1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-00482 ) Applicant for Security Clearance ) Appearances For Government: Caroline E. Heintzelman, Esq., Department Counsel For Applicant: Pro se ___________ Decision ___________ HARVEY, Mark, Administrative Judge: Applicant’s statement of reasons (SOR) alleges nine delinquent debts totaling $66,847. All of his SOR debts were paid and resolved except for his mortgage debt, one credit card debt, and a student loan possibly in forbearance. Applicant has a plan to bring his remaining SOR debts to current status. Financial considerations security concerns are mitigated. Eligibility for access to classified information is granted. History of the Case On August 18, 2015, Applicant signed his Questionnaire for National Security Positions (SF 86) or security clearance application (SCA). (Government Exhibit (GE) 1) On June 14, 2016, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued an SOR to Applicant pursuant to Executive Order (Exec. Or.) 10865, Safeguarding Classified Information Within Industry, February 20, 1960; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program, January 2, 1992 (Directive); and the Adjudicative Guidelines for Determining Eligibility for Access to Classified Information (AG), which became effective on September 1, 2006. The SOR detailed reasons why the DOD CAF did not find under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for Applicant, and recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked. (Hearing Exhibit (HE) 2) 2 Specifically, the SOR set forth security concerns arising under Guideline F (financial considerations). On August 30, 2016, Applicant responded to the SOR and requested a hearing. On October 5, 2016, Department Counsel was ready to proceed. On November 1, 2016, the case was assigned to me. On November 17, 2016, the Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing, setting the hearing for December 7, 2016. (HE 1) The hearing was held as scheduled. During the hearing, Department Counsel offered five exhibits; Applicant offered four exhibits; and all proffered exhibits were admitted without objection. (Tr. 15-17; GE 1- 5; Applicant Exhibits (AE) A-D) On December 15, 2016, DOHA received a copy of the transcript of the hearing. Applicant provided 13 exhibits after the hearing, and all exhibits were admitted without objection. (AE E-AE Q) On January 26, 2017, I received the final document, and the record closed that same day. (AE E) Findings of Fact1 In Applicant’s SOR response, he took responsibility for all SOR debts, and he also provided extenuating and mitigating information. Applicant’s admissions are accepted as findings of fact. Applicant is a 51-year-old quality engineer. (Tr. 5, 7; GE 1) He has been employed by the same DOD contractor for eight years. (Tr. 7) Before working for the DOD contractor, he worked for a large corporation as a quality engineer for nine years. (Tr. 8) In 1983, he graduated from high school. (Tr. 7) In 1987, he received a bachelor’s degree in fine arts, and in 1995, he received a bachelor’s degree in electrical engineering. (Tr. 7) He never served in the U.S. Armed Forces. (Tr. 6) In 1988, he married, and his four children are ages 17, 20, 22, and 25. (Tr. 5-6) The youngest three children live with Applicant and his spouse. (Tr. 6) Financial Considerations Applicant’s spouse’s annual salary for the previous five years has been about $35,000. (Tr. 19) Applicant’s annual salary is $79,000. (Tr. 19) His spouse handles the family budget and pays their bills. (Tr. 19) His spouse completed financial counseling. (Tr. 20) After they pay their bills, they have a monthly remainder of about $500. (Tr. 22) Applicant’s spouse described their finances and debt resolution plans. (Tr. 20-53) In this decision, the term “Applicant” refers to both Applicant and his spouse’s statements. Applicant and his spouse discuss their debts and finances with each other, and he trusted his spouse to handle the family finances. (Tr. 55-56) 1Some details have been excluded to protect Applicant’s right to privacy. Specific information is available in the cited exhibits. 3 For several years, Applicant and his spouse used a debt consolidation and resolution (DCR) service to address their delinquent debts. (Tr. 20, 22) His spouse closed the DCR account in September 2016 when she filed for Chapter 13 bankruptcy to address her debts. (Tr. 21, 46) She filed for bankruptcy in her name only, and Applicant did not file for bankruptcy protection. She filed for bankruptcy to stop any foreclosure proceedings on their residence. (Tr. 46) She began making payments to the bankruptcy trustee in October 2016. (Tr. 40) At the time of her hearing, she had made three payments to the bankruptcy trustee. (Tr. 40) She was nervous about having her husband join in the Chapter 13 bankruptcy because it might adversely affect his employment and security clearance. (Tr. 48) She was not sure about her husband’s liability for unpaid interest after the Chapter 13 bankruptcy was completed for her. (Tr. 48-51) Applicant was open