1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 12-01438 ) Applicant for Security Clearance ) Appearances For Government: Gina Marine, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ ANTHONY, Joan Caton, Administrative Judge: After a thorough review of the pleadings, testimony, and exhibits, I conclude that Applicant failed to rebut or mitigate the Government’s security concerns under Guideline F, Financial Considerations. His eligibility for a security clearance is denied. Statement of the Case Applicant submitted an Electronic Questionnaire for Investigations Processing (e- QIP) on September 23, 2011. On November 19, 2013, the Department of Defense (DOD) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, Financial Considerations. DOD acted 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) effective within the Department of Defense for SORs issued after September 1, 2006. On December 4, 2013, Applicant provided a notarized answer to the SOR and requested a hearing before an administrative judge at the Defense Office of Hearings and Appeals (DOHA). The case was assigned to me on January 10, 2014. I convened a 2 hearing on January 29, 2014, to consider whether it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. The Government called no witnesses and introduced six exhibits, which were marked Ex. 1 through Ex. 6 and entered in the record without objection. Applicant testified, called no other witnesses, and introduced no exhibits. At the conclusion of the hearing, I left the record open until February 10, 2014, so that Applicant could, if he wished, provide additional information. Applicant timely filed 16 post-hearing submissions, which I marked as Ex. A through Ex. P.1 The Government did not object to the admission of Applicant’s post- hearing submissions.2 DOHA received the hearing transcript (Tr.) on February 6, 2014. Procedural Matters In a discussion of preliminary matters at the beginning of the hearing, the Government moved to amend the SOR by withdrawing allegations 1.d., 1.f., and 1.h. Applicant did not object, and the Government’s motion was granted. (Tr. 9-11.) Findings of Fact The amended SOR contains 11 allegations of financial conduct that raise security concerns under Guideline F, Financial Considerations.3 The financial delinquencies alleged in the amended SOR total approximately $108,634. In his Answer to the SOR, Applicant admitted the debts alleged at SOR ¶¶ 1.a. through 1.i. and the debt alleged at SOR ¶ 1.m. He denied the allegations of delinquent debt at SOR ¶¶ 1.j., 1.k., 1.l., and 1.n. In his answers to the allegations at ¶¶ 1.a., 1.b., 1.c., 1.e., 1.g., 1.i., and 1.m. of the amended SOR, Applicant asserted his belief that the age of the debts rendered them uncollectible under the statute of limitations in his state of residence. Applicant’s admissions to the allegations in the amended SOR are entered as findings of fact. (SOR; Answer to SOR.) Applicant is married and 37 years old. He and his wife have two young children. When he was 18 years old, Applicant enlisted in the U.S. military, where he served on active duty for approximately three and one-half years. Thereafter, he served in National Guard units for an additional four years. Since 2001, he has been employed as a government contractor and has worked for his current employer. His most recent job 1 Applicant included 15 submissions, with a cover sheet which contained information of an evidentiary nature. Accordingly, I marked the cover sheet as Applicant’s Exhibit (Ex.) A and then marked the 15 remaining submissions as Applicant’s Ex. B through Ex. P. 2 The Government’s e-mail of no objection is identified in the record as Hearing Exhibit (HE) 1. 3 The debts alleged on the amended SOR include four in charged-off status and seven in collection status. 3 title is systems engineering manager. He was first awarded a security clearance in 1994. (Ex. 1; Tr. 25-26.) Applicant earned a bachelor’s degree in information systems management and computer science in 2001. He began work on a master’s degree in strategy and leadership in 2006, but he did not complete the required thesis. He is currently enrolled in an executive master of business administration program. (Ex. 1; Tr. 87-89.) In 2006, Applicant and his wife experienced marital difficulties. His wife left their home and moved with their young son to another state. Applicant continued to support his wife and child. In addition, the breakup was adversarial, and Applicant incurred substantial legal fees in an attempt to acquire custody of his son. (Tr. 27-29.) In 2007, Applicant and his wife began marital counseling. In 2008, they reconciled, reestablished their marital relationship, and began to live together again. They had a second child in 2013. (Tr. 32, 99-100.) The SOR alleges at ¶ 1.a. that Applicant owes a bank card creditor $29,284 on a charged-off account that had not been paid as of November 19, 2013. The SOR alleges at ¶ 1.m. that Applicant owes $6,086 to the same bank creditor, and the debt had not been satisfied as of November 19, 2013. Applicant admitted both debts. (SOR; Answer to SOR.) After completing his e-QIP in September 2011, Applicant was interviewed in October 2011 by an authorized investigator from the U.S. Office of Personnel Management (OPM). During the interview, Applicant stated that in 2007, he opened a line of credit with the bank identified at SOR ¶¶ 1.a. and 1.m. to pay divorce attorney fees. He claimed he made some payments on the debt, but he could not recall dates or specific