DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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                                                                      )                                                          
        ------------------------------------                   )         ISCR  Case No.  11-13489      
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Applicant for Security Clearance )
Appearances
For Government: Gina Marine, Esq., Department Counsel
For Applicant: Kevin Sherlock, Esq.
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 Decision
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WESLEY, Roger C., Administrative Judge:
Based upon a review of the pleadings, exhibits, and testimony, Applicant has
mitigated the security concerns regarding his finances. Eligibility for access to classified
information is granted. 
 
Statement of the Case
On February 20, 2013, the Department of Defense (DOD) issued a Statement of
Reasons (SOR) detailing reasons why the DOD could not make the preliminary
affirmative determination of eligibility for granting a security clearance, and DOD
recommended referral to an administrative judge to determine whether a security
clearance should be granted, continued, denied, or revoked. This 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 (AGs) implemented by the Department of Defense on
September 1, 2006.  
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Applicant responded to the SOR on March 22, 2013, and requested a hearing.
The case was assigned to me on July 17, 2013, and was scheduled for hearing on
August 21, 2013, by video teleconference. The hearing was convened on that date. At
hearing, the Government's case consisted of four exhibits (GEs 1-4). Applicant relied on
one witness (himself) and seven exhibits. (AEs A-G) The transcript (Tr.) was received
on August  24, 2013.  
Procedural Issues 
Before the close of the hearing, Applicant requested leave to keep the record
open to afford him the opportunity to supplement the record with documented financial
counseling.  For good cause shown, Applicant was granted 14 days to supplement the
record.  The Government was afforded two days to respond. Within the time permitted,
Applicant supplemented the record with documented financial counseling. I admitted
Applicant’s post-hearing submission as AE H.
Summary of Pleadings
Under Guideline F, Applicant allegedly accumulated five delinquent debts
exceeding more than $45,000. Each of these alleged debts is reported as a charge-off.
In his response to the SOR, Applicant admitted all of  the allegations. He claimed
the listed debts in the SOR represent debts he co-signed for his wife while they were
married, with three of the debts reflecting student loans for his wife’s benefit. He claimed
his debts were divided and evenly apportioned in their divorce agreement. He explained
his ex-wife did not uphold their settlement agreement and failed to pay the debts she
accepted responsibility for (including the vehicle loan he co-signed for in subparagraph
1.a. Applicant further claimed he prioritized the debts he accepted responsibility for
under his divorce agreement and paid each of these prioritized debts. And he claimed
he will address his wife’s listed debts once he sells his home and is able to free up
funds currently reserved to pay his mortgage and rent. 
Findings of Fact
Applicant is a 30-year-old embedded soft-ware engineer for a defense contractor
who seeks a security clearance. The SOR allegations admitted by Applicant are
incorporated and adopted as relevant and material findings. Additional findings follow.
Background
Applicant earned a bachelor of arts degree in engineering in May 2005. (GE 1;
Tr. 32) He married in July 2005 and helped to finance his wife’s advanced education
during their marriage. (Tr. 34) Applicant divorced his wife in June 2007 and has no
children from this marriage. (GE 1; Tr. 35-36) Applicant claims no military service in his
security  clearance application. 
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Finances
In 2006, Applicant and his wife purchased a home for $127,000, and financed
their purchase with an 80-20 loan. (GEs 3 and 4; Tr. 38-41) Under the loan terms, the
first mortgage ($102,000) covered 80 percent of their loan financing and the remaining
20 percent was covered by a second mortgage ($25,000). Applicant and his wife paid
nothing down on their purchase. 
