1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) 1 ) ISCR Case No. 15-02728 ) Applicant for Security Clearance ) Appearances For Government: Rhett Petcher, 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 access to classified information is denied. Statement of the Case On October 21, 2015, 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. On June 1 Applicant married and has changed her name. For continuity, her maiden name is used in this Decision. 2 8, 2017, new AG were implemented and are effective for decisions issued after that date.2 Applicant answered the SOR on November 3, 2015, and elected to have her case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s file of relevant material (FORM). Applicant received it on December 13, 2016. She was afforded an opportunity to file objections and submit material in refutation, extenuation, or mitigation within 30 days of receipt of the FORM. The Government’s evidence is identified as Items 1 through 8. Applicant did not object to the Government’s evidence. She provided a response to the FORM, along with documents marked as Applicant Exhibits (AE) A through JJ. There were no objections and all Items and exhibits were admitted into evidence. The case was assigned to me on October 1, 2017. Findings of Fact Applicant admitted the allegations in the SOR ¶¶ 1.a, 1.b, 1.c, 1.e, 1.g, 1.h, 1.i, 1.n, 1.o, 1.p, 1.q, 1.s through 1.w, 1.y, 1.jj, 1.ll, 1.mm, 1.oo, 1.vv, 1.ww and 1.xx. She denied the remaining allegations. She provided comments regarding some of the allegations. After a thorough and careful review of the pleadings and exhibits submitted, I make the following findings of fact. Applicant is 49 years old. She married in 1991 and divorced in 2010.3 She has two children from that marriage. She remarried. She earned an associate’s degree in 1993. She has worked for her present employer, a federal contractor, since 1999.4 The debts alleged in the SOR are supported by Applicant’s admissions, credit reports from February 2013, March 2014, December 2014, September 2015, November 2016, and Applicant’s bankruptcy documents.5 Applicant attributed her financial problems to her husband losing his job in 2009 and their divorce. In her January 2013 security clearance application (SCA), she disclosed she failed to pay her 2011 federal income taxes because she did not have the money, and it was being addressed through her bankruptcy plan. She estimated that she owed $6,000. She also disclosed in her SCA and SOR answer that she filed 2 I considered the previous AG, effective September 1, 2006, as well as the new AG, effective June 8, 2017. My decision would be the same if the case was considered under the previous AG. 3 Items 1, 2. Applicant provided conflicting dates for when she and her husband divorced. In her SCA Section 17 she indicated she and her husband divorced in March 2010. In responses to Section 26 she stated they divorced in March 2011. In her answer to the SOR, she stated “by early 2012, we divorced.” 4 Item 2. 5 Items 1, 2, 3, 4, 5, 6, 7. 3 Chapter 13 bankruptcy in March 2012, which was dismissed in July 2012. Applicant stated it was dismissed due to errors in the filing process.6 Applicant filed Chapter 13 bankruptcy again in September 2012.7 The bankruptcy Trustee filed a motion to dismiss the Chapter 13 bankruptcy for cause in March 2015. It stated: [F]or material default in the plan as the Debtor has failed to make all plan payments as required by the plan. Debtor is an above median income Debtor and thru March 2015 should have paid $109,804 to the plan. The Debtor, [as] of March 9, 2015, has only paid $97,088 and is therefore short of plan payments in the amount of $12,716.8 The Trustee’s motion was granted and on April 10, 2015, and Applicant’s Chapter 13 bankruptcy was dismissed. The Trustee’s final report and accounting noted that the number of months from filing to the last payment was 31. The case had been pending for 35 months. The amount of unsecured claims discharged without payment was $0.00. The total amount paid by or on behalf of the debtor, less the amount refunded to debtor, was $100,031. The only debts that were paid through the bankruptcy were secured debts for Applicant’s two vehicles ($14,580 and $1,912) and three secured debts to her mortgage company ($11,949; $47,103, $18,475). The payment plan was for 60 months.9 Applicant stated in her answer to the SOR: By May of 2015, I had paid in over $100,000 to my plan and I no longer felt the need to rely on the trustee to make payments on my behalf. At the conclusion of my Chapter 13, all my creditors were notified that my case was dismissed. Only a few medical companies have requested repayment. The majority of creditors wrote off the debt and therefore decided not to pursue legal action against me. I have every intention of working with any creditor that does request payment. The judge decided my plan should concentrate on making up past house payments and auto payments, as well as administrative and attorney fees. Unsecured debts were established at 0%. Tax payments were scheduled to be paid at the end of the plan. 6 Items 1, 2. 