Item 5.1
1
                                                                     
                               DEPARTMENT OF DEFENSE
                DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 13-01312
)
)
Applicant for Security Clearance )
Appearances
For Government: Pamela Benson, Esq., Department Counsel
For Applicant: Pro se
______________
Decision
______________
WHITE, David M., Administrative Judge:
Applicant incurred substantial debts that he could not repay during the ten years
following a family medical tragedy. He had more than $346,000 of debt cancelled as
uncollectible, and resolved about $15,400 in other debts. About $156,000 in debt
remains unresolved. Resulting security concerns were not mitigated. Based on a review
of the pleadings and exhibits, eligibility for access to classified information is denied.
Statement of the Case 
Applicant submitted a security clearance application (SF 86) on August 28, 2013.1
On February 6, 2014, the Department of Defense (DoD) issued a Statement of Reasons
(SOR) to Applicant, detailing security concerns under Guideline F (Financial
Item 1.2
Item 4. 3
The Government submitted ten Items in support of the SOR allegations. 4
Items 4 and 5.5
Item 4.6
2
Considerations).  The action was taken under Executive Order 10865, Safeguarding2
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 that
came into effect in the Department of Defense on September 1, 2006. 
Applicant submitted a written response to the SOR on February 27, 2014, and
requested that his case be decided by an administrative judge on the written record
without a hearing.  Department Counsel submitted the Government’s written case on3
May 19, 2014. A complete copy of the File of Relevant Material (FORM)  was provided to4
Applicant, and he was afforded an opportunity to file objections and submit material in
refutation, extenuation, or mitigation within 30 days of his receipt of the FORM. 
Applicant signed the document acknowledging receipt of his copy of the FORM on
June 6, 2014. He submitted additional material in refutation, extenuation, and mitigation
on July 1, 2014, within the 30-day period, and made no objection to consideration of any
contents of the FORM. Department Counsel indicated no objection to the admissibility of
Applicant’s FORM Response (FR) in a memorandum dated July 7, 2014. I received the
case assignment on July 17, 2014.
Findings of Fact
Applicant is 67 years old, married, and has two adult children. A third child passed
away in January 2006. Applicant earned a bachelor’s degree and commission from the
U.S. Naval Academy in 1970, and a master’s degree from the Naval War College in
1989. He honorably retired after 26 years of service as a naval officer, and has worked
as a program director for a defense contractor since June 1996. He held a security
clearance, without incident, throughout his naval and post-naval careers in support of
national defense.  5
In his response to the SOR, Applicant admitted the allegations in SOR ¶¶ 1.a, 1.b,
1.d, 1.e, 1.f, and 1.g. He denied the remaining allegations in the SOR, with some
explanations.  Applicant’s admissions are incorporated into the following findings of fact.6
Applicant admittedly filed for Chapter 13 bankruptcy relief in January 2010. His
listed liabilities totaled about $797,000. This bankruptcy proceeding was dismissed in
Item 4; Item 6 at 19 of 44, 41 of 44, 47; FR Attch. 9.7
Item 4 at 3, 8; Item 9 at 2; FR at 2-3, Attch. 8.8
FR Attch. 4.9
Item 4; FR.10
3
April 2010 because Applicant’s debts were too high for him to qualify for bankruptcy relief
under Chapter 13. His attorney informed him that his only other bankruptcy option would
be under Chapter 11, but he could not afford the legal fees associated with such a
proceeding.  7
Applicant’s SOR-listed debts break down into four groups. The first, involving only
SOR ¶ 1.b, is the $88,183 charged-off balance due on the second mortgage loan
formerly secured by the home involved in Applicant’s August 2011 short sale of that
property. In two letters, dated June 28 and 29, 2011, the lender offered to release their
lien on the property (with the reduced balance remaining due and payable) for a payment
of $11,300 from the short-sale proceeds, or to accept $22,600 as settlement in full for
the then-outstanding account balance of $99,483. The lender received $11,300 in the
short-sale escrow settlement and released the lien, but Applicant was unwilling or unable
to pay the additional $11,300 to resolve the remaining $88,183 balance. He states that
the lender has made no further effort to collect this debt, but it has not been cancelled or
otherwise forgiven and remains unresolved.  8
The second group comprises four credit card account debts, totaling $80,706 and
owed to a credit union, alleged in SOR ¶¶ 1.c, 1.i, 1.j, and 1.k. Applicant provided a letter
from a recovery specialist at the credit union dated June 23, 2014, stating, “there has
been a payment received on each [of these] account[s] since September 2010 and there
is a monthly payment arrangement in place to repay all the accounts.”  Applicant9
provided documentation of some payments toward each of these accounts, as well as
statements showing more recent balances below those alleged in the SOR. The most
recent of these statements showed a $4,600 reduction from the $45,196 balance alleged
in SOR ¶ 1.c; a $1,443 reduction from the $4,908 balance alleged in SOR ¶ 1.i; a $721
reduction from the $4,688 balance alleged in SOR ¶ 1.j; and a $6,176 reduction in the
$25,914 balance alleged in SOR ¶ 1.k. Applicant’s documentation demonstrates
resolution of about 16% of these delinquent credit card debts over the past four years,
but more than $67,700 remains unresolved. Applicant states that he has agreed to make
combined monthly payments of $627 toward these four accounts, at which rate it will
take nine years to resolve them if all such payments are made.10
The third group of delinquent debts, alleged in SOR ¶¶ 1.d through 1.g, involved
two credit card accounts and two lines of credit with a major bank, totaling $59,893.
