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     DEPARTMENT OF DEFENSE 
 DEFENSE OFFICE OF HEARINGS AND APPEALS 
In the matter of: ) 
) 
[Names Redacted] ) ISCR Case No. 17-04293 
) 
) 
Applicant for Security Clearance ) 
Appearances 
For Government: Michelle Tilford, Esquire, Department Counsel 
For Applicant: Pro se 
______________ 
Decision 
______________ 
HOGAN, Erin C., Administrative Judge: 
On January 8, 2018, the Department of Defense (DoD) issued a Statement of 
Reasons (SOR) to Applicant detailing security concerns under Guideline F, Financial 
Considerations. The action was taken under Executive Order (EO) 10865, Safeguarding 
Classified Information within Industry (February 20, 1960), as amended; Department of 
Defense Directive 5220.6, Defense Industrial Personnel Security Clearance Review 
Program (January 2, 1992); and the adjudicative guidelines (AG) effective within the 
Department of Defense on June 8, 2017.  
On February 5, 2018, Applicant answered the SOR and requested a hearing 
before an administrative judge. Department Counsel was ready to proceed on March 9, 
2018. The case was assigned to another administrative judge on July 20, 2018. A notice 
of hearing was issued on August 24, 2018, scheduling the hearing on October 10, 2018. 
The case was transferred to me on October 9, 2018.  The hearing was held as 
scheduled. During the hearing, the Government offered eight exhibits which were 
admitted as Government Exhibits (Gov) 1 – 8.  Applicant testified. The record was held 
open to allow Applicant to submit additional documents. She timely submitted a nine-
page document which was admitted as Applicant Exhibit (AE) A. The transcript (Tr.) 
was received on October 19, 2018. Based upon a review of the pleadings, exhibits, and 
testimony, eligibility for access to classified information is denied.   
01/02/2019
 
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Findings of Fact 
 
 Applicant is a 50-year-old employee of a DoD contractor seeking to maintain a 
security clearance. She has worked for her current employer since March 2017. She 
has a 24-year history of working for various defense contractors. The highest level of 
education Applicant has achieved is high school. She is married, but recently separated. 
She has a 16-year-old son with her current husband and a 27-year-old daughter from a 
previous relationship. (Tr. 21-22; Gov 1)   
 
On November 28, 2016, Applicant submitted a security clearance application as 
part of a periodic reinvestigation. (Gov 1) A subsequent security clearance background 
investigation revealed Applicant filed for Chapter 13 bankruptcy in January 2016. The 
bankruptcy was dismissed in November 2017 (SOR ¶ 1.a: Gov 2 at 3,5-6; Gov 3; Gov 4; 
Gov 6 at 2; Gov 7 at 3).  The SOR alleged delinquent debts, to include:  a $693 debt 
(SOR ¶ 1.b: Gov 4 at 49); a delinquent state tax debt in the amount of $793 (SOR ¶ 1.c: 
Gov 4 at 49); a delinquent mortgage in the amount of $32,694 (SOR ¶ 1.d: Gov 4 at 25-
26, 49; Gov 6 at 2; Gov 7 at 4); two debts owed to the Internal Revenue Service (IRS) in 
the amounts of $8,339 and $7,184 (SOR ¶¶ 1.e and 1.f: Gov 4 at 49); and a delinquent 
automobile loan that was delinquent in the amount of $596. (SOR ¶ 1.g: Gov 4 at 25-26, 
49; Gov 8 at 6). 
 
