1 DEPARTMENT OF DEFENSE DEFENSE OFFICE OF HEARINGS AND APPEALS In the matter of: ) ) --- ) ISCR Case No. 17-01737 ) Applicant for Security Clearance ) Appearances For Government: Bryan Olmos, Esquire, Department Counsel For Applicant: Pro se ______________ Decision ______________ GALES, Robert Robinson, Administrative Judge: Applicant failed to mitigate the security concerns regarding financial considerations. Eligibility for a security clearance is denied. Statement of the Case On April 12, 2012, Applicant applied for a security clearance and submitted an Electronic Questionnaire for Investigations Processing (e-QIP) version of a Security Clearance Application. On June 1, 2017, the Department of Defense (DOD) Consolidated Adjudications Facility (CAF) issued a Statement of Reasons (SOR) to him, under Executive Order 10865, Safeguarding Classified Information within Industry (February 20, 1960), as amended and modified; DOD Directive 5220.6, Defense Industrial Personnel Security Clearance Review Program (January 2, 1992), as amended and modified (Directive); and the Adjudicative Guidelines for Determining Eligibility For Access to Classified Information (December 29, 2005) applicable to all adjudications and other determinations made under the Directive, effective September 1, 2006.1 The SOR alleged 1 Effective June 8, 2017, by Directive 4 of the Security Executive Agent (SEAD 4), dated December 10, 2016, National Security Adjudicative Guidelines (AG) for all covered individuals who require initial or continued eligibility for access to classified information or eligibility to hold a sensitive position, were established to supersede all previously 2 security concerns under Guideline F (Financial Considerations), and detailed reasons why the DOD adjudicators were unable to find that it is clearly consistent with the interests of national security to grant or continue a security clearance for Applicant. The SOR recommended referral to an administrative judge to determine whether a clearance should be granted, continued, denied, or revoked. It is unclear when Applicant received the SOR as there is no receipt in the case file. In a sworn statement, notarized June 28, 2017, Applicant responded to the SOR and elected to have his case decided on the written record in lieu of a hearing. A complete copy of the Government’s file of relevant material (FORM) was mailed to Applicant by the Defense Office of Hearings and Appeals (DOHA) on July 18, 2017, and he was afforded an opportunity, within a period of 30 days after receipt of the FORM, to file objections and submit material in refutation, extenuation, or mitigation. In addition to the FORM, Applicant was furnished a copy of the Directive as well as the previous Adjudicative Guidelines applicable to his case. Applicant received the FORM on July 24, 2017. Applicant’s response was due on August 23, 2017. As of December 4, 2017, Applicant had not submitted any response to the FORM. The case was assigned to me on December 4, 2017. Findings of Fact In his Answer to the SOR, Applicant admitted with comments all of the factual allegations pertaining to financial considerations (¶¶ 1.a. through 1.f.). Applicant’s admissions and comments are incorporated herein as findings of fact. After a complete and thorough review of the evidence in the record, and upon due consideration of same, I make the following additional findings of fact: Applicant is a 28-year-old employee of a defense contractor. He has been serving as an aircraft mechanic since February 2012. He previously held a number of relatively short-term part-time positions until he joined his current employer. He was unemployed from October 2009 until January 2010, and again from March 2010 until September 2011. He is a 2008 high school graduate, and he earned a vocational, technical, or trade school certification for airframe and power plant in 2011. He has never served with the U.S. military. He has never held a security clearance. Applicant was married in September 2013 and divorced in October 2014. He married again in May 2016. He has no children. issued national security adjudicative criteria or guidelines. Accordingly, those guidelines previously implemented on September 1, 2006, under which this security clearance review case was initiated, no longer apply. In comparing the two versions, there is no substantial difference that might have a negative effect on Applicant in this case. 3 Financial Considerations2 In late 2014, Applicant and his first wife were going through a divorce. Because of problems he was having with a 2014 vehicle, he decided to purchase another 2014 vehicle. At the time, his net weekly pay was $600. For reasons