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                              DEPARTMENT OF DEFENSE
               DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 12-06065
)
)
Applicant for Security Clearance )
Appearances
For Government: Julie R. Mendez, Esquire, Department Counsel
For Applicant: Kevin A. Peck, Esquire
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Decision
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WHITE, David M., Administrative Judge:
Applicant incurred substantial delinquent indebtedness on Federal income taxes
due from 2008 through 20011, and on his home mortgage. The evidence is insufficient
to mitigate resulting security concerns. Based upon a review of the pleadings,
testimony, and exhibits, eligibility for access to classified information is denied. 
Statement of the Case
Applicant submitted a security clearance application (SF 86) on November 8,
2011. On September 10, 2013, the Department of Defense (DoD) issued a Statement of
Reasons (SOR) to Applicant, detailing security concerns under Guideline F (Financial
Considerations). The action was taken 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
Program (January 2, 1992), as amended (Directive); and the Adjudicative Guidelines for
Determining Eligibility for Access to Classified Information, effective within the
Department of Defense after September 1, 2006. 
Applicant answered the SOR in an undated writing (AR) that was received by the
Defense Office of Hearings and Appeals (DOHA) on October 16, 2013, and requested a
hearing before an administrative judge. Department Counsel was prepared to proceed
There is no exhibit marked “AE I.”1
Applicant provided no pay records to document his current gross income.  He variously estimated it to be2
between $57,120 to $69,000 per year in different uncorroborated statements. See GE 3 at 7; AE J at 5; Tr.
34, 72.
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on November 25, 2013. The case was assigned to me on December 3, 2013. DOHA
issued a Notice of Video Teleconference Hearing on January 14, 2014, and I convened
the hearing, as scheduled but in an alternate location, on January 27, 2014. Applicant,
his counsel and witness, and the court reporter attended the hearing in person.
Department Counsel participated from DOHA Headquarters by video teleconference.
The Government offered Exhibits (GE) 1 through 3, which were admitted without
objection. Applicant offered Exhibits (AE) A through H, and Hearing Exhibit (HE) I, a trial
memorandum, which were admitted without objection. Applicant and one witness
testified on his behalf. I granted Applicant’s request to leave the record open until
February 10, 2014, for submission of additional evidence. DOHA received the transcript
of the hearing (Tr.) on February 6, 2014. Applicant timely submitted AE J,  which was1
admitted  without objection and the record closed.
Findings of Fact
Applicant is a 48-year-old employee of a defense contractor, where he has
worked since August 2011. He is married, with five children, ages 12, 18, 22, 26, and
28. The youngest three children still live with him and his wife. He graduated from high
school in 1983, and earned an Airframes and Powerplant Certificate from a vocational
school in 1987. He has no military service, and has not previously applied for or held a
security clearance. His father was a naval aviator who was shot down over Viet Nam in
1966, and was missing in action until ultimately declared deceased in about 1980.
Applicant’s son also served in the Navy for five years.  (GE 1; Tr. 19, 29-30, 34-35, 94.) 
In his response to the SOR, Applicant admitted the allegations concerning
delinquent Federal income tax and mortgage debts set forth in SOR ¶¶ 1.a through 1.c,
with explanations. Applicant’s admissions, including his statements in response to
DOHA interrogatories (GE 3), are incorporated in the following findings.
Applicant worked for his current employer from 1987 to 1989 as an aircraft
structures mechanic. He then went to work for a major airline company as a flight line
technician, eventually earning about $89,000 per year. His employment at the airline
was terminated in June 2011 for abuse of sick leave, after having received previous
notices placing him on “sick leave watch” for having six or more sick leave occurrences
per year. While appealing his termination from the airline, he obtained his current
employment as a Flight Test Aviation Maintenance Technician in August 2011. He has
since earned $20,000 to $32,000 less per year than he was being paid when he left the
airline.  During his two months of unemployment between jobs, after leaving the airline2
in June 2011, he received $550 per week in unemployment compensation. (GE 1 at 10-
12; Tr. 31-34, 58-60.)
Applicant’s testimony and memory were vague concerning their use of these funds. It appears from GE 23
that they refinanced the original $351,000 mortgage in November 2004 for $450,000 and refinanced again
in October 2005 for $497,000. This would mean that only about $61,000 in equity was cashed out in 2006;
a figure that is more consistent with the expenditures that Applicant testified about. He did not explain how
he spent the roughly $150,000 in equity funds from the two previous refinancing loans.
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Applicant’s wife worked in a job that paid her around $35,000 to $40,000 per year
from 2006 to May 2009, when she was laid off due to the closure of her facility. She was
then unemployed until February 2012, when she obtained new employment, in which
she earns a similar amount. (GE 3 at 7; AE J at 5; Tr. 48, 61, 92.) 
