1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 12-04667 ) Applicant for Security Clearance ) Appearances For Government: Braden M. Murphy, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ MATCHINSKI, Elizabeth M., Administrative Judge: Applicant defaulted on about $43,126 in consumer credit obligations between 2009 and 2010. As of September 2013, he had reduced a $1,933 charged-off balance to $90.85, and a $2,627 debt had been paid after collection. He failed to corroborate claimed payments of $9,200 toward $16,116 in collection balances or the elimination of other debts through his spouse’s bankruptcy filing. More documented progress of debt resolution is needed before I can conclude that his financial problems are safely in the past. Clearance denied. Statement of the Case On February 4, 2014, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued a Statement of Reasons (SOR) to Applicant, detailing the security concerns under Guideline F (Financial Considerations), and explaining why it was unable to find that it is clearly consistent with the national interest to grant or continue his security clearance. The DOD CAF took action under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; Department of Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review 2 Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the Department of Defense on September 1, 2006. Applicant answered the SOR allegations on March 7, 2014. On March 14, 2014, Applicant indicated that he would accept the opinion of a Defense Office of Hearings and Appeals (DOHA) administrative judge based upon review of the written record. On March 31, 2014, the Government submitted a File of Relevant Material (FORM) consisting of ten exhibits (Items 1-10). DOHA forwarded a copy of the FORM to Applicant and instructed him to respond within 30 days of receipt. Applicant received the FORM on April 8, 2014. On April 14, 2014, he submitted his rebuttal. On April 18, 2014, Department Counsel indicated the Government had no objections to its admission. On April 29, 2014, the case was assigned to me to consider whether it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. On review of the file, I accepted Applicant’s rebuttal to the FORM into the record as Applicant exhibit (AE) A. Findings of Fact The SOR alleges under Guideline F that as of February 4, 2014, Applicant owed $51,013 in delinquent debt that had been charged off (SOR 1.a-1.c and 1.f) or placed for collection (SOR 1.d-1.e and 1.g-1.k). (Item 1.) In his Answer, Applicant admitted all the debts, although he believed that SOR 1.d and 1.h were the same debt. He added that he had paid $550 on another account that had been delinquent in the amount of $822, and that the debts in SOR 1.b, 1.c, 1.i, 1.j, and 1.k were included in his spouse’s bankruptcy filed in February 2014. When he declined a hearing, he explained that most of his available money had been spent helping a young man. (Item 3.) After considering the Government’s FORM, including Applicant’s Answer (Item 3), and Applicant’s rebuttal (AE A) to the FORM, I make the following findings of fact. Applicant is a 70-year-old married electronic technician. He served in the United States military for 20 years, from 1962 to 1982. In July 1982, he began working for a defense contractor. He was with the company over 19 years when his then employer lost the contract to Applicant’s current employer in February 2002. Applicant has held a DOD Top Secret clearance since January 2003. (Items 4, 10.) On December 15, 2008, Applicant executed an Electronic Questionnaire for Investigations Processing (e-QIP) to renew his DOD security clearance eligibility. He responded negatively to whether he had been over 180 days delinquent on any debts in the last seven years and to whether he was currently over 90 days delinquent on any debts. (Item 4.) As of December 19, 2008, Applicant was making timely payments on a joint car loan taken out in February 2007 for $19,155, to be repaid at $344 per month; on a second joint car loan taken out in January 2008 for $23,428, to be repaid at $435 per month; on a joint mortgage balance of $277,029; and on $30,776 in credit card balances on nine accounts in his name. He had no delinquent accounts on his credit record. (Item 5.) 