The separation agreement Applicant and his wife completed in May 2007 does
not address the real estate deed and mortgages covering their residence. (AE A; Tr. 40)
Acting on the advice of his counsel, Applicant enlisted his wife and her new husband to
remove their names from the deed. (Tr. 40)  After exploring short sale options, Applicant
and his wife completed a market-based sale of their home in 2012. (Tr. 43-46) Because
the sale only produced $109,000 in sale proceeds, Applicant was required to bring
$15,725 of his own funds to the closing. (Tr. 45-46) He funded the $15,725 cash
infusion with a loan from his 401(k) retirement plan. (Tr. 45-46)  
During their marriage, Applicant and his wife accumulated a number of joint
credit card and student loan debts. (GEs 3 and 4; Tr. 63-64)  In 2007, Applicant co-
signed for his wife’s purchase of an automobile for $15,867. (GE 3) At the time,
Applicant and his spouse were making $70,000 between them and had ample income
sources to meet their credit obligations. (Tr. 39-40) Following their divorce, his wife
defaulted on her monthly car payments. In September 2011, the seller repossessed the
vehicle and charged off the remaining deficiency balance of $11,740.  (GEs 2 and 4)
Credit reports reveal the seller assigned its deficiency rights to the creditor listed in
subparagraph 1.a, who charged off the debt. (GE 3)  The debt remains unpaid. 
Applicant claims the debt covered by subparagraph 1.a belonged to his ex-wife
under their separation agreement. (AE A; Tr. 36-37, 49-50)  Because the parties’
settlement agreement does not identify specific apportioned debts, the debts Applicant
claims were assumed by his ex-spouse must be inferred from the documentary
evidence and Applicant’s verbal understandings with his ex-spouse. Applicant’s claims
are credible and accepted under all of the circumstances considered. To date, neither
Applicant nor his ex-spouse have made any concerted efforts to pay off the deficiency
owed to creditor 1.a. (Tr. 41, 51,57, 69-70)
While married, Applicant co-signed for his wife on three student loans.  In June
2005, he co-signed for his wife to obtain a student loan with creditor 1.c for $5,783.
After paying on the loan for several years, his wife ceased making payments, and the
loan was charged off in April 2009 with a delinquent balance of $786. (GE 3) In the
following year (August 2006), Applicant co-signed for his wife on another student loan
with the same lender (creditor 1.b) for $15,603. (GE 4) When his wife quit paying on this
loan in accordance with the loan’s terms, creditor 1.b charged off the loan in April 2009
with a delinquent loan balance of $21,378. (GEs 3 and 4) Both of these student loans
remain outstanding with no repayment history and the legal responsibility of Applicant.
(GEs 3 and 4; Tr. 57)  Efforts to enlist his ex-spouse’s assistance in paying the debts
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have been unsuccessful. (Tr. 87) And Applicant has not taken any direct actions himself
to address the debts since he was apprised of their outstanding status by the
investigator from the Office of Personnel Management (OPM) who interviewed him in
2011. (GE 2)  
Applicant co-signed with his wife in October 2006 on another student loan with
creditor 1.e for $10,600. This loan was intended to benefit Applicant directly with
creditor 1.e and is implicitly covered in his separation agreement as his sole
responsibility. (GE 3) Applicant’s  credit reports reveal that the loan was deferred for
several years and defaulted in 2012 with a balance over 180 days past due in the
amount of $8,331. (GEs 3 and 4) This debt has been charged off by the creditor and
has never been paid. (GEs 2 and 4; Tr. 50-51, 57) As a joint and several obligor,
Applicant bears responsibility for this loan as well.
In the personal financial statement he completed in January 2013, Applicant
reported gross monthly income of $8,242  and net monthly income of $4,938. (GE 2) He
reported net monthly expenses of $2,256, monthly debt payments of $2,241, and a net
monthly remainder of $441. (GE 2) For comparison purposes, in the monthly budget he
produced at the hearing, he listed gross monthly income of $8,433 and net monthly
income of $3,528. (AE G) In his prepared budget, he reported monthly expenses of
$2,214, monthly debt payments of $1,223, and a net monthly remainder of only $91.
