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DEPARTMENT OF DEFENSE 
DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
 
In the matter of:   ) 
) 
     )  ISCR Case No. 12-05035 
     ) 
) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Philip Katauskas, Esq., Department Counsel 
For Applicant: Pro se 
 
 
______________ 
 
Decision 
______________ 
 
 
CREAN, Thomas M., Administrative Judge: 
 
Based on a review of the pleadings, exhibits, and testimony, eligibility for access 
to classified information is granted. Applicant presented sufficient information to mitigate 
security concerns for financial considerations. 
 
Statement of the Case 
 
On September 17, 2010, and June 19, 20131, Applicant submitted an Electronic 
Questionnaire for Investigations Processing (e-QIP) to obtain a security clearance 
required for a position with a defense contractor. After an investigation conducted by the 
Office of Personnel Management (OPM), the Department of Defense (DOD) issued 
Applicant interrogatories to clarify information in his background. Applicant responded to 
the interrogatories on November 12, 2013. After reviewing the results of the background 
                                            
1 The SOR is based on the September 17, 2010 e-QIP. At the hearing, Applicant stated that he 
also submitted an e-QIP in 2013. The 2013 e-QIP was not in the case file and Department Counsel did 
not have the 2013 e-QIP. After the hearing, Applicant provided a copy of the 2013 e-QIP, and it is 
included in the record as Applicant Exhibit K.  
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investigation and Applicant's responses to the interrogatories, DOD could not make the 
affirmative findings required to issue a security clearance. DOD issued Applicant a 
Statement of Reasons (SOR), dated March 13, 2014, detailing security concerns for 
financial considerations under Guideline F, personal conduct under Guideline E, and 
foreign influence under Guideline B. The 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 (Directive); and the adjudicative 
guidelines (AG) effective in the DOD on September 1, 2006.  
 
Applicant answered the SOR on April 15, 2014. He admitted 17 of the 25 
financial allegations. He denied the two personal conduct allegations, and admitted the 
foreign influence allegation that his wife is a dual citizen of the United States and 
Russia. Department Counsel was prepared to proceed on May 30, 2014, and the case 
was assigned to me on June 2, 2014. DOD issued a Notice of Hearing on June 17, 
2014, scheduling a hearing for July 17, 2014. Applicant signed for the Notice of Hearing 
on June 24, 2014. I convened the hearing as scheduled on July 9, 2014. The 
Government offered four exhibits that I marked and admitted into the record without 
objection as Government Exhibits (GX) 1 through 4. Applicant testified, and offered six 
exhibits that I marked and admitted into the record without objection as Applicant 
Exhibits (AE) A through F. I kept the record open for Applicant to submit additional 
documents. Applicant timely submitted five documents. Department Counsel did not 
object to the documents. (GX 5, Memorandum, dated August 12, 2014) I marked and 
admitted the documents into the record as AX G through K. I received the transcript of 
the hearing (Tr.) on July 18, 2014. 
 
Procedural Issue 
 
 Department Counsel moved to withdraw the foreign influence and personal 
conduct security allegations after the evidence was introduced at the hearing. (Tr. 61-
63, 77) I granted the motion. The only security concern is for financial considerations. 
 
Findings of Fact 
 
After a thorough review of the pleadings, transcript, and exhibits, I make the 
following essential findings of fact.  
  
