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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
)       ISCR Case No. 14-02773
)
)
Applicant for Security Clearance )
Appearances
For Government: Nicole A. Smith, Esq., Department Counsel
For Applicant: David Truong, Esq.
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Decision
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CURRY, Marc E., Administrative Judge:
Applicant mitigated the financial considerations and foreign influence security
concerns. Clearance is granted. 
Statement of the Case
On February 27, 2015, the Department of Defense (DOD)  issued a Statement of
Reasons (SOR) detailing the security concerns under Guidelines F, financial
considerations, and  B, foreign influence.  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 (AG).
Applicant answered the SOR on April 24, 2015, admitting all of the allegations
and requesting a hearing. On August 21, 2015, the case was assigned to me. On
September 9,  2015, the Defense Office of Hearings and Appeals (DOHA) issued a
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notice of hearing scheduling the case for September 28, 2015. I held the hearing as
scheduled and considered three Government exhibits (GE), marked as GE 1 through 3,
and one Applicant exhibit (AE), marked as AE A. Also, I took administrative notice of the
facts set forth in 19 documents (Hearing Exhibits (HEs) I-XIX)  concerning the People’s
Republic of China (PRC), and I took administrative notice of the facts set forth in 12
documents (HEs XX-XXXI)) concerning Taiwan. The transcript was received on October
6, 2015.
Findings of Fact
Applicant is a 63-year-old married man with one adult child from a previous
marriage. He has been married to his current wife for 11 years.
Applicant was born and raised in Taiwan and has been a naturalized U.S. citizen
since 1981. (GE 1 at 7) Applicant received a dual secondary education. Specifically,
children in Taiwan are educated either through a traditional Chinese system or a U.S.-
style system. The latter system is private. It caters to children of the U.S. military, U.S.
government contractors, U.S. government employees, and other expatriates. Native
Taiwanese children are typically educated through the Chinese system. (Tr. 63)
Applicant was educated through both systems, receiving a high school diploma from the
Chinese school in 1970, and a diploma from the U.S. school in 1971. (Tr. 63-64)
Applicant preferred the U.S. school to the Chinese school because it encouraged
creativity and individuality. In contrast, the Chinese curriculum overemphasized
conformity and discipline. (Tr. 71) 
Applicant is one of less than 12 people worldwide who have ever received such a
dual education. (Tr. 65) His father, an intelligence officer in the Taiwanese department of
defense, was visionary enough to recognize the value of an American education, and
had the income to provide it for Applicant. (Tr. 65)
After Applicant graduated from high school, he took a standardized test that all
Taiwanese citizens were required, at the time, to take. Students scoring in the top ten
percent were admitted into the national college. Everyone else was required to serve in
the military for two years. Applicant did not score high enough on the test to forego
compulsory military service. Consequently, he was drafted in 1972, and served through
1974. (Answer at 5) He was a private at the time of his discharge. (Tr. 69)
Shortly after leaving the Taiwanese military, Applicant immigrated to the United
States. Upon arriving, he took a job in a Chinese restaurant, initially working as a bus
boy before being promoted to a waiter. In 1975, he entered a state university, graduating
in 1979 with a dual degree in computer science and accounting. (Tr. 74) Applicant
financed his college education with his income from waiting tables. (Tr. 73) While in
college, he continued to work full time. (Tr. 75)
After graduating, Applicant took a job in the information technology field. He
worked with this employer for eight years before leaving to start his business, a company
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that provides health care information technology services to hospitals. (Tr. 77) Since
starting the company in 1988, it has evolved into an enterprise with annual revenue
ranging between $60 and $200 million, that employs approximately 425 people located
in 40 states, and provides services to  multiple government agencies. Applicant’s
company is a privately-held corporation. He is the sole shareholder.