(AE G) Applicant attributed the changes in his reported gross income to a compensation
raise and the lower net income figure to increased deductions from his 401(k) loan to
facilitate the payoff of his mortgage debt. (AE C) Applicant has savings of $200 and
retirement savings worth under $70,000. (GE 2) The home he recently sold has been
eliminated as a carried asset on his balance sheet. (Tr. 58)
Believing his reported delinquent debts were charged off, Applicant did not
consider himself liable for any of the listed debts. Tr. 65-66)  Informed otherwise, he
expects to address his old debts (both his own and those owned by his ex-spouse) with
freed-up funds he will have at his disposal once he repays his 401(k) loan at the rate of
$1,200 a month, predictably within 18 months. (Tr. 58) With the 401(k) loan repaid, he
expects to have additional resources (at least $1,200 a month) to address his
delinquent debts. (Tr. 53-56)  
Since the hearing, Applicant completed financial counseling with a reputable
credit counseling service. (AE H) His counseling service provided a detailed financial
action plan that covered causes of his financial hardship (divorce in 2007, relocation in
2012, bills in collection status, identified hardship, and increases in living expenses), his
cited goals (debt reduction, control of his budget, building a savings account, stopping
collection calls, and setting up a payment plan), and suggested actions (i.e., contact
creditors to make payment arrangements, education and budget counseling, destruction
of credit cards, maintain regular payments, open a debt management program to
reduce debt, set savings goals, track expenses, find supplemental work, and consider
educational resources). (AE H) 
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Besides furnishing a financial plan, Applicant’s counseling service completed a
budget assessment designed to increase his available resources to address his
outstanding debts. (AE H)  His counseling service did not provide any debt consolidation
service or accept payments for remittance to his identified creditors. (AE H)
Endorsements
Applicant furnished several endorsements from colleagues who have worked
with him and are familiar with his financial history dating to his past marriage. (AE E) His
colleagues characterize him as a person of outstanding character and judgment.
Applicant’s direct supervisor credited him with being a reliable and trustworthy
performer. (Tr. 25)  After expressing familiarity with Applicant’s finances, his supervisor
expressed no security concerns with the former’s  finances. (Tr. 27-28) In Applicant’s
performance evaluation for 2012, he is credited with outstanding performance. (AE B;
Tr. 25-26, 52) 
Policies
         The AGs list guidelines to be used by administrative judges in the decision-making
process covering DOHA cases. These guidelines take into account factors that could
create a potential conflict of interest for the individual applicant, as well as
considerations that could affect the individual’s reliability, trustworthiness, and ability to
protect classified information.  These guidelines include "[c]onditions that could raise a
security concern and may be disqualifying” (disqualifying conditions), if any, and many
of the "[c]onditions that could mitigate security concerns.” They must be considered
before deciding whether or not a security clearance should be granted, continued,
revoked, or denied. The guidelines do not require administrative judges to place
exclusive reliance on the enumerated disqualifying and mitigating conditions in the
guidelines in arriving at a decision. Each of the guidelines is to be evaluated in the
context of the whole person in accordance with AG ¶ 2(c)
In addition to the relevant AGs, administrative judges must take into account the
pertinent considerations for assessing extenuation and mitigation set forth in AG ¶ 2(a)
of the AGs. AG ¶ 2(a) is intended to assist the judges in reaching a fair and impartial
commonsense decision based upon a careful consideration of the pertinent guidelines
within the context of the whole person. The adjudicative process is designed to examine
a sufficient period of an applicant’s life to enable predictive judgments to be made about
whether the applicant is an acceptable security risk. 
When evaluating an applicant’s conduct, the relevant guidelines are to be
considered  together with the following AG ¶ 2(a) factors: (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 chances; (7) the motivation for the conduct; (8) the potential for
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pressure, coercion, exploitation, or duress; and (9) the likelihood of continuation or
recurrence.
       Viewing the issues raised and evidence as a whole, the following adjudication policy
factors are pertinent herein:
Financial Considerations
The Concern: 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. 
Adjudicative Guidelines, ¶ 18.