3 Around August 2008, Applicant’s spouse promised to help care for a friend’s grandson, who had drug-related legal problems. Applicant asserts, without corroboration, that he and his spouse spent about $90,000 of their own money 1 in legal fees, court fines, and warrants for the young man, who died of a drug overdose in January 2011. This unreimbursed expenditure caused Applicant to fall behind on his own accounts. (Item 10.) On November 22, 2010, an incident report was submitted to the DOD CAF indicating that Applicant was delinquent on most of his financial obligations and that his automobile had been repossessed. (Item 6.) A check of Applicant’s credit on February 18, 2011, revealed that Applicant had been chronically past due 30 days in his payment of the February 2007 auto loan, but it was now current. The other car loan had been charged off in July 2010 in the amount of $15,494 (SOR 1.f). He had defaulted on his and his spouse’s mortgage payments of $1,382 per month, and around June 2010, their mortgage lender had foreclosed on their home to settle the debt. In addition, several credit card accounts had been charged off or placed for collection starting in 2009. (Item 7.) The delinquencies are shown in the following table. Debt as alleged in SOR Delinquency history Payment Status 1.a. $317 charged-off debt Credit card account opened Mar. 2002; $1,644 high credit; last activity Aug. 2009; $1,933 charged off Feb. 2010; $317 past due as of Aug. 2013. (Items 5, 7-8, 10.) $90.85 unpaid balance as of Sep. 9, 2013; asserts paid Sep. 16, 2013 (Item 3); no proof of payment. 1.b. $635 charged-off debt Credit card account opened Apr. 2001 as authorized user; 120 days past due on $635 balance Oct. 2009; disputed as of Jul. 2013. (Items 5, 7-8, 10.) Spouse’s credit card debt; believes covered in her Feb. 2014 bankruptcy filing, but no proof. (Item 3; AE A.) 1.c. $3,613 charged-off debt Credit card account opened in his name May 2006; $2,380 credit limit; last activity Apr. 2009; $3,451 charged off Nov. 2009; $3,613 balance Jul. 2013. (Items 7-8, 10.) Claims spouse’s credit card debt; believes covered in her Feb. 2014 bankruptcy, but no proof; no payments as of Mar. 2014. (Item 3; AE A.) 1.d. $8,706 collection debt Credit card account opened Dec. 2006; $7,901 balance current as of Dec. 2008; $8,956 charged off Sep. 2009; purchased by Asserts $8,713.97 balance paid in $950 installments Oct. 2013-Feb. 2014 (Item 3); no proof of payments. 1 In rebuttal to the FORM, Applicant stated that he, his spouse, and the woman’s grandson spent altogether “5,000,000 plus dimes at least” (AE A), which is considerably more than what he told the OPM investigator. He did not provide any corroborating documentation of court costs, attorney fees, or other expenditures for the woman’s grandson. 4 assignee Jun. 2011; $8,957 collection balance Sep. 2013. (Items 5, 7-8, 10.) 1.e. $7,403 collection debt Credit card account opened Mar. 2006; $6,249 high credit; last activity Apr. 2009; $7,403 for collection Sep. 2009; with assignee as of May 2012. (Items 3, 7-8, 10.) Asserts paid $4,450 in lump sum by debit (Item 3); no proof of payment. 1.f. $15,494 charged-off debt Joint $23,428 car loan opened Jan. 2008; $15,494 charged off Jul. 2010. (Items 3, 7-8, 10.) No payments as of Mar. 2014. (Item 3.) 1.g. $2,627 collection debt Joint credit card account opened Jun. 1999; $2,100 high credit; $1,738 current balance as of Dec. 2008; $2,627 charged off Aug. 2009. (Items 3, 5, 7-8.) Paid after charge off or collection; zero balance as of Sep. 22, 2013. (Items 8, 10.) 1.h. $8,956 collection debt Same debt as SOR 1.d 1.i. $2,110 collection debt Contractually liable for $2,110 for collection Nov. 2010; unpaid as of Jan. 2011. (Item 7.) Believes debt on spouse’s Feb. 2014 bankruptcy; no payments; no longer on his credit record as of Sep. 2013. (Items 3, 10; AE A.) 1.j. $645 collection debt Contractually liable for $645 medical debt in collection Dec. 2009; unpaid as of Jan. 2011. (Item 7.) Believes debt on spouse’s Feb. 2014 bankruptcy; no payments; no longer on his credit record as of Sep. 2013. (Items 3, 10; AE A.) 1.k. $507 collection debt Individually liable for $507 debt for collection Oct. 2010; unpaid as of Jan. 2011. (Item 7.) Believes debt on spouse’s Feb. 2014 bankruptcy; no payments; no longer on his credit record as of Sep. 2013. (Items 3, 10; AE A.) On March 16, 2011, Applicant was interviewed about his adverse credit accounts by an authorized investigator for the Office of Personnel Management (OPM). Applicant acknowledged that his account with the lender in SOR 1.a was in collection, and that his vehicle (SOR 1.f) was repossessed in 2010. He claimed that the accounts in SOR 1.b-1.e, 1.g, and 1.i-1.k were in his spouse’s name, and that he knew no details about the debts. Applicant also indicated that he and his spouse had a home loan foreclosed in 2010. They owed about $190,000 on the mortgage, and the house sold for $70,000. She had been living in the home while Applicant occupied a separate residence, which he had paid off in 1995. After the foreclosure, she cohabited