1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) [Name Redacted] ) ISCR Case No. 15-02744 ) ) Applicant for Security Clearance ) Appearances For Government: Eric Borgstrom, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ HOGAN, Erin C., Administrative Judge: On February 19, 2016, the Department of Defense (DOD) issued a Statement of Reasons (SOR) to Applicant detailing security concerns under Guideline F, Financial Considerations. The action was taken under Executive Order (EO) 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) effective within the Department of Defense after September 1, 2006. On March 21, 2016, Applicant answered the SOR and requested a hearing before an administrative judge. Department Counsel was ready to proceed on May 25, 2016. I was assigned the case on June 8, 2016. On August 1, 2016, a Notice of Hearing was issued, scheduling the hearing for August 23, 2016. The hearing was held as scheduled. During the hearing, the Government offered seven exhibits which were admitted as Government Exhibits (Gov) 1 – 7. Applicant testified, called one witness, and offered seven exhibits which were admitted as Applicant Exhibits (AE) A – G. The record was held open until September 7, 2016, to allow Applicant to submit additional exhibits. He timely offered one exhibit, which consisted of seven documents and was marked and admitted as AE H. Department Counsel’s did not object to AE H. (HE III) The transcript (Tr.) was received on August 31, 2016. Based upon a review of the 2 pleadings, exhibits, and testimony, eligibility for access to classified information is granted. Findings of Fact In his response to the SOR, Applicant admits the SOR allegations. Applicant is an employee of a Department of Defense contractor seeking a security clearance. He has worked for his current employer since March 2011. His highest level of education is a bachelor’s degree. He divorced in 2011 and remarried in June 2016. He has a daughter, age 16, and a son, age 13, with his first wife. His current wife has two children, ages 15 and 16. One child lives with them. The other child lives with his father. (Tr. at 20-23; Gov 1) Applicant’s security clearance background investigation revealed six delinquent debts. They include a $3,545 judgment entered against Applicant in December 2011 for a charged-off store credit card account (SOR ¶ 1.a: Gov 2 at 16, Gov 3 at 1; Gov 6 at 4; Gov 7 at 3); a $1,367 charged-off account store credit card account (SOR ¶ 1.b: Gov 2 at 15, 29; Gov 3 at 3; Gov 4 at 3; Gov 5 at 2; Gov 6 at 2; Gov 7 at 5); a $4,040 charged- off bank credit card account (SOR ¶ 1.c: Gov 2 at 15, 18-20, 24; Gov 3 at 3; Gov 4 at 3; Gov 5 at 2; Gov 6 at 2; Gov 7 at 4); a $3,258 charged-off bank credit card account (SOR ¶ 1.d: Gov 2 at 15, 25-26, 31-35; Gov 3 at 5; Gov 4 at 4; Gov 5 at 2; Gov 6 at 2; Gov 7 at 3); a $1,995 charged-off store credit card account (SOR ¶ 1.e: Gov 2 at 15, 27; Gov 3 at 6; Gov 4 at 6; Gov 5 at 2; Gov 6 at 2; Gov 7 at 4); and a $4,266 judgment entered against Applicant for a bank credit card account. (SOR ¶ 1.f: Gov 2 at 15, 17, 21-23; Gov 6 at 2; Gov 7 at 3) Applicant’s financial problems were primarily caused by his divorce. In 2010, Applicant and his wife separated. The separation agreement was signed in July 2011. Applicant agreed to quitclaim his interest in the marital home. His wife agreed to hold him harmless for all expenses, taxes, and upkeep of the marital home. She also agreed to pay him $28,650, and that she would refinance the mortgage in her name within 60 days after the dissolution. Applicant timely signed a quitclaim deed, but his ex-wife did not refinance the mortgage as promised until several years later, after Applicant took her to court for contempt. In May 2015, she refinanced the mortgage and paid Applicant $28,650. Applicant had to spend $7,000 in attorney’s fees regarding the issues surrounding his divorce. (Tr. 25-27,34; AE F; AE G) Applicant incurred extra expenses after the divorce in order to provide for his children. (Tr. 26) A few years after the divorce, Applicant started to work on cleaning up his credit. In 2013, he hired a law firm to help him settle his debts. In June 2013, letters were sent to his creditors in an attempt to settle the debts. Some creditors responded. He settled with the creditors who responded to his offer of settlement. (Tr. 28: AE A – AE) 3 The status of the SOR debts are as follows: SOR ¶ 1.a: $3,545 judgment for charged-off store credit card account: Paid. Applicant settled the debt for $1,780. He paid the debt in October 2015. (Tr. 29-30; AE A; Gov 3 at 1) SOR ¶ 1.b: $1,367 charged-off store credit card account: Paid. Settled for less than the full value in October 2015. This may be the same account as SOR ¶ 1.a. (Tr. 31-33; Gov 3 at 3; AE F) SOR ¶ 1.c: $4,040 bank credit card account that was charged off: In June 2013, Applicant’s lawyer attempted to contact creditor