Applicant initially encountered financial problems while her daughter was 
attending college from August 2009 to May 2015.  She and her husband were unable to 
get financing for her daughter’s education because they had a bad credit rating. They 
made arrangements with a private party to pay $2,000 monthly during the six months 
that her daughter attended college. They made the payments, but got behind on their 
mortgage at least $600 monthly over the five-year-period that her daughter attended 
college. The mortgagor contacted Applicant in 2013 and informed her that partial 
payments could not be accepted until Applicant paid all of the arrearage. They 
recommended a loan modification. The loan modification was approved, but one 
payment was missed after the modification was approved, and the modification was 
withdrawn.  They applied for a second modification, but were denied.  The mortgage 
was sold to the current lender. Applicant and her husband submitted a third request for 
a modification which was denied. (Tr at 29-32; Gov 8 at 4) 
 
When the third request for a mortgage modification was denied, Applicant filed 
for Chapter 13 bankruptcy on January 6, 2016, in an attempt to save her home. Her 
husband declined to be a party to the bankruptcy. Applicant and her husband’s net 
monthly income at the time of the bankruptcy filing was $8,834.39. Their total monthly 
expenses were $6,812. Approximately $2,022 was left over after expenses each month. 
Applicant agreed to a payment plan of $2,200 monthly payments for months 1-4; $800 
monthly for months 5 – 33; and $1,568 monthly for months 34 – 60.  Applicant initially 
made payments. On November 15, 2017, the U.S. Bankruptcy Court dismissed 
Applicant’s Chapter 13 bankruptcy for failure to make payments.  (Tr. 25-29; Gov 3; Gov 
4) 
 
 
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 Applicant paid towards the Chapter 13 plan for several months. Several events 
occurred that affected her ability to make her payments.  In March 2017, her employer 
lost the contract and it was awarded to another contractor. She accepted a job with the 
new contractor, but her annual pay was decreased by $12,000. The cost of her health 
benefits increased and she worked a month without pay while the contracts were 
transitioning. Her new employer did not provide corporate credit cards or travel 
advances. When she is on official travel, she is expected to pay for all expenses from 
her personal funds, with the exception of airfare, and then file for reimbursements.  She 
was advised when she filed for reimbursement, she would be paid within a week. It took 
the company a month to reimburse her for her travel expenses. (Tr. At 16-17, 24; 
Answer to SOR) 
  
 Applicant testified that her husband was not good with his finances. He would not 
contribute to the household expenses. He spent his money “willy nilly.”  They had a joint 
account where both were expected to deposit money in order to pay for the household 
expenses. Her husband would often not contribute or would withdraw the funds for his 
personal use. (Tr. 26, 32, 37, 53-55, 65-66) 
 
 Applicant enrolled her son in a private high school with an annual tuition of 
$16,000 while she was making payments towards her Chapter 13 plan. She admits that 
she could not afford the tuition payments and payments towards the Chapter 13 plan. 
She and her husband did not qualify for financial aid.  The tuition payments were $1,600 
a month. She paid $800 and her husband paid $800.  Applicant enrolled her son in 
private school for better opportunities. The school was pursuing her son because of his 
athletic abilities. He does better academically and is doing well. (Tr. 38-41, 63) 
 
 Applicant also stated that various unexpected expenses such as car repairs, 
house repairs, and mold removal after their basement was flooded during Hurricane 
Isabel contributed to their inability to pay expenses. (Tr. 28; Response to SOR)  
  
The status of the remaining SOR debts: 
 
SOR ¶ 1.b: $693 debt owed to a business/collection agency:  Applicant is not 
sure what this debt is for.  In her response to the SOR, Applicant believed this debt  
might be related to her Chapter 13 bankruptcy because she did some research and the 
creditor is identified as a leading source of bankruptcy account management products 
and services. She believes it is a valid debt and is attempting to locate a good point of 
contact with the company. During the hearing, Applicant testified that she admits the 
debt, but does not know what it is for. She thinks it might be for not turning in cable 
television equipment, but she is not sure. She claims that she has not attempted to 
resolve the debt after her bankruptcy was dismissed. She is not sure how she can 
locate the debt. (Tr. 41-42; Response to SOR)  
 
 SOR ¶ 1.c: $793 state income tax debt: Applicant testified that her husband 
agreed to pay the state tax debt. After the hearing, she provided a copy of an 
installment bill from the state comptroller, dated July 2, 2018. The balance was 
 
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$1,112.80.  Her husband agreed to pay $51.33 on a monthly basis. There is no 
documentation that he is making regular payments toward this debt. (Tr. 44-46, 67; AE 
A at 2) 
 