These accounts were all opened between April and August 2006. When Applicant was
unable to make his agreed payments on these debts, he unsuccessfully “attempted to
Item 4 at 4, 5; FR at 1.11
Item 4; Items 7 through 9; FR.12
Item 9; See also Item 8. 13
Item 4; Item 9 (showing report date of 7/11); FR Attch. 11.14
FORM; Item 4; FR.15
4
negotiate reasonable payments.”  His last payments toward the lines of credit were11
made in November 2008, and his last payments toward the credit cards were in May
2009. Eventually, the accounts were written off as losses by the lender, and Applicant
received IRS Forms 1099-C reporting the cancelled debts as income. The two line of
credit debts, totaling $48,358, were cancelled in 2011. This total, as well as the $286,462
in cancelled unsecured first mortgage debt resulting from the short sale of his home the
same year, appeared on his 2011 Federal income tax return as excludable income on
which taxes were not required to be paid due to his insolvency. The two cancelled credit
card debts, totaling $11,535, were cancelled in 2012, and Applicant paid Federal taxes
on the resulting income. Applicant is no longer obligated to pay any of these cancelled
debts. However, including the first mortgage deficiency forgiven in connection with his
home’s short sale, he borrowed, spent, and failed to repay more than $346,000 as
promised during this period.12
The final group involves three allegations of delinquent debts totaling $2,498 that
are resolved. The charge account alleged in SOR ¶ 1.h was opened in April 2005 and
reported to be delinquent in December 2009. Applicant’s May 2014 credit report reports
this debt as a “paid charge off” with a zero balance due as of April 2011.  The debts13
alleged in SOR ¶¶ 1.l and 1.m involved final utility bills associated with Applicant’s move
after selling his home in 2011. He provided documentation that these debts were
erroneously reported and were satisfactorily resolved.  14
Applicant’s son was diagnosed with cancer in 2004, at age 29. Applicant said that
his financial problems arose due to lost income and payment of expenses that were
above and beyond what was covered by his son’s medical insurance, which he
voluntarily undertook on his son’s behalf. In email correspondence with the financial
advisor he hired to help him try to renegotiate his mortgages before the short sale of his
home, Applicant explained that he could not comply with his lender’s request to
document or identify specific medical bills and expenses because they were mixed in
with his general credit card and loan accounts. Applicant also did not provide either
itemization or documentation of these claimed medical expenses in his responses to the
SOR or FORM, so their impact on his financial situation cannot be accurately evaluated.
As Department Counsel noted, Applicant’s son died in January 2006 and his financial
records reflect that his delinquencies began in 2008 and worsened thereafter. A causal
link between his son’s tragic medical situation and Applicant’s more recent financial
issues is therefore difficult to discern based on the information he provided.  15
Item 5; Item 7; FR Attch. 3.16
Item 6.17
Item 6.18
FR Attch. 13.19
5
Since his retirement from the Navy in 1996, Applicant has been continuously
employed as a program director for a major defense contractor. His adjusted gross
income, including retirement pay, was $240,156 in 2011; and $247,569 in 2012. In
December 1997, he took out a first mortgage loan on his home for $170,350. He took out
a $22,077 home equity loan in February 2000. In April 2000 he took out a $91,220
second mortgage loan that he refinanced in August 2000 and April 2001 up to a total of
$157,866. Starting in June 2001, he took out another series of second mortgage loans
with a different lender starting at $27,000 and increasing to $88,400 by September 2002.
He then refinanced his first mortgage loan with this lender for $172,307 in November
2002, and borrowed another $19,000 in a second mortgage in January 2003. In
December 2003, he refinanced his first mortgage loan up to $322,700 and paid off his
previous mortgages from those proceeds. In June 2004 he took out another second
mortgage loan of $35,000, then increased this loan to $65,000 in November 2004. He
again refinanced this second mortgage with a different lender in September 2005,
increasing the total to $163,475. Finally, in February 2006, he refinanced all of his
mortgage debt with another different lender resulting in a first mortgage loan of $500,000
and a second mortgage loan of $100,000. These were the loans involved in the short-
sale discussed above.  16
Despite having borrowed these substantial sums and earning well over $200,000
per year, Applicant’s 2010 bankruptcy petition reported total assets of $417,393; of which
$384,798 was the home on which he then owed over $605,000 in mortgages. His only
remaining assets were $32,595 in personal property, of which $11,000 was a pending
tax refund; and $13,450 was a car, on which he had an outstanding $20,430 secured
loan. His combined cash on hand, checking and savings account balances totaled
$175.  17
There is no evidence that Applicant was requested to respond to financial
interrogatories, or that he responded if such a request was made. He submitted no
recent financial statement or budget that reflected his current income and expenditures.
