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                            DEPARTMENT OF DEFENSE                                                  
             DEFENSE OFFICE OF HEARINGS AND APPEALS                               
           
             
 
In the matter of: ) 
 ) 
  )  ISCR Case No. 17-01144 
  ) 
 ) 
Applicant for Security Clearance ) 
 
Appearances 
 
For Government: Caroline Heintzelman, Esq., Department Counsel 
For Applicant: Pro se 
 
 
 
______________ 
  
Decision 
______________ 
 
 
WHITE, David M., Administrative Judge: 
 
 Applicant suffered several financial setbacks due to circumstances beyond his 
control. He acted responsibly, resolved all former concerns, and restored his financial 
solvency. Resulting security concerns were mitigated. Based upon evaluation of the 
testimony, pleadings and exhibits, national security eligibility is granted. 
 
History of Case 
 
On February 4, 2016, Applicant submitted an Electronic Questionnaire for 
Investigations Processing (e-QIP). On May 3, 2017, the Department of Defense 
Consolidated Adjudications Facility (DoD CAF) issued Applicant a Statement of 
Reasons (SOR) alleging 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 
effective within the DoD after September 1, 2006. 
 
 
 
 
 
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 Applicant answered the SOR in writing on June 1, 2017 (Answer), and requested 
a hearing before an administrative judge. The Defense Office of Hearings and Appeals 
(DOHA) assigned the case to me on June 29, 2017. DOHA issued a Notice of Hearing 
on July 11, 2017, setting the hearing for July 28, 2017. On that date, Department 
Counsel offered Government Exhibits (GE) 1 through 5 into evidence. Applicant 
testified, and offered Exhibits (AE) A through D into evidence. All exhibits were admitted 
without objection. I granted Applicant’s request to leave the record open until August 28, 
2017, to permit submission of additional evidence. DOHA received the hearing 
transcript (Tr.) on August 8, 2017. Applicant timely submitted additional evidence, which 
I marked AE E and AE F, and admitted without objection. The record closed as 
scheduled.  
 
The SOR in this case was issued under the adjudicative guidelines that came 
into effect within the DoD on September 1, 2006. Security Executive Agent Directive 
(SEAD) 4, National Security Adjudicative Guidelines, implemented new adjudicative 
guidelines that came into effect on June 8, 2017. All national security eligibility 
determinations issued on or after June 8, 2017, are to be decided using the new 
National Security Adjudicative Guidelines for Determining Eligibility for Access to 
Classified Information or Eligibility to Hold a Sensitive Position (AG), as promulgated in 
Appendix A of SEAD 4. I considered the previous adjudicative guidelines, as well as the 
new AG, in adjudicating Applicant’s national security eligibility. This decision is issued 
pursuant to, and cites, the new AG; but my decision would be the same under either set 
of guidelines. 
 
Findings of Fact 
 
 Applicant has been employed by a Federal contractor since April 2009, and 
applied for the periodic review and renewal of his security clearance in connection with 
that work. The SOR contained three allegations concerning Applicant’s former financial 
issues, involving two charged-off credit accounts totaling $41,929 and his failure to file 
his 2015 Federal income tax return on time. Applicant admitted all of the allegations, 
with explanations. (GE 1; Answer.)   
 
 Applicant is 44 years old and divorced, with a 10-year-old daughter. He is a high 
school graduate and is nearing eligibility for a bachelor’s degree. He honorably retired 
from the Army National Guard as a chief warrant officer (CW2) in December 2011, after 
20 years of active and reserve service that included a yearlong deployment to Operation 
Enduring Freedom combat zones in 2005 and 2006. He has successfully held a security 
clearance for more than 20 years in connection with his military service and 
employment in the defense industry. (Answer; GE 1; GE 2; Tr. 6-9, 71.)  
 