According to the company’s chief of human resources, who has worked for
Applicant since 1992, the company’s organizational philosophy is “helping customers
solve their problems and ta[king] care of the people who help do that.” (Tr. 30) As such,
Applicant is very accommodating to his employees. When dealing with employees with
personal hardships and crises, he tends to “err on the side of being generous.” (Tr. 32)
He values the “big camaraderie” involved in brainstorming with employees to provide
government information technology solutions. (Tr. 86) 
Applicant “is bombarded with requests” to buy his business. (Tr. 78) Although he
has not completely ruled out selling the company, he currently does not want to sell it
because he believes it would be akin to “sell[ing] off [his] people.” (Tr. 79)  
Applicant is a well-respected philanthropist.  Over the past 17 years, Applicant
has raised more than $500,000 for cancer research through his annual charity golf
tournament. (Answer, Attachment 11) He also has organized fundraisers to support U.S.
troops stationed abroad with care packages, and to support impoverished children with
toys for Christmas. (Answer, Attachment 11 at 2; Tr. 40) Over the years, his company
has also matched contributions that employees have raised for  various charities. (Tr. 40)
The majority of Applicant’s clients are government agencies. In 2011, deep
budget cuts led to the cancellation or reduction in scope of several of Applicant’s
government contracts. Consequently, his business suffered. His gross revenue
decreased from $6 million in 2010 to $600,000 in 2011.
According to the chief financial officer of Applicant’s company, this drastic profit
decrease generated an income tax problem. Specifically, Applicant’s company employs
the cash basis method of income tax accounting. Under this method, the company did
not report the income that they received for the service contracts that they procured in
2010. Instead, they reported it when the services were actually performed in 2011. Many
large companies that perform service contracts report their income in this manner, so as
to prevent large fluctuations in income tax liabilities from year to year. (Tr. 55, 58-61)
Here, however, the opposite occurred, as Applicant’s 2011 tax return reflected an illusory
profit, leaving his company with a federal income tax debt of $1.5 million and a state
income tax debt of $107,000 that it was unable to pay. (GE 3) Subsequently, these debts
became delinquent. Because Applicant’s company is structured as an IRS subchapter S-
corporation, he was personally liable for these debts.
Applicant gradually began paying this delinquency through installments, beginning
in April 2011. (Answer, attachment 2) By July 2013, he had satisfied the state income tax
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delinquency. (Answer, attachment 4) By September 2015, he had satisfied the federal
income tax delinquency. (AE A; Tr. 47)  
Applicant’s company has a $13 million line of credit, personally guaranteed by
Applicant. During the 2011 business slowdown, the company defaulted on the loan.
(Answer at 8) In April 2014, Applicant’s company entered into a forbearance agreement
with the bank. (Answer, Attachment 5) Under the terms of the agreement, the company
pledged to pay down the principal and reduce its expenses. Per the chief financial
officer, the company has fulfilled its responsibilities under the forbearance agreement
and refinanced its line of credit with another bank that has extended the company a
lower interest rate. The new credit line is in good standing. (Tr. 52) 
Applicant’s company has completely recovered from the 2011 economic
downturn. His individual net worth is $63 million. (Answer, attachment 11 at 4)
Over the years, Applicant’s company has attempted to “break into the electronic
health records software and related services industry in Hong Kong, China, and Taipei,”
a lucrative and competitive market that many U.S. companies are also exploring. (Tr. 88)
He has conducted extensive research, attending business seminars in the region,
meeting government officials, and meeting industry professionals in the process.
