1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) ) ISCR Case No. 16-00701 ) ) Applicant for Security Clearance ) Appearances For Government: Rhett Petcher, Esq., Department Counsel For Applicant: Pro se ______________ Decision ______________ COACHER, Robert E., Administrative Judge: Applicant has not mitigated the financial considerations security concerns. Eligibility for access to classified information is denied. Statement of the Case On August 9, 2016, the Department of Defense Consolidated Adjudications Facility (DOD CAF) issued Applicant a Statement of Reasons (SOR) detailing security concerns under Guideline F, financial considerations. The DOD CAF acted under Executive Order (EO) 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended; DOD 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended (Directive); and the adjudicative guidelines (AG).1 1 I decided this case using the AG implemented by DOD on June 8, 2017. However, I also considered this case under the previous version of the AG implemented on September 1, 2006, and my conclusions are the same using either set of AG. 2 Applicant answered the SOR on August 22, 2016, and elected to have his case decided on the written record in lieu of a hearing. Department Counsel submitted the Government’s File of Relevant Material (FORM) on October 19, 2016.2 The evidence included in the FORM is identified as Items 2-8 (Item 1 includes pleadings and transmittal information). The FORM was mailed to Applicant, who received it on November 11, 2016. Applicant was given an opportunity to file objections and submit material in refutation, extenuation, or mitigation. Applicant did not file objections, but did submit exhibits (AE) A-P. Items 2-8 and AE A-P are admitted into evidence without objection. The case was assigned to me on October 1, 2017. Findings of Fact Applicant admitted all the allegations in his answer to the SOR. The admissions are adopted as findings of fact. After a careful review of the pleadings and evidence, I make the following additional findings of fact. Applicant is 49 years old. He has worked for a defense contractor since April 2004. He has been primarily deployed during that timeframe to Afghanistan. He served in the Army from 1987 to 1998 when he was medically discharged. He is married for the second time, his first marriage ending in divorce. He has four children. He has a bachelor’s degree.3 The SOR alleged a dismissed Chapter 13 bankruptcy (July 2016), three federal tax liens filed in 2011 and 2012, totaling $75,994, and delinquent home mortgage payments from 2009 to March 2015. The allegations are supported by credit reports from December 2014, June 2015, and June 2016; Applicant’s November 2014 security clearance application (SCA); court filings concerning his Chapter 13 bankruptcy; his interview with a defense investigator in September 2015; and his SOR admissions.4 Applicant explained that since about 2004 he has worked in a deployed environment while his wife takes care of the family finances. He also admitted failing to handle their financial obligations properly. He claims he received poor financial advice on negotiating with their mortgage lender to reduce their payments. To avoid mortgage foreclosure, they filed a Chapter 13 bankruptcy petition. A bankruptcy plan was approved and Applicant sporadically made his monthly payments of $4,450, however, several months he paid less than the plan required. In July 2016, his Chapter 13 was dismissed because he was approximately $12,250 delinquent on his plan payments. Applicant refiled a Chapter 13 petition in August 2016. The listed liabilities in his petition 2 Included within the FORM were two amendments to the SOR propounded by Department Counsel. The first amendment replaced language in SOR ¶ 1.a. The second amendment added an allegation SOR ¶ 1.f. On November 11, 2016, Applicant received the FORM containing the amendments and admitted both. AE B. 3 Item 2. 4 Items 1-8. 3 amounted to over $800,000. There is no documentary evidence of an approved bankruptcy plan, but Applicant documented he made $6,000 monthly payments from September to November 2016 to the bankruptcy trustee. 5 Applicant’s federal tax liability and liens resulted from an audit of his 2007 taxes where it was determined he incorrectly filed his tax returns; and he did not properly report the sale of a residence. This resulted in tax liability in excess of $75,000. He claims to have set up a monthly payment plan of $1,200 to the IRS, making those payments until he filed his Chapter 13 bankruptcy in 2015. He provided documentation showing he made one payment of $1,000 in September 2011, one payment of $1,205 in November 2011, and one payment of $500 in February 2013. No further proof of payments under the payment plan was offered, but he did provide documentation showing that previous tax-year refunds were applied against his total tax debt. As of October 2016, he still owed over $19,000 toward his 2008 tax liability. The tax debt are unresolved.6 In 2006, Applicant purchased a home valued at approximately $500,000. He secured two mortgages to