Applicant submitted no evidence of financial counseling except the internet and
telephone session he completed on December 2, 2009, in order to comply with
bankruptcy filing requirements. No debt repayment plan was prepared during that
session.18
Applicant submitted letters from an impressive group of senior colleagues and
supervisors who have known and worked with him for many years. All of them described
his excellent character, integrity, important contributions to mission accomplishment, and
flawless compliance with security procedures.  19
6
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
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.
7
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. 
Department Counsel asserted, and the record evidence established, 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’s financial problems arose and worsened over the last ten years.
Throughout that period he has earned substantial income from both his Navy retirement
and his position as a program director at a major defense contractor. He also borrowed
large sums against the equity in his former home, and through multiple credit card
accounts and lines of credit. Unable to pay his debts, he attempted to obtain relief
through a Chapter 13 bankruptcy. However, his excessive indebtedness made him
ineligible for such relief. A large portion of his unsecured debt was cancelled and written
off by creditors in 2011 and 2012. Although those debts are no longer outstanding, they
remain part of his history of not meeting his financial obligations. He was unable to pay
$11,300 requested by his second mortgage holder to settle and resolve his outstanding
$88,183 debt to that lender, which remains outstanding with no prospective resolution.
He also owes more than $67,700 in delinquent credit card debts to a credit union, toward
which he has agreed to pay relatively small monthly payments. This evidence raises
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,
8
unexpected medical emergency, or a death, divorce or separation), 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; 
(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 inability to live within his means or to satisfy several large, voluntarily
incurred, financial obligations, is recent and ongoing. Some unsubstantiated amount of
his delinquent debt resulted from his son’s tragic terminal illness from 2004 to early
2006, but Applicant failed to demonstrate changed financial practices since that time that
would support a finding that continuation or recurrence of such behavior is unlikely. The
evidence does not establish mitigation under MC 20(a).
Applicant offered insufficient evidence to support significant mitigation under MC
20(b). He has been fully employed and well compensated during the entire time in
question. From the record evidence, it is reasonable to infer that he earned well over $2
million in salary and retirement payments over the past ten years. He also borrowed
about $500,000 over that period that he has been unable to repay. The record evidence
demonstrates that he has few net assets. Other than general statements that he
assumed financial responsibility for expenses that were not covered by his adult son’s
medical insurance between 2004 and January 2006, Applicant did not demonstrate
where his funds went or that their expenditure was responsible under the circumstances.
Applicant offered minimal evidence of financial counseling, and did not establish
clear indications that his financial problems are being resolved or are under control. He
demonstrated no progress toward resolution of his $88,183 second mortgage debt, and
only minimal progress with respect to more than $67,000 remaining in delinquent credit
card accounts. He provided evidence of some payments toward those accounts that
formerly totaled over $80,000, but did not show that payments were consistently made
as agreed. He resolved the three debts, totaling less than $2,500, that were alleged in
SOR ¶¶ 1.h, 1.l, and 1.m. However, he did not provide a budget or other evidence to
demonstrate future solvency and ability to resolve remaining debts while avoiding future
delinquencies. Accordingly, little mitigation under MC 20(c) and 20(d) was proven. 
Applicant did not deny the existence or original validity of any SOR-listed debt.
Accordingly, MC 20(e) is not applicable.
9
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 a long and
distinguished career in support of the national defense, and is highly regarded by a
number of people whose opinions warrant significant weight and consideration. He is an
experienced, mature, and accountable adult, who is responsible for his voluntary choices
and conduct that underlie the security concerns expressed in the SOR. His inability to
meet substantial, voluntarily incurred, financial obligations is ongoing. Although large
portions of his delinquent indebtedness were cancelled and written off by creditors,
substantial debt remains which he did not demonstrate an ability to resolve within a
reasonable period. The potential for pressure, coercion, and duress remains significant,
and continuation or recurrence of financial irresponsibility was not shown to be unlikely.
The evidence provided by Applicant was insufficient to mitigate the resulting security
concerns. 
Despite Applicant’s outstanding history of service and reputation for integrity, the
record evidence concerning his recent financial activities and circumstances generates
substantial doubt as to his present eligibility and suitability for a security clearance. He
did not meet his burden to mitigate the security concerns arising from his financial
considerations.
10
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
Subparagraphs 1.a through 1.g: Against Applicant
Subparagraph 1.h: For Applicant
Subparagraphs 1.i through 1.k: Against Applicant
Subparagraphs 1.l and 1.m: For 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.
                                              
DAVID M. WHITE
Administrative Judge