SOR ¶ 1.d:  $32,694 delinquent mortgage debt:  Applicant filed for bankruptcy in 
an attempt to save her home from foreclosure. After the bankruptcy was dismissed, her 
home went to foreclosure in July 2018. She is not sure if they owe anything after the 
foreclosure. She initially prepared a plan for her and her husband to follow, but her 
husband did not follow the plan. They agreed to let the home go to foreclosure and 
separated.  They are planning to divorce. (Tr. 46-47; Response to SOR)  
 
SOR ¶¶ 1.e and 1.f: $8,339 and $7,184 federal tax debts: Applicant’s Chapter 13 
bankruptcy paperwork lists two tax debts owed to the IRS for $10,079 and $7,184. It is 
not clear what tax years the debts were incurred. (Gov 4)  Applicant is not sure how the 
tax debt was incurred. She asserts that she claims no exemptions, but believes her 
husband claimed more exemptions than he should have claimed. She attempted to 
arrange a payment plan with the IRS before filing for bankruptcy, but it was not 
successful. During the hearing, she was not sure how much she owed towards the 
federal tax debt. She estimated it was about $15,000. She set up a payment plan with 
the IRS in August 2018.  She pays $300 monthly to the IRS. (Tr. 47-52, 58-59)   
 
The record was held open to allow Applicant to provide information about the 
current status of her federal and state tax debts. She provided a statement about 
installment agreement activity from July 17, 2017, to July 16, 2018. The statement listed  
a tax debt for the 2013 tax year with beginning balance of $3,916; and a tax debt for the 
2014 tax year with a beginning balance of $1,543. The statement showed an ending 
balance of 0 even though no payments were made. Applicant did not provide a 
complete history of her federal income tax returns so it is not clear whether the tax 
debts listed for 2013 and 2014 are the same tax debts alleged in the SOR. Applicant did 
not provide proof of the installment agreement she entered into with the IRS in August 
2018. She testified that she paid $300 a month to the IRS, but provided no 
documentation verifying payments. The record evidence is inconclusive regarding the 
status of Applicant’s federal tax debts. (AE A)  
 
SOR ¶ 1.d: $596 delinquent debt owed on a car loan:  Applicant purchased a 
used car. She encountered financial problems and was unable to make payments on 
the car. The car was expensive to maintain and she spent over $2,000 in repairs. She 
voluntarily turned the car into the dealer in June 2018. She is not sure whether she 
owes any money as a result of turning in the car. (Tr. 55-56; Response to SOR)  
 
Applicant earned $97,000 annually before the contract changed to her current 
employer. Her annual income was reduced to $85,000.  She currently earns around 
$87,000 annually. Her husband’s annual income is approximately $70,000. Applicant 
has approximately $30,000 in a 401(k) account. She has about $50 in savings. She and 
her husband are separated, but there is no formal separation agreement.  She intends 
to file for divorce at some point in the future. (Tr. 52, 59, 62-27)  
 
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 Applicant provided several Certificates of Appreciation noting her outstanding 
performance on several projects she worked on as a contractor over the past eight 
years.  This indicates she is a highly valued contractor employee. (AE A at 3-8)  
 
 Applicant states that she has worked as a government contractor for over 24 
years. She would never put the security of the nation in jeopardy. (Tr. 71) 
 
Policies 
 
When evaluating an applicant’s suitability for a security clearance, the 
administrative judge must consider the adjudicative guidelines (AG). In addition to brief 
introductory explanations for each guideline, the AG list potentially disqualifying 
conditions and mitigating conditions, which are useful 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 access 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, the applicant is 
responsible for presenting “witnesses and other evidence to rebut, explain, extenuate, 
or mitigate facts admitted by applicant or proven by Department Counsel. . . .” The 
applicant 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 the applicant may deliberately or inadvertently fail to protect or safeguard classified 
information. Such decisions entail a certain degree of legally permissible extrapolation 
as to potential, rather than actual, risk of compromise of classified information. 
 
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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).   
 
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. 
 
