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                           DEPARTMENT OF DEFENSE
         DEFENSE OFFICE OF HEARINGS AND APPEALS
          
            
In the matter of: )
)
) ISCR Case No. 14-05867
          )
Applicant for Security Clearance )
Appearances
For Government: Carroll Connelley, Esq., Department Counsel
For Applicant: Pro se
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Decision
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CURRY, Marc E., Administrative Judge:
Although Applicant’s financial problems were caused by a business downturn,
and he has been making good-faith efforts to resolve his debts, he failed to provide
enough corroborating evidence for me to conclude that his finances no longer pose a
security concern. Clearance is denied. 
Statement of the Case
On June 20, 2015, the Department of Defense Consolidated Adjudications
Facility (DOD CAF) 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 (AG) implemented by the DOD on
September 1, 2006. On July 26, 2015, Applicant answered the SOR, admitting
subparagraphs 1.a through 1.c(1), and denying subparagraphs 1.c(2) and 1.c(3). He
requested a hearing, whereupon the case was assigned to me on October 1, 2015.
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DOHA issued a notice of hearing on October 7, 2015, scheduling the hearing for
October 26, 2015. The hearing was held as scheduled. At the hearing, I received seven
Government exhibits (GE 1 - GE 7), and four Applicant exhibits (AE A - AE D). Also, I
took administrative notice of a copy of the discovery letter from Department Counsel to
Applicant, dated September 3, 2015. At the close of the hearing, I left the record open,
at Applicant’s request, to allow him the opportunity to submit additional exhibits. Within
the time allotted he submitted six additional exhibits that I admitted and incorporated
into the record as AE E through AE J. DOHA received the transcript (Tr.) on November
3, 2015.
Findings of Fact
Applicant is a 72-year-old man who is a veteran of the United States Air Force,
serving from 1961 to 1965. He was honorably discharged. He graduated from college
with a degree in general studies in 1970, earned a master’s degree in 1990, in the field
of educational administration, and a Ph.D in the field of educational leadership in 1994.
(Tr. 21) Since 1994, Applicant has been self-employed as a consultant who investigates
discrimination and workplace harassment complaints on a contract basis for various
U.S. Government agencies. Applicant began this line of work after retiring from a career
in state government in 1994. 
Typically, Applicant’s business generated between $60,000 and $80,000 in
revenue. (Tr. 63) However, after the 2008 economic downturn, Applicant’s contracts
decreased drastically, causing his revenue to decrease to less than $6,000 annually.
(GE 2 at 1; Tr. 25; Tr. 63) Consequently, Applicant became unable to make ends meet.
In September 2009, Applicant filed for Chapter 7 bankruptcy protection. The debt
included $369,694 from two home mortgages and $33,470 of  unsecured debt. (GE 6 at
21)  In May 2010, the case was dismissed on technical grounds. (GE 5) 
In September 2010, Applicant re-filed the Chapter 7 bankruptcy petition. (GE 6)
As part of the Chapter 7 proceedings, Applicant agreed to re-affirm the mortgage debt.
(AE J) In January 2011, the bankruptcy court discharged Applicant’s unsecured debt.
(GE 2 at 7) 
Having re-affirmed the mortgage debt, Applicant sought to negotiate a refinance
with the bank. (Tr. 60) His efforts were unsuccessful, as the bank in June 2011 moved
to foreclose the home. (AE I at 3) While the foreclosure process was  pending, the IRS
in early 2012, audited Applicant’s federal income tax returns from 2002, 2004, and 2008
through 2011. The audit concluded that Applicant owed  $78,000. (AE F; GE 3 at 3)  
  
In October 2012, Applicant filed for Chapter 13 bankruptcy protection, including
the mortgagee  as a scheduled creditor. (GE 7 at 4) His attorney advised him that taking
this route would forestall the foreclosure proceedings. (Tr. 61) At that time, Applicant
was approximately $86,000 behind on mortgage payments. (Item 7 at 6) 
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The SOR alleges that he scheduled two federal income tax debts in the
bankruptcy petition, in addition to the mortgage. The income tax debts stemmed from
the 2012 audit, and had, by the time of the bankruptcy filing, increased to approximately
$82,000. In 2013, a federal tax lien of $58,936 was entered to secure a portion of the
total amount past due.
Applicant admits filing the bankruptcy petition, but, contrary to the Government’s
allegation in SOR subparagraph 1.(c)(3), denies including the tax debts in the petition.
The Government’s supporting evidence is inconclusive.    
In October 2012, the bankruptcy court dismissed the Chapter 13 petition
because, under bankruptcy law, it was filed too close in time to Applicant’s Chapter 7
bankruptcy discharge. (GE 7) Subsequently, the bank, after satisfying proper notice
requirements,  sold Applicant’s home in September 2013. (AE I at 3) In November 2013,
Applicant filed exceptions to the sale, arguing, among other things, that lawyers for the
bank stopped refinance negotiations in bad faith. As a remedy, he asked that the court
set aside the foreclosure sale and order the bank to participate in mediation with him
and assist him with a mortgage modification. (AE I at 3)
On November 22, 2013, the court rejected Applicant’s claim and ratified the sale.