Applicant and his wife purchased their home in May 2002 for $369,000, with a
mortgage loan of $351,000 and monthly payments of $2,824.  In December 2006, they
refinanced the home with a cash-out fixed-rate mortgage loan of $558,000 requiring
monthly payments of about $4,200. They used the $190,000 to $210,000 in cash-out
equity to repay about $40,000 toward a Federal income tax lien to the Internal Revenue
Service (IRS), to pay off a used-car loan, to purchase a piano, to pay other small bills,
and to put about $5,000 in their savings account.  (GE 2; Tr. 65-68.) 3
Applicant was unable to make the new mortgage payments starting in 2009,
when his wife was laid off. Over the succeeding years, he negotiated a series of three
mortgage modifications, reducing his monthly payment to around $3,700. Nevertheless,
as he admitted in his response to SOR ¶ 1.c, he fell about $70,000 behind in payments.
This represents about 19 months worth of payments, although it accrued over a longer
period since Applicant testified that, “sometimes we would pay half of the payment, half
of the mortgage payment. It was just a big struggle.” (Tr. 70.) In August 2013, Applicant
agreed to make “Trial Period Plan” payments of $3,547 in September and October
2013, in an effort to obtain approval of another mortgage modification. He testified that
he made those payments. (AE C; Tr. 49-50, 69-71.)
Applicant’s mortgage lender recently sold the loan to the current holder, with
whom he negotiated another modification agreement that was accepted by the creditor
in January 2014. This agreement covers a total debt of $620,005; comprising $519,213
in unpaid principal, $88,214 in unpaid interest, and $12,578 in an unpaid escrow
balance due. The agreement calls for deferment of the unpaid interest for five years.
Applicant will have to make five years of $2,596 interest-only payments (at 6.0%) on the
principal balance and $896 escrow payments, for a total monthly payment of $3,492. At
the end of the five-year “reduction period” under the agreement, the original terms of
Applicant’s mortgage loan will become effective, and he will still owe the full principal
balance and deferred interest amount. (AE B; AE D; AE H; Tr. 50-51, 75-79.) 
In 2008, in order to increase his available income, Applicant reduced his Federal
income tax withholding. This resulted in the $10,567 delinquent tax debt to the IRS, as
alleged in SOR ¶ 1.a. In 2011 he entered into an agreement to pay the IRS $200 per
month toward this debt, but could not afford to make these payments and is currently
considered to be in an “uncollectible” status. (AR; GE 3; Tr. 40-41, 80.)
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When Applicant’s employment was terminated by the airline in June 2011, the
outstanding balance on about $14,000 for a loan he had taken from his 401(k) plan
became due and he withdrew the remaining $16,000 from the plan to meet living
expenses. This resulted in a 20% tax penalty on those funds. The resulting 2011
Federal income tax delinquency was combined with about $12,000 in tax delinquencies
from 2009 and 2010 to generate the $21,351 IRS tax lien described in SOR ¶ 1.b, which
is also in an uncollectible status. (AR; GE 3; Tr. 46, 63, 81-82.)
Applicant provided documentation of one $200 payment in January 2014 toward
the 2008 tax debt, and of the application of his $741 IRS refund for 2012 taxes toward
his 2009 tax delinquency. He testified that he had paid about $2,000 to $3,000 toward
delinquent taxes, but still owed about $10,000 toward 2008 taxes and had made no
other payments toward the 2009 through 2011 delinquencies. He also admitted that he
has no current repayment plan in effect for any of these IRS delinquencies. (AR; GE 3;
AE A; AE B; Tr. 40-41, 45-46, 61-65, 74, 80-82.) 
In late January 2014, Applicant began attending the three-week Goodwill
Industries “Key to Change Financial Education Course.” This involves a 12-hour
curriculum covering goal setting, monthly spending plans, banking basics, account
management, borrowing money, insurance, how to read a credit report, and saving
money. The program coordinator anticipated that he would complete the classes on
February 20, 2014. He testified that he finds the class to be “helpful” and “very
informative.” (AE F; AE G; Tr. 51-52.)
Applicant provided two financial statements, without supporting documentation,
showing different income amounts and expense estimates. He also testified about his
budget. Several significant discrepancies and unreasonable estimates reduce the
credibility of the estimated monthly surpluses, particularly in light of his financial history.
For example, the budgeted deductions from gross to net salary are inconsistent with his
claim that he corrected a previous pattern of under-withholding Federal income taxes,
and his car expense figures and descriptions are inconsistent. He failed to document
consistent payments under any of his various repayment plans toward either his
mortgage or his IRS delinquencies. (GE 3 at 7; AE J; Tr. 72-74, 84-86.)
Applicant provided no evidence concerning the quality of his professional
performance, the level of responsibility his duties entail, or his track record with respect
to handling sensitive information and observation of security procedures. He submitted
no character references describing his judgment, trustworthiness, integrity, or reliability,
other than testimony from his wife, who stated that he is a great husband and father
who gives generously to others in need.