Burden of Proof
By virtue of the principles and policies framed by the AGs, a decision to grant or
continue an applicant's security clearance may be made only upon a threshold finding
that to do so is clearly consistent with the national interest.  Because the Directive
requires administrative judges to make a commonsense appraisal of the evidence
accumulated in the record, the ultimate determination of an applicant's eligibility for a
security clearance depends, in large part, on the relevance and materiality of that
evidence. See United States, v. Gaudin, 515 U.S. 506, 509-511 (1995).  As with all
adversarial proceedings, the judge may draw only those inferences which have a
reasonable and logical basis from the evidence of record.  Conversely, the judge cannot
draw factual inferences that are grounded on speculation or conjecture.
The Government's initial burden is twofold: (1) it must prove by substantial
evidence any controverted facts alleged in the SOR, and (2) it must demonstrate that the
facts proven have a material bearing to the applicant's eligibility to obtain or maintain a
security clearance. The required materiality showing, however, does not require the
Government to affirmatively demonstrate that the applicant has actually mishandled or
abused classified information before it can deny or revoke a security clearance. Rather,
the judge must consider and weigh the cognizable risks that an applicant may
deliberately or inadvertently fail to safeguard classified information.
Once the Government meets its initial burden of proof of establishing admitted or
controverted facts, the evidentiary burden shifts to the applicant for the purpose of
establishing his or her security worthiness through evidence of refutation, extenuation, or
mitigation.  Based on the requirement of  Exec. Or. 10865 that all security clearances be
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clearly consistent with the national interest, the applicant has the ultimate burden of
demonstrating his or her clearance eligibility. “[S]ecurity-clearance determinations should
err, if they must, on the side of denials.” See Department of the Navy v. Egan, 484 U.S.
518, 531 (1988).  And because all security clearances must be clearly consistent with the
national interest, the burden of persuasion must remain with the Applicant.
Analysis  
Applicant is an embedded software engineer with a considerable history of
financial problems associated with joint debts accumulated during a prior marriage that
are unpaid and have since been charged off. As a part of their 2007 divorce agreement
they accepted individual responsibility for their respective debts created during the
marriage. 
While Applicant paid off most of the debts he assumed responsibility for, he did
not until recently accept financial responsibility for the joint debts his ex-spouse assumed
and failed to satisfy. Applicant’s failure to satisfy one debt of his own acceptance and
take responsibility for his ex-wife’s joint debts once he learned of her defaults raises
security concerns.  
Financial concerns
To date, Applicant has not addressed any of the charged-off delinquent debts
listed in the SOR that remain his legal responsibility as a joint obligor.  Four of the listed
debts (creditors 1.a-1.d) reflect debts he co-signed for on his ex-wife’s behalf. A fifth debt
(creditor 1.e) represents a debt he accepted responsibility for under the terms of his
separation agreement.  Outstanding balances on Applicant’s unpaid debts approximate
$45,000. Applicant’s past history of accumulations of delinquent debts and his past
inability to resolve the debts accumulated during his marriage warrant  the application of
two of the disqualifying conditions (DC) of the AGs for financial considerations: ¶ DC
19(a), “inability or unwillingness to satisfy debts,” and ¶19(c) “a history of not meeting
financial obligations.”
Holding a security clearance involves the exercise of important fiducial
responsibilities, among which is the expectancy of consistent trust and candor.  Financial
stability in a person cleared to access classified information is required precisely to
inspire trust and confidence in the holder of the clearance. While the principal concern of
a clearance holder’s demonstrated financial difficulties is vulnerability to coercion and
influence, judgment and trust concerns are implicit in financial cases.
Extenuating circumstances associated with Applicant’s debts are dated and entail
debts allocated to his wife that she failed to resolve following their divorce. MC ¶ 20(b),
“the conditions that resulted in the behavior 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,” is applicable to Applicant’s situation. Since learning his wife’s debts
 Based on the admitted credit reports and other documentation, the listed student loans of Applicant’s ex spouse1
involve privately funded student loans that may not be exempt from statute of limitation coverage in the same way as
Federally guaranteed student loans. 
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were unpaid and charged-off, he has committed to paying off the $15,000 he borrowed
from his 401(k) retirement plan to complete the sale of his home.  Once he repays the
loan, he will use his freed-up resources to address his own remaining debt, as well as his
ex-wife’s charged-off car loan and student loans.