 Applicant and his wife bought a home in June 2007 at the height of the real 
estate market. They put down 10% of the purchase price, and financed the remainder 
through an 80% first mortgage and a separate 10% home equity line of credit (HELOC). 
His wife earned a little more than half of the family’s income at the time. During the 
subsequent real estate crash and severe economic recession, her company suffered 
 
 
 
 
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business losses and she was among many employees who were reduced to part-time 
work to avoid layoffs. Even with Applicant’s full-time job and part-time National Guard 
income, the family finances and their marriage were badly strained. In March 2012 they 
separated, pending divorce, and Applicant continued to live in their house. His wife 
made no contributions toward their joint debts. After July 2012 Applicant could not afford 
to make the payments toward their first mortgage loan while paying his other bills, and 
that loan became delinquent. (Answer; GE 1; GE 2; GE 5; AE B; Tr. 45-50, 59-60.) 
 
 Applicant’s final divorce decree, issued in February 2013, ordered that each 
spouse assume and pay half of their two mortgage debts. Applicant had continued 
making the full payments toward the HELOC during their separation, then began 
making just his half of those payments after the divorce decree was issued. However, 
his ex-wife did not make payments, and that loan became delinquent. The lender would 
not renegotiate the terms of the HELOC, and also canceled the credit card it had issued 
to Applicant. Applicant made his last payment toward the HELOC in December 2013, 
and the lender charged off that loan in February 2014 with an outstanding balance of 
$28,778 as alleged in SOR ¶ 1.a. The lender issued Applicant an IRS Form 1099-C on 
December 31, 2014, reporting that amount as earned income to him (Answer; GE 1; GE 
2; GE 5; AE B; AE C; Tr. 45-50, 59-60.) 
 
 Applicant unsuccessfully tried to short-sell his house for more than a year, in 
coordination with his mortgage holders, but they initiated foreclosure proceedings and 
eventually sold it at auction in March 2015. The first mortgage holder cancelled and 
discharged Applicant’s remaining $65,071 liability for that loan, and issued him an IRS 
Form 1099-C dated March 12, 2015. The creditor reported this mortgage loan to have 
been fully resolved through the foreclosure process, and it was not alleged to be a 
source of security concerns in the SOR. (GE 2; GE 3; GE 5; AE D; Tr. 50, 53-54.) 
 
 Applicant had to rent and move into an apartment after the foreclosure. This 
further strained his budget, and he attempted to negotiate an affordable arrangement 
with the bank to continue repaying the credit card account it had canceled when the 
HELOC became delinquent. The bank would not agree to new terms he could afford, so 
he stopped making payments toward this debt after March 2015. As alleged in SOR ¶ 
1.b, the bank placed the account for collection with a balance due of $13,151. He 
entered into a settlement agreement with the collection agency holding this debt in July 
2017, and he finished making the agreed payments to fully resolve this debt on August 
7, 2017. (GE 2; AE C; AE E; Tr. 51-52.)  
 
 During his October 31, 2016 OPM security interview, Applicant volunteered that 
he had not yet filed his 2015 Federal income tax return despite having obtained a filing 
extension until October 15, 2016. He explained that his ex-wife had filed bankruptcy 
proceedings that included the HELOC loan secured by their former home, and he 
needed to obtain more information and documentation to obtain legal/tax advice before 
completing his return. He later learned that his ex-wife’s bankruptcy offered no help to 
him, but several additional issues delayed his filing of this tax return. First, he misplaced 
his 1099-C documents during the move from his house into the rental apartment after 
 
 
 
 
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the foreclosure. Then, while in a distant state on a work assignment during the spring 
and summer of 2015, he discovered a lump in his throat that was diagnosed as thyroid 
cancer, for which he had to undergo operations and begin lifelong treatments. He also 
suffered severe injuries in a bicycle accident during August 2015, although he did not 
attribute his income tax filing delay to that incident. (Answer; GE 2; Tr. 52-56, 60-67.) 
 
 During early 2017, Applicant found his 1099-C documentation and retained a 
certified public accountant (CPA) to help him calculate and file his 2015 and 2016 taxes 
(for which he also obtained a filing extension). These returns were accurately prepared 
by the CPA, and filed on June 13, 2017.1 For tax year 2015, with proper inclusion of the 
$65,071 in cancelled debt from the first mortgage lender’s March 2015 IRS Form 1099-
C, Applicant’s total Federal tax due was $3,733. He had $7,447 in payroll withholding 
for that year, so he received a refund of $3,714. For tax year 2016, he received a 
$1,987 refund. He was not assessed any interest or penalties for the delayed filing of 
his income tax return. (Answer; AE D; Tr. 52-56, 60-62.) 
 