Applicant is 50 years old and employed by a defense contractor. He has an 
associate’s degree, has been married since February 2006, and has two young 
children. He was a self-employed general contractor from January 2003 until May 2010 
when he started employment with the defense contractor. He was initially employed by 
the defense contractor with a yearly salary of $80,000. He has steadily risen with the 
company and is now a senior executive with a salary of approximately $133,000. The 
company is reorganizing and he is proposed to be the executive vice president with a 
potential salary of $170,000. (Tr. 29-36; GX 1, e-QIP, dated June 19, 2013; AX C, Tax 
Form 1040, 2013; AX D, Presentation, undated) 
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Applicant worked for a large oil company in construction management for 
approximately 18 months before he started his own general contracting business 
building or renovating gas stations for large oil companies from 2001 until 2009. Federal 
and state laws required that contractors building or renovating gas stations have 
specialized licenses to manage hazardous waste and contaminated soil. Applicant had 
all the required certificates from both the federal government and the state governments 
in the vicinity where he worked. The rules were very specific, and once he started the 
process to place or renovate a tank in the ground, he had to complete the process 
under all circumstances. At the time, the oil companies owned all of the properties 
where the gas stations were located. The companies paid all of the bills from Applicant 
on time and understood that Applicant was required to make changes to comply with 
the strict environmental rules. Applicant did not have to be concerned with the business 
operations because the oil companies systematically paid their invoices every two 
weeks. His business with the oil companies was very profitable. The oil companies were 
Applicant’s clients for about eight years. He was accustomed to being paid regularly and 
having a positive cash flow with his sub-contractors. (Tr. 42-45, 50-52) 
 
In 2008, the oil companies started to sell the properties to private individuals who 
would build the gas stations and then own and manage them. The individuals did not 
want to pay for all of the work Applicant was required to do to meet environmental rules. 
The private owners were only concerned with cost and not the work needed to comply 
with environmental regulations. Applicant had to have technical contractors examine the 
soil, have special permits to remove contaminated soil, and to locate licensed dumps for 
the contaminated soil. Applicant had to pay for these environmental charges, but his 
private clients many times refused to reimburse him for this work, and pay on time. 
Many customers did not understand the importance of paying debts on time. (Tr. 52-54) 
 
Applicant focused on the construction part of the business because of his 
experience with the oil companies paying the bills when submitted. He did not pay 
adequate attention to the business side and the payment of bills by his private 
customers. When the private customers did not pay the bills on time, Applicant tried 
working with the private customers on the debts but was unsuccessful. He did not have 
a positive cash flow and was unable to pay his sub-contractors. He admits he was 
irresponsible in not seeking liens against the private customers. He was always paid on 
time by the oil companies and he always paid his subcontractors on time. He was not 
experienced in doing business with customers who did not pay on time, and he had no 
experience in taking customers to court and seeking liens. (Tr. 45-47, 74-75) 
 
The debts listed at SOR 1.b to 1.p. and 1.s are liens and judgments placed by 
Applicant’s sub-contractors in 2009. These debts have not been paid. The debt at 1.g is 
a duplicate of the debt at 1.h. There is only one debt for $24,697. The debt at 1.k is a 
duplicate of the debts at 1.i, and 1.j, There is only one debt for $18,536. (Tr. 61, 66) 
 
The debt at SOR 1.q is unpaid state income taxes. Prior to Applicant starting his 
own company, he worked for a company that withheld state income taxes from his pay. 
However, the company did not send the funds to the state as required. The company is 
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no longer in business. Applicant filed his state tax return each year. He kept his pay 
sheets from the company and was able to establish with the state that state taxes had 
been withheld from his pay. The state audited his account and reduced the amount 
owed to $19,215, which included penalties and interest, for three tax years in the 1990s. 
Shortly before this hearing, the state agreed to settle the debt for $8,000. When he 
receives the written settlement offer from the state, he will pay the $8,000 tax bill. (Tr. 
31-32, 67-69; AX B, Tax Audit, dated July 8, 2014) 
 