to the possibility of joining the Chapter 13 bankruptcy.2 Applicant’s history of delinquent debt is documented in his credit reports, October 2, 2015 Office of Personnel Management (OPM) personal subject interview (PSI), and hearing record. The status of his SOR debts is as follows: SOR ¶¶ 1.a alleges Applicant’s $231,851 mortgage account was $19,658 delinquent, and 1.b alleges a home equity loan with a balance of $17,954. (AE H; AE I) SOR ¶¶ 1.a and 1.b were debts owed to the same creditor. In 2003, Applicant and his spouse purchased their residence. (Tr. 27) In 2008, Applicant was laid off, and he was unemployed for about one year. (Tr. 27) They fell behind on their mortgage accounts. Initially his mortgage monthly payment was $1,700 and around 2011, his monthly payments increased to $2,800. (Tr. 39) Applicant and his spouse applied for several mortgage modifications; however, they were not approved. (Tr. 41-42, 44-45) In 2015, Applicant’s spouse filed for bankruptcy to stop the foreclosure or forced sale of their residence. (Tr. 28, 31) They have about $70,000 equity in their home. (Tr. 29, 45) Correspondence from the creditor indicated as of September 2016, the principal balance was $228,665, and the accrued interest was $14,920. (AE B) Applicant’s spouse made several payments to address the mortgage before she filed for bankruptcy, and now payments are being made through her Chapter 13 bankruptcy. (Tr. 30) One bankruptcy document showed $36,623 necessary to cure any default on their mortgage, and the interest rate was 6.125 percent on a variable interest rate loan. (AE H) As of November 2016, she was required to pay the bankruptcy trustee $595 monthly, and the plan requires monthly payments for 60 months. (Tr. 30; AE D; AE H) The two mortgages are secured priority debts, and all of her payments to the trustee will go toward the mortgage interest. (Tr. 31-33) On January 20, 2017, the creditor wrote Applicant and informed him that he and his spouse were released from repayment of the debt in SOR ¶ 1.b. (AE I) 2It was not clear that Applicant understood that his spouse’s Chapter 13 bankruptcy discharge does not affect his responsibility toward any joint debts. This means that he will continue to be responsible for paying back his joint debts that he held with his spouse. All joint debts continue to accrue interest during the bankruptcy. After five years his spouse’s responsibility for paying the delinquent interest on their mortgage will be discharged, and assuming Applicant does not make any mortgage payments, Applicant will owe more than $40,000 in delinquent interest on his mortgage, and the mortgage lender will be free to foreclose on the debt, if Applicant is unable to bring his mortgage to current status. 4 SOR ¶ 1.c alleges a charged-off bank credit card for $9,639. On November 8, 2016, the debt was settled for $964. (Tr. 33-35; AE C; AE J) SOR ¶ 1.d alleges a bank credit card placed for collection for $8,945. DCR agreed to settle the debt for $4,026 to be paid by $500 monthly payments. (AE K) DCR wrote Applicant that the payments were completed, and this debt is resolved. (Tr. 35-36; AE K) SOR ¶ 1.e alleges a $7,700 student loan taken out to pay for his daughter’s education that is past due in the amount of $513. (Tr. 36-37; GE 3 at 4) Applicant was unsure about the status because he believed it was in deferment status. (Tr. 37) After his hearing, he sent a student loan status document for a $4,835 student loan debt indicating it was in forbearance until January 25, 2017. (AE G; AE L) The $7,700 student loan may also be in forbearance. SOR ¶¶ 1.f and 1.i allege a charged-off bank credit card for $3,774. The SOR allegations are duplications of each other. (Tr. 38-39) On January 20, 2016, Applicant and the creditor agreed to settle the debt for $1,887. (AE M) On January 19, 2017, the creditor wrote that Applicant completed payments and resolved this debt. (AE N) SOR ¶ 1.g alleges a store credit card placed for collection for $3,551. This debt is being addressed under Chapter 13 of the Bankruptcy Code. (Tr. 38; AE O) Applicant has not made any payments to address this debt. SOR ¶ 1.h alleges a charged-off bank debt for $2,623. On January 25, 2017, the creditor wrote the debt was settled and resolved. (AE Q) Applicant’s credit reports describe multiple debts that were paid as agreed. Applicant’s spouse noted that if she is able to negotiate a new payment schedule for their mortgage she will cancel the Chapter 13 bankruptcy. Policies The U.S. Supreme Court has recognized the substantial discretion of the Executive Branch in regulating access to information pertaining to national security emphasizing, “no one has a ‘right’ to a security clearance.” Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). As Commander in Chief, the President has the authority to control access to information bearing on national security and to determine whether an individual is sufficiently trustworthy to have access to such information.” Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicant’s eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.” Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended. Eligibility for a security clearance is predicated upon the applicant meeting the criteria contained in the adjudicative guidelines. These guidelines are not inflexible rules of law. Instead, recognizing the complexities of human behavior, these guidelines are 5 applied in conjunction with an evaluation of the whole person. An administrative judge’s overarching adjudicative goal is a fair, impartial, and commonsense decision. An administrative judge must consider all available, reliable information about the person, past and present, favorable and unfavorable. The Government reposes a high degree of trust and confidence in persons with access to classified information. This relationship transcends normal duty hours and endures throughout off-duty hours. Decisions include, by necessity, consideration of the possible risk the applicant may deliberately or inadvertently fail to safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation about potential, rather than actual, risk of compromise of classified information. Clearance decisions must be “in terms of the national interest and shall in no sense be a determination as to the loyalty of the applicant concerned.” See Exec. Or. 10865 § 7. Thus, nothing in this decision should be construed to suggest that it is based, in whole or in part, on any express or implied determination about applicant’s allegiance, loyalty, or patriotism. It is merely an indication the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. Initially, the Government must establish, by substantial evidence, conditions in the personal or professional history of the applicant that may disqualify the applicant from being eligible for access to classified information. The Government has the burden of establishing controverted facts alleged in the SOR. See Egan, 484 U.S. at 531. “Substantial evidence” is “more than a scintilla but less than a preponderance.” See v. Washington Metro. Area Transit Auth., 36 F.3d 375, 380 (4th Cir. 1994). The guidelines presume a nexus or rational connection between proven conduct under any of the criteria listed therein and an applicant’s security suitability. See ISCR Case No. 95-0611 at 2 (App. Bd. May 2, 1996). Once the Government establishes a disqualifying condition by substantial evidence, the burden shifts to the applicant to rebut, explain, extenuate, or mitigate the facts. Directive ¶ E3.1.15. An applicant “has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance.” ISCR Case No. 01-20700 at 3 (App. Bd. Dec. 19, 2002). The burden of disproving a mitigating condition never shifts to the Government. See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). “[S]ecurity clearance determinations should err, if they must, on the side of denials.” Egan, 484 U.S. at 531; see AG ¶ 2(b). Analysis Financial Considerations AG ¶ 18 articulates the security concern for financial problems: 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 6 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 Appeal Board explained the scope and rationale for the financial considerations security concern as follows: This concern is broader than the possibility that an applicant might knowingly compromise classified information in order to raise money in satisfaction of his or her debts. Rather, it requires a Judge to examine the totality of an applicant’s financial history and circumstances. The Judge must consider pertinent evidence regarding the applicant’s self-control, judgment, and other qualities essential to protecting the national secrets as well as the vulnerabilities inherent in the circumstances. The Directive presumes a nexus between proven conduct under any of the Guidelines and an applicant’s security eligibility. ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012) (citation omitted). AG ¶ 19 provides two disqualifying conditions that could raise a security concern and may be disqualifying in this case: “(a) inability or unwillingness to satisfy debts;” and “(c) a history of not meeting financial obligations.” Applicant’s history of delinquent debt is documented in his credit reports, OPM PSI, and hearing record. The Government established the disqualifying conditions in AG ¶¶ 19(a) and 19(c) requiring additional inquiry about the possible applicability of mitigating conditions. Five mitigating conditions under AG ¶ 20 are potentially applicable: (a) the behavior happened so long ago,3 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, 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; 3A debt that became delinquent several years ago is still considered recent because “an applicant’s ongoing, unpaid debts evidence a continuing course of conduct and, therefore, can be viewed as recent for purposes of the Guideline F mitigating conditions.” ISCR Case No. 15-06532 at 3 (App. Bd. February 16, 2017) (citing ISCR Case No. 15-01690 at 2 (App. Bd. Sep. 13, 2016)). 