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              DEPARTMENT OF DEFENSE  
                  DEFENSE OFFICE OF HEARINGS AND APPEALS 
 
 
 
In the matter of:  ) 
 ) 
       )  ISCR Case No. 13-01115 
 ) 
Applicant for Security Clearance ) 
 
Appearances 
 
For Government: Gina L. Marine, Esq., Department Counsel 
For Applicant: Bradley Moss, Esq. 
 
 
________________ 
 
Decision 
________________ 
 
O’BRIEN, Rita C., Administrative Judge: 
 
Based on a review of the pleadings, exhibits, and testimony, I conclude that 
Applicant has not mitigated the security concerns raised under the guideline for financial 
considerations. His request for a security clearance is denied. 
 
Statement of the Case 
 
On November 19, 2013, the Department of Defense (DOD) issued to Applicant a 
Statement of Reasons (SOR) that detailed security concerns under Guideline F 
(financial considerations). 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; and the Adjudicative Guidelines (AG) 
implemented by the Department of Defense on September 1, 2006. 
 
In his Answer to the SOR, Applicant admitted both allegations under Guideline F. 
The Defense Office of Hearings and Appeals (DOHA) issued a Notice of Hearing on 
February 4, 2014, setting the hearing date for February 26, 2014. At the hearing, I 
admitted into evidence four Government exhibits (GE 1-4). Applicant testified, offered 
the testimony of three witnesses, and presented nine exhibits, admitted into evidence as 
AE A-I. I marked Applicant's exhibit list as Hearing Exhibit (HE) I. I granted Applicant's 
request to hold the record open for additional documentation. He timely submitted three 
 
 
 
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exhibits, which I admitted as AE J-L. I marked Applicant's cover email as HE II. DOHA 
received the transcript of the hearing (Tr.) on March 7, 2014. 
 
Findings of Fact 
 
Applicant’s admissions are incorporated as findings of fact. After a thorough 
review of the pleadings and the evidence, I make the following additional findings of 
fact. 
 
Applicant is 50 years old and single. He served in the U.S. Navy in the 1980s. He 
holds a bachelor’s degree in finance, and has taken graduate courses in computer 
technology. He has worked 25 years as either a federal government employee or a 
federal contractor. He has held clearances intermittently since the early 1980s, without 
incident. Applicant began his current employment as a management consultant for a 
defense contractor in October 2012. His original annual salary was $110,000. However, 
a mandatory employee pay cut in 2014 resulted in his salary being reduced to $72,000. 
(GE 1, 2; Tr. 63-66, 114) 
 
In 2001, Applicant was laid off and out of work for six to eight months. He was 
also unemployed for two months in 2008. Applicant supported himself on savings, and 
did not did not accrue delinquencies during either of these periods. In his Answer, 
Applicant stated that before 2011, he had a “better than satisfactory credit history of 
repaying my financial obligations on time.” In September 2011, Applicant was laid off 
from his job with a federal contractor. He was unemployed until he accepted his current 
position in October 2012. Applicant supported himself with savings, his retirement 
funds, and help from his family. He became delinquent on his mortgages, car loan, 
utilities, and taxes.1 He informed his creditors that he had limited funds available to 
meet his obligations. (Answer; GE 1, 2; Tr. 73-74, 87-91, 110)  
 
The SOR alleges Applicant has one delinquency related to a mortgage loan, and 
one delinquent credit card account. The two accounts total $156,000. They appear in 
credit reports dated May and October 2013, and February 2014. (GE 3, 4; AE H)  
 
Between 2001 and 2006, Applicant bought three properties, which together 
involved seven mortgage loans. During his unemployment in 2011 and 2012, Applicant 
became delinquent on the loans. In 2011, he met with a realty team and the team’s 
attorney about his mortgage debts. Applicant bought the following properties. 
                                                 