with Applicant until February 2011, when she went to stay with one of her sons out of state. Applicant asserted that the delinquencies 5 were beyond his control. He did not intend to fall behind on his financial obligations in the future, but he also did not intend at present to repay his past-due debts. He was contemplating whether to pursue bankruptcy. On his monthly gross income of $8,200 ($6,500 from employment and $1,700 in military pension) and his spouse’s $3,500 monthly social security and unemployment benefits, Applicant estimated their joint net income at $8,200. Their monthly living expenses and current debt payment totaled $440. His reported assets included one acre of land and a trailer valued at $45,000, checking account deposits of $1,500, a classic airplane worth $60,000, and a car valued at $7,000. (Item 10.) As of September 9, 2013, Applicant’s credit record showed the past-due balances alleged in SOR 1.a-1.f. The accounts in SOR 1.g and 1.h reportedly had zero balances after being charged off and transferred or sold. The accounts in SOR 1.i-1.k were no longer on his credit record. (Item 8.) On September 11, 2013, the DOD CAF asked Applicant about any efforts to resolve his delinquent debts since his March 2011 interview. (Item 9.) In response, Applicant provided a credit report of September 22, 2013, showing the unpaid balances in SOR 1.a- 1.f, but no new delinquencies. Applicant completed a Personal Financial Statement on October 2, 2013. He reported joint monthly income after deductions of $8,659.78 and monthly expenses of $1,807. As for debt payments, he indicated that he had paid off the debt in SOR 1.e on September 30, 2013, and that he was scheduled to begin making $950 monthly payments on the collection debt in SOR 1.d on October 10, 2013, although the arrangement was “on hold for Gov. 10/01 layoff.” (Item 10.) Applicant’s spouse apparently filed for bankruptcy around February 20, 2014. He expects all of the remaining past-due debt on his record to be eliminated through her bankruptcy discharge anticipated around May 2014. 2 As of April 14, 2014, she was still living apart from Applicant. She lives on a social security benefit of $1,050 per month and on what Applicant provides for her subsistence. (AE A.) Applicant has not had any credit counseling. He lives frugally and no longer uses any credit cards. He keeps between $3,000 and $5,000 in his checking account. He plans to retire in September or October 2014, although if he should lose his security clearance access eligibility, he intends to retire immediately, sell his assets, and move from his area. Applicant has four vehicles: a 1976 truck with poor gas mileage; a 1979 sports car that he considers unreliable for all but local travel; a 2005 car with low mileage; and a 2007 car for commuting. He still has an old airplane that he bought around 1972. He had hoped to fly it someday but it needs more repairs than he had planned, so he may sell parts. Applicant has a 401(k) account, in which he has “a few dollars.” (AE A.) 2 In the FORM, Department Counsel expressly encouraged Applicant to submit documentation of any payments on his debts. Applicant presented no documentation to verify payments or his spouse’s bankruptcy filing, so it is unclear which debts, if any, would be eliminated in a Chapter 7 discharge. With the exception of the debt in SOR 1.b, on which he was an authorized user per his December 2008 (Item 5) and February 2011 (Item 7) credit reports, the accounts were opened jointly or in his name only. He is legally liable for repayment, even assuming that his spouse ran up the debt on some of his accounts. See AE A (“I found it hard to understand how my wife could amass so much debt on some of the credit cards before it was shut off.”). 6 Policies The U.S. Supreme Court has recognized the substantial discretion the Executive Branch has in regulating access to information pertaining to national security, emphasizing that “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are required to be considered in evaluating an applicant’s eligibility for access to classified information. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are applied in conjunction with the factors listed in the adjudicative process. The administrative judge’s overall 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 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 that the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation as to potential, rather than actual, risk of compromise of classified information. 