7 Item 7. Applicant noted in her SOR response that the SOR and FORM incorrectly stated that her second Chapter 13 bankruptcy was filed in September 2013. The correct year is 2012. I have sua sponte corrected the error and will consider September 2012 as the accurate date. 8 Item 7. 9 Item 7. 4 Reason A: On advice of my council (sic), I requested the case be closed. However, my attorney also advised that we have the court close the case for me, to protect my right to refile within six months if necessary. The court agreed to do so and listed the reason of failure to make plan payments. In truth I think I missed [approximately] 5 payments over the life of my plan, 2 with the courts approval. At no time during my case did the court fault me for not paying my obligation as required. In fact, they approved the two skipped payments stating they wished everyone paid as faithfully as I had.10 Applicant’s bankruptcy documents, specifically the document that reflected scheduled creditors, shows the Internal Revenue Service (IRS) holds priority claims against her in the amounts of $15,014, $4,566, $1,911, and $7,654.11 In Applicant’s response to the SOR, she stated that her 2010 federal taxes are now paid and that she has submitted a payment plan to the IRS. It appears Applicant’s 2010 federal tax debt was satisfied. She provided documents to show she has been working with an attorney to resolve her remaining tax debt. Her request for an installment agreement is dated December 2016. She stated that the IRS has verbally agreed to the plan, and her first payment was due in February 2017. Applicant’s tax documents reflect a request for an installment agreement to pay taxes owed for tax years 2011 through 2015 with a total balance owed of $34,044. Her failure to pay federal taxes for years 2013, 2014, and 2015 were not alleged.12 She did not provide an explanation for why she failed to timely pay her 2010 and 2012 taxes.13 In Applicant’s FORM response, she provided a document from her mortgage company dated June 2015, after her bankruptcy was dismissed. It stated: “Your account is presently due for the months of 12/1/2014 to 6/1/2015. The arrearage totals $18,157.36, which includes late charges and any credit for partial payments made.”14 The letter confirms an agreement that Applicant signed in June 2015 to start payments in August 2015. She provided a credit report from November 2016, which reflects the account as “pays as agreed.”15 In Applicant’s response to the FORM, she stated that the accounts in SOR ¶¶ 1.n, 1.w, 1.y, 1.dd and 1.ll are no longer payable because some of them were sold by 10 Item 1. 11 Item 7. Also listed is an IRS unsecured claim for $982. 12 I have not considered Applicant’s failure to timely pay her 2013, 2014, and 2015 federal income taxes or any other derogatory information not alleged for disqualifying purposes. I will consider them when making a credibility determination, in the application of the mitigating conditions, and in a whole-person analysis. 13 AE A, Y, Z, BB, CC, DD, EE, FF, GG. 14 AE X. 15 AE B. 5 the original creditors to collection agencies. There is no evidence that she contacted the new creditors and paid the collection accounts. The original creditors and some collection accounts are included in her bankruptcy documents as unsecured debts, none of which were paid when her bankruptcy was dismissed.16 Applicant stated in her answer to the SOR and FORM response that many of her debts were resolved. The documents provided support the following: SOR ¶ 1.g-has a balance owed of $8,666 and is unpaid. In Applicant’s November 2016 credit report it shows the account is charged off.17 SOR ¶ 1.h ($6,020)-Applicant did not pay this debt. She received an IRS 1099C form for tax year 2015. The credit report she provided shows the account is charged off.18 SOR ¶ 1.i ($60)-Applicant received a letter from the collection agency. It reflected a zero balance on the account.19 This debt is resolved. SOR ¶ 1.n-($4,167)-A letter from the original creditor reflects the account was sold to a collection agency. Applicant’s November 2016 credit report shows it was included in her bankruptcy as part of a “wage earner plan.” It also shows it was sold. Since the bankruptcy was dismissed without discharging the