 Applicant managed to resolve all of his other debts throughout this turbulent 
period in his life, and presently has no delinquent debt. He has about $6,000 to $7,000 
in a savings account and about $50,000 in a 401(k) retirement plan. He has undergone 
several financial counseling sessions, closely tracks his income and expenses to remain 
current on his bills, and lives frugally. (GE 3; GE 4; GE 5; AE B; AE E; AE F; Tr. 58-59.) 
 
 A DoD employee and clearance holder who served on active duty with Applicant, 
and has been a close friend of his for more than 20 years, wrote a letter praising his 
trustworthiness, loyalty, dedication, and integrity. (AE E.) Applicant’s bearing and 
demeanor throughout his hearing evinced candor, openness, and sound understanding 
of his financial responsibilities. 
 
Policies 
 
 When evaluating an applicant’s national security eligibility, the administrative 
judge must consider the adjudicative guidelines. In addition to brief introductory 
explanations for each guideline, the adjudicative guidelines (AG) list potentially 
disqualifying conditions and mitigating conditions, which are to be used in evaluating an 
applicant’s national security eligibility. 
 
 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 AG ¶ 2 describing 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 applicable guidelines in the context of a number 
                                            
1 Although Applicant had not realized it due to all of the turmoil in his life during the Spring of 2015, his 
CPA discovered that he had also failed to file his 2014 Federal income tax return. He freely disclosed and 
discussed this fact during the hearing. The 2014 return, including the December 1099-C related to 
cancellation of the $28,778 HELOC balance, was filed together with his 2015 and 2016 returns. He had 
already paid all applicable taxes through withholding, and received a $481 refund for 2014. (Tr. 60-61.) 
 
 
 
 
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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. I have not drawn inferences based on mere 
speculation or conjecture.  
 
 Directive ¶ E3.1.14 requires the Government to present evidence to establish 
controverted facts alleged in the SOR. Pursuant to Directive ¶ E3.1.15, an “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, and has the 
ultimate burden of persuasion as to obtaining a favorable clearance decision.”  
 
 A person applying for national security eligibility seeks to enter 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 national security eligibility. 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 or 
sensitive information.  
 
 Finally, as emphasized in Section 7 of Executive Order 10865, “[a]ny 
determination under this order adverse to an applicant shall be a determination in terms 
of the national interest and shall in no sense be a determination as to the loyalty of the 
applicant concerned.” See also Executive Order 12968, Section 3.1(b) (listing multiple 
prerequisites for access to classified or sensitive information.) 
 
Analysis 
 
Guideline F: Financial Considerations 
 
 The security concerns relating to the guideline for financial considerations are set 
out in AG ¶ 18, which reads in pertinent part:       
 
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 
 
 
 
 
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issues of personal 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. 
 
 AG ¶ 19 describes three conditions that could raise security concerns and may 
be disqualifying in this case:  
 
(a) inability to satisfy debts;  
 
(c) a history of not meeting financial obligations and 
 
(f) failure to file or fraudulently annual Federal, state, or local income tax 
returns or failure to pay annual Federal, state, or local income tax as 
required. 
 
Applicant encountered financial difficulties caused by his wife’s unanticipated 
loss of income after they purchased a home, which worsened during their subsequent 
separation and divorce. He defaulted on their mortgage loans after she stopped paying 
her court-ordered half of those debts, and his HELOC lender cancelled his credit card 
account when that loan went into default. This turmoil was compounded by his 
diagnosis and aggressive treatment for thyroid cancer and move into an apartment 
while traveling for work. As a result, his 2015 Federal income tax return was not filed on 
time despite the fact that he was due a refund of almost half of the income tax 
withholding he had already paid toward that year’s taxes. These facts establish prima 
facie support for the foregoing disqualifying conditions, and shift the burden to Applicant 
to mitigate the resulting security concerns. 
 
