1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-00725 ) Applicant for Security Clearance ) Appearances For Government: David Hayes, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ RICCIARDELLO, Carol G., Administrative Judge: Applicant failed to mitigate the security concerns under Guideline F, financial considerations. Eligibility for a security clearance is denied. Statement of the Case On June 22, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued to Applicant a Statement of Reasons (SOR) 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; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG) effective within the DOD on September 1, 2006. Applicant answered the SOR on July 27, 2016, and he requested a hearing before an administrative judge. The case was assigned to me on January 5, 2017. The Defense Office of Hearings and Appeals (DOHA) issued a notice of hearing on February 13, 2017. I convened the hearing as scheduled on March 2, 2017. The 2 Government offered exhibits (GE) 1 through 5, which were admitted into evidence without objection. Applicant testified and offered Applicant’s Exhibits (AE) A through J, which were admitted into evidence without objection. DOHA received the hearing transcript (Tr.) on March 10, 2017. Findings of Fact Applicant admitted the allegations in SOR ¶¶ 1.a, 1.b, and 1.d. He denied the allegation in SOR ¶ 1.c. After a thorough and careful review of the pleadings, exhibits, and testimony, I make the following findings of fact. Applicant is 55 years old. He earned a bachelor’s degree in 1991 and a master’s degree in 2000. He enlisted in the Army in 1981 and was honorably discharged in 1988 in the paygrade E-5. He served in the National Guard from 1988 to 1991. He was commissioned as an second lieutenant through the ROTC program after completing college in 1991. He served on active duty from then until his retirement in September 2006 as a major. He receives a military pension.1 Applicant married in 1991 and divorced in 2005. He has a 24-year-old son and a 23-year-old daughter from the marriage. His daughter completed her bachelor’s degree in 2016, but continues attending college to earn a second bachelor’s degree. Applicant provides his daughter between $800 and $1,000 a month for support. She does not have student loans. His son is married and working.2 Applicant and his ex-wife continue to jointly own a house where she resides with her current husband. In the past, he provided her $2,800 a month for support and to make the mortgage payments. The mortgage payment is $1,975. This support was for his daughter who was living with her mother before she turned 21 years old. It is unknown when he stopped making support payments, but they have ceased. In August 2014, his ex-wife stopped making the mortgage payments, so Applicant made them. He indicated his ex-wife will pay about $400, and he will pay the remainder. Applicant has made mortgage payments on the house ranging from $1,340 to $2,680 based on bank statements from December 2015 to February 2017.3 Applicant testified that the house is on the market for sale.4 Applicant and his ex-wife also owned a house in another state that was purchased in 1993. It was used as rental property. His mortgage payments were $810. He timely made his mortgage payments. He sold the house in November 2016. He 1 Tr. 24-31. 2 Tr. 84-87; GE 1. 3 AE E. 4 Tr. 31-32, 52, 67-72. 3 made a profit of $32,000, and it was split with his ex-wife, so he received $16,000. He has about $12,000 left from the profit.5 Applicant has cohabitated with his girlfriend since 2011. She is from another country and is a U.S. permanent resident. He traveled to her country of origin in 2013 for approximately 11-20 days.6 In 2012, Applicant obtained a loan for approximately $15,000, so his girlfriend could purchase a vehicle. She makes the $290 loan payments. He pays the rent, utilities, and most of their living expenses. She does not have steady employment. Applicant owned a truck that was damaged beyond repair in 2016. He took the money he received from the insurance company, and used about $3,000 for a down payment toward the purchase of a 2016 car for about $22,000. His monthly payments are about $350. He also had a motorcycle that was in an accident in August 2015. He received about $11,600 from the insurance company for the damaged motorcycle. All except $5,000 was used to pay off the loan on the damaged motorcycle. He used the remaining $5,000 as a down payment to purchase another motorcycle for $18,000, financing the $13,000 balance. He has two credit cards, one with a balance of about $2,000, and another with a balance of about $1,200 that he is current with payments. He indicated he participated in financial counseling when he was in the military, but none recently. He testified he had a budget a couple of years ago, but does not have a current one.7 Applicant purchased another house in July or August 2006 shortly before retiring from the military in September 2006. He obtained a mortgage that was divided between two companies for 80% of the loan and 20% of the loan, with different interest rates. He was unable to find a job for nine months after he retired. He used credit cards to pay his mortgage payments and to make other purchases. He indicated a couple of years later the real estate market and the value of his house declined. He contacted his bank in an attempt to modify his mortgage payments. He was advised that he had to be three months delinquent on the mortgage before a modification could be considered. He stopped making the mortgage payments in the summer of 2009 and contacted the bank every couple of months in regard to the status of his loan-modification application. About a year after he stopped making his mortgage payments, he was contacted by the mortgage lender on the 20% loan. He indicated he arranged to pay $200 a month on that loan, which he paid for a year. In approximately August 2010 the mortgage lender on the 80% loan contacted him with an offer for a new payment amount. Applicant stated his income had changed, and he could not afford the amount offered. He asked the mortgage company to reconsider and propose a new amount. He was not provided a new amount. The house was placed in foreclosure. He contacted an attorney who advised him to stop paying his credit cards because the bank was aware he was 5 Tr. 66, 69-71. 