AG ¶ 19 notes several disqualifying conditions that could raise security concerns. 
The disqualifying conditions that are relevant to Applicant’s case include: 
 
(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 has a history of financial problems, which she tried to resolve by filing 
for bankruptcy under Chapter 13. The plan was dismissed for failure to make timely 
payments towards the plan. She and her husband owe the IRS approximately $17,264 
as well as $793 in delinquent state income taxes. The SOR also alleged three 
delinquent accounts, which included a mortgage, and a car loan, with a total 
approximate balance of $33,983. AG ¶¶ 19(a), 19(b), 19(c), and 19(f) apply to 
Applicant’s case.  
   
 
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An individual who is financially irresponsible may also be irresponsible, 
unconcerned, or careless in his obligations to protect classified information. Behaving 
irresponsibly in one aspect of life provides an indication of how a person may behave in 
other aspects of life. A person’s relationship with his creditors is a private matter until 
evidence is uncovered demonstrating an inability or unwillingness to pay debts under 
agreed terms. Absent evidence of strong extenuating or mitigating circumstances, an 
applicant with a history of serious or recurring financial difficulties is in a situation of risk 
inconsistent with the holding of a security clearance. An applicant is not required to be 
debt free, but is required to manage his finances in such a way as to meet his financial 
obligations.  
 
Failure to comply with tax laws suggests that an applicant has a problem with 
abiding by well-established government rules and systems. Voluntary compliance with 
rules and systems is essential for protecting classified information.  See, e.g., ISCR 
Case No. 16-01726 at 5 (App. Bd. Feb. 28, 2018). A person who fails repeatedly to fulfill 
his or her legal obligations, such as paying taxes when due, does not demonstrate the 
high degree of good judgment and reliability required of those granted access to 
classified information. See, e.g. ISCR Case No. 17-01382 at 4 (App. Bd. May 16, 2018). 
 
With regard to Applicant’s federal tax debts, the emphasis of the DOHA Appeal 
Board on security concerns arising from tax cases is instructive. See ISCR Case No. 
14-05794 at 7 (App. Bd. July 7, 2016) (reversing grant of security clearance and stating, 
“His delay in taking action to resolve his tax deficiency for years and then taking action 
only after his security clearance was in jeopardy undercuts a determination that 
Applicant has rehabilitated himself and does not reflect the voluntary compliance of 
rules and regulations expected of someone entrusted with the nation’s secrets.”); ISCR 
Case No. 14-01894 at 2-6 (App. Bd. Aug. 18, 2015) (reversing grant of a security 
clearance and emphasizing the applicant’s failure to timely file and pay taxes); See also 
ISCR Case No. 14-03358 at 3, 5 (App. Bd. Oct. 9, 2015) (reversing grant of a security 
clearance, and stating “A security clearance represents an obligation to the Federal 
Government for the protection of national secrets. Accordingly failure to honor other 
obligations to the Government has a direct bearing on an applicant’s reliability, 
trustworthiness, and ability to protect classified information.”).  
 
The Government’s substantial evidence and Applicant’s own admissions raise 
security concerns under Guideline F. The burden shifted to Applicant to produce 
evidence to rebut, explain, extenuate, or mitigate the security concerns. (Directive ¶ 
E3.1.15) An applicant has the burden of proving a mitigating condition, and the burden 
of disproving it never shifts to the Government. (See ISCR Case No. 02-31154 at 5 
(App. Bd. Sept. 22, 2005))  
 
AG ¶ 20 includes examples of conditions that could mitigate security concerns 
arising from financial difficulties. The following mitigating conditions potentially apply:  
 
(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 
 
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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. 
 
