DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
--------------------------------- )      ISCR Case No. 14-00014
)
Applicant for Security Clearance )
Appearances
For Government: Jeff Nagel, Department Counsel
For Applicant: Pro se
August 29, 2014
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Decision
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LOKEY ANDERSON, Darlene D., Administrative Judge:
Applicant submitted his Electronic Questionnaire for Investigations Processing
(E-QIP) on November 16, 2009.  (Government Exhibit 1.)  On April 7, 2014, the
Department of Defense (DoD), pursuant to Executive Order 10865 and Department of
Defense Directive 5220.6 (Directive), dated January 2, 1992, (as amended), issued a
Statement of Reasons (SOR) to the Applicant, which detailed reasons why DoD could
not make the preliminary affirmative finding under the Directive that it is clearly
consistent with the national interest to grant or continue a security clearance for the
Applicant and recommended referral to an Administrative Judge to determine whether
clearance should be denied or revoked.
The Applicant responded to the SOR on April 30, 2014, and he requested an
administrative hearing before a Defense Office of Hearings and Appeals Administrative
Judge.  This case was assigned to the undersigned Administrative Judge on May 29,
2014.  A notice of hearing was issued on May 27, 2014, and the hearing was scheduled
for June 11, 2014.  At the hearing the Government presented eight exhibits, referred to
as Government Exhibits 1 through 8, which were admitted without objection.  The
Applicant presented four exhibits, referred to as Applicant’s Exhibits A through D, which
were also admitted into evidence without objection.  He also testified on his own behalf.
The record remained open until close of business on June 17, 2014, to allow the
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Applicant to submit additional documentation.  The Applicant submitted sixteen Post-
Hearing Exhibits, referred to as Applicant’s Post-Hearing Exhibits 1 through 16, which
were admitted without objection.  The official transcript (Tr.) was received on June 19,
2014.  Based upon a review of the pleadings, exhibits, and testimony, eligibility for
access to classified information is granted.
 FINDINGS OF FACT
The Applicant is 53 years old and married.  He has a Bachelor’s degree in
Information Technology and holds the position of Senior Consultant for a defense
contractor.  He is seeking to obtain a security clearance in connection with this
employment.   
The Government opposes the Applicant's request for a security clearance, on the
basis of allegations set forth in the Statement of Reasons (SOR).  The following findings
of fact are entered as to each paragraph and guideline in the SOR:
Paragraph 1 (Guideline F - Financial Considerations)  The Government alleges that the
Applicant is ineligible for clearance because he is financially overextended and at risk of
having to engage in illegal acts to generate funds.      
The Applicant admitted each of the allegations set forth in the SOR under this
guideline.  (See Applicant’s Answer to SOR.)  Credit Reports of the Applicant dated
November 24, 2009; August 27, 2013; March 18, 2014; May 19, 2014, and June 9,
2014, reflect that at one time Applicant was indebted for each of the debts set forth in
the SOR, in an amount totaling in excess of $150,000.  (Government Exhibits 4, 5, 6, 7
and 8.) 
Applicant served honorably on active duty in the United States Navy for 23 years,
from 1984 to 2007.  During his stellar military career he underwent numerous
deployments and received many awards and commendations for his service.
(Applicant’s Post-Hearing Exhibits 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12 and 13.)  He also
held a security clearance without issue.  He has been employed as a civilian for the past
seven years and with his current employer since December 2014.
    
In 2006 Applicant and his wife were gainfully employed, and looking for an
investment to bolster their retirement.  That same year, they learned of an out-of-state
investment opportunity, and they decided to take advantage of it.  They invested
between $10,000 and $20,000 of their money to purchase three out-of-state rental
properties, namely single-family homes, from a company.  This company offered, as a
packaged deal, to provide property management, maintenance services, and would
ensure that the properties were rented at all times, or they would cover the rent for the
time the property was not occupied by a tenant.  They would also ensure that Applicant
received payments from all rents.  
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In 2007 Applicant’s wife lost her job.  One of the two properties had a major fire
that caused considerable damage.  Applicant also started receiving notices of eviction
on the properties.  Following this, the management company simply stopped doing the
job they had promised.  Applicant did not receive any rents for about six months and
was unable afford the mortgages himself.  He got no help from the management
company.  This eventually led to both properties going into foreclosure.      