6 GE 1. 7 Tr. 87-106. 4 making those payments and not his mortgage payments. Applicant’s lawyer was able to prevent the foreclosure twice, but failed the third time. The house was sold in approximately January 2011. He continued to live in the house until April 2011.8 Applicant indicated in his answer to the SOR that after his house foreclosed, he contacted some of the credit card companies and settled one and was making payments on two others. He also indicated that he is more financially stable and making arrangements to pay his debts. Applicant attributed his financial problems to periods of unemployment. After he retired from the military in September 2006, he was unemployed until June 2007. He listed other periods of unemployment as follows: June 2008 to January 2009; June 2009 to September 2009; part of October 2009; and September 2010 to November 2010. He has been steadily employed since November 2010. Credit reports from May 2015, January 2016 and September 2016 support the validity of the debts alleged in the SOR.9 Applicant completed his security clearance application (SCA) in April 2015 and was interviewed by a government investigator in October 2015. He told the investigator that he was advised by his attorney to stop paying the credit card debt alleged in SOR ¶ 1.a ($26,309) so that the bank would be forced to modify his mortgage. He used this credit card to pay his mortgage. He also told the investigator he contacted the creditor about the debt and was told he did not owe anything. He stated the creditor never notified him that he owed the debt. Applicant then admitted to the investigator that he forgot about the debt. Applicant testified that he defaulted on the credit card in 2006 or 2007. He made some payments on it in 2007 and sporadic payments until September 2010, when he stopped paying it. Applicant did not retrieve a credit report to determine the status of the debt or if the account had been sold. He stated around the summer of 2015, he began making inquiries. He stated around January 2016, he heard from the collection company holding the debt. Applicant began a payment plan in February 2016. He made a $500 payment in February 2016 and subsequent monthly payments of $200.10 Applicant testified that he did not remember he had a credit card on the account alleged in SOR ¶ 1.b ($9,125). He was confronted with this debt during his background interview in October 2015 and indicated he had no knowledge of the account. He last made a payment on the account in August 2010. He contacted the creditor and made an agreement to make monthly payments of $104 beginning in February 2017 and the final payment to be completed in March 2024. Applicant has made one payment.11 8 Tr. 39-46; Answer to SOR. 9 Tr. 32-35; GE 1, 3-5. 10 Tr. 35-39, 61-66, 72-74; AE A. 11 Tr. 74-77; AE C. 5 The debt in SOR ¶ 1.c ($7,058) is a credit card debt. From 2010 until the summer of 2014 he made no contact with the creditor. The creditor contacted him about the delinquent debt, and he agreed to make monthly payments of $106. He provided proof that he has made monthly payments since September 2015. He was unable to access his payment record prior to that date, but provided a document confirming the agreement from 2014.12 The debt in SOR ¶ 1.d ($42,195) is the 20% mortgage loan as discussed above. He testified he made $200 payments on the loan from September 2009 to September 2010. Applicant has not made any payments since then. He continued to live in the house until April 2011 without paying mortgage or rent to live there since the summer of 2009. Applicant provided documents that show the creditor obtained a judgment on the debt in August 2014. In April 2015, the creditor attempted to garnish Applicant’s wages to pay the debt, but was unsuccessful because Applicant was granted an exemption because he was providing support for his daughter. He stated that his attorney is negotiating a settlement. This debt is not resolved.13 Applicant provided a character letter from his brother, who is also the president of the company where Applicant is working. His brother stated that Applicant has been employed with his company since November 2010. His brother describes Applicant as a person with high moral and ethical standards, who always puts the needs of others before himself. He is loyal, dedicated, and trustworthy.14 Applicant provided a letter indicating his gross salary is approximately $59,000. He receives approximately $44,700 from his military pension. He explained he is in a better financial situation now to take care of his past debts. He recently received a raise and hopes to increase the monthly payments he is making on the delinquent debts. He testified that he was told by his lawyer that some of his unsecured debts “will go away with time.”15 Policies When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the adjudicative guidelines. In addition to brief introductory explanations for each guideline, the adjudicative guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. 12 Tr. 77-81; AE B, J. 13 Tr. 46-61; AE D. 14 AE G. 15 Tr. 82-83, 108. 6 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. Likewise, I have not drawn 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, an “applicant is responsible for presenting witnesses and other evidence to rebut, explain, extenuate, or mitigate facts admitted by applicant or proven by Department Counsel and has the ultimate burden of persuasion to obtain a favorable security decision.” 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 safeguard classified information. Such decisions entail a certain degree of legally permissible extrapolation of 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 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 7 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. This concern is broader than the possibility that an individual might knowingly compromise classified information in order to raise money. It encompasses concerns about an individual’s self-control, judgment, and other qualities essential to protecting classified information. An individual who is financially irresponsible may also be irresponsible, unconcerned, or negligent in handing and safeguarding classified information.16 The guideline notes several conditions that could raise security concerns. I have considered all of the disqualifying conditions under AG & 19, and the following two are potentially applicable: (a) inability or unwillingness to satisfy debts; and (c) a history of not meeting financial obligations. Applicant had delinquent debts that were unpaid or resolved. The above disqualifying conditions apply. The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. The following mitigating conditions under AG ¶ 20 are potentially applicable: (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, 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 16 See ISCR Case No. 11-05365 at 3 (App. Bd. May 1, 2012). 