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 concerns about financial considerations are set out in AG ¶ 18: 7 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. Between 2009 and 2010, Applicant defaulted on ten consumer credit accounts in his name, including a car loan opened jointly. Around $43,126 of delinquent debt was charged off or placed for collection. Another credit card account, on which he was an authorized user, was charged off in the amount of $635 (SOR 1.b). Disqualifying conditions AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and ¶ 19(c), “a history of not meeting financial obligations,” apply. The evidence also shows that he and his spouse lost a home to foreclosure around June 2010, after they fell behind in the mortgage payments. While the property sold for around $70,000, when they owed about $190,000 on the loan (Item 10), there is no evidence that the lender is pursuing them for the deficiency balance. Even so, it shows the extent to which Applicant and his spouse were willing to go to make good on a promise to his spouse’s friend. 3 Applicant’s financial problems are too recurrent and recent to fully apply mitigating condition AG ¶ 20(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.” All of the accounts became delinquent in 2009 or 2010, and several had not been paid as of the SOR. With the exception of the debt in SOR 1.b, on which he was an authorized user, he was legally liable to pay the delinquent balances, even if they were incurred by his spouse on his accounts. AG ¶ 20(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,” is not sufficiently established. Applicant’s sole explanation for falling behind is that he and his spouse spent around $90,000 in legal costs for a young man that his spouse had promised to help. Even assuming Applicant believed in good faith that he and his spouse would eventually be reimbursed, one has to question Applicant’s financial judgment in paying as much as $90,000, if not more, in legal fees and fines for a young man who was in and out of jail for drug offenses, especially when the support came at a cost to Applicant’s own credit worthiness. 3 The DOHA Appeal Board has long held that the administrative judge may consider non-alleged conduct to assess an applicant’s credibility; to evaluate an applicant’s evidence of extenuation, mitigation, or changed circumstances; to consider whether an applicant has demonstrated successful rehabilitation; to decide whether a particular provision of the Adjudicative Guidelines is applicable; or to provide evidence for a whole person analysis under Section 6.3 of the Directive. See, e.g., ISCR Case No. 03-20327 (App. Bd. Oct. 26, 2006); ISCR Case No. 09-07219 (App. Bd. Sep. 27, 2012). The mortgage cannot provide a separate basis for disqualification since it was not alleged in the SOR, but it is still relevant to assessing Applicant’s financial judgment generally. In rebuttal to the FORM, Applicant stated, “I bet my wife wishes that she had done more to protect our future and [the young man’s].” (AE A.) Even if his spouse is primarily liable for exhausting their assets for the benefit of this young man, Applicant bears some responsibility for not limiting the financial support. 8 As of September 2013, the collection agent for the debt in SOR 1.a was reporting only $90.85 owed on an account charged off in the amount of $1,933. The credit bureaus were reporting a $317 past-due balance on that account, although it is likely that the debt status had not been updated on his credit record. Applicant maintains that he satisfied the debt on September 16, 2013. He provided no corroboration of the payment, although payments have obviously been made to reduce the balance from $1,933 in February 2010 to $317 as of August 2013. Another debt, of $2,627 (SOR 1.g), is shown as paid after collection on Applicant’s credit record as of February 22, 2013. 4 AG ¶ 20(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 AG ¶ 20(d), “the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts,” are partially implicated by payments to resolve the delinquencies in SOR 1.a and 1.g. When he answered the SOR, Applicant indicated that he had made payments of $950 each between October 2013 and February 2014 toward the collection debt in SOR 1.d and that he had made a debit payment of $4,450 toward the collection balance in SOR 1.e. He provided no corroboration of those payments, which, if made, would fall short of fully satisfying the debts without some evidence of an agreement by the creditor to accept less than the full balance in settlement. Furthermore, there is no evidence of any payments on the credit card account in SOR 1.c, for which he is individually responsible, or on the automobile loan in SOR 1.f, which is a joint debt. Neither AG ¶ 20(c) nor AG ¶ 20(d) is satisfied as to those