debt, the account remains unpaid and delinquent.20 In her SOR answer, Applicant stated that she paid the debt in SOR ¶.ff ($123) last year. No proof was provided. She stated she did not recognize the debt alleged in SOR ¶ 1.ll ($900). It appears to be a duplicate of SOR ¶ 1.jj ($900), which she included in her bankruptcy. SOR ¶ 1.ll is resolved in her favor. Applicant provided documents from medical providers.21 Those exhibits noted that she filed bankruptcy, and the accounts were not collectible. The medical debts alleged in the SOR are: ¶¶ 1.r-$80; 1.s -$845; 1.aa-$62; 1.bb-$460; 1.ee-$396; 1.gg- $92; 1.hh-$546; 1.ii-$209; 1.kk-$572; 1.nn-$288; 1.oo-$6,834; 1.pp-$106, 1.qq-$89; 1.rr- $44; 1.ss-$350, and 1.ww-$592. There is a document addressing SOR ¶ 1.s indicating that the account was included in Applicant’s bankruptcy, and was written off by the 16 AE A, F. 17 AE G. 18 AE B, D. 19 AE E. 20 AE B, F. 21 AE G, H, M, N, O, P. 6 creditor. There is no evidence that after Applicant’s bankruptcy was dismissed she paid any of these creditors. In Applicant’s answer to the SOR, she referenced the medical debts in ¶¶ 1.ee, 1.gg, 1.hh, 1.ii, 1.kk, 1.nn, 1.pp, 1.qq, 1.rr, and 1.ss. Regarding each debt she stated that she believed it “was repaid or written off in the last year, but I can’t be sure without the company name.”22 The name of each creditor is listed in her bankruptcy documents under unsecured debts. No proof was provided regarding the debts being paid.23 Applicant indicated in her FORM response that she was working with her lawyer and one of the medical creditors to consolidate her debts and work toward a repayment plan. She also noted that she was attempting to research the different medical creditors to determine what creditor now holds the account.24 Applicant’s November 2016 credit report shows the debts in SOR ¶¶ 1.j ($250) and 1.k ($79) were disputed because they were included in her bankruptcy. These debts were not discharged, and there is no proof they are paid. Applicant stated in her FORM response that she was first told by the creditor that these debts are “no longer payable.” She was later told they are legal debts, presumably because her bankruptcy was dismissed. She indicated she is waiting to hear from the creditor regarding their resolution.25 They remain delinquent. Applicant disputes the debt in SOR ¶ 1.xx ($3,579). This was a personal loan from 2013. An attorney representing the person holding the loan presented Applicant’s attorney with the request for payment. Applicant disputes the loan. She stated in her answer to the SOR that her lawyer advised her it was not a legal debt. No documentary evidence was provided to confirm this conclusion. It is unresolved.26 Applicant indicated that some of her creditors no longer have her accounts. These were debts that were included in her bankruptcy. She provided a credit report dated November 2016. Many of the delinquent debts that were included in her bankruptcy are no longer listed on her credit report. She did not provide proof that she paid any of them or the collection accounts.27 22 Item 1. 23 Items 1, 7. Applicant provided AE Q which appears to have been copied over another document. The debt at the top of the document does not reflect the same creditor or balance at the bottom of the document. 24 AE A. 25 Item 7; AE A, B. 26 Item 1; AE T, U. V. 27 Item 7; AE A, B. 7 Applicant stated in her FORM response that most of her creditors have written off her debts, sold them, or they are barred by the statute of limitations. She indicated the state tax debt in SOR ¶ 1.d ($4,254) belonged to her ex-husband, who paid the debt. She was unable to provide proof due to the deadline to respond to the FORM. She did not provide documentary evidence that the debt belonged solely to her ex-husband.28 Applicant stated in her FORM response the following: I would like to offer additional information that proves I have acted responsibly and in good faith to repay or resolve my financial obligations and that I have established a meaningful track record of repayment that is consistent with the national interest to grant my eligibility for access to classified information. Although my financial problems were a direct result of my ex-husband’s loss of income and our divorce in 2012. I have a proven track record of working honorably as a contractor for the [government] since August [day] 1999 without issue (well before and well after my Chapter 13 bankruptcy).29 No information was provided regarding Applicant’s current income, budget, or expenses. There is evidence that through her bankruptcy attorney she likely received financial counseling. Policies When evaluating an applicant’s national security