not explained, Applicant was unable to maintain his payments on his original vehicle and other accounts. He managed to keep his mortgage payments current. Because of continuing financial problems, in March 2015, Applicant filed for bankruptcy under Chapter 13 of the U.S. Bankruptcy Code. At the time, he listed $138,855 related to creditors holding secured claims (including his three automobiles); $4,643 related to creditors holding unsecured priority claims (to the Internal Revenue Service (IRS) for $2,000 and to his bankruptcy attorney); and $21,871 related to creditors holding unsecured nonpriority claims (including charge accounts, credit cards, and student loans). Under the bankruptcy, Applicant was required to surrender his initial 2014 vehicle and a 2013 vehicle to the lienholders.3 It is unclear if any creditors identified in the petition, other than the two auto lienholders, received any payments from the bankruptcy trustee as there is no trustee report included in the case file. The bankruptcy was dismissed in June 2015. On April 5, 2016, Applicant filed another Voluntary Bankruptcy Petition under Chapter 13 of the U.S. Bankruptcy Code. The identities of the creditors and the nature of their claims were not specified in the documentation included in the case file. Applicant completed credit counseling associated with the bankruptcy. He made his fourth installment payment of an unspecified amount on May 18, 2016. The bankruptcy was dismissed on May 19, 2016. At about the same time, Applicant spent a week in Mexico while on his honeymoon. In addition to the two Voluntary Petitions for bankruptcy filed in 2015 and 2016, the SOR identified four purportedly delinquent accounts that had been placed for collection, two of which were charged off, as generally reflected by Applicant’s 2015 and 2017 credit reports. Those debts, totaling approximately $30,442, their current status, according to the credit reports, other evidence submitted by the Government and Applicant, are described as follows: (SOR ¶ 1.c.): This is an automobile installment loan with a high credit of $42,298 and past-due balance of $10,299 that was placed for collection. The creditor eventually charged off $14,868.4 The vehicle was surrendered to the lienholder as part of Applicant’s 2015 bankruptcy. Although not reflected in any documentation, Applicant contends that the creditor obtained a judgment against him. Applicant admitted that the account remains 2 General source information pertaining to the financial accounts discussed below can be found in the following exhibits: Item 2 (Answer to the SOR, dated June 28, 2017); Item 4 (Personal Subject Interview, dated December 15, 2016); Item 5 (Extracts of Voluntary Petition for Bankruptcy, dated March 6, 2015); Item 6 (Extracts of Voluntary Petition for Bankruptcy, dated April 5, 2016); Item 7 (Combined Experian, TransUnion, and Equifax Credit Report, dated November 10, 2015); Item 8 (Equifax Credit Report, dated April 21, 2017). 3 Item 5 (Schedule C-1 (Supplemental Exemption Analysis)), supra note 2. 4 Item 7, supra note 2, at 9; Item 8, supra note 2, at 1. 4 delinquent. He explained that he cannot currently afford to pay anything on the debt, but would attempt to pay when he has money to do so. The account has not been resolved. (SOR ¶ 1.d.): This is another automobile loan with a high credit of $29,889 and past-due and unpaid balance of $14,201 that was placed for collection and eventually charged off.5 This vehicle was also surrendered to the lienholder as part of Applicant’s 2015 bankruptcy. Applicant admitted that the account remains delinquent. He repeated that he cannot currently afford to pay anything on the debt, but would attempt to pay when he has money to do so. The account has not been resolved. (SOR ¶ 1.e.): This is an unspecified type of account with a high credit of $1,000 and a past-due balance of $1,163 that was placed for collection. The remaining unpaid balance is $1,224.6 This vehicle was also surrendered to the lienholder as part of Applicant’s 2015 bankruptcy. Applicant acknowledged that he had forgotten about the bill. He stated that he would try to contact the creditor to set up a payment plan. He offered no evidence to indicate that he has done so. The account has not been resolved. (SOR ¶ 1.f.): This is a satellite network account with an unpaid balance of $149 that was placed for collection.7 Applicant acknowledged that he had forgotten about the bill. He stated that he would contact the creditor to finalize the account, but he offered no evidence to indicate that he had done so. The account has not been resolved. In 2015, when Applicant filed his initial bankruptcy petition, his