1 Applicant filed his tax returns as required, but he could not afford to pay his federal taxes for tax years 
2010 and 2011. He owes approximately $17,000 and has been paying his debt through a payment plan 
of $250 per month. His federal tax debt is not alleged in the SOR. Unalleged conduct can be considered 
for limited purposes including: (a) to assess an applicant's credibility; (b) to evaluate an applicant's 
evidence of extenuation, mitigation, or changed circumstances; (c) to consider whether an applicant has 
demonstrated successful rehabilitation; (d) to decide whether a particular provision of the Adjudicative 
Guidelines is applicable; or (e) to provide evidence for whole-person analysis under Directive § 6.3. See, 
ISCR Case No. 00-0633 at 3 (App. Bd. Oct. 24, 2003); ISCR Case No. 03-20327 at 4 (App. Bd. Oct. 26, 
2006); ISCR Case No. 08-09232, (App. Bd. Sept. 9, 2010) at 3. (GE 2; Tr. 110-112, 146) 
 
 
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Property 1. Short-sold. In 2001, Applicant purchased a townhouse for 
$335,000. He paid approximately five percent down, and financed the property through 
two loans. Both of the loans were adjustable-rate mortgage (ARM) loans. His total 
monthly payment was $2,300. His gross annual income at the time was $108,000. In 
2009, his monthly payment was about to increase by $600 per month, which would 
have been difficult for him to pay. He requested a modification, but he was told he had 
to let the mortgage become three months delinquent to qualify. After he was three 
months delinquent, he was granted a modification and the loan became a fixed interest 
loan. (GE 2; Tr. 70-73) 
 
By March 2012, Applicant had obtained a third loan secured by the property. He 
contacted the three lenders to obtain approval of a short sale. The holder of the second 
mortgage loan initially would not approve a short sale, but eventually approved it. The 
property sold in October 2013 for $365,000. Each of the three lenders received a 
portion of the sale proceeds. Applicant testified that he has no remaining debt on any of 
the three mortgage loans. (GE 2; AE J; Tr. 92-96) 
 
Property 2. Short-sold., Applicant testified he purchased an investment in 
property 2005 for $530,000. His gross annual income at the time was $160,000. He did 
not make a down payment. He financed it through two five-year ARM loans, intending to 
hold it a short time and sell it before the loans adjusted to a higher rate. In 2010, when 
the ARM loans adjusted upward, Applicant was unable to sell the property or refinance 
it because the real estate market had declined and the market value of his property 
dropped by approximately $100,000. Over the seven years that Applicant owned the 
property, he had tenants for approximately six years. Although the rent was generally 
about $200 to $300 less than his mortgage payment, he was able to meet his mortgage 
payments before his layoff in 2011. In October 2011, Applicant requested a short sale, 
which the lenders approved. In March 2012, the property was sold through a short-sale. 
(Tr. 47, 78-82, 91-92, 140-141) 
 
Property 3. First mortgage current; second mortgage delinquent. Applicant 
and other family members live in state A. Applicant's parents lived in state B, but were 
planning to relocate. In January 2006, in an attempt to provide a place for his parents to 
live near the family, Applicant purchased a property in state A for $636,000. He financed 
the house with a four to five percent down payment, and two five-year ARM loans. The 
total monthly payment was $2,542. He was earning $170,000 annually. His mother 
sometimes resided in the house in state A. Applicant testified that his mother has 
contributed to the rent since about 2008, but she testified that she did not do so until he 
was laid off in 2011. (AE F; Tr. 47-61, 83-87, 96-100) 
 
As of the date of his security clearance application in April 2013, Applicant lived 
in Property 1. At the hearing, he stated he is living in Property 3. He testified he did not 
have difficulty paying the mortgage on Property 3 after his 2011 lay off because his 
mother made most of the monthly payment. She now resides there “on a pretty regular 
basis.” She contributes at least $1,000 per month towards the mortgage, and a portion 
 
 
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of the utility bill. In about mid-2012, the ARM on the primary loan for Property 3 
adjusted, and his payment increased. In February 2013, Applicant worked with a credit 
counseling service to assist him in replacing the ARM with a fixed rate loan. The lender 
granted Applicant a forbearance, and the loan was subsequently modified in November 
2013. The primary mortgage loan is current. (GE 2; Tr. 83-87, 96-100, 138-139) 
 