finance the home. The combined monthly payments for the mortgages was about $3,000. He made his last payment in 2009. Because of the market crash, his home lost significant value. He sought to work with his mortgage lender to modify his mortgage. Applicant provided documentation showing the efforts he made to negotiate a mortgage modification, which included using a foreclosure mediation service in June 2012 and hiring a law firm in January 2013 to defend against foreclosure and seek a loan modification. In 2014, the lender began foreclosure proceedings. The foreclosure was stayed when Applicant filed his 2015 Chapter 13 bankruptcy petition. When he was making payments under the Chapter 13 plan, his mortgage payment was included in the $4,450 amount.7 Applicant’s second Chapter 13 bankruptcy filing in August 2016, disclosed a monthly income and expense schedule, which calculated his monthly net income as $22,708 and net monthly expenses as $13,239 (this amount included payments of $1,992 for two mortgages; $541 for a car payment; and $4,195 for taxes owed). His monthly remainder after all expenses was listed as $9,468. Applicant also has approximately $34,400 in deferred student loans. No payment plan was included for this debt. In addition to the mortgage modification assistance, there is evidence of financial counseling through the bankruptcy process.8 5 Items 1, 3, 7-8; AE A, C. 6 Item 3; AE D, I, J. 7 Items 3-6; AE K-N. 8 Items 5, 8. 4 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. 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(a), 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 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, 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 that an 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. 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). 5 Analysis Guideline F, Financial Considerations AG & 18 expresses the security concern for financial considerations: 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. The guideline notes several conditions that could raise security concerns. I have considered all of them under AG & 19 and the following potentially apply: (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 (f) 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 filed for Chapter 13 bankruptcy in March 2015 with liabilities listed in excess of $800,000. That case was dismissed because Applicant failed to make the required plan payments. He refiled a second Chapter 13 action in August 2016. The IRS filed approximately $75,000 worth of federal tax liens against Applicant. He continues to owe at least $19,000 in federal tax debt. He failed to make his monthly mortgage payments from about 2009, which sent his home into foreclosure proceedings that were stayed by his Chapter 13 bankruptcy filing. I find all the disqualifying conditions are raised. The guideline also includes conditions that could mitigate security concerns arising from financial difficulties. I have considered all of the mitigating conditions under AG ¶ 20 and the following potentially apply: 6 (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; 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’s debts are recent and remain unresolved. He did not provide sufficient evidence to show that his financial problems are unlikely to recur. He attempted to resolve his financial problems by filing a Chapter 13 bankruptcy, but he failed to make required plan payments resulting in his case being dismissed. He refiled, but failed to provide evidence that a Chapter 13 plan was approved and that he is complying with that plan. He has owed federal taxes since 2007. AG ¶ 20(a) does not apply. Applicant’s reliance on his wife’s financial acumen while he was deployed may be considered a condition beyond his control, however, he failed to take responsible actions to address his debts and taxes. I find AG ¶ 20(b) partially applies. Applicant provided sufficient evidence to show that he was making a good-faith effort to work a mortgage modification to avoid foreclosure on his residence. However, his taxes and remaining debts have not been fully addressed. There is evidence of financial counseling. AG ¶¶ 20(c) and 20(d) partially 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 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 7 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 guideline and the whole-person concept. I considered the potentially disqualifying and mitigating conditions in light of all the facts and circumstances surrounding this case. I considered his military service, his civilian employment, his extensive deployment history, and the circumstances that led to his financial difficulties. Applicant has not established a track record of financial stability. 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 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 Subparagraphs 1.a – 1.d: Against Applicant Subparagraph 1.e: For Applicant Subparagraph 1.f: 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. _____________________________ Robert E. Coacher Administrative Judge