 AG ¶ 20(a) does not apply because Applicant’s financial problems are ongoing. 
The $693 debt alleged in SOR ¶ 1.b is unresolved. Although a payment plan is in place, 
the balance on the state tax debt (SOR ¶ 1.b) has increased from $793 to $1,112. 
When she surrendered her car to the dealership, it is likely that Applicant will owe a 
deficiency balance after the car is sold at auction. (SOR ¶ 1.g). It is unclear whether 
Applicant will owe anything as a result of her home foreclosure. Finally, the status of 
Applicant’s federal tax debt is uncertain. Although Applicant provided a statement 
indicating that there is a zero balance on the taxes owed for tax years 2013 and 2014, 
she did not provide an explanation as to how the tax debt was paid even though no 
payments were received.  Applicant did not provide a full transcript from the IRS, so she 
still might owe taxes for other tax years, such as 2015 or 2016. The only evidence in the 
record is the federal tax debts listed on her Chapter 13 bankruptcy paperwork, but no 
tax years were listed. Applicant was not certain of what years the tax debts were 
incurred. I cannot conclude that tax debt has been resolved. 
 
 AG ¶ 20(b) partially applies because Applicant’s financial situation was adversely 
affected by her employment transition from one contractor to another.  She experienced 
a $9,000 annual income reduction as well.  She recently separated from her husband 
whom she blames for most of the financial issues. These circumstances were beyond 
Applicant’s control and adversely affected her ability to pay her bills. However, this 
mitigating condition is given less weight because Applicant has not demonstrated she 
acted responsibly under the circumstances while most of the delinquent debt was 
incurred.  While it is admirable that Applicant wants the best for her children, she opted 
to pay for her daughter’s college education over a four-year period rather than paying 
her mortgage, which resulted in a significant mortgage delinquency. In 2016, she filed 
 
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for bankruptcy under Chapter 13 in an attempt to save her home. During this same 
timeframe, she enrolled her son in a private school with annual tuition costs of $16,000.   
While Applicant says her husband spent money that should be used for household 
expenses elsewhere, they also incurred a monthly tuition payment of $1,600, which 
prevented her from making payments towards the Chapter 13 bankruptcy plan which 
ultimately led to the dismissal of the bankruptcy. Applicant and her husband appeared 
to have the income to manage their expenses, they made poor decisions when 
managing their finances. For this reason AG ¶ 20(b) is given less weight.      
 
 AG ¶ 20(c) does not apply. Applicant did not take a formal financial counseling 
course. It is not clear that she has a plan in place to avoid future financial issues.  
 
 AG & 20(d) does not apply because Applicant has not demonstrated a good-faith 
effort towards resolving her delinquent debts. She filed Chapter 13 bankruptcy, but her 
case was dismissed for failure to make payments in November 2017.  She has not 
taken steps to resolve her delinquent debts since that time. While Applicant has 
reduced her expenses by moving into a one bedroom apartment, she has not shown 
that she is making a good-faith effort to resolve her federal tax debts. 
 
AG & 20(g) does not apply. The record is inconclusive that all of Applicant’s 
federal and state tax debts are being resolved.  
 
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 considered Applicant’s favorable 
employment history as a federal contractor. I considered Applicant’s reduction in income 
after a new contractor won the bid on the project that she works on. I considered that 
 
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Applicant recently separated from her husband and moved into a one-bedroom 
apartment. However, Applicant has several debts that have been neglected for years. 
Granted, she wants to provide her children with the best education, but she chose to 
pay for their tuition even though she was unable to pay her daily expenses. Her 
daughter’s college tuition payments resulted in a serious mortgage debt and ultimately a 
home foreclosure.  She enrolled her son in a private school while she was undergoing a 
Chapter 13 bankruptcy plan. The monthly tuition resulted in Applicant defaulting on the 
Chapter 13 payment plan. She has not attempted to resolve her debts after the Chapter 
13 was terminated for failure to make payments.  As a security clearance holder, she 
should have taken a proactive approach towards resolving her state and federal income 
tax debts. She did not follow through with her attempts to enter into payment plans with 
the IRS. She did not provide sufficient evidence to indicate that her federal tax debts are 
being resolved. Security concerns under financial considerations are not mitigated.    
 
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.g    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 security to grant Applicant eligibility for a security 
clearance.  Eligibility for access to classified information is denied. 
 
 
                                                
_________________ 
ERIN C. HOGAN 
Administrative Judge