monthly net income was $3,334; his monthly expenses were $2,843; and he had a monthly net remainder available for discretionary spending or savings of $491.8 In December 2016, during his interview with an investigator from the U.S. Office of Personnel Management (OPM), he indicated that his net weekly income was between $660 and $680, or a maximum of $2,720 per month. He was paying up to $3,496 in monthly expenses, which was expected to increase by $365 once his student loan deferment ended in February 2017.9 Based on those figures, Applicant has no reasonable opportunity to pay all of the bills that he contended he was paying. It is not known what Applicant’s current financial resources may be because he did not submit a Personal Financial Statement to reflect his current net monthly income; monthly expenses; and any monthly remainder that might be available for discretionary spending or savings. There is no evidence of a budget. There is no evidence of any financial counseling other than that which he received associated 5 Item 7, supra note 2, at 7; Item 8, supra note 2, at 2. 6 Item 7, supra note 2, at 9; Item 8, supra note 2, at 2. 7 Item 8, supra note 2, at 2. 8 Item 5, supra note 2. 9 Item 4, supra note 2, at 7. 5 with his bankruptcies. Applicant offered no evidence to indicate that his financial situation is now under control. 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.”10 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. The President has authorized the Secretary of Defense or his designee to grant an applicant eligibility for access to classified information “only upon a finding that it is clearly consistent with the national interest to do so.”11 When evaluating an applicant’s suitability for a security clearance, the administrative judge must consider the guidelines in SEAD 4. In addition to brief introductory explanations for each guideline, the guidelines list potentially disqualifying conditions and mitigating conditions, which are used in evaluating an applicant’s eligibility for access to classified information. An administrative judge need not view the guidelines as inflexible, ironclad rules of law. Instead, acknowledging 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. 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 meaningful decision. In the decision-making process, facts must be established by “substantial evidence.”12 The Government initially has the burden of producing evidence to establish a potentially disqualifying condition under the Directive, and has the burden of establishing controverted facts alleged in the SOR. Once the Government has produced substantial evidence of a disqualifying condition, under Directive ¶ E3.1.15, the applicant has the burden of persuasion to present evidence in refutation, explanation, extenuation or mitigation, sufficient to overcome the doubts raised by the Government’s case. The burden of disproving a mitigating condition never shifts to the Government.13 10 Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 11 Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960), as amended and modified. 12 “Substantial evidence [is] such relevant evidence as a reasonable mind might accept as adequate to support a conclusion in light of all contrary evidence in the record.” ISCR Case No. 04-11463 at 2 (App. Bd. Aug. 4, 2006) (citing Directive ¶ E3.1.32.1). “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). 13 See ISCR Case No. 02-31154 at 5 (App. Bd. Sep. 22, 2005). 6 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 as well. It is because of this special relationship that the Government must be able to repose a high degree of trust and confidence in those 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 as to potential, rather than actual, risk of compromise of classified information. Furthermore, “security clearance determinations should err, if they must, on the side of denials.”14 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.”15 Thus, nothing in this decision should be construed to suggest that I have based this decision, in whole or in part, on any express or implied determination as to Applicant’s allegiance, loyalty, or patriotism. It is merely an indication the Applicant has or has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance. 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 avoided drawing inferences grounded on mere speculation or conjecture. 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. 14 Egan, 484 U.S. at 531. 15 See Exec. Or. 10865 § 7. 