The second loan on Applicant's residence is delinquent (allegation 1.b). 
Applicant's credit reports show when it was charged off by the creditor, it had a balance 
of $131,624, with $3,800 past due. Applicant testified that when the interest rate 
adjusted at about the same time as the first loan, he was unable to afford the $300 
increase because he was not employed. The loan became delinquent in January 2012. 
He testified he has not made payments on the loan for approximately one-and-one-half 
years because his realtor advised him to bring the primary mortgage loan current first. 
In late 2011 or early 2012, while he was unemployed, he provided the second lender 
with his financial information, and requested a reduced payment, but without success. 
When he obtained a job in October 2012, he requested a loan modification. As of the 
hearing date, he was still awaiting a response. He has also made a settlement offer of 
$5,000. Even if the lender agrees to a modification, Applicant expects it to be difficult for 
him to make the payments. He testified that, at the time he bought his properties, he 
knew that when the ARM loans increased, he would have difficulty meeting the 
payments. (Answer; GE 2-4; AE H; Tr. 101-104, 124, 134-139, 152-155) 
 
 The SOR also alleges a credit card account with a delinquent balance of $24,864 
(allegation 1.a). In late 2011 or early 2012, while he was unemployed, Applicant 
requested a reduced payment plan, but the creditor would not agree. The account 
became delinquent in February 2012. After Applicant obtained employment in October 
2012, he requested a monthly payment plan, but the creditor did not offer a plan that 
Applicant could afford. Toward the end of 2013, he offered the creditor a settlement 
amount of $3,000 but he was referred to a collection agency. About one week before 
the hearing, Applicant offered the current collection agency the same settlement 
amount. The creditor refused and requested a lump-sum payment of approximately 
$19,000, which Applicant could not afford. The debt is unresolved. (Answer; GE 2, 3; 
AE H; Tr. 104-110, 124-128) 
 
At the time Applicant completed his October 2013 personal financial statement 
(PFS), he was earning $110,000. His net monthly income, including $500 rent form his 
mother, was $6,168. He also had approximately $16,000 in a retirement account. His 
monthly expenses totaled $1,901, including payments on his primary mortgage, a car 
loan ($721 per month), his IRS tax debt, and three credit cards. His debt payments 
totaled $3,807. His monthly net remainder (MNR) was $460. He was not making 
payments on the SOR debts listed at allegations 1.a and 1.b. (GE 2; AE F; Tr. 130) 
 
Applicant completed an updated PFS in January 2014 showing a net worth of 
negative $197,450. In February 2014, his company made budget cuts and his salary 
was reduced to $72,000, or $6,000 monthly. His net monthly pay is $3,926. Based on 
 
 
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his October 2013 expenses and debt payments of $5,708, his monthly remainder would 
be negative $1,782. However, he submitted an updated balance sheet in March 2014 
that showed an MNR of negative $753. His February 2014 credit report shows a credit 
score of 599, which is described as “poor.” (AE F, G, H, K, L; Tr. 114, 120-121, 145) 
 
 In January 2014, Applicant sought assistance from a financial counseling service. 
The company suggested a plan that would require Applicant to pay the company $746 
monthly to resolve his credit card account (allegation 1.a). The counselor determined 
Applicant could not afford the plan. The counselor advised him on ways to cut 
expenses, and Applicant has implemented some of the cost-cutting measures. (AE I; Tr. 
130-134, 155-158) 
 
 Applicant's two brothers provided letters of recommendation. They describe him 
as reliable, responsible with his money, and family-oriented. One brother noted that 
Applicant “got caught up in the real estate fervor and has learned a vital lesson from 
this entire experience.” The other brother stated, “I have seen him act responsibly with 
his finances my entire life and these recent events did not change my view of him on 
that.” Applicant's friend of 34 years, who was unaware of the extent of Applicant's 
indebtedness, stated Applicant lives within his means. Two coworkers, who have 
known Applicant from five to ten years, did not have personal knowledge of his 
significant financial problems. They described him as adaptable, professional, and 
disciplined. (AE A-E; Tr. 15-60) 
 