Moreover, all of the listed debts accrued during Applicant’s marriage and predate
his 2007 separation agreement. Applicant did not become aware that his ex-wife had
stopped paying on her assumed debts until 2011. Applicant is current with all of his post-
separation obligations and promises to remain so. Although certainly not dispositive
under Appeal Board guidance, most of the covered debts are aged and are potentially
barred by his state’s six-year statute of limitations for written obligations. See A Rev.
Stat. Ann. § 12-541, et seq.  Under all of the circumstances considered, MC ¶ 20(a), “the1
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,” is applicable to Applicant’s
situation.
Financial counseling and follow-up payment initiatives with a major creditor (his
home lender holding his first and second purchase mortgages) reflect responsible,
prudent  attempts to regain control of his finances. His good-faith efforts merit the
application of MC ¶ 20(c), “the person has received counseling for the problem and/or
there are clear indications that the problem is being resolved or is under control,” and
MC ¶ 20(d), “the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.”
Historically, the Appeal Board has never required an applicant to show that he is
debt free and possessed of a plan for paying off all of his debts immediately or
simultaneously with the payment of his other debts. See ISCR Case No. 07-06482, at 3
(App. Bd. May 21, 2008). To qualify for application of the good-faith mitigating condition
(MC ¶ 20(d)), an applicant need only show good-faith efforts to repay overdue creditors,
or some other good-faith plan for repayment, accompanied by reasonable actions to
effectuate that plan. ISCR Case No.  05-11366, at 4 n.9 (App. Bd. Jan 12, 2007)  By his
repayment initiatives to complete the closing of his home sale, Applicant  showed
responsible, good-faith efforts to satisfy a major mortgage obligation that was once a
joint debt of his own and his ex-spouse. 
Applicant has developed a detailed budget and long-term repayment plan with the
help of his chosen counseling firm to resolve both his own debt delinquency (creditor 1.e)
and the  defaulted debts of his ex-spouse. His earning prospects for the foreseeable
future are promising and strengthened by the positive professional support he has
received from his employer. Prospects are excellent for Applicant’s successful
completion of his repayment plan and restoration of his finances to stable levels. 
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Consideration of Applicant’s background and financial history, and his latest
efforts to repay the marital debts he assumed responsibility for under the terms of his
separation agreement, as well as the defaulted debts allocated to his ex-spouse, enables
Applicant to mitigate judgment and trust concerns associated with his finances.
Applicant’s documented corrective efforts to date are sufficient to enable him to mitigate
security concerns rated to the listed debts in the SOR.
From a whole-person standpoint, the evidence is sufficient to demonstrate that
Applicant has mounted responsible, good-faith efforts over the six-plus years since
completing his separation agreement and later learning of his ex-wife’s defaults.
Because his loan from his 401(k) retirement plan to satisfy closing demands on his home
sale currently consumes most of his available resources, his delayed commitments to
address the remaining marital debts is reasonable under all of the circumstances and
meets the  minimum good-faith payment requirements of Guideline F. 
To his credit, Applicant has performed well for his employer and is highly regarded
by his direct supervisor and colleagues. His meritorious accomplishments at work
reinforce the good-faith repayment efforts he is demonstrating with his creditors. In
making a whole-person assessment, careful consideration was given to the respective
burdens of proof established in Egan (supra), the AGs, and the facts and circumstances
of this case in the context of the whole person. Favorable conclusions warrant with
respect to the allegations covered by subparagraphs 1.a through 1.e
       
Formal Findings
In reviewing the allegations of the SOR and ensuing conclusions reached in the
context of the findings of fact, conclusions, conditions, and the factors listed above, I
make the following formal findings:
GUIDELINE F:           FOR APPLICANT
Subparagraphs  1.a through 1.e:           FOR Applicant
          Conclusions
In light of all the circumstances presented by the record in this case, it is clearly
consistent with the national interest to grant or continue Applicant’s security clearance.
Clearance is granted.
                                          
Roger C. Wesley
Administrative Judge
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