7 The guideline notes several conditions that could raise security concerns. Under AG ¶ 19(a), an “inability to satisfy debts” is potentially disqualifying. In addition, AG ¶ 19(b) may apply if there is an “unwillingness to satisfy debts regardless of the ability to do so.” Similarly, under AG ¶ 19(c), “a history of not meeting financial obligations” may raise concerns. Applicant’s two bankruptcies and his credit reports reflect at least four delinquent accounts which are alleged in the SOR, and he has admitted that those SOR- related accounts are still delinquent. AG ¶¶ 19(a), 19(b), and 19(c) apply. The guideline also includes examples of conditions that could mitigate security concerns arising from financial difficulties. Under AG ¶ 20(a), the disqualifying condition may be mitigated where “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.”16 Also, under AG ¶ 20(b), financial security concerns may be mitigated where “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.” Evidence that “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” is potentially mitigating under AG ¶ 20(c). Similarly, AG ¶ 20(d) applies where the evidence shows “the individual initiated and is adhering to a good-faith effort to repay overdue creditors or otherwise resolve debts.”17 In addition, AG ¶ 20(e) may apply if “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.” AG ¶ 20(b) partially applies, and AG ¶ 20(c) minimally applies, but none of the remaining mitigating conditions apply. The nature, frequency, and recency of Applicant’s continuing financial difficulties since about 2014 or before make it difficult to conclude that 16 A 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. Feb. 16, 2017) (citing ISCR Case No. 15- 01690 at 2 (App. Bd. Sep. 13, 2016)). 17 The 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 [or statute of limitations]) 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 it occurred “so long ago” or “was so infrequent,” or that it is “unlikely to recur.” Applicant noted some unspecified financial hardships during 2014 when he was going through a divorce and had to purchase another vehicle. Other than the divorce and unhappiness with one vehicle, there is no evidence to specify what other factors contributed to Applicant’s financial difficulties, unless one concludes that spending money on a week in Mexico or purchasing expensive cars during a period of financial stress, constitute such factors. Rather than addressing the four delinquent SOR-related accounts, over a substantial period of time, Applicant simply took no action to resolve them. Instead, he claimed he was unaware of one such account and that he had forgotten the other account. Aside from Applicant’s verbal and written comments regarding his debts, there is little documentary evidence to support his claimed good-faith efforts to address those debts before or after the SOR was issued. Applicant failed to submit documentation to indicate that creditors or collection agents had been contacted; repayment plans had been established; payments had been made; or accounts had been resolved. There are no copies of account statements, cancelled checks, bank statements or registers, receipts, or letters from creditors or collection agents reflecting any positive activity – documented proof to substantiate compliance with repayment arrangements – with respect to the accounts. Furthermore, while there is evidence of two bankruptcies, and four unspecified (as to amounts or payees) installment payments, there are no specifics as to any payments that may have been made to the bankruptcy creditors. Clearance decisions are aimed at evaluating an applicant’s judgment, reliability, and trustworthiness. They are not a debt-collection procedure. The guidelines do not require an applicant to establish resolution of each and every debt alleged in the SOR. An applicant needs only to establish a plan to resolve financial problems and take significant actions to implement the plan. There is no requirement that an applicant immediately resolve or make payments on all delinquent debts simultaneously, nor is there a requirement that the debts alleged in an SOR be paid first. Rather, a reasonable plan and concomitant conduct in furtherance of the plan may provide for the payment of such debts one at a time. Mere promises to pay debts in the future, without further confirmed action, are insufficient. There is no evidence of a good-faith effort to contact the creditors to resolve the accounts.18 There is little evidence that the conditions that may have resulted in the financial issues were largely beyond Applicant=s control. There is no evidence of financial counseling, other than that which was associated with his bankruptcy filings, a budget, or any disputes. Applicant offered no evidence to indicate