 The guideline includes five conditions in AG ¶ 20 that could mitigate the security 
concerns arising from Applicant’s alleged financial difficulties:  
 
(a) the behavior happened so long ago, was so infrequent, or occurred 
under such circumstances that it is unlikely to recur and does not cast 
doubt on the individual’s current reliability, trustworthiness, or good 
judgment;  
 
(b) the conditions that resulted in the financial problem were largely 
beyond the person’s control (e.g., loss of employment, a business 
downturn, unexpected medical emergency, or a death, divorce or 
separation, 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;  
 
 
 
 
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(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 relatively short period of financial troubles arose from the unique but 
nearly simultaneous circumstances involving the severe economic downturn, the 
dissolution of his marriage, and his onset of cancer. Despite his best attempts to repay 
all of his debts through frugal living and to short-sell his house, he was ultimately unable 
to meet his mortgage payments using his income alone. After foreclosure proceedings 
resolved his first mortgage debt, his remaining HELOC balance was cancelled and all 
resulting income taxes were properly paid. That lender also cancelled his credit card 
account with a substantial outstanding balance that had been regularly paid on time. 
Applicant fully resolved and paid that account to the assigned collection agent. These 
actions establish mitigation of security concerns raised by his two formerly delinquent 
debts under AG ¶¶ 20(a), (b), (c), and (d). 
 
Applicant hired a CPA who helped him to calculate and file his tardy income tax 
return for 2015; which had been complicated and delayed by the unique events that 
were beyond his control. He had already paid almost double the amount of tax he owed 
for 2015 through withholding, had obtained a filing extension which he could not meet, 
and was not assessed any interest or penalties as a result of the late filing. These facts 
mitigate concerns over his failure to file the 2015 taxes in a timely manner under AG ¶¶ 
20(a), (b), (c), and (g). 
 
Applicant obtained financial counseling to help him better manage his budget and 
carefully track his income and expenses, which helped him establish a solvent and 
responsible financial situation with sufficient income to avoid future delinquencies. He 
demonstrated complete mitigation of financial security concerns under these five 
mitigating conditions. 
 
Whole-Person Concept 
 
 Under the whole-person concept, the administrative judge must evaluate an 
applicant’s national security eligibility 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(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 
 
 
 
 
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for the conduct; (8) the potential for pressure, coercion, exploitation, or 
duress; and (9) the likelihood of continuation or recurrence. 
 
According to AG ¶ 2(c), the ultimate determination of whether to grant national security 
eligibility must be an overall commonsense judgment based upon careful consideration 
of the applicable guidelines and the whole-person concept.  
 
I considered the potentially disqualifying and mitigating conditions in light of all 
pertinent facts and circumstances surrounding this case. Applicant is a mature adult, 
who has demonstrated accountability for resolving the debts he was formerly unable to 
repay. He has now resolved his formerly delinquent debt and filed all income tax 
returns, which resulted in substantial refunds. He demonstrated strong character and 
has devoted most of his adult life to successful support of national security objectives. 
Applicant provided persuasive evidence of rehabilitation and sufficient income security 
to ensure solvency in the future. The potential for pressure, exploitation, or duress is 
minimal. Overall, the evidence has eliminated the formerly legitimate doubt as to 
Applicant’s eligibility and suitability for a security clearance. He successfully met his 
burden to mitigate the security concerns arising under the guideline for financial 
considerations.  
 
Formal Findings 
 
 Formal findings for or against Applicant on the allegations set forth in the SOR, 
as required by ¶ E3.1.25 of the Directive, are: 
 
  Paragraph 1, Guideline F:   FOR APPLICANT 
 
   Subparagraphs 1.a through 1.c:   For Applicant 
 
Conclusion 
 
 In light of all of the circumstances presented by the record in this case, it is 
clearly consistent with the interests of national security to grant Applicant eligibility for a 
security clearance. National security eligibility for access to classified information is 
granted. 
                                        
         
 
DAVID M. WHITE 
Administrative Judge