 Applicant's friend of 40 years testified that he did not know details of Applicant's 
financial situation, but stated Applicant was “[t]rying to get real involved in real estate 
and then the market collapsed.” He testified that Applicant tried to work out 
arrangements with creditors, and is “[n]ot the kind of person that would just let debt 
hang out there.” (Tr. 15-23) 
 
 The managing partner and facility security officer (FSO) of Applicant's company 
testified that she has daily contact with Applicant. She noted that he disclosed his 
financial problems on his security clearance application, and he has had no security 
violations. She cited his excellent job performance, his professionalism, and his candor 
in disclosing his financial issues. (Tr. 22-41) 
 
 Applicant's mother is a retired federal employee and is now employed as a 
contractor with a federal agency. She testified that before Applicant was laid off in 
2011, he did not have financial problems. After his layoff, he applied for jobs regularly. 
She assisted him financially when he was unable to meet his obligations. She knew 
two of his properties lost significant value and he was “[q]uite indebted with those two 
properties.” She has provided funds twice to help Applicant with bills, and contributes 
approximately $1,000 monthly for the mortgage. (Tr. 43-63) 
 
 
 
 
 
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Policies 
 
Each security clearance decision must be a fair and commonsense 
determination based on examination of all available relevant and material information, 
and consideration of the pertinent criteria and adjudication policy in the AG.2 Decisions 
must also reflect consideration of the factors listed in ¶ 2(a) of the Guidelines, 
commonly referred to as the “whole-person” concept.  The presence or absence of a 
disqualifying or mitigating condition does not determine a conclusion for or against an 
applicant. However, specific applicable guidelines are followed whenever a case can 
be measured against them as they represent policy guidance governing the grant or 
denial of access to classified information. In this case, the pleadings and the 
information presented by the parties require consideration of the security concerns and 
adjudicative factors addressed under Guideline F (financial considerations).   
 
 A security clearance decision is intended only to resolve the question of whether 
it is clearly consistent with the national interest3 for an applicant to either receive or 
continue to have access to classified information. The Government bears the initial 
burden of producing admissible information on which it based the preliminary decision 
to deny or revoke a security clearance for an applicant. Additionally, the Government 
must be able to prove controverted facts alleged in the SOR. If the Government meets 
its burden, it then falls to the Applicant to refute, extenuate or mitigate the Government’s 
case. Because no one has a “right” to a security clearance, an applicant bears a heavy 
burden of persuasion.4 A person who has access to classified information enters into a 
fiduciary relationship with the Government based on trust and confidence. Therefore, 
the Government has a compelling interest in ensuring each applicant possesses the 
requisite judgment, reliability, and trustworthiness of one who will protect the national 
interests as her or his own. The “clearly consistent with the national interest” standard 
compels resolution of any reasonable doubt about an applicant’s suitability for access in 
favor of the Government.5 
 
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 
                                                 
2 Directive. 6.3. 
3 See Department of the Navy v. Egan, 484 U.S. 518 (1988). 
4 See Egan, 484 U.S. at 528, 531. 
5 See Egan; AG ¶ 2(b). 
 
 
 
 
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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. . . 
 
 Applicant’s mortgage and credit card accounts represent a delinquent debt load 
of $156,488. He had difficulty meeting his payments on three properties, including two 
he purchased during the real estate boom. He short-sold two properties, but he has 
been delinquent since January 2012 on the second loan on his residence. The credit 
card loan became delinquent in February 2012. He is unable to resolve the debts at 
this time. The following disqualifying conditions under AG ¶19 apply: 
 
(a) inability or unwillingness to satisfy debts; and 
 
(c) a history of not meeting financial obligations.  
 
 The Financial Considerations guideline also contains factors that can mitigate 
security concerns. I have considered the mitigating factors under AG ¶ 20, especially 
the following: 
 
(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; and 
 
(d) the individual initiated a good-faith effort to repay overdue creditors or 
otherwise resolve debts.  
 