(Answer at 3)  One such trip occurred as part of Applicant’s participation in a trade
commission, organized by his state governor, to nurture commerce between Applicant’s
home state and various Asian countries. (Tr. 100)
In 2011, Applicant established a holding company in Hong Kong. (Answer at 3)
He is its director and chairman. Applicant’s holding company owns a PRC business, a
wholly foreign-owned subsidiary (WFOE) specializing in health information technology
market research and development. (Tr. 89) Applicant structured his venture in this
manner because working through holding companies is a legal prerequisite for
developing a PRC client base. (Tr. 89; Answer at 3) Applicant does not have a direct
ownership interest in the WFOE, and his U.S. company has neither an ownership
interest in the holding company, nor the WFOE. (Answer at 3) Thus far, the WFOE has
received no contracts and has generated no revenue. (Tr. 90)
Applicant has two brothers who are U.S. citizens. One brother has been living in
Hong Kong since the 1990s. He is a real estate developer. He has a detailed knowledge
of the PRC business market, and is helping Applicant with business development for his
health information systems venture. (Tr. 102-103: Answer at 4) Applicant communicates
with this brother approximately once per month.
Applicant’s other brother moved from the U.S. after he retired, and splits his time
between PRC and Taiwan. Applicant communicates with him about four times per year.
They do not discuss the details of Applicant’s work. (Answer at 4; Tr. 92)
Both of Applicant’s parents are deceased. Applicant’s father was an intelligence
officer who worked within Taiwan’s department of defense. (Tr. 104) He retired in the
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1990s and passed away approximately 15 years ago. (Answer at 5) Applicant has never
been contacted by any Taiwanese officials about his father’s government service.
(Answer at 5) Applicant has three other living siblings. All of them are U.S. citizens and
residents. (Tr. 104)
The United States and Taiwan enjoy a “robust unofficial relationship. (HE XXIII at
1) Taiwan is the United States’ tenth largest trading partner. (HE XXIII at 1) In 2012, two
Taiwanese nationals were charged with allegedly seeking to export sensitive U.S.
military technology to PRC. (HE XXX at 1) In October 2014, a Taiwanese-American man
pleaded guilty to conspiracy to defraud the United States in its enforcement of
regulations targeting proliferators of weapons of mass destruction. (HE XXVI at 1)
The PRC is a totalitarian country that competes with the United States for military,
technological, and financial influence worldwide. To achieve its strategic objectives, the
PRC aggressively conducts espionage against the United States government and U.S.
businesses. (HE IV at 2) PRC’s intelligence services, as well as private companies and
other entities, frequently seek to exploit Chinese citizens or persons with family ties to
China who can use their insider access to corporate networks to steal secrets. (HE I)
The growing need for medical care by aging populations in countries such as PRC is
likely to drive interest in collecting valuable U.S. healthcare and related information. (HE I
at 17) 
Policies
When evaluating an applicant’s suitability for a security clearance, the
administrative judge must consider the revised adjudicative guidelines (AG). In addition
to brief introductory explanations for each guideline, the adjudicative guidelines list
potentially disqualifying conditions and mitigating conditions.
These guidelines are not inflexible rules of law. Instead, recognizing the
complexities of human behavior, these guidelines are applied together with the factors
listed in the adjudicative process. 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.” 
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 for obtaining a favorable security
decision.
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Analysis
Financial Considerations
Under this guideline, “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) Applicant’s 2011 income tax delinquency and credit line default trigger the
application of  AG ¶ 19(a), “inability or unwillingness to satisfy debts,” and AG ¶ 19(c), “a
history of not meeting financial obligations.” 
Applicant’s financial problems stemmed from a business downturn in 2011 when
his company’s revenue decreased by 90 percent. As his company recovered from the
downturn, Applicant gradually began paying his income tax delinquencies in installments.
By September 2015, he had satisfied both the state and federal income tax delinquency.
Similarly, he paid his credit line delinquency and refinanced it with a lower interest rate
credit line. Currently, both Applicant and his company are thriving financially.
The following mitigating conditions are applicable: 
(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;
(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
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debts.
Applicant has mitigated the financial considerations security concerns.