Applicant filed a Chapter 13 Bankruptcy petition in May 2013 to organize the sub-
contractor debts for ease of payment. He hired an attorney to work with him to complete 
all of the documents required by the bankruptcy. Applicant told the attorney that not all 
of the debts, including some debts listed in the SOR, were listed for the trustee. 
Applicant wanted to be sure all debts were listed so he could have a favorable debt to 
creditor ratio for a payment plan. The attorney did not follow through and did not send 
an accurate list of all debts to the trustee. Subsequently, the attorney left the law firm 
before Applicant could have the correct debts filed with the trustee. Applicant thought he 
was complying with the payment plan. Since she did not get all of the debts, the trustee 
dismissed the bankruptcy in November 2013. The trustee had not made any payments 
to the creditors. Applicant had made ten monthly payments to the trustee totaling about 
$8,000 per the payment plan. The trustee returned the funds to Applicant, less the 
administrative fees when she dismissed the bankruptcy. Applicant has held the funds in 
an account so he can use them to pay creditors when he has a payment plan with the 
creditors. The SOR debts were not paid by the Chapter 13 bankruptcy. (Tr. 54-61; AX F, 
Bankruptcy Documents; See, Attorney e-mails attached to the Response to SOR) 
 
Applicant and his bankruptcy attorney researched all of the debts listed in his 
credit report to be able to include them in his bankruptcy petition. He had no information 
on some of the debts and their research did not reveal information on the debts. The 
only debt he could verify was the debt at 1.t. This debt is included in his payment plan 
below. He disputes the debts at SOR 1.u, 1.v, 1.w, and 1.y since he has no information 
on the debts. (Tr. 70-71) 
 
Applicant had a debt to a credit card company as listed at SOR 1.x. The credit 
card was used to purchase items when he was a general contractor. The debt has not 
been paid. He denied the debt because his attorney advised him that the credit card 
company had written the debt off. Applicant recently accepted a settlement offer from 
the credit card company that requires monthly payments of $438.87 for 12 months. He 
has not made any of the payments. (Tr. 71-72; AX I, Settlement Offer) 
 
Applicant decided not to refile a Chapter 13 bankruptcy. He could save over 
$4,000 attorney and filing fees and achieve the same result by a structured payment 
plan he developed. He has a plan to pay all of the debts accumulated from his general 
contractor business. The plan requires total monthly payments of $2,092.67 for 
approximately five years. He has a large equity in his home because of extra mortgage 
payments. He has sufficient monthly income to make both the plan’s payments and 
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increased mortgage payments. (AX G, Payment Plan, dated August 12, 2014; AX H, 
Mortgage Payments, dated June 2, 2014)  
 
Applicant presented a letter of recommendation from his company’s director of 
administration who is also the facility security officer. She notes that Applicant was hired 
by the company because of his general contractor experience and the ownership of his 
own company. Applicant possessed the needed entrepreneurial, business development, 
administration, and construction industry experience needed for the position. He has a 
proven track record of self-motivation and project experience. He has the ability to 
create, implement, and maintain a successful business plan. He is highly respected by 
his peers. (AX E, letter, dated July 7, 2014) 
 
Applicant’s subordinate wrote that he has known Applicant for three years. 
Applicant displayed a high level of integrity and has been a team leader. He is someone 
you can count on when there are problems. (AX J, Letter, dated July 30, 2014) 
 
Policies 
 
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 must 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 overarching 
adjudicative goal is a fair, impartial, and commonsense decision. According to AG ¶ 
2(c), the entire process is a conscientious scrutiny of a number of variables known as 
the “whole-person concept.” The administrative judge must consider all available, 
reliable information about the person, past and present, favorable and unfavorable, in 
making a decision. 
 
The protection of the national security is the paramount consideration. AG ¶ 2(b) 
requires that “[a]ny doubt concerning personnel being considered for access to 
classified information will be resolved in favor of national security.” In reaching this 
decision, I have drawn only those conclusions that are reasonable, logical, and based 
on the evidence contained in the record.  
 
Under Directive ¶ E3.1.14, the Government must present evidence to establish 
controverted facts alleged in the SOR. Under Directive ¶ E3.1.15, the applicant is 
responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, 
or mitigate facts admitted by applicant or proven by Department Counsel. . . . .” The 
applicant has the ultimate burden of persuasion in seeking 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 
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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. 
 