7 (d) the individual initiated a good-faith effort to repay overdue creditors or otherwise resolve debts;4 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. The Appeal Board concisely explained Applicant’s responsibility for proving the applicability of mitigating conditions as follows: Once a concern arises regarding an Applicant’s security clearance eligibility, there is a strong presumption against the grant or maintenance of a security clearance. See Dorfmont v. Brown, 913 F. 2d 1399, 1401 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991). After the Government presents evidence raising security concerns, the burden shifts to the applicant to rebut or mitigate those concerns. See Directive ¶ E3.1.15. The standard applicable in security clearance decisions is that articulated in Egan, supra. “Any doubt concerning personnel being considered for access to classified information will be resolved in favor of the national security.” Directive, Enclosure 2 ¶ 2(b). ISCR Case No. 10-04641 at 4 (App. Bd. Sept. 24, 2013). AG ¶¶ 20(a), 20(b), 20(c), and 20(d) apply. Applicant’s delinquent debts were caused by his unemployment before obtaining his current employment. This is a circumstance beyond his control, and he acted responsibly by resolving six out of nine of his SOR debts. Based on Applicant’s credible and sincere promise to pay his debts and his track record of paying his debts, future new delinquent debt “is unlikely to recur and does not cast doubt on [Applicant’s] current reliability, trustworthiness, or good judgment,” and “there are clear indications that the problem is being resolved or is under control.” His 4The Appeal Board has previously explained what constitutes a “good faith” effort to repay overdue creditors or otherwise resolve debts: In order to qualify for application of [the “good faith” mitigating condition], an applicant must present evidence showing either a good-faith effort to repay overdue creditors or some other good-faith action aimed at resolving the applicant’s debts. The Directive does not define the term “good-faith.” However, the Board has indicated that the concept of good-faith “requires a showing that a person acts in a way that shows reasonableness, prudence, honesty, and adherence to duty or obligation.” Accordingly, an applicant must do more than merely show that he or she relied on a legally available option (such as bankruptcy) in order to claim the benefit of [the “good faith” mitigating condition]. (internal citation and footnote omitted) ISCR Case No. 02-30304 at 3 (App. Bd. Apr. 20, 2004) (quoting ISCR Case No. 99-9020 at 5-6 (App. Bd. June 4, 2001)). 8 payments of his debts showed good faith. He has sufficient income to keep his debts in current status and to continue making progress paying his remaining debts. I am confident that Applicant will conscientiously endeavor to maintain his financial responsibility. His efforts are sufficient to mitigate financial considerations security concerns. 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 have incorporated my comments under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(a) were addressed under Guideline F, but some warrant additional comment. Applicant is a 51-year-old quality engineer. He has been employed by the same DOD contractor for eight years. In 1987, he received a bachelor’s degree in fine arts, and in 1995, he received a bachelor’s degree in electrical engineering. In 1988, he married, and his four children are ages 17, 20, 22, and 25. The youngest three children live with Applicant and his spouse. He was unemployed for about one year before obtaining his current employment, and this unemployment damaged his family finances. Applicant’s SOR alleges nine delinquent debts totaling $66,847. He began resolving his SOR debts before he received the SOR. All of his debts were paid and resolved except for his mortgage debt, one credit card debt, and a student loan possibly in forbearance. Applicant has a plan to bring his remaining SOR debts to current status. He assures he intends to pay his debts, and he understands the conduct required to retain his security clearance. The Appeal Board has addressed a key element in the whole- person analysis in financial cases stating: . . . the concept of 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 9 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 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 established a “meaningful track record” of debt re-payment, and I am confident he will maintain his financial responsibility. I have carefully applied the law, as set forth in Egan, Exec. Or. 10865, the Directive, and the AGs, to the facts and circumstances in the context of the whole person. Financial considerations security concerns 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 through 1.i: For Applicant Conclusion In light of all of the circumstances presented by the record in this case, it is clearly consistent with national security to grant or continue Applicant’s eligibility for a security clearance. Eligibility for access to classified information is granted. _________________________ MARK HARVEY Administrative Judge