to settle the debt. His attorney did not receive a reply. Applicant was under the mistaken impression that since it was charged off, the debt went away. He discovered that this was incorrect and he hopes to locate the creditor to settle the debt. After the hearing, Applicant provided a copy of an IRS Form 1099c which the creditor issued on November 26, 2014, cancelling the above debt. The debt is resolved, although it does not appear Applicant made a payment towards this debt. Applicant may have another tax issue with the IRS related to the IRS Form 1099c. The forgiven portion of the debt will be considered income. However, it is likely that Applicant will attempt to resolve any potential issue based on his track record of resolving his debts. (Tr. 35-36; AE B; AE H, Document 5) SOR ¶ 1.d: $3,258 charged-off bank credit card account: In June 2013, Applicant’s lawyer contacted the creditor and offered to the settle the debt for $1,500. The collection company offered to settle the debt for a $1,459 payment. Applicant agreed and settled the debt for that amount on June 24, 2013. Applicant has a related issue regarding this debt. The creditor claimed for the full amount of the debt on the IRS Form 1099c. They did not deduct Applicant’s payment. He submitted a formal dispute regarding the related tax issue to the IRS and the matter is pending before the IRS. Once the dispute is reviewed, he will pay the amount that the IRS concludes that he owes. (Tr. 36-38; AE C; AE H, Documents 6-7) SOR ¶ 1.e: $1,995 charged-off store credit card account: In June 2013, Applicant’s lawyer contacted the creditor and offered to the settle the debt for $750. The creditor did not respond to the inquiry. Applicant sent another letter to the creditor on September 1, 2016, attempting to resolve this account. The debt is unresolved, but Applicant hopes to settle the debt. (Tr. 42; AE D; AE H, Document 3) SOR ¶ 1.f: $4,266 bank credit card judgment: In June 2013, Applicant’s lawyer contacted the creditor and offered to the settle the debt for $2,000. The account was settled and paid on October 5, 2015. (Tr. 43-44; AE E) Applicant is able to pay his current monthly obligations. All of the issues between he and his ex-wife are resolved . (Tr. 46-47) After monthly expenses, he and his current wife have about $200 left over each month. He has $100 in savings and $1,300 in checking. He has $6,000 in his 401(k) account. He and his wife purchased a house in 4 October 2015. His wife was laid off a few months ago, but currently collects unemployment. His motorcycle and car are paid off. He has two open credit card accounts which are current. (Tr. 28,46-53; AE H, Document 4) Whole-person Factors A former co-worker of Applicant’s who was the government oversight/surveillance representative wrote a reference on his behalf. He states Applicant exhibits a capable comprehension and understanding of technically developed machines and higher level testing products. Applicant is described as “patient, confident, respected, and very well organized, irrespective of pressing business and industry occurrences.” (AE H, Document 1). His performance evaluations are also favorable. (AE H, Document 2) In his spare time, Applicant is a volunteer firefighter and a state-registered emergency management technician (EMT). (Tr. 55-56) 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 and mitigating conditions, which must be considered when determining 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 as to obtaining a favorable security decision. 5 A person who seeks access to classified information enters 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. Section 7 of EO 10865 provides that decisions shall be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See also EO 12968, Section 3.1(b) (listing multiple prerequisites for access to classified or sensitive information). Analysis Guideline F, Financial Considerations The security concern relating to the guideline for Financial Considerations is set out in AG & 18: 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. The guideline notes several disqualifying conditions that could raise security concerns. I find AG &19(a) (an inability or unwillingness to satisfy debts); and AG &19(c) (a history of not meeting financial obligations) apply to Applicant’s case. Applicant has encountered financial problems since 2010 when he and his first wife separated and divorced. He incurred six delinquent debts, a total approximate balance of $18,471. Two of the creditors filed judgments against him. An individual who is financially irresponsible may also be irresponsible, unconcerned, or careless in their obligations to protect classified information. Behaving 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 their creditors is a private matter until evidence is uncovered demonstrating an inability or unwillingness to pay debts under agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an applicant with a history of serious or recurring financial difficulties is in a situation of risk inconsistent with the holding of a security clearance. An applicant is not required to be 6 debt free, but is required to manage their finances in such a way as to meet their financial obligations. The Government’s substantial evidence and Applicant’s own admissions raise security concerns under Guideline F. The burden shifted to Applicant to produce evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive ¶ E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden of disproving it never shifts to the Government. (See ISCR Case No. 02-31154 at 5 (App. Bd. Sept. 22, 2005)) The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions apply: 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) applies because Applicant has been attempting to resolve his delinquent accounts since 2013. He has resolved most of the accounts. He has demonstrated that he is attempting to resolve his debts. Applicant’s financial problems do not cast doubt on his reliability, trustworthiness, or good judgment. AG & 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) applies. Applicant’s financial problems were the results of his separation and divorce in 2011. Applicant had a difficult time paying expenses after the divorce. His ex-wife complicated matters by her failure to follow the terms of the divorce agreement by refinancing the mortgage on the marital residence in her name. Applicant attempted to reach out to his creditors in 2013. He has been able to resolve the debts alleged in SOR ¶¶ 1.a, 1.b, 1.d, and 1.f. Applicant does not live above his means and acted responsibly under the circumstances. AG & 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 under control) applies. He has successfully resolved most of the debts. He is attempting to resolve his remaining financial issues. Applicant’s financial situation is being resolved. AG & 20(d) (the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts) applies. In June 2013, Applicant hired a law firm to help him settle or resolve his debts. He successfully resolved SOR ¶¶ 1.a, 1.b, 1.d, and 1.f. He is attempting to resolve an issue with the IRS regarding a dispute of the amount the creditor in SOR ¶ 1(d) alleged was forgiven in an IRS Form 1099c. He will pay what he owes once the dispute is resolved. He is still attempting to locate the current collector of the debt alleged in SOR ¶ 1(e). Based on his good-faith efforts to resolve the other debts alleged in the SOR, he will likely pay the debt once he is able to locate the creditor. 7 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 the 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 the facts and circumstances surrounding this case. I considered the favorable recommendation of Applicant’s former co-worker as well as his favorable performance evaluations. I considered that Applicant’s financial problems are the result of his divorce in 2011. I considered that Applicant had to spend a lot of money in legal fees after his divorce to get his ex-wife to refinance the mortgage in her name alone. I considered that Applicant has been diligently attempting to resolve his delinquent debt since June 2013 and that he has resolved most of the delinquent debts. The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating: . . . the concept of a meaningful track record necessarily includes evidence of actual debt reduction through payment of debts. However, an applicant is not required as a matter of law, to establish that he has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he has . . . established a plan to resolve his financial problems and taken significant actions to implement that plan. The Judge can reasonably consider the entirety of an applicant’s financial situation and his actions in evaluating the extent to which that applicant’s plan for the reduction of his outstanding indebtedness is credible and realistic. See Directive ¶ E2.2(a) (Available, reliable information about the person, past and present, favorable and unfavorable, should be considered in reaching a determination.) There is no requirement that a plan provide for payments on all outstanding debts simultaneously. Rather, a reasonable plan (and concomitant conduct) may provide for the 8 payment of such debts one at a time. Likewise, there is no requirement that the first debts actually paid in furtherance of a reasonable debt plan be the ones listed in the SOR. ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations and quotation marks omitted). Applicant has made a good-faith effort to resolve his delinquent accounts. Security concerns under financial considerations are mitigated. 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.e: For Applicant 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. _________________ ERIN C. HOGAN Administrative Judge