amounts paid. He told the investigator he was seeking advice from legal counsel in order to settle the debt. (Ex. 2.) In his June 2013 response to DOHA interrogatories, Applicant stated that he had disputed the debt alleged at SOR ¶ 1.a. He also stated that the debt had been sold to another creditor and the original creditor refused to accept payment. He stated that the debt alleged at SOR ¶ 1.m. had been paid in full. At his hearing, Applicant stated that he attempted to contact the creditor after receiving the SOR in November 2013. In a post- hearing submission, Applicant stated: “In 2012 [the creditor] sent me a 1099-C for Cancellation of Debt and I [filed] this form with my 2012 Federal Income Taxes as Income per the rules required by the IRS. Additionally, I paid on-time the resulting federal taxes for this [discharged] debt.” Applicant did not provide documentation to corroborate his claim that the delinquent debts alleged at SOR ¶¶ 1.a. and 1.m. had been resolved. (Ex. 1; Ex. 3; Ex. A; Tr. 44-45.) In his answer to the SOR, Applicant admitted the $19,101 charged-off debt alleged at SOR ¶ 1.b. When he was interviewed by an authorized investigator in October 2011, Applicant did not recognize the debt, which appeared as a collection 4 account on his credit bureau report of October 2011 and as a charged-off account on his credit bureau report of December 2013. Both credit reports show that the account was opened in 2008. (Ex. 2; Ex. 5; Ex. 6.) When he responded to DOD interrogatories in June 2013, Applicant stated that he had disputed the account and the balance. At his hearing, he reported that, after receiving the SOR in November 2013, he attempted to contact the creditor to arrange for payment but had learned that the account had been sold to a collection agency, and the creditor would no longer accept payment. (Ex. 3; Tr. 52-54.) In a post-hearing submission, Applicant asserted: “In 2013, [the creditor] sent me a 1099-C for Cancellation of Debt and I plan on [filing] the form with my 2013 Federal Income taxes as Income per the rules required by the IRS. Additionally, I will pay the resulting federal taxes for this [discharged] debt.” Applicant did not provide documentation to corroborate his assertion. (Ex. A.) In his answer to the SOR, Applicant admitted the $4,800 charged-off debt alleged at SOR ¶ 1.c. When he was interviewed by an authorized investigator in October 2011, Applicant stated he was disputing the debt, then in collection status, because he had paid it. The debt appears on Applicant’s credit bureau reports of October 2011 and December 2013, with the notation that the account had been transferred or sold. Applicant’s credit bureau report of December 2013 indicates that the account was opened in March 2006. In June 2013, in response to DOD interrogatories, Applicant listed a zero balance for the debt. At his hearing, Applicant stated that he contacted the creditor after receiving the SOR in November 2013. He stated that the creditor told him it would provide him with contact information for the current holder of the debt, but Applicant had not received such information by the date of his hearing. He failed to provide information on the status of the debt in his post-hearing submissions. The debt remains unsatisfied. (Ex. 2; Ex. 3; Ex. 5; Ex. 6; Tr. 53-55.) In his answer to the SOR, Applicant admitted a $1,286 debt, a partially-secured loan in charged-off status, alleged at SOR ¶ 1.e. However, in his answer, he also stated: “I contacted [the creditor] several years ago as this is not my account and I have no knowledge of this account. Based on the age of the debt, the statute of limitations [in Applicant’s state of residence] has expired for collecting on this debt.” (Answer to SOR) The debt alleged at SOR ¶ 1.e. appears on Applicant’s credit bureau reports of October 2011 and December 2013. Both reports indicate that the account was opened in February 2009. When he was interviewed by an authorized investigator in October 2011, Applicant stated that he had no knowledge of the account. (Ex. 2; Ex. 5; Ex. 6.) At his hearing, Applicant stated that the statute of limitations in his state of residence “on revolving debt is 40 months or four years.” He further stated: “If, during that four year period of time, you reopen the debt, that reages it and it stays on your credit report. And so, by virtue of me trying to negotiate with any of these creditors. . . 5 who no longer own the debt, then it would reage that debt and stay on my credit report.” (Tr. 56.) Applicant further explained that in 2010 and 2011, when the statute of limitations was expiring on some of his debts, he stopped contacting the creditors because he did not want to reaffirm the debts and have them remain on his credit report. However, in 2013, when he received the SOR, he contacted some of the creditors again, but he did not contact the creditor identified at SOR ¶ 1.e. Applicant failed to provide information in his post-hearing submission to establish that the debt alleged at SOR ¶ 1.e. had been satisfied. (Tr. 52-61.) Applicant stated that his state statute of limitations argument applied also to the debts alleged in the SOR at ¶ 1.g. ($3,662) and ¶ 1.i. ($22,742). Applicant’s credit bureau report of October 2011 showed that the delinquent account alleged at SOR ¶ 1.g. was opened in February 2010. The credit report also showed that the delinquent account alleged at SOR ¶ 1.i. was opened in May 2006 and identified as delinquent in September 2011. At his hearing, Applicant