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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
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)         ISCR Case No. 11-12824
)
)
Applicant for Security Clearance )
Appearances
For Government: Philip J. Katauskas, Esq., Department Counsel
For Applicant: Pro se
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Decision
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MASON Paul J., Administrative Judge:
The credit reports show two mortgage accounts that have been delinquent since
March 2009. Applicant’s April 2013 personal financial statement and other financial
documentation indicate that he has resources to address the mortgage accounts, but has
decided to wait until the accounts are removed from his credit reports. Applicant’s payment
of the listed cable television account and other unlisted accounts is insufficient to overcome
the security concerns associated with the financial considerations guideline. Eligibility for
access to classified information is denied. 
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Statement of the Case
Applicant completed and signed an Electronic Questionnaire for Investigations
Processing (e-QIP) on March 24, 2011. He was interviewed by an investigator from the
Office of Personnel Management (OPM) on June 29, 2011. The interview summary and
Applicant’s interrogatory responses to financial issues appear in Government exhibit (GE)
2, dated April 29, 2013. Applicant agreed with the interview summary and answered
affirmatively that the summary could be admitted into evidence at a hearing to determine
his security suitability. (GE 2)
On December 13, 2013, the Department of Defense (DOD) issued a Statement of
Reasons (SOR) detailing security concerns under the financial considerations guideline
(Guideline F). The action was taken pursuant to 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
Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG)
implemented by the Department of Defense on September 1, 2006. 
Applicant’s answer to the SOR was notarized on January 14, 2013. The Defense
Office of Hearings and Appeals (DOHA) issued a notice of hearing on March 20, 2014, for
a hearing on April 11, 2014. The hearing was held as scheduled. The government’s six
exhibits (GE 1-6) and Applicant’s nine exhibits (AE A-A I) were admitted into evidence
without objection. His post-hearing exhibit (AE J) was admitted into evidence without
objection. The transcript (Tr.) was received on April 21, 2014. The record closed on April
28, 2014. 
Findings of Fact
The SOR contains three allegations under the guideline for financial considerations.
The delinquent debts include two delinquent mortgage accounts totaling approximately
$142,000, and one cable television account amounting to $55. Applicant admitted all factual
allegations. He paid the cable account (SOR 1.b), but he has not acted on the two
mortgage accounts (SOR 1.a, 1.c) because the accounts will be removed from his credit
report in August or October 2014. He has paid other delinquent accounts not listed in the
SOR. 
Applicant is 44 years old. He has been married since October 1997, and has two
children, a son 11 years old, and a daughter 7 years old. He was naturalized as a United
States (U.S.) citizen in December 1999. In December 2000, he received a bachelor’s
degree in computer science. He suspended his pursuit of a master’s degree in computer
science because of family and financial responsibilities. He has been employed as a senior
software engineer for a defense contractor since April 2007. His wife has also been working
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for the same employer for an unidentified period of time. Before Applicant’s current
employment, he worked for three years as a software engineer for another defense
contractor. He has held a security clearance since March 2004. Applicant’s wife was laid
off in November 2013, but resumed working in late March 2014. 
Background of Financial Problems 
Applicant purchased his first home for $375,000 in 2005, where he and his family
lived for the next three years. In early 2008, he converted his first home to a rental. He
purchased, refurbished, and moved his family into a second home and found a tenant for
his rental. He testified that he rented the first home for three months in early 2008, until the
renter could no longer pay the rent. Applicant could not find another renter and was unable
to sell the house because of a depressed real estate market. He testified that he contacted
the creditor (mortgage lender) several times to negotiate a modification of the two
mortgages on the converted rental because he had no resources to cover the monthly
payments. He indicated the creditor did not respond. The house was foreclosed and sold
by the creditor for $179,000, and purchased by a third party in August 2008 for $208,000.
Applicant testified that the creditor (mortgage lender) provided him with a 1099-C
(cancellation of debt), informing him that he owed $29,000 in income on the sale of the
rental (difference between purchase price and sale price). No 1099-C was entered into the
record. Applicant submitted AE J (Internal Revenue Service (IRS) transcript for 2007),
claiming that one of the entries represents additional taxes paid on the sale of the rental.