Guideline B, Foreign Influence
Under this guideline, “foreign contacts and interests may be a security concern if
the individual has divided loyalties or foreign financial interests, may be manipulated or
induced to help a foreign person, group, organization, or government in a way that is not
in the United States interests, or is vulnerable to pressure or coercion by any foreign
interest.” Moreover, “adjudication under this Guideline can and should consider the
identity of the foreign country in which the foreign contact or financial interest is located,
including, but not limited to, such considerations as whether the foreign country is known
to target United States citizens to obtain protected information and/or is associated with
a risk of terrorism.” (AG ¶ 6)
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Applicant’s service as a draftee in the Taiwanese army occurred more than 40
years ago. His father, a former Taiwanese military intelligence officer, died approximately
15 years ago, and Applicant has never been contacted by anyone from the Taiwanese
government regarding his father’s occupation. I conclude that these allegations do not
generate any security concerns. 
One of Applicant’s brother’s is living in Taiwan and PRC, splitting his time
between both countries, and another brother is living year-round in PRC. AG ¶ 8(a),
“contact with a foreign family member, business or professional associate, friend, or
other person who is a citizen of or a resident in a foreign country if that contact creates a
heightened risk of foreign exploitation, inducement, manipulation, pressure, or coercion,”
applies.
Applicant only talks four times per year to his brother living in Taiwan, and their
conversations do not concern work. If Taiwan were the only country in question, AG ¶
8(c), “contact or communication with foreign citizens is so casual and infrequent that
there is little likelihood that it could create a risk for foreign influence or exploitation,”
would apply. However, Applicant’s brother splits his time living in Taiwan and PRC.
Given the pervasive nature of PRC’s espionage against the United States, and its
disrespect for human rights, AG ¶ 8(c) does not apply. Given the nature and frequency of
Applicant’s contacts with brother living in PRC with whom he shares a business
relationship, AG ¶ 8(c) is inapplicable to their relationship, also.
Applicant’s business in PRC has neither generated any contracts, nor any
revenue. However, the effort that Applicant has spent developing this business and
structuring it so that it can compete  with other multinational U.S. companies seeking to
penetrate the PRC information technology market render it a substantial interest
regardless of whether it has generated revenue. AG ¶ 7(e), “a substantial business,
financial, or property interest in a foreign country, or in any foreign-owned or foreign-
operated business, which could subject the individual to heightened risk of foreign
influence or exploitation,” applies.
Applicant’s wife, adult child, and three of his siblings live in the United States. He
has lived in the United States for more than 40 years and has been a naturalized citizen
for nearly 35 years. In that time, he has risen from a busboy to the owner of $200 million
company with 425 employees nationwide. Currently, he is a pillar of his community who
has positively impacted the lives, not only of his employees, but of the cancer victims,
impoverished children, and U.S. troops whom have benefitted from his charitable
endeavors. 
In sum, Applicant’s experience since immigrating to the U.S. epitomizes the
American Dream. Considering the totality of Applicant’s U.S. contacts, and the depth of
his integration into the social, charitable, and commercial fabric of the United States, I
conclude that AG ¶ 8(b) applies, set forth below, as follows:
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there is no conflict of interest, either because the individual’s sense of
loyalty or obligation to the foreign person, group, government, or country is
so minimal, or the individual has such deep and longstanding relationships
and loyalties in the U.S., that the individual can be expected to resolve any
conflict of interest in favor of the U.S. interest,” applies. he would resolve
any conflict of interest posed by his business in PRC and his relatives living
in PRC in the U.S. interest.
Applicant has mitigated the Guideline B security concern.
Whole-Person Concept
Under the whole-person concept, 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.
I considered these whole-person factors in my application of the mitigating conditions.
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.c: For Applicant
Paragraph 2, Guideline B: FOR APPLICANT
Subparagraphs 2.a - 2.e: For Applicant
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Conclusion
In light of all of the circumstances presented by the record in this case, it is clearly
consistent with national security to grant Applicant eligibility for a security clearance.
Eligibility for access to classified information is granted.
                                             
MARC E. CURRY
Administrative Judge