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                           DEPARTMENT OF DEFENSE 
         DEFENSE OFFICE OF HEARINGS AND APPEALS 
           
             
 
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 16-00840 
  )   
 ) 
Applicant for Security Clearance ) 
 
 
Appearances 
 
For Government: Adrienne Driskill, Esq., Department Counsel 
For Applicant: Pro se 
 
 
June 6, 2017 
______________ 
 
Decision 
______________ 
 
 
LOKEY ANDERSON, Darlene D., Administrative Judge: 
 
 
Statement of the Case 
 
On June 29, 2016, the Defense Office of Hearings and Appeals (DOHA) 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 for cases after September 1, 2006.  
 
Applicant answered the SOR on August 4, 2016, and requested a hearing before 
an administrative judge. The case was assigned to me on October 3, 2016. DOHA 
issued a notice of hearing on November 3, 2016, and the hearing was convened as 
scheduled on December 8, 2016. The Government offered Exhibits 1 through 3, which 
were marked and admitted without objection. The Applicant called eight witnesses, and 
offered Exhibits A through P, which were admitted without objection.  She also testified 
 
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on her own behalf. DOHA received the transcript of the hearing (Tr.) on December 19, 
2016.  
 
 
Findings of Fact 
 
 Applicant is a 54-year-old employee of a defense contractor. She is married with 
three children.  She has two Master’s Degrees, one in Business Administration, and the 
other in Science Systems Engineering and Information Technology Management.  She 
is self-employed and holds the position as President and owner of her own consulting 
business.  She is also working as an acquisition professional or consultant for another 
defense contractor.  She is seeking to retain a security clearance in connection with her 
employment. 
 
 The SOR alleges that Applicant has ten delinquent mortgage accounts owed to a 
number of creditors totaling in excess of $300,000. In her Answer, Applicant denied 
each debt, asserting that they have been paid and resolved.  Each debt can also be 
found listed in credit reports dated October 29, 2015; and September 15, 2016. (See 
Applicant’s Exhibits 2 and 3.)   
 
 After graduating from college, Applicant was commissioned an Ensign from the 
Naval Reserve Officer Training Corps Unit in May 1984.  She served on active duty in 
the United States Navy for 22 years until April 2006 when she was honorably 
discharged.  She has held a security clearance at some level since 1984.  She has a 
stellar military career record.  (Applicant’s Exhibit A.) 
 
 Instead of a stock portfolio, Applicant and her husband have invested in property 
over time to establish wealth.  Applicant’s father, when he was alive, invested in 
property and so Applicant was introduced to the concept at an early age.  She grew up 
with paying cash for property, as a way of investing.  As a teenager she showed 
properties, painted, cleaned, and even sucked sewage out of properties.  Her father 
owned as many as 60 to 80 properties at a given time.  He brought properties with cash 
he earned from his trucking company.     
 
 Applicant bought her first property in 1989 before meeting her husband.  She and 
her husband, who has a real estate license, bought their first property together in 1995.  
Over time, Applicant and her husband have continued to purchase properties in an 
effort to build their retirement portfolio.  They currently have 30 properties, comprised of 
condominiums, single family houses, commercial property and garages.  (Tr. p. 120.)  
These properties are located in various states across the United States.  When 
Applicant’s father died in 2007, Applicant inherited some of her father’s properties and 
at one time she owned about 50 properties.   
 
 Applicant and her husband both retired from the United States Navy in 2006.  
They both receive military pensions at the commander level.  They retired because they 
have a special needs child.  (Tr. p. 23.)  After retiring, Applicant started her own 
consulting company, a small woman-owned, disabled-veteran-owned business, which 
 
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has been up and running since 2006.  She also provides consulting services to another 
defense contractor.   
 
 Prior to the downturn in the real estate market in 2008, Applicant’s properties 
were fully occupied with tenants, as the real estate business was flourishing.  In 2008, 
the property values started to slip and vacancies rose.  Interest rates went up, and 
Applicant was underwater on a number of her properties.  Her father, who died of ALS 
in 2006, was at that time also in arrearages on federal taxes and maintenance issues 
for some of his properties that Applicant inherited.  She then had the responsibility to 
pay those debts and straighten out that business.  Applicant stated that she was asset 
rich but cash poor.  To get out of her situation, Applicant had to pursue what is known 
as strategic defaults on the properties that she was unable to keep.  Her intention was 
to keep the properties, but after trying to obtain a loan modification on each one without 
success, the properties were either subject to a short sale, foreclosure, or a deed in lieu 
of foreclosure.  Applicant was able to retain ownership of approximately 30 of her 
properties.  Eight of her properties were foreclosed upon.    
 