(GE 2; AE C, J; Tr. 30-36, 56-62) 
Significantly, Applicant made no mention in his June 2011 interview summary of a
1099-C form that he testified receiving from the creditor (mortgage lender). The
government credit reports show that the two mortgage accounts were opened in
September 2005, and have been delinquent since March 2009. Applicant testified that after
talking with a number of unidentified individuals, he believes the mortgage accounts will be
removed from his credit report in August or October 2014. He did not believe he was at
fault for not paying the accounts because he considered his retirement funds were better
suited for the next potential round of employment layoffs that could occur. (GE 2, 3, 4, 5;
AE E, F, G; Tr. 38-39)
During the security investigation, Applicant provided an updated status of other
accounts that are not listed in the SOR. His documentation reveals that three or four of the
seven unlisted accounts were determined to be duplicates and the remaining three
accounts were satisfied. An unlisted tax lien (unpaid taxes) was withdrawn in December
2008, after Applicant submitted documentation proving that he was not working in the state
during the time period in issue. He  satisfied the account at SOR 1.b on March 17, 2014.
(GE 2, 3, 4, 5; AE D, E, F, G; Tr. 40) 
 He admitted in his June 2011 interview summary that a $13,496 tax lien was filed against him in November1
2010 for filing incorrect tax returns for 2007, 2008, and 2009. GE 3 reflects the lien was released in July 2011.
(GE 3) 
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Applicant indicated he has not accumulated additional debt since 2007.  In 2012, a1
credit counselor advised him not to open any more credit accounts. (Tr. 36)
According to his April 2013 personal financial statement (PFS), Applicant’s net
monthly income was about $8,400. He had $4,500 in monthly expenses. His monthly debt
payment to creditors was $1,806, and his net monthly remainder was $2,144. He estimated
the value of his real estate, bank savings, stocks and bonds, and transportation vehicles
totaled about $352,000. The total account value in Applicant’s salaried savings plan for
April 9, 2013 was almost $84,000. (GE 2, attachment, PFS)
Character Evidence
For the years 2007 through 2011, Applicant’s yearly overall performance evaluations
were “successful.” His performance review for 2012 was rated as satisfactory and meeting
all of the customer’s requirements. 
Policies
When evaluating an applicant's suitability for a security clearance, the administrative
judge must consider the potentially disqualifying and mitigating conditions of the AG. These
conditions should be evaluated in the context of nine general factors known as the whole-
person concept to bring together all available, reliable information about the person, past
and present, favorable and unfavorable, in making a decision regarding security clearance
eligibility. 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 the potential,
rather than actual, risk of compromise of classified information.
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. . . ." An applicant
has the ultimate burden of persuasion of establishing that it is clearly consistent with the
national interest to grant him a security clearance. 
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Analysis
Financial Considerations 
The security concern for financial considerations is set forth 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 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.
The applicable disqualifying conditions under AG ¶ 19 are: 
(a) inability or unwillingness to satisfy debts; and 
(c) a history of not meeting financial obligations. 
The credit reports and Applicant’s admissions prove that he is responsible for two
delinquent mortgage accounts totaling about $142,000. He obtained a first and second
mortgage to purchase a home in 2005. The accounts have been delinquent since March
2009. Although Applicant is able to repay the mortgage accounts, he is unwilling to repay
them because he believes they will be removed from his credit report in the near future. AG
¶¶ 19(a) and 19(c) are applicable.
Four mitigating conditions under AG ¶ 20 are potentially pertinent: 
(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 reliability, trustworthiness, and good judgment; 
(b) the conditions that resulted in the financial problem were largely beyond
the person's control 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
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(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts. 
While there is no evidence that Applicant has incurred additional financial problems
since the release of the federal tax lien in July 2011, he has taken no documented steps
to address the two mortgages after they became delinquent in March 2009. Applicant’s
inaction continues to cast doubt on his trustworthiness and judgment. AG ¶ 20(a) does not
apply. 