eligibility, the administrative judge must consider the AG. In addition to brief introductory explanations for each guideline, the AG list potentially disqualifying conditions and mitigating conditions, which are 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, 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 national security eligibility will be resolved in favor of the national security.” In reaching this decision, I have drawn only those conclusions that are reasonable, logical, and based on the 28 AE A. 29 AE A. 8 evidence contained in the record. Likewise, I have avoided drawing 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. Directive ¶ E3.1.15 states that 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 as to obtaining 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 that an applicant may deliberately or inadvertently fail to 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 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 or sensitive information. Financial distress can also be caused or exacerbated by, and thus can be a possible indicator of, other issues of personnel security concern such as excessive gambling mental health conditions, substance misuse, or alcohol abuse or dependence. An individual who is financially overextended is at greater risk of having to engage in illegal or otherwise questionable acts to generate funds. Affluence that cannot be explained by known sources of income is also a security concern insofar as it may result from criminal activity, including espionage. 9 AG ¶ 19 provides conditions that could raise security concerns. The following are potentially applicable: (a) inability to satisfy debts; (b) unwillingness to satisfy debts regardless of the ability to do so; (c) a history of not meeting financial obligations; and (g) failure to file or fraudulently filing annual Federal, state, or local income tax returns or failure to pay annual Federal, state, or local income tax as required. Applicant has numerous unresolved delinquent debts, including unpaid federal taxes for tax years 2010, 2011 and 2012. She filed Chapter 13 bankruptcy in September 2012 and later decided she no longer needed the trustee to make her payments through the plan. She defaulted on the bankruptcy, and it was dismissed in April 2015. Her unsecured delinquent debts were not discharged or paid. 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, a death, divorce or separation, clear victimization by predatory lending practices, or identity theft), and the individual acted responsibly under the circumstances; (c) the individual has received or is receiving financial counseling for the problem from a legitimate and credible source, such as a non-profit credit counseling service, and there are clear indications that the problem is being resolved or is under control; (d) the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts; (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 10 documented proof to substantiate the basis of the dispute or provides evidence of actions to resolve the issue; and (g) the individual has made arrangements with the appropriate tax authority to file or pay the amount owed and is in compliance with those arrangements. Applicant began experiencing financial problems in 2009 with the loss of her husband’s income. They divorced sometime between 2010 and 2012. Applicant filed Chapter 13 bankruptcy in September 2012 and through the plan she paid secured debts held by her mortgage company and for car loans. She subsequently decided she did not want to continue to make payments through the bankruptcy trustee and stopped. The Chapter 13 bankruptcy was dismissed in April 2015. She did not provide evidence that she paid or arranged payment plans for the debts that are alleged in the SOR, except for ¶ 1.i. She provided sufficient proof that her 2010 federal income taxes are paid. She did not provide sufficient evidence that her financial problems are unlikely to recur. Her failure to complete her bankruptcy payment plan or to resolve the delinquent debts included in the plan, or those outside of the plan casts doubt on her reliability, trustworthiness and good judgment. AG ¶ 20(a) does not apply. Applicant’s husband’s unemployment and their divorce were beyond her control. For the full application of AG ¶ 20(b), Applicant must show that she has acted responsibly under the circumstances. Initially, Applicant acted responsibly by filing Chapter 13 bankruptcy in September 2012. This allowed her to pay the secured loans for her mortgage and cars. She later decided to stop making payments through the bankruptcy Trustee. Her only explanation was that she had paid over $100,000 and felt