 Applicant's debts are recent, because his mortgage loan and credit account 
debts are currently delinquent. Financial problems may recur in light of his unstable 
financial status: his pay has been reduced significantly, and he has a substantial 
negative MNR. However, because Applicant has made efforts to deal with his 
delinquencies, and his situation does not indicate a current lack of trustworthiness, he 
receives some mitigation under AG ¶ 20(a).  
 
 
 
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 Some elements of Applicant's financial history resulted from events beyond his 
control, including the real estate market crash, his layoff in 2011, and a recent pay cut. 
Applicant made efforts by working with the lenders, and ultimately sold two properties 
for less than the mortgage balance owed. However, a key element in the evaluation is 
that Applicant initiated his financial problems by his own actions. He consciously 
decided to purchase two properties during the real estate boom, taking on debt of more 
than $1,000,000. He placed a small down payment on one property and no down 
payment on the other. He financed both through ARMs. At one point, he had a total of 
seven ARMs on three properties. Most significantly, he knew when he made these 
loans that he would be unable to make the payments when the interest rates 
increased. Only limited mitigation is available to Applicant under AG ¶ 20(b). 
  
 Applicant sought professional advice on his financial situation from realtors, and 
more recently, from a financial counseling company. However, the financial counseling 
company informed him he could not afford a payment plan, even though it related to 
only one of his delinquencies. Two large debts remain unresolved. With a substantial 
negative monthly remainder, there appears little likelihood he will be able to bring his 
delinquencies under control in the near future. Applicant receives some mitigation 
under AG ¶ 20(c) and (d), but on balance, the partial mitigation available under 
Guideline F is insufficient to outweigh the significant debt that Applicant voluntarily 
assumed and is unlikely to be able to resolve in the foreseeable future.  
 
Whole-Person Analysis 
  
 Under the whole-person concept, an administrative judge must evaluate the 
applicant’s security eligibility by considering the totality of an applicant’s conduct and all 
the circumstances. An 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. 
 
AG ¶ 2(c) requires that the ultimate determination of whether to grant a security 
clearance must be an overall commonsense judgment based upon careful 
consideration of the guidelines and the whole-person concept. Under the cited 
guideline, I considered the potentially disqualifying and mitigating conditions in light of 
all the facts and circumstances surrounding this case.  
 
 
 
 
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 In assessing Applicant's request for security clearance eligibility, I considered 
the positive evidence under the whole-person concept. He is an educated man who 
has held responsible positions with the federal government, either as an employee or a 
contractor, for 25 years. He had solid credit before the housing market crash and 
unemployment affected his finances. He has resolved several debts. 
 
 However, the evidence against approval of Applicant’s clearance is more 
substantial. The mortgage debts that he took on interfered with his ability to pay his 
other debts, including his federal taxes. Applicant has not made payments on his 
significant second mortgage loan for approximately one-and-one half years. He is in 
touch with the lender, but there is no evidence of a solution. Although he has contacted 
the collection agency that holds his credit card account, he has no plan in place to 
resolve that debt of almost $25,000. The prospect for resolving his debts is poor, given 
his substantial negative monthly remainder. An applicant is not required to have 
resolved every debt. However, not only must he have a plan in place to deal with his 
debts, but he must show significant steps have taken place to implement that plan.6  
 
 It is well settled that once a concern arises regarding an applicant's security 
clearance eligibility, there is a strong presumption against the grant or renewal of a 
security clearance.7 The evidence at this time fails to satisfy the doubts raised about 
Applicant’s suitability for a security clearance. For all these reasons, I conclude he has 
not mitigated the security concerns raised by the financial considerations guideline. 
 
Formal Findings 
 
Paragraph 1, Guideline F   AGAINST APPLICANT 
 
  Subparagraphs 1.a – 1.b  Against Applicant  
 
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is not 
clearly consistent with the interests of national security to allow Applicant access to 
classified information. Applicant’s request for a security clearance is denied. 
 
 
 
 
RITA C. O’BRIEN 
Administrative Judge 
                                                 
6 ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008). 
 
7 See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990)