Applicant became delinquently indebted to a bank for two mortgages, one in the
amount of $72,358.18; and the other for $67,517.86.  Applicant testified that the debts
were cancelled by the bank in 2010, as he was issued a Form 1099-A and a Form
1099-C.  (Applicant’s Exhibits B and C.)  These were filed with his 2010 tax return, and
he paid the taxes that were assessed.  (See Applicant’s Exhibit D, Applicant’s 2010
state income tax return that includes the Form 1099-C.)  Applicant further testified that
the property with the loan amount of $72,358.18 was sold by the lender at a profit that
generated a Form 1099-A.  Since it was sold for a profit, Applicant had no tax liability.
The other property with the loan amount of $67,517.86 was sold by the lender for a loss
that generated a Form 1099-C, which is a cancellation of debt.  The Government
submitted no evidence to the contrary.   
Applicant also became delinquently indebted for credit card debt in the amount of
$8,292.  Applicant testified that he used the credit card to pay for financial counseling
that he thought could assist in saving the properties.  Applicant intended on paying the
debt and was working to set up a payment arrangement.  Instead, the lender threatened
to garnish his wages, which would have effected his ability to pay his other bills, so he
decided to filed for Chapter 13 Bankruptcy protection.  He completed the debtor
education course as required.  (Applicant’s Post-Hearing Exhibit 14.)  In April 2011,
Applicant filed for Chapter 13 and included this delinquent debt.  (See, Schedule F in
Applicant’s Exhibit A.) Applicant has complied with the Chapter 13 Trustee’s payment
schedule without hardship.  (Government Exhibit 3.)   
Applicant is current on all of his other debts.  He has a history of paying his bills
on time and living within his means.  He has no other credit card debt.  
In early 2011, Applicant was contacted and interviewed by the Internal Revenue
Service and the Federal Bureau of Investigation concerning the property management
company. in which he had invested.  He learned that they were under investigation for
fraud.  He was informed that the situation had occurred to many other investors and that
it even involved the same properties he had purchased.  In February 2013, Applicant
and his wife testified in District Court against the defendant management company.
The defendant pled guilty and sentencing was scheduled for July 2014.  (Tr. pp. 26-27.)
Applicant received a letter of appreciation from the Navy for his excellent work as
a civilian.  (Applicant’s Post-Hearing Exhibit 15.)  He also received a Service Excellence
award from another government employer.  (Applicant’s Post-Hearing Exhibit 16.) 
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POLICIES
Enclosure 2 of the Directive sets forth adjudication policies divided into
"Disqualifying Factors" and "Mitigating Factors."  The following Disqualifying Factors
and Mitigating Factors are found to be applicable in this case:
Guideline F (Financial Considerations)
18.  The Concern.  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. 
Conditions that could raise a security concern:
19.(a) inability or unwillingness to satisfy debts; and
19.(c) a history of not meeting financial obligations. 
Conditions that could mitigate security concerns:
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;
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 
20.(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
In addition, as set forth in Enclosure 2 of the Directive at pages 18-19, in
evaluating the relevance of an individual’s conduct, the Administrative Judge should
consider the following general factors:
a. The nature, extent, and seriousness of the conduct and surrounding
circumstances;
    b. The circumstances surrounding the conduct, to include knowledgeable
participation;
c.  The frequency and recency of the conduct;
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d.  The individual’s age and maturity at the time of the conduct;
e.  The extent to which participation is voluntary;
f.  The presence or absence of rehabilitation and other permanent behavior
changes;
g.  The motivation for the conduct; 
h. The potential for pressure, coercion, exploitation or duress; and
 i.  The likelihood of continuation or recurrence.
The eligibility criteria established in the DoD Directive identify personal
characteristics and conduct, which are reasonably related to the ultimate question,
posed in Section 2 of Executive Order 10865, of whether it is “clearly consistent with the
national interest” to grant an Applicant’s request for access to classified information.
The DoD Directive states, “The adjudicative process is an examination of a
sufficient period of a person’s life to make an affirmative determination that the person is
an acceptable security risk.  Eligibility for access to classified information is predicated
upon the individual meeting these personnel security guidelines.  The adjudicative
process is the careful weighing of a number of variables known as the whole-person
concept.  Available, reliable information about the person, past and present, favorable
and unfavorable, should be considered in reaching a determination.” The Administrative
Judge can draw only those inferences or conclusions that have reasonable and logical
basis in the evidence of record.  The Judge cannot draw inferences or conclusions
based on evidence which is speculative or conjectural in nature.  Finally, as emphasized
by President Eisenhower in Executive Order 10865, “Any determination under this order
. . . 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.”