Analysis 
 
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 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. (AG ¶ 18) An individual who 
is financially overextended is at risk of having to engage in illegal acts to generate 
funds. However, the security concern is broader than the possibility that an individual 
might knowingly compromise classified information to raise money. It encompasses 
concerns about an individual’s responsibility, trustworthiness, and good judgment. 
Security clearance adjudications are based on an evaluation of an individual’s reliability 
and trustworthiness. It is not a debt-collection procedure. An individual who is financially 
irresponsible may also be irresponsible, unconcerned, or careless in his or her 
obligations to protect classified information. Behaving responsibly or irresponsibly in one 
aspect of life provides an indication of how a person may behave in other aspects of life.  
 
A person’s relationship with his creditors is a private matter until evidence is 
uncovered demonstrating an inability or unwillingness to repay debts under agreed 
terms. Absent evidence of strong extenuating or mitigating circumstances, an applicant 
with a history of serious or recurring financial difficulties is at risk of acting inconsistently 
with holding a security clearance. An applicant is not required to be debt free, but is 
required to manage his finances in such a way as to meet his financial obligations.  
 
Delinquent debts established by credit reports and partially admitted by Applicant 
raise Financial Considerations Disqualifying Conditions AG ¶ 19(a) (inability or 
unwillingness to satisfy debts); and AG ¶ 19(c) (a history of not meeting financial 
obligations). The evidence indicates a history of both an inability but not an 
unwillingness to satisfy debt.  
 
I also considered the Mitigating Conditions at 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); and AG ¶ 20(b) (the conditions that resulted in the financial problems 
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 
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individual acted responsibly under the circumstances). The mitigating condition at AG ¶ 
20(a) applies, but AG ¶ 20(b) does not apply.  
 
Applicant incurred delinquent debt when he was a general contractor and his 
clients did not pay him for his work and he was unable to pay his sub-contractors. The 
sub-contractors entered judgments and liens against Applicant for the work they had 
performed for him. Applicant is no longer a general contractor with private customers 
and employing sub-contractors. The debts were incurred under the unusual 
circumstances of Applicant’s customers not paying the bills to Applicant. The debts are 
unlikely to recur because he is now a salaried employee and not self-employed.  
 
The conditions leading to the financial problems were not wholly beyond his 
control. Applicant’s initial customers, large oil companies, paid their bills on time. When 
the client base switched to private owners, Applicant did not take the appropriate 
measures to collect the bills for his work. His failure to adequately monitor the finances 
and seek liens and judgments against his customers led to the delinquent debts. The 
conditions causing the debts were his responsibility. He has now acted responsibly by 
negotiating and developing a plan to pay the debts. He has sufficient income to meet his 
financial obligations under the payment plan.   
 
I considered mitigating condition at AG ¶ 20(c) (the person has received or is 
receiving counseling for the problem and/or there a clear indication that the problem is 
being resolved or is under control). Applicant did not present any information concerning 
financial counseling. However, a requirement for filing a bankruptcy is to have a 
financial management course. Applicant’s financial obligations are under control. 
 
I considered mitigating condition at AG ¶ 20(d) (the individual has initiated a 
good-faith effort to repay the overdue creditors or otherwise resolve debts) as to the 
past-due mortgage. For AG ¶ 20(d) to apply, there must be an “ability” to repay the 
debts, the “desire” to repay, and “evidence” of a good-faith effort to repay. Good faith 
means acting in a way that shows reasonableness, prudence, honesty, and adherence 
to duty and obligation. A systematic method of handling debts is needed. Applicant must 
establish a "meaningful track record" of debt payment. A "meaningful track record" of 
debt payment can be established by evidence of actual debt payments or reduction of 
debt through payment of debts. A promise to pay delinquent debts in the future is not a 
substitute for a track record of paying debts in a timely manner and acting in a 
financially responsible manner. Applicant must establish that he has a reasonable plan 
to resolve financial problems and has taken significant action to implement that plan.  
 