AG ¶ 20(b) is a two-prong condition requiring an applicant to demonstrate that his
financial issues were caused by matters outside his control, and that he “acted responsibly
under the circumstances.” A serious real estate market downturn in 2008 was clearly a
contributing cause of Applicant’s inability to sell his rental property or modify the two
delinquent mortgages. However, the limited mitigation Applicant receives under the
condition is due to the absence of documented evidence showing that he acted responsibly
to resolve the delinquent mortgage accounts. Simply waiting for delinquent accounts to be
removed from a credit report does not represent good judgment in the management of
one’s financial obligations.
Applicant’s discussion with a credit counselor in 2012 has no application under AG
¶ 20(c) because the two mortgage accounts have not been resolved. 
Applicant receives limited mitigation under AG ¶ 20(d) because he paid the cable
television bill, even though he did not address the account until March 2014, after he
received the SOR. He asserted that the two mortgage accounts would be removed from
his credit report in August or October 2014. I interpret his remarks as his plan to resolve
the delinquent accounts by waiting for them to be removed under provisions of the Fair
Credit Reporting Act. DOHA’s Appeal Board has held that even though an applicant’s debts
may soon be removed from his credit report, this removal does not eliminate their review
for security purposes: 
...the removal of those debts from his credit report does not make them
disappear as if they never existed or preclude the Judge from considering
other record evidence that shows those debts exist. The security significance
of Applicant’s credit history does not turn on whether Applicant’s debts could
or could not be legally listed on a credit report after the passage of seven
years. ISCR Case No. 02-14950 at 4 (App. Bd. May 15, 2003; See ISCR 98-
0111 at 3 (App. Bd. Nov. 13, 1998)
In addition, while Applicant may legally rely on the running of a limitations statute to
avoid paying the mortgage accounts, his reliance does not qualify as a good-faith effort to
satisfy debts. See ISCR Case No. 99-9020 at 5-6 (App. Bd. Jun. 4, 2001) Even though the
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Directive does not define “good-faith,” the DOHA Appeal Board has indicated the term
“requires a showing that a person acts in a way that shows reasonableness, prudence,
honesty, and adherence to duty or obligation.” 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).
In sum, Applicant’s plan to wait for his debts to be removed from his credit report does not
constitute a good-faith effort to resolve the mortgage accounts. Applicant receives only
limited mitigation under AG ¶ 20(d). 
Whole-Person Concept 
I have examined the evidence under the disqualifying and mitigating conditions of
the financial guideline. I have also weighed the circumstances within the context of nine
variables known as the whole-person concept. In evaluating the relevance of an individual's
conduct, the administrative judge should consider the following factors:
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 the participation was 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 a commonsense judgment based on careful consideration of
the guidelines and the whole-person concept.
Applicant is 44 years old. He is married and has two children. He has been working
for his current employer since 2007. His successful performance evaluations from 2007
through 2012, coupled with his resolution of the cable account in March 2014, weigh in his
favor. 
Weighing against the favorable evidence is the fact that the two mortgage accounts
have been delinquent for about four years. There is insufficient documentary evidence to
conclude that the mortgage accounts have been extinguished by AE J (IRS transcript for
2007). The credit reports show that the two accounts continue to be delinquent as of
November 2013, despite Applicant’s continuous employment since 2007 and having
available resources since at least April 2013, to address both accounts. Rather than
honoring his financial obligations, Applicant has chosen to wait until both accounts are
removed from his credit report. His conduct constitutes poor judgment and
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untrustworthiness. Having weighed and balanced the disqualifying conditions with the
mitigating conditions, and in the context of the whole-person concept, Applicant has not
sufficiently mitigated residual judgment and trustworthiness concerns arising from the
financial considerations guideline.
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
Subparagraphs 1.a, 1.c: Against Applicant
Subparagraph 1.b: For Applicant
Conclusion
In light of all of the circumstances presented by the record in this case, it is not
clearly consistent with national interest to grant Applicant eligibility for a security clearance.
Eligibility for access to classified information is denied. 
Paul J. Mason
Administrative Judge