Policies
When evaluating an applicant’s suitability for a security clearance, the
administrative judge must consider the adjudicative guidelines (AG). In addition to brief
introductory explanations for each guideline, the adjudicative guidelines list potentially
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disqualifying conditions (DCs) and mitigating conditions (MCs), which are to be used 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 AG ¶ 2 describing the adjudicative process. The administrative judge’s
overarching adjudicative goal is a fair, impartial, and commonsense decision. According
to AG ¶¶ 2(a) and 2(c), the entire process is a conscientious scrutiny of applicable
guidelines in the context 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 the 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. Likewise, I have avoided drawing inferences
grounded on mere speculation or conjecture.
Under Directive ¶ E3.1.14, the Government must present evidence to establish
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, “[t]he applicant is
responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or
mitigate facts admitted by the applicant or proven by Department Counsel, and has the
ultimate burden of persuasion as to obtaining a favorable clearance decision.” Section 7
of Executive Order 10865 provides: “[a]ny determination under this order adverse to an
applicant shall be a determination in terms of the national interest and shall in no sense
be a determination as to the loyalty of the applicant concerned.”
A person applying for access to classified information seeks to enter 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.
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Analysis
Guideline F, Financial Considerations
The security concerns under the guideline for financial considerations are set out
in AG ¶ 18, which reads in pertinent part:      
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. 
The record evidence potentially raises security concerns under two Guideline F
DCs, as set forth in AG ¶ 19: 
(a) inability or unwillingness to satisfy debts; and
(c) a history of not meeting financial obligations. 
Applicant established a pattern of spending beyond his means that dates to
before 2008, when the first SOR-listed delinquencies arose. He accrued about $32,000
in Federal income tax indebtedness for tax years 2008 through 2011, and was able to
document less than $1,000 in payments toward that debt. He owes more than $620,000
on his home mortgage loan, which he has not consistently paid on a timely basis since
2009. This loan is secured by property for which he paid $369,000 in 2002. His most
recent mortgage loan modification calls for him to make payments only for interest on
the outstanding principal and escrow obligations over the next five years, but he did not
demonstrate that he will be able to do so. This evidence raised significant security
concerns under DCs 19(a) and (c), thereby shifting the burden to Applicant to rebut,
extenuate, or mitigate those concerns.
The guideline includes five conditions in AG ¶ 20 that could mitigate security
concerns arising from Applicant’s financial difficulties:
(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;
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(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; 
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts; and
(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.
Applicant’s three SOR-listed delinquent debts are recent and ongoing, without
indication that the circumstances under which they arose have changed. He used about
$40,000 of his 2006 cash-out mortgage refinancing to repay previous tax delinquencies
to the IRS that were not alleged in the SOR. He therefore failed to establish substantial
mitigation under MC 20(a). 
Applicant also offered insufficient evidence to support significant mitigation under
MC 20(b). His brief period of unemployment in 2011 was caused by a job termination for
abuse of sick leave, and he received substantial unemployment compensation during
that time. Most of his Federal income tax delinquency was caused by his choice to
under-withhold for tax years 2008 through 2011, and the remainder was caused by his
choice to borrow against and withdraw the balance of his 401(k) retirement savings. He
failed to comply with his original IRS repayment plan, and has no current agreement to
resolve these tax debts. He has recently negotiated the most recent of multiple
mortgage loan modifications, but has not consistently met his mortgage obligations
since 2009 or demonstrated that he can meet this one.
Applicant did not undergo financial counseling until entering a 12-hour Goodwill
Industries program just prior to his hearing. He neither documented any substantially
effective effort to repay or otherwise resolve any of the SOR-listed delinquent debts, nor
asserted a legitimate basis to dispute their validity. These facts preclude significant
mitigation under MC 20(c), (d), or (e). 
“An applicant is not required to show that [he] has completely paid off [his]
indebtedness, only that [he] has established a reasonable plan to resolve [his] debts
and has ‘taken significant actions to implement that plan.’” ISCR Case No. 06-12930 at
2 (App. Bd. Mar. 17, 2008) (quoting ISCR Case No. 04-09684 at 2-3 (App. Bd. Jul. 6,
2006)). Applicant has made various agreements to resolve his SOR-listed
delinquencies, but has not demonstrated any success in complying with them, or in
reducing the underlying obligations. 
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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
pertinent facts and circumstances surrounding this case. Applicant has voluntarily
incurred substantial delinquent indebtedness to the IRS and in mortgage obligations
that he could not and cannot currently afford to repay. These debts remain outstanding,
creating the ongoing potential for pressure and duress. The evidence does not support
a finding that continuation or recurrence are unlikely, or that behavioral changes
demonstrate rehabilitation. He is a mature and experienced individual who is
accountable for his choices and financial irresponsibility. Overall, the record evidence
creates ongoing doubt as to Applicant’s present eligibility and suitability for a security
clearance.
Formal Findings
Formal findings for or against Applicant on the allegations set forth in the SOR,
as required by ¶ E3.1.25 of Enclosure 3 of the Directive, are:
Paragraph 1, Guideline F: AGAINST APPLICANT
Subparagraph 1.a: Against Applicant
Subparagraph 1.b: Against Applicant
Subparagraph 1.c: Against Applicant
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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.
                                              
DAVID M. WHITE
Administrative Judge