stated that he had not contacted the creditors identified at SOR ¶¶ 1.g. and 1.i. after receiving the SOR. In post-hearing submissions, Applicant failed to provide documentation that either debt was satisfied. (Ex. 5; Tr. 54.) Applicant denied the delinquent debts alleged at SOR ¶ 1.j. ($4,490), ¶ 1.k. ($7,182), ¶ 1.l. ($9,177), and ¶ 1.n. ($824). At his hearing, he stated that he had satisfied in full the debt alleged at SOR ¶ 1.l. In a post-hearing submission, he provided documentation to corroborate payment. (Ex. J; Ex. K; Tr. 50.) Applicant also claimed he had satisfied the debts alleged at SOR ¶¶ 1.j., 1.k., and 1.n. The three delinquent debts were owed to the same creditor, and they were later sold to a successor creditor. In response to DOD interrogatories, Applicant stated that he had disputed the debts alleged at SOR ¶¶ 1.j. and 1.k., and they had been removed from his credit bureau reports. He also reported that debt alleged at SOR ¶ 1.n., showing a $824 delinquency, had been satisfied. (Ex. 3; Tr. 55, 85-86.) In post-hearing submissions, Applicant provided settlement offers, dated November 2009 and March 2010, from creditors holding the debts alleged at SOR ¶¶ 1.j. and 1.k. The creditor holding the delinquent debt alleged at SOR ¶ 1.j. offered to settle the debt for $660, and the creditor holding the delinquent debt alleged at SOR ¶ 1.k. offered to settle the debt for $1,100. Applicant failed to provide documentation corroborating payment of the debts alleged on the amended SOR at ¶¶ 1.j., 1.k., and 1.n. (Ex. O; Ex. P.) In his post-hearing submissions, Applicant also provided information from the three national credit reporting services. The information indicated that he had disputed at least one unidentified debt, which had been investigated and the results communicated to him. At his hearing, Applicant stated that in 2008, he had investigated the possibility of resolving his financial delinquencies by filing for Chapter 7 bankruptcy. 6 However, he did not proceed because he learned that his income was above the limit allowed for filing for bankruptcy protection. When questioned about his plans for resolving his financial delinquencies, Applicant stated that he would wait until his creditors contacted him for payment. (Ex. E.; Ex. F.; Ex. G.; Ex H.; Ex. I.; Tr. 68-70.) In May 2013, in response to DOD interrogatories, Applicant provided a personal financial statement. As a post-hearing submission, he provided a more up-to-date personal financial statement. He reported a net family monthly income of $12,567.4 His fixed monthly expenses total $5,575. (Ex. 4; Ex. B.) At his hearing, Applicant stated that in January 2014, he purchased a home for $662,000.5 His down payment was approximately $32,000, and he financed the home with a home mortgage of $630,000. His monthly payments on the home mortgage are approximately $3,589. (Tr. 15, 37-39.) Applicant purchased a 2006 Infiniti automobile in 2009 and a 2010 Honda Odyssey in 2012. On his recent personal financial statement, he valued the two vehicles at $23,000. He also listed $80,000 in bank savings and $175,000 invested in stocks, bonds, certificates of deposit, and a 401(k) savings account. He owes approximately $38,000 in student loans and is current on his payments. He stated that he has had financial counseling twice since 2008. (Ex. 4; Ex. B; Ex. C; Ex. D; Tr. 36-41.) Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security, and it has emphasized that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 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.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant Applicant’s eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified. When evaluating an applicant’s suitability for a security clearance, an administrative judge must consider and apply the adjudicative guidelines (AG). In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. 4 Applicant’s net monthly income is $9,567, and his wife’s net monthly income is $3,000 (Ex. 4; Ex. B.) 5 On his May 2013 personal financial statement, Applicant reported that he did not own a home and paid monthly rent of $1,500. (Ex. 4.) 7 These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, the administrative judge applies these guidelines 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 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. 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, or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The applicant has the ultimate burden of persuasion in seeking 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 protect or 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. 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.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information). 