she no longer needed to rely on the Trustee to make the payments on her behalf. She did not provide evidence that she continued making the payments to her creditors. Instead, she relied on the accounts falling off her credit report, being barred by the statute of limitations, or for each creditor to contact her and request payment. Many of these creditors stopped pursuing their claims because the debts were reflected as being included in a wager earner repayment plan through the bankruptcy. Applicant’s actions do not constitute acting responsibly. The evidence does not support that she had paid or arranged payment plans with the creditors. AG¶ 20(b) partially applies. There is evidence that Applicant has received financial counseling through her attorney and it is a requirement before filing bankruptcy. However, there is insufficient evidence that there are clear indications that Applicant’s financial problems are being resolved. Applicant failed to complete her Chapter 13 bankruptcy payment plan or pay unsecured debts, demonstrating that her financial problems are not under control. AG 20 (c) does not apply. Applicant has numerous delinquent debts that remain unresolved. Through her initial Chapter 13 bankruptcy she was resolving some debts. Once she defaulted on the plan, she failed to show she has made legitimate attempts to repay her delinquent 11 debts. The debt in SOR ¶ 1.i is resolved in her favor. AG ¶ 20(d) applies only to this debt. It does not apply to the remaining SOR debts. Applicant stated that she paid certain debts or disputed them. There is evidence that the debt in SOR ¶ 1.ll is a duplicate with SOR ¶ 1.jj. Therefore, SOR ¶ 1.ll is decided in Applicant’s favor. She did not provide documented proof to substantiate the basis of other disputed debts or her actions to resolve these debts. AG ¶ 20(e) applies only to these two debts noted in this paragraph. Applicant admitted that she did not pay her 2010 through 2012 federal income taxes. They were included as part of her Chapter 13 bankruptcy plan. After she defaulted on the plan, sometime later she contacted the IRS to make payment arrangements. She provided a copy of a proposed IRS installment agreement dated December 2016. She provided documents from her attorney to show he was assisting her with her delinquent taxes. She stated she agreed to begin making payments on the proposed plan in February 2017. Applicant did not provide an explanation for why she failed to timely pay her 2013, 2014, and 2015 federal taxes. She did not provide information about her income, expenses, or a budget. She did not provide information about her income tax withholding. She provided evidence that her 2010 federal taxes are now paid. I do not have evidence that the installment agreement was approved and that she is in compliance. AG ¶ 20(g) partially applies. 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(d): (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(d) were addressed under that guideline, but some warrant additional comment. 12 Applicant is 49 years old. She has been working for her present employer since 1999. She attributed her financial problems to the loss of her husband’s income in 2009 and their divorce sometime thereafter. Initially, Applicant responsibly addressed her delinquent debts through a Chapter 13 bankruptcy. In April 2015, the bankruptcy was dismissed due to her failure to comply. She stated she stopped making the payments through the Trustee because she no longer felt the need to do so. Her debts were not discharged in bankruptcy. She failed to address her delinquent debts after her bankruptcy was dismissed. She has relied on creditors not pursuing the delinquent debts, the statute of limitations, or the unfounded belief that she is not responsible for them because the accounts were sold to collection agencies. Applicant failed to show she is responsibly managing her finances and paying her delinquent debts. The record evidence leaves me with serious questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all these reasons, I conclude Applicant failed to mitigate the security concerns arising under Guideline F, financial considerations. 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: Against Applicant Subparagraph 1.b: For Applicant Subparagraphs 1.c through 1.h: Against Applicant Subparagraph 1.i: For Applicant Subparagraphs 1.j through 1.kk Against Applicant Subparagraph 1.ll: For Applicant Subparagraphs 1.mm through1.xx 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’s eligibility for a security clearance. Eligibility for access to classified information is denied. _____________________________ Carol G. Ricciardello Administrative Judge