowed access to sensitive information must be
resolved in favor of protecting such information.  The decision to deny an individual a6
security clearance does not necessarily reflect badly on an applicant’s character. It is
merely an indication that the applicant has not met the strict guidelines the President
and the Secretary of Defense established for issuing a clearance.
Analysis
Guideline F, Financial Considerations
AG ¶ 18 expresses the security concern pertaining to financial considerations:
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 over-
extended 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
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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.
AG ¶ 19 describes conditions that could raise a security concern and may be
disqualifying:
(a) inability or unwillingness to satisfy debts;
(b) indebtedness caused by frivolous or irresponsible spending and the
absence of any evidence of willingness or intent to pay the debt or
establish a realistic plan to pay the debt;
(c) a history of not meeting financial obligations;
(d) deceptive or illegal financial practices such as embezzlement,
employee theft, check fraud, income tax evasion, expense account fraud,
filing deceptive loan statements, and other intentional financial breaches
of trust;
(e) consistent spending beyond one's means, which may be indicated by
excessive indebtedness, significant negative cash flow, high debt-to-
income ratio, and/or other financial analysis;
(f) financial problems that are linked to drug abuse, alcoholism, gambling
problems, or other issues of security concern;
(g) failure to file annual Federal, state, or local income tax returns as
required or the fraudulent filing of the same;
(h) unexplained affluence, as shown by a lifestyle or standard of living,
increase in net worth, or money transfers that cannot be explained by
subject's known legal sources of income; and
(i) compulsive or addictive gambling as indicated by an unsuccessful
attempt to stop gambling, "chasing losses" (i.e. increasing the bets or
returning another day in an effort to get even), concealment of gambling
losses, borrowing money to fund gambling or pay gambling debts, family
conflict or other problems caused by gambling.
Applicant admits being past due $242,000 on mortgages of more than $800,000.
It is not paid and he does not know whether he will sell the house or pay the debt over a
period of time.  He was provided 30 days to submit documentation as to his concrete
plan, but no documentation was received. Consequently, the evidence is sufficient to
raise the disqualifying conditions in ¶¶ 19(a) and 19(c). 
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AG ¶ 20 provides conditions that could mitigate security concerns. The following
are potentially relevant:
(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;
(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; and
(f) the affluence resulted from a legal source of income.
Applicant invested in a business venture in 2005. He signed two mortgage loans
based on little information. This act led to a convoluted set of events. Some of the
events were out of his control, but he basically acted without real knowledge. He took
advice and decided to stop paying  the mortgages. However, he continued to live in the
house. He has not made any payments to the banks since 2009. He recently decided to
list the house on the real estate market. He submitted a sales contract on the house,
but at the same time had no idea if that would come to fruition. He also noted that
perhaps he would stay in the house and pay the mortgage. He has not acted
responsibly. He did not submit any information after the hearing to show his definite
plan of action. The large debt remains unresolved. He has not mitigated the financial
considerations security concern. AG ¶¶ 20 (a), (b), (c) and (d) do not 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 an applicant’s
conduct and all the circumstances. The administrative judge should consider the nine
adjudicative process factors listed at AG ¶ 2(a): 
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(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. As noted above, the
ultimate burden of persuasion is on the applicant seeking a security clearance. 
I considered the potentially disqualifying and mitigating conditions in light of all
the facts and circumstances surrounding this case as well as the whole-person factors.
Applicant is a 57-year-old highly educated retired Army officer. He has worked in the
defense contract area for a number of years. He also works in the area of relief service
out of the country. He trusted an unknown person and agreed to invest in a business
venture in 2005.
Applicant did not research the business venture. An unfortunate set of events
occurred after the purchase, but I do not find that he acted responsibly. He has been
living in the property for four years without making a single payment on the mortgage.
He has not mitigated the security concerns in this case. He did not meet his burden of
proof. Clearance is denied.
 
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: Against Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is  not
clearly consistent with the national interest to continue Applicant’s security clearance.
Clearance is denied. 
                                                     
NOREEN A. LYNCH.
Administrative Judge
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