Applicant initially filed a Chapter 13 bankruptcy as a means of organizing his 
delinquent debts and having a plan and means to pay the debts. He paid under the plan 
for ten months. His attorney failed to provide the bankruptcy trustee with a list of all of 
Applicant’s debts as requested by Applicant. The bankruptcy trustee dismissed the 
bankruptcy and returned all of the funds Applicant paid towards the debts. The 
dismissal was not Applicant’s fault but that of his attorney. Applicant has kept the funds 
returned to him in an account he can use to pay debts. Applicant did not want to file 
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another Chapter 13 bankruptcy so he could save the attorney and bankruptcy fees. He 
developed a plan to pay his delinquent debts on his own. He has not yet started making 
payments under the plan. Normally promises to pay delinquent debts in the future are 
not a substitute for a track record of paying debts in a timely manner or otherwise acting 
in a financially responsible way, However, Applicant’s past actions to file the Chapter 13 
bankruptcy petition, making the required monthly payments for ten months under the 
bankruptcy plan, and develop a new plan on his own are more than a mere promise to 
pay in the future, He acted proactively and kept the returned funds to pay settlements. 
He has sufficient income to make the monthly payments according to his plan. He 
established his ability to have a “meaningful track record” of debt payments. His actions 
on the debts are reasonable, prudent, and an honest adherence to his financial 
obligations.  
 
I have considered 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 provided 
documented proof to substantiate the basis of the dispute or provided evidence of 
action to resolve the issue). Applicant disputes four of the debts because he did not 
have any information on the debts. He and his attorney researched the debts for the 
Chapter 13 petition but could not locate information on the debts. He disputes the debts 
and is contacting creditors to see if he can learn more about the debt. 
 
Applicant’s present and past management of his finances reflects favorably on 
his trustworthiness, honesty, and good judgment. Applicant established that his financial 
actions are a “meaningful track record” of debt payment. The recent documented 
actions to resolve delinquent debt provided by Applicant are firm indication that he is 
managing his financial obligations reasonably and responsibly, and his responsible 
conduct is likely to continue. He has shown an honest adherence to financial duty and 
obligation. There is ample evidence of responsible behavior, good judgment, and 
reliability. Based on the financial information available, to include Applicant’s continued 
action to resolve the debts, I conclude that Applicant mitigated the financial 
considerations security concerns. 
 
Whole-Person Analysis 
 
Under the whole-person concept, the administrative judge must evaluate an 
applicant’s security eligibility by considering the totality of the applicant’s conduct and all 
relevant 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 
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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 a security clearance 
must be an overall commonsense judgment based upon careful consideration of the 
guidelines and the whole-person concept.  
 
I considered the potentially disqualifying and mitigating conditions in light of all 
the facts and circumstances surrounding this case. I considered the favorable 
information concerning Applicant provided by his employer and fellow worker. Applicant 
presented sufficient information to establish that he acted reasonably and responsibly 
towards his finances. His present financial track record establishes confidence in the 
responsible management of his financial obligations. This indicates he will be concerned 
and act responsibly in regard to classified information. Overall, the record evidence 
leaves me without questions and doubts as to Applicant’s judgment, reliability, 
trustworthiness, and eligibility and suitability for a security clearance. For all these 
reasons, I conclude that Applicant has mitigated security concerns arising under the 
financial considerations guideline. Eligibility for access to classified information is 
granted.  
 
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:   FOR APPLICANT 
 
 Subparagraphs 1.a-1.y:  For Applicant 
 
Paragraph 2, Guideline E:   WITHDRAWN 
 
Paragraph 3, Guideline B:   WITHDRAWN 
 
Conclusion 
 
In light of all of the circumstances presented by the record in this case, it is 
clearly consistent with the national interest to grant Applicant eligibility for a security 
clearance. Eligibility for access to classified information is granted. 
 
 
 
_________________ 
THOMAS M. CREAN 
Administrative Judge