CONCLUSIONS
In the defense industry, the security of classified industrial secrets is entrusted to
civilian workers who must be counted upon to safeguard such sensitive information
twenty-four hours per day, seven days per week.  The Government is therefore
appropriately concerned when available information indicates that an Applicant for
clearance may be involved in instances of financial irresponsibility, which demonstrates
poor judgment or unreliability.
It is the Government’s responsibility to present substantial evidence to support
the finding of a nexus, or rational connection, between the Applicant’s conduct and the
holding of a security clearance.  If such a case has been established, the burden then
shifts to the Applicant to go forward with evidence in rebuttal, explanation or mitigation,
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which is sufficient to overcome or outweigh the Government’s case.  The Applicant
bears the ultimate burden of persuasion in proving that it is clearly consistent with the
national interest to grant him or her a security clearance.
In this case the Government has met its initial burden of proving that the
Applicant has been financially irresponsible (Guideline F).  This evidence indicates poor
judgment, unreliability and untrustworthiness on the part of the Applicant.  Because of
the scope and nature of the Applicant's conduct, I conclude there is a nexus or
connection with his security clearance eligibility.
Here, the old saying applies, if it sounds to good to be true, it is.  Applicant
detrimentally relied on the property management company to properly handle his
investments.  The company grossly mismanaged the Applicant’s properties, he was not
financially prepared to take over the payments in the event the company breached their
contract, and he took the hit, causing considerable strain on his finances, and his
properties were foreclosed upon.  Applicant intentions were honorable throughout the
entire process.  He has received no inherent benefit from the default.  This was
obviously an isolated incident that will not recur.         
Applicant received a Form 1009-A and a Form 1099-C from the lender
concerning the loans on the properties and paid the taxes that were assessed from the
transactions.  His other debt is being handled through her Chapter 13.
Applicant understands that he must remain fiscally responsible if he is to hold a
security clearance.  He has made a good-faith effort to resolve his past due
indebtedness.  He has not incurred any new debt that he cannot afford to pay.  He has
learned from his mistakes, and demonstrated that he can properly manage his financial
affairs.  There is clear evidence of financial rehabilitation.  Considering all of the
evidence, the Applicant has introduced persuasive evidence in rebuttal, explanation or
mitigation that is sufficient to overcome the Government's case. 
Under Guideline F (Financial Considerations), Disqualifying Conditions 19.(a)
inability or unwillingness to satisfy debts; and 19.(c) a history of not meeting financial
obligations, apply.  However, Mitigating Conditions 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; 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 20.(d) the
individual initiated a good-faith effort to repay overdue creditors or otherwise resolve
debts also apply.  Accordingly, I find for the Applicant under Guideline F (Financial
Considerations).    
I have also considered the “whole-person concept” in evaluating the Applicant’s
eligibility for access to classified information.  Under the particular facts of this case, the
totality of the conduct set forth above, when viewed under all of the guidelines as a
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whole, support a whole-person assessment of good judgement, trustworthiness,
reliability, candor, and a willingness to comply with rules and regulations, and/or other
characteristics indicating that the person may properly safeguard classified information.
  I have considered all of the evidence presented, including his excellent and
dedicated service to our country during his 23 years of active duty in the Navy, followed
by his seven years of civilian service.  It mitigates the negative effects of his financial
indebtedness and the effects that it can have on his ability to safeguard classified
information.  On balance, it is concluded that the Applicant has overcome the
Government's case opposing his request for a security clearance.  Accordingly, the
evidence supports a finding for the Applicant as to the factual and conclusionary
allegations expressed in Paragraph 1 of the SOR.   
     FORMAL FINDINGS
Formal findings For or Against the Applicant on the allegations in the SOR, as
required by Paragraph 25 of Enclosure 3 of the Directive are:
Paragraph 1: For the Applicant.
        Subpara.  1.a.: For the Applicant.
        Subpara.  1.b.: For the Applicant.
    Subpara.  1.c.: For the Applicant.
 DECISION
In light of all the circumstances presented by the record in this case, it is clearly
consistent with the national interest to grant or continue a security clearance for the
Applicant.
Darlene Lokey Anderson
Administrative Judge