8 (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. In 2010, Applicant stopped paying his credit card debts and mortgage. He has been employed since November 2010. He began paying one delinquent credit card debt after the creditor contacted him (SOR ¶ 1.c) in 2014. He recently made one payment on another card (SOR ¶ 1.b) that he was confronted with during his October 2015 interview. In January 2016, he made a payment arrangement on the credit card debt in SOR ¶ 1.a. His largest debt in SOR ¶ 1.d is now a judgment. No payments have been made to resolve it, but he stated his attorney is attempting to negotiate a settlement. AG ¶ 20(a) does not apply because his debts are recent and multiple. Although he stated his financial difficulties were due to periods of unemployment, he has been working steadily since November 2010 and also receives a military pension. For many years he took no action on paying the delinquent debts. Other than the one debt where the creditor contacted him, he did not begin to address the others until after he completed his SCA or after his background interview. He had the resources to make nonessential purchases. His behavior casts doubt on his current reliability, trustworthiness, and good judgment. Applicant attributed his financial problems to periods of unemployment, from 2006 when he retired from the military to November 2010 when he attained full-time employment. His unemployment was beyond his control. For the full application of AG ¶ 20(b), Applicant must have acted responsibly under the circumstances. Applicant has been employed full time and has been receiving his military pension since November 2010. He was living in the house that was eventually foreclosed without paying rent or the mortgage from the summer of 2009 until he vacated the premises in April 2011, thereby reducing his living expenses and increasing his disposable income. He failed to address any of the delinquent debts alleged in the SOR until a creditor contacted him in 2014. The others he did not address until after he completed his SCA. His largest debt in SOR ¶ 1.d remains unresolved. Although Applicant may have had some financial difficulties due to his unemployment, there is insufficient evidence to conclude he acted responsibly under the circumstances. AG ¶ 20(b) partially applies. Applicant has not had financial counseling regarding his current financial situation. He does not have a current budget. He failed to timely address his delinquent debts after he was employed full time. He has not made payments on his largest debt, indicating his attorney is negotiating a settlement, and he was also advised that some of his unsecured debts “will go away with time.” Although he stated he is now in a better financial situation and he is addressing some of the delinquent debts, the largest debt remains unresolved. AG ¶ 20(c) partially applies. Applicant did not begin to address his delinquent debts until one creditor contacted him in 2014 regarding paying the debt in SOR ¶ 1.c. Despite being on notice that his debts were a security concern he made minimal effort to resolve his other 9 delinquent debts. These debts have been delinquent since 2010. He is making payments on three of the four debts, the most recent payment plan started in 2017. The largest debt remains unresolved. Based on all of the facts, I cannot find that Applicant initiated good-faith efforts to repay overdue creditors because he delayed addressing the debts for four to seven years. However, he is making payments towards resolving three of the four credit cards. AG ¶ 20(d) partially applies to the three debts he is paying. Through his testimony and other evidence there is insufficient evidence to conclude Applicant disputes that he is responsible for any of the alleged debts. AG ¶ 20(e) does not apply. 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 the facts and circumstances surrounding this case. I have incorporated my comments under Guideline F in my whole-person analysis. Some of the factors in AG ¶ 2(a) were addressed under that guideline, but some warrant additional comment. Applicant is a 55-year-old, educated, military veteran. He attributed his financial difficulties to periods of unemployment after he retired. He purchased a house and because of his unemployment he used credit cards to pay the two mortgages. The house eventually foreclosed, and he was responsible for the payment of one of the mortgages. Applicant has been employed full time since November 2010. He receives a military pension. He lived rent-free in the house from the summer of 2009 until he vacated the premises in April 2011. He failed to address his delinquent debts until one of the creditors contacted him in 2014, and he began paying on that account. He did not take action on the other accounts until after he completed his SCA. His largest debt 10 remains unresolved. He failed to provide a reasonable explanation for his failure to act responsibly for many years toward paying his creditors, despite having some resources to do so. Applicant does not have a reliable track record of acting responsibly toward his financial obligations. His conduct raises questions about his judgment, reliability, and trustworthiness. Overall, the record evidence leaves me with questions and doubts about Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate financial considerations guideline security concerns. 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.c: For Applicant Subparagraph 1.d: Against 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 a security clearance. Eligibility for access to classified information is denied. _____________________________ Carol G. Ricciardello Administrative Judge