that his financial situation is now under control. Equally as important, there is no evidence that Applicant acted responsibly under the circumstances, and that failure to do so continues to cast doubt on his current 18 “Even if Applicant’s financial difficulties initially arose, in whole or in part, due to circumstances outside his [or her] control, the Judge could still consider whether Applicant has since acted in a reasonable manner when dealing with those financial difficulties.” ISCR Case No. 05-11366 at 4 n.9 (App. Bd. Jan. 12, 2007) (citing ISCR Case No. 99- 0462 at 4 (App. Bd. May 25, 2000); ISCR Case No. 99-0012 at 4 (App. Bd. Dec. 1, 1999); ISCR Case No. 03-13096 at 4 (App. Bd. Nov. 29, 2005)). A component is whether he or she maintained contact with creditors and attempted to negotiate partial payments to keep debts current. 9 reliability, trustworthiness, and good judgment.19 Considering Applicant’s present income, and his outstanding debts, there is little likelihood that he will be able to make payments to his creditors in the foreseeable future.20 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 SEAD 4, App. A, ¶ 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 SEAD 4, App. A, ¶ 2(c), the ultimate determination of whether to grant a security clearance must be an overall commonsense judgment based upon careful consideration of the guidelines and the whole-person concept. Moreover, I have evaluated the various aspects of this case in light of the totality of the record evidence and have not merely performed a piecemeal analysis.21 There is some evidence mitigating Applicant’s conduct. He is a 28-year-old aircraft mechanic serving with the same employer since February 2012. The disqualifying evidence under the whole-person concept is simply more substantial. There are four delinquent accounts alleged in the SOR with a combined unpaid balance of $30,442, as well as two dismissed Chapter 13 bankruptcies. Applicant apparently made no efforts to address those accounts since they were placed for collection or charged off. There is no evidence that he disputed any of the accounts or that he contacted his creditors in an effort to resolve them. Considering the lack of evidence regarding his current finances, and the absence of character evidence regarding Applicant’s honesty, integrity, and trustworthiness, I am 19 See ISCR Case No. 09-08533 at 3-4 (App. Bd. Oct. 6, 2010). 20 It should be noted that the Appeal Board has indicated that promises to pay off delinquent debts in the future are not a substitute for a track record of paying debts in a timely manner and otherwise acting in a financially responsible manner. ISCR Case No. 07-13041 at 4 (App. Bd. Sept. 19, 2008) (citing ISCR Case No. 99-0012 at 3 (App. Bd. Dec. 1, 1999)). 21 See U.S. v. Bottone, 365 F.2d 389, 392 (2d Cir. 1966); See also ISCR Case No. 03-22861 at 2-3 (App. Bd. Jun. 2, 2006). 10 unable to reach a positive conclusion pertaining to Applicant’s eligibility for a security clearance. The Appeal Board has addressed a key element in the whole-person analysis in financial cases stating:22 In evaluating Guideline F cases, the Board has previously noted that 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 [or she] has paid off each and every debt listed in the SOR. All that is required is that an applicant demonstrate that he [or she] has “. . . established a plan to resolve his [or her] 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 [or her] 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. Applicant has demonstrated an extremely poor track record of debt reduction and elimination efforts, avoiding the debts in his name, and failing to take timely corrective actions. Overall, the evidence leaves me with substantial questions and doubts as to Applicant’s eligibility and suitability for a security clearance. For all of these reasons, I conclude Applicant has failed to mitigate the security concerns arising from his financial considerations. See SEAD 4, App. A, ¶¶ 2(d)(1) through AG 2(d)(9). 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.: Against Applicant Subparagraph 1.c.: Against Applicant Subparagraph 1.d.: Against Applicant Subparagraph 1.e.: Against Applicant Subparagraph 1.f.: Against Applicant 22 ISCR Case No. 07-06482 at 2-3 (App. Bd. May 21, 2008) (internal citations omitted). 11 Conclusion In light of all of the circumstances presented by the record in this case, it is not clearly consistent with the interests of national security to grant Applicant eligibility for a security clearance. Eligibility for access to classified information is denied. ________________________ ROBERT ROBINSON GALES Administrative Judge