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 8 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 Ainability or unwillingness to satisfy debts@ is potentially disqualifying. Similarly, under AG & 19(c), Aa history of not meeting financial obligations@ may raise security concerns. Between 2006 and 2008, Applicant accumulated substantial delinquent debt when he and his wife experienced marital difficulties, his wife subsequently left him, and Applicant incurred significant legal obligations and attorneys’ fees as he sought custody of his minor son. After Applicant and his wife reconciled in 2008, he did not resolve the debts he had incurred, and he was unable or unwilling to pay his creditors. These delinquent debts are alleged on the SOR. This evidence is sufficient to raise disqualifying conditions under AG ¶¶ 19(a) and 19(c). The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. Several Guideline F mitigating conditions could apply to the security concerns raised by Applicant’s financial delinquencies. Unresolved financial delinquency might be mitigated if it “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.” (AG ¶ 20(a)) Additionally, unresolved financial delinquency might be mitigated if “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.” (AG ¶ 20(b)) Still other mitigating circumstances that might be applicable include 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” (AG ¶ 20(c)) or “the individual has initiated a good-faith effort to repay overdue creditors or otherwise resolve debts.” (AG ¶ 20(d)) Finally, if “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 options to resolve the issue,” then AG ¶ 20(e) might apply. Applicant has a history of financial difficulties and inattention to his financial responsibilities. While his debts arose in the past, many of them are ongoing, and they occurred under circumstances that are likely to recur. Applicant has been employed with his current employer since 2001, and he earns a good salary. While his marital difficulties from 2006 to 2008 may have been beyond his control when they occurred, he and his wife were reconciled and resumed their marriage in about 2008, nearly six years ago. Even so, Applicant has not addressed most of the delinquencies from the time of his marital separation, suggesting that he has not acted responsibly under the circumstances. 9 In his answer to the SOR and in testimony, Applicant asserted his belief that his delinquent debts were unenforceable under his state’s statute of limitations. In ISCR Case No. 07-09966 at 3 (App. Bd. Jun. 25, 2008), DOHA’s Appeal Board addressed an applicant’s reliance on the unenforceability of his debts under a state statute of limitations: Security clearance decisions are not controlled or limited by such statutes of limitation. A security clearance adjudication is not a proceeding aimed at collecting an applicant’s personal debts. Rather, it is a proceeding aimed at evaluating an applicant’s judgment, reliability, and trustworthiness. Accordingly, even if a delinquent debt is legally unenforceable under state law, the federal government is entitled to consider the facts and circumstances surrounding an applicant’s conduct in incurring and failing to satisfy the debt in a timely manner. See, e.g., ISCR Case No. 01-09691 at 3 (App. Bd. Mar. 27, 2003). Moreover, the Appeal Board has also concluded that while an applicant may legally rely on the running of a statute of limitations to avoid paying a debt, the applicant’s reliance does not constitute a good-faith effort to resolve debts within the meaning of the Directive. See ISCR Case No. 99-9020 at 5-6 (App. Bd. Jun. 4, 2001). DOHA’s Appeal Board has also 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 a statute of limitations]) in order to claim the benefit of [the “good-faith” mitigating condition.] (ISCR Case No. 06-14521 at 2 (App. Bd. Oct. 15, 2007) (quoting ISCR Case No. 03- 20327 at 4 (App. Bd. Oct. 26, 2006)). Between 2006 and 2008, Applicant incurred significant delinquent debt. Eleven of those debts are alleged on the SOR. To his credit, Applicant provided, in a post- hearing exhibit, corroboration that he had satisfied the debt alleged at SOR ¶ 1.l. However, he failed to provide documentation establishing that the other ten delinquencies had been satisfied. At his hearing, he stated that he would pay the debts if the creditors contacted him for payment. Applicant has had financial credit counseling, and he recently took on considerable new debt when he purchased a home in January 10 2014. What is missing from his record is consistent payment of his debts over time. He has not established a track record that demonstrates that he can be relied upon to allocate his financial resources to satisfy his many financial delinquencies. I conclude that while AG ¶¶ 20(d) and 20(e) have limited applicability in this case, AG ¶¶ 20(a), 20(b), and 20(c) do not apply in mitigation. 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. I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. Applicant is a mature person of 37 years. His financial problems began several years ago and are ongoing. Applicant’s efforts to address his financial delinquencies are minimal and recent. He does not have a reliable history of timely and consistent payment of his financial obligations. Despite a steady substantial income for several years, he has failed to budget his income to satisfy his delinquent debts. The record evidence leaves me with questions and doubts about Applicant’s judgment and reliability as well as his eligibility and suitability for a security clearance. For these reasons, I conclude Applicant failed to mitigate the security concerns arising from his financial delinquencies. 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 11 Subparagraphs 1.a. - 1.c.: Against Applicant Subparagraph 1.d.: Withdrawn Subparagraph 1.e.: Against Applicant Subparagraph 1.f.: Withdrawn Subparagraph 1.g.: Against Applicant Subparagraph 1.h.: Withdrawn Subparagraphs 1.i. - 1.k.: Against Applicant Subparagraph 1.l.: For Applicant Subparagraphs 1.m. - 1.n.: 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 grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. ____________________________ Joan Caton Anthony Administrative Judge