 Applicant also testified that in 2002 she and her husband joined a real estate 
investment club to pursue investments for their children, which they believed led them 
astray.  Applicant’s husband, who handled the particulars of the transactions, testified 
that they would go to a one-day seminar and could purchase up to six or seven 
properties in one day.  They were offered 5 percent down loans to purchase the 
properties.  Applicant was putting the debt for the down payments on her personal 
residence.  The club promised the buyers that they would be guaranteed a certain 
amount of rent for each location purchased.  Applicant found that this was not the case, 
and believes that about ten of her properties were impacted by this false guarantee.  
(Tr. p. 134.)   
 
 The following properties listed in the SOR were either foreclosed upon or 
Applicant was given a release of lien on the second trust deeds for some unknown 
reason.  Between 2008 and 2014, Applicant has had eight of her properties foreclosed 
upon.  Only six of the foreclosures are represented in the SOR. 
  
 1(a) a debt owed to a lender for a delinquent mortgage account in the amount of 
$33,060 was never paid by the Applicant.  This was a second trust deed on a property 
which was part of the investment club.  This property was foreclosed upon in 2010.  
Applicant claims that she is not responsible for the second trust deed once the property 
goes in to foreclosure.  She states that it is no longer reflected as owing on her credit 
report.  (Tr. p.p. 154-157.)  She contends that the account is closed out and Applicant 
owes nothing to the lender.  Applicant states that she paid the 1099C taxes on the 
property.  (Tr. p. 158.)         
 
 1(b) and 1(c) are one in the same debt owed to a lender for a delinquent second 
mortgage account, in the amounts of $39,641 and $7,251 respectively.  Applicant was 
unable to obtain a loan modification, and the property was also foreclosed upon in 2010.  
Applicant claims that she paid the 1099C taxes on the property.  It is not reflected as 
owing on the Applicant’s credit report.  (Tr. pp. 160-161.) 
 
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   1(d) and 1(e) are one in the same debt owed to a lender for a delinquent 
second mortgage account in the amounts of $28,981 and $10,583 respectively.  
Applicant states that she negotiated a loan modification on the first trust deed and was 
given a deed of release (lender dismissed the second) for the second trust deed.  (Tr. p. 
163-164.)  She claims that there is nothing owed on this account and it is not reflected 
on her credit report.  Applicant still owns the property, and is making regular monthly 
payments on the first trust deed.  (Applicant’s Exhibit F, and Tr. pp. 164 -165.) 
 
 1(f) a debt owed to a lender for a delinquent mortgage account in the amount of 
$29,639 was never paid by the Applicant.  Applicant was unable to obtain a loan 
modification, and the property was foreclosed upon.  Applicant claims that she paid the 
1099C taxes on the property.  It is not reflected as owing on the Applicant’s credit 
report.  (Applicant’s Exhibit G.)    
 
 1(g) a debt owed to a lender for a delinquent second mortgage account in the 
amount of $37,891 was never paid by the Applicant.  The property was foreclosed upon.   
Applicant states that she was released from the debt by the bank. Applicant states that 
she paid the 1099C taxes on the property.  (Tr. p. 171.)  
 
 1(h) a debt owed to a lender for a delinquent mortgage account in the amount of 
$35,297 was never paid by the Applicant.  Applicant did a deed in lieu of foreclosure 
and gave the property back to the bank in early 2014.  She claims that she paid the 
1099C taxes on the property.  (Tr. p. 172.)   
 
 1(i) a debt owed to a lender for a delinquent mortgage account in the amount of 
$38,922 was past due.  Applicant was able to obtain a slight loan modification on the 
first trust deed mortgage.  Applicant received a release of lien on the property for the 
second trust deed.  Applicant still owns the property and is current on the first mortgage.  
(Tr. p. 177.)   
 
 1(j) a debt owed to a lender for a delinquent mortgage account in the amount of 
$38,277 was never paid by the Applicant.  The property was foreclosed upon.  Applicant 
states that she paid the 1099C taxes on the property.  (Tr. pp. 176 -177.) 
 
 Applicant’s husband testified that some of their properties received loan 
modifications.  The ones that they could not get loan modifications on, and could not 
sell, they allowed to go into foreclosure, as there was nothing else they could do at that 
point.  (Tr. p. 178)  Applicant plans on keeping the 30 properties she now has with no 
plan to purchase more at this time.  Their future involves an exit strategy from this 
situation, but there are no specifics as of yet. 
 