(AE I at 4) Applicant appealed the case, and on July 9, 2015, the state’s appellate court
upheld the lower court decision. (AE I)
In August 2013, Applicant sought to resolve the IRS tax debts by seeking an offer
in compromise for $500. (AE F at 2) He contends that the IRS accepted his offer, and
after receiving his payment, released the lien. (Answer at 1) In support of his contention,
he submitted an October 2015 credit report that does not include a tax lien or any other
tax liability. (AE D)  
Currently, Applicant’s company has an annual revenue of approximately $51,000
annually. (Tr. 64) He contends that the only debts that he has are a car note and a
credit card with a $600 balance. (AE D) Neither debt is delinquent.    
Policies
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, they 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.” 
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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.
Analysis
Guideline F, Financial Considerations
The Government failed to establish that Applicant listed the IRS as a creditor for
a $13,726 debt, as it alleged in SOR subparagraph 1.c(3). I resolve this allegation in
Applicant’s favor. As for the remainder of the SOR, the potential security ramifications
must be evaluated under the financial considerations guideline. Specifically, it sets forth
that “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) 
Between 2008 and 2012 Applicant incurred approximately $180,000 of
delinquent debt. Moreover, an IRS audit revealed tax underpayments from multiple tax
years totalling approximately $78,000. AG ¶ 19(a), “inability or unwillingness to satisfy
debts,” and AG ¶ 19(c), “a history of not meeting financial obligations,” apply.
The following mitigating conditions under AG ¶ 20 are potentially 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; 
(d) the individual initiated a good-faith effort to repay overdue creditors or
otherwise resolve debt; and
(e) the individual has a reasonable basis to dispute the legitimacy of the
past-due debt which is the case of the problem and provides . . . .
evidence of actions to resolve the issue.
Applicant’s financial problems related entirely to his business struggles that
began with the 2008 recession. Although a few of the years that the IRS audit covered
predated the 2008 recession, there is no record evidence to infer that the tax
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underpayments resulted from financial problems. Applicant actively confronted his
financial problems, obtaining a Chapter 7 discharge, and attempting to negotiate a
refinance of his delinquent mortgage. AG ¶¶ 20(b) and 20(d) apply.
Applicant’s contention, appealed to his state’s appellate court, that the court
should set aside the foreclosure sale of his home, was robust and in good faith, despite
its ultimate failure. Under these circumstances AG ¶ 20(e) applies. 
Regardless of the good-faith basis of Applicant’s dispute of the foreclosure
ratification, he did not prevail, and his eviction was scheduled within six weeks after the
hearing. Moreover, as for the income tax delinquencies, I conclude that their absence
from the credit report that he submitted is insufficient to establish that he has settled
them. 
Given that Applicant has been a wage-earning adult for nearly 55 years, his
period of financial difficulty was isolated. Under these circumstances, I conclude that he
has mitigated the negative security ramifications of his Chapter 7 bankruptcy discharge,
as alleged in SOR subparagraphs 1.a and 1.b. Accordingly, I resolve them in his favor. 
Conversely, Applicant was scheduled to be evicted from his home approximately
six weeks after this hearing, and he failed to prove that he resolved the federal tax
delinquencies. Under these circumstances, I cannot conclude that there are clear
indications that the problem is being resolved or is under control. AG ¶ 20(c) does not
apply. I resolve SOR subparagraphs 1.c(1) and 1.c(2) against Applicant.
Whole-Person Concept
Under the whole-person concept, the administrative judge should consider the
nine adjudicative process factors listed at AG ¶ 2(a). They are as follows: 
(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.
The issue of the tax debts was of critical importance to the resolution of this case.
Applicant’s testified credibly, and there is nothing on record to indicate that he has ever
had any financial problems, excluding those related to the 2008 business downturn,
during his 55-year career. Moreover, he has been actively involved in attempting to
resolve his financial problems. However, Applicant only provided circumstantial
evidence that he satisfied the tax debts. There is no per se rule that prevents me from
finding that debts were paid based solely on testimonial and circumstantial evidence.
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However, the debt alleged in subparagraph 1.c(2) is not a miscellaneous utility bills, or a
nominal credit card or medical bill. It is a tax debt owed to the U.S. Government,
totalling more than $60,000. Under these circumstances, concrete proof such as a
cancelled check or an IRS Form 1450, a Certificate of Release of Federal Tax Lien, was
imperative. Applicant provided no such evidence, therefore, he did not carry the burden.
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: AGAINST APPLICANT
Subparagraphs 1.a-1.b: For Applicant
Subparagraph 1.c(1): Against Applicant
Subparagraph 1.c(2): Against Applicant
Subparagraph 1.c(3): 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.
MARC E. CURRY
Administrative Judge