delinquencies. Applicant indicated that he expects the debts in SOR 1.b, 1.c, 1.i, 1.j, and 1.k, to be discharged in his spouse’s bankruptcy. There is no confirmation that those accounts have been included in a bankruptcy filing. Since Applicant was only an authorized user on the account identified in SOR 1.b, it may well be covered in a bankruptcy filing by his spouse. As of February 2011, the credit reporting agencies were showing that Applicant was contractually liable for a $2,110 collection balance (SOR 1.i) and a $645 medical debt in collection (SOR 1.j). It is unclear whether his spouse has any legal liability for those debts. The $3,613 charged-off credit card debt (SOR 1.c) and $507 collection balance (SOR 1.k) are reportedly Applicant’s individual responsibility (Item 7), so they would presumably not be covered by her bankruptcy. Available documentation is insufficient to show that most of the debts in the SOR are not his responsibility. Mitigating condition AG ¶ 20(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,” applies only to the debts in SOR 1.b and 1.h. Whereas Applicant is listed as only an authorized user on the account in SOR 1.b, I accept that the credit card belongs to his spouse and that she incurred the debt. The debt in SOR 1.h is duplicated in SOR 1.d and does not represent an additional 4 In the FORM, Department Counsel inaccurately indicated that the account in SOR 1.g was listed as a $2,100 past-due balance on Applicant’s September 22, 2013 credit report. (Item 10.) Both Experian and Equifax reported the balance as $0.00. Experian reported $2,100 as the credit limit while Equifax reported $2,100 as the high balance on the account. Both Experian and Equifax indicated the debt as charged off and transferred. Trans Union reported a high balance of $2,627, a credit limit of $2,100, and a current balance of $0.00, and paid after charge-off/collection. The credit report relied on by the Government does not establish a current delinquency on the account in SOR 1.g. 9 delinquency. Nonetheless, the financial concerns raised by his record of delinquent accounts are only partially mitigated. Whole-Person Concept Under the whole-person concept, the administrative judge must consider the totality of an applicant’s conduct and all relevant circumstances in light of the nine adjudicative process factors in AG ¶ 2(a). 5 Applicant brought on his financial problems. He failed to limit the expenses paid for a young man in legal difficulty. If Applicant’s spouse incurred much of the credit card debt on his record, then he bears responsibility for not controlling her access to his personal credit. Consequences of his extremely poor financial judgment included the loss of the home that his spouse occupied and the repossession of a vehicle. Several consumer credit card accounts in his name were charged off or placed for collection as well. Applicant is not required to resolve all of his delinquent debts before he can be granted security clearance eligibility. Even so, the DOHA Appeal Board has required that an applicant demonstrate that he has a realistic plan established to resolve his financial problems and that he has taken significant actions to implement that plan. See ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted). Even if I accept his uncorroborated claims of payment on some $16,116.97 in collection debt (SOR 1.d and 1.e), Applicant has no plan in place to resolve the $15,494 car loan balance on his credit record. Weighing in his favor, Applicant has a long history of employment in the defense industry following his retirement from the United States military. At the same time, 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. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9 th Cir. 1990.). For the reasons noted above, based on the facts before me and the adjudicative guidelines that I am required to consider, I am unable to conclude that it is clearly consistent with the national interest to continue Applicant’s security clearance eligibility at this time. 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 5 The factors under AG ¶ 2(a) are as follows: (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. 10 Subparagraph 1.a: For Applicant Subparagraph 1.b: For Applicant Subparagraph 1.c: Against Applicant Subparagraph 1.d: Against Applicant Subparagraph 1.e: Against Applicant Subparagraph 1.f: Against Applicant Subparagraph 1.g: For Applicant Subparagraph 1.h: For Applicant Subparagraph 1.i: Against Applicant Subparagraph 1.j: Against Applicant Subparagraph 1.k: 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. ________________________ Elizabeth M. Matchinski Administrative Judge