 Applicant’s husband further testified that they have about $240,000 in mutual 
funds and other investments, which also include ROTH IRA’s, and TSP’s.  Applicant 
receives about $50,000 annually from military retirement and he receives about $45,000 
annually.  They also receive about $120,000 annually from their real property.  
Applicant’s salary from her company is uncertain given the nature of her work and the 
contracts that may or may not be available.  Her husband explained that their income 
 
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drastically fluxuates based upon the repairs or other necessities required on the various 
properties.   
 
 Seven other witnesses comprised of an attorney and law professor, a lieutenant 
commander, a master chief, a nun who attends the same parish as the Applicant, a 
former military officer and coworker, a networking associate who works for the 
Department of the Navy, and several others attest to Applicant’s trustworthiness and 
loyalty.  They are all friends and or professional associates of the Applicant who have 
known her in various capacities throughout her life.  The collectively profess her 
reliability, honesty and personal and professional judgment.  They all recommend her 
for a security clearance.  (Tr. pp. 23 -115.)      
 
 Letters of recommendation were received from various professional associates 
including a lieutenant commander, a retired Navy commander, four Navy captains, and 
one staff judge advocate.  They all consider Applicant to be an excellent applicant for 
security clearance with the requisite professionalism, character, and trustworthiness.  
(Applicant’s Exhibit E.)  
 
 
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 are to be used in evaluating an 
applicant’s eligibility for access to classified information. 
 
These guidelines are not inflexible rules of law. Instead, recognizing the 
complexities of human behavior, administrative judges apply the guidelines 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 the applicant or proven by Department Counsel.” The 
applicant has the ultimate burden of persuasion to obtain a favorable security decision.  
 
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 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 adverse 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, as 
follows:       
 
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 conditions that could raise security concerns under 
AG ¶ 19. Two are potentially applicable in this case:   
 
(a) inability or unwillingness to satisfy debts; 
 
(c) a history of not meeting financial obligations.  
 
 Applicant voluntarily entered into multiple real estate transactions.  She 
accumulated significant mortgage debt that she was unable or unwilling to pay when the 
real estate market collapsed in 2008.  As a result of her inability to pay her mortgages, 
eight of her properties have been foreclosed upon.  The evidence is sufficient to raise 
the above disqualifying conditions. 
  
 None of the Financial Considerations Mitigating Conditions under AG ¶ 20 are 
potentially applicable.  
 
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 Applicant denied the allegations under this guideline, but essentially admitted the 
underlying conduct.  She admits to voluntarily borrowing money from the respective 
lenders to purchase the properties in question.  She also admits to defaulting on the 
loans.  Her plan was to rent to tenants and have them pay the mortgages.  It is well 
understood that the real estate market, like the stock market, is a gamble and not a 
guarantee.  Applicant’s situation did not go as planned, and in 2008, the real estate 
market collapsed.  Applicant was not prepared for the consequences and found herself 
underwater with many of her properties, unable to pay the mortgages.  In fact, she was 
so financially extended that eight of her properties were foreclosed upon.  As previously 
mentioned, she maintains that a few of the second trust deed loans have been forgiven 
and removed from her credit report.  
 
 If the delinquent debt is legally unenforceable under a state law, the Government 
can still consider Applicant’s judgment in acquiring the debt and whether she handled 
the debt responsibly after its acquisition. Clearly Applicant had demonstrated a great 
degree of poor judgment in acquiring such a large number of properties, which she 
could not realistically afford.  Applicant’s involvement in these real estate transactions 
casts doubt onto her current reliability, trustworthiness, or good judgment. She has not 
acted responsibly under the circumstances. There are no indications that the problem is 
resolved or under control, nor has there been a good faith effort to resolve her debts. 
The concern remains unmitigated.  
 
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.  
 
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Applicant is well respected by her friends and professional associates.  She is 
also commended for her long and dedicated service to the Navy and our national 
security. Yet, she still remains in a constant state of juggling the payments for 30 
separate properties each month.  This is excessive and well beyond what is affordable.  
She has already had eight property foreclosures, which she strategically allowed in 
order to maintain her other properties.  This conduct places the Applicant and the 
Government at a significant risk for pressure, coercion, exploitation, and duress.  
Applicant has made several questionable financial choices that do not demonstrate the 
judgment, reliability, or trustworthiness needed to hold a security clearance. There are 
significant unresolved concerns about Applicant’s finances and judgment.  
 
Overall, the record evidence leaves me with questions and doubts as to 
Applicant’s eligibility and suitability for a security clearance. For all these reasons, I 
conclude Applicant has not mitigated the Financial Considerations 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 
 
  Subparagraph 1.a.~1.j.:   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 eligibility for a security 
clearance. Eligibility for access to classified information is denied. 
 
 
 
________________________ 
Darlene Lokey Anderson 
Administrative Judge