DATE: February 15, 2006

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SSN: -----------

Applicant for Security Clearance

DECISION OF ADMINISTRATIVE JUDGE

ELIZABETH M. MATCHINSKI

APPEARANCES

FOR GOVERNMENT

Daniel F. Crowley, Esq., Department Counsel

FOR APPLICANT

Pro Se

SYNOPSIS

Applicant has a history of financial problems from about 1995, when he was recalled to work after a layoff at less than half his previous salary. He incurred unforeseen costs after a fire in his home in 1996 forced him and his family (spouse and nine children) into a hotel and then apartment for almost a year. Chapter 13 bankruptcies filed in November 1996 and September 1998 were dismissed before his debts were repaid. Under a Chapter 13 filed in December 1998, Applicant made some payments of $700 monthly, but was four months in arrears as of January 2001. He resolved his secured debts through a September 2002 refinancing, but again fell behind. A November 2003 judgment of $1,024 for water/sewer services was unpaid as of July 2005. Financial considerations persist. Personal conduct and criminal conduct concerns are raised by his failure to disclose larceny charges on his SF 86. Clearance is denied.

On November 3, 2004, the Defense Office of Hearings and Appeals (DOHA) issued a Statement of Reasons (SOR) to the Applicant. The SOR detailed reasons under Guideline F, financial considerations, Guideline E, personal conduct, and Guideline J, criminal conduct, why DOHA could not make the preliminary affirmative finding under the Directive that it is clearly consistent with the national interest to grant or continue a security clearance for the Applicant. ⁽¹⁾ Specifically, the government alleged that after two previous Chapter 13 bankruptcy filings had been dismissed, Applicant was repaying his debt at $700 per month with a balloon payment of $21,180 due the 60^th month, but the case had been voluntarily dismissed after only 43 months; that he owed $2,144 in consumer credit debt, $482 in past due cellular phone costs, and $1,000 in unpaid utility services debt; that he had failed to list an April 2000 felony larceny by check charges against him and April 1998 larceny charges on his May 2002 security clearance application.

Applicant answered the SOR on January 3, 2005, and requested a hearing. The case was assigned to me on August 1, 2005. On August 23, 2005, I convened a hearing pursuant to notice dated August 2, 2005. The government submitted 24 exhibits, which were entered without any objections. Applicant testified and submitted five exhibits. The evidentiary record was held open at Applicant's request until September 6, 2005, to submit financial documentation. On August 24, 2005, Applicant forwarded correspondence dated December 7, 2004, from him to a credit bureau requesting investigation of certain items on his credit report. Department Counsel having filed no objection, the document was marked and entered as Exhibit F. On September 7, 2005, I received the transcript of the August 23, 2005 hearing.

In his January 3, 2005 Answer, Applicant admitted Chapter 13 bankruptcy proceedings commenced in November 1996 and September 1998 had been dismissed prematurely; a December 1998 Chapter 13 bankruptcy filing was voluntarily dismissed in August 2002 on repayment of his debts; $482 in unpaid telephone services had been charged off in November 2003; and he owed approximately $1,000 in delinquent utility services debt as of July 2003. He denied the debts alleged in ¶¶ 1.d., 1.e., 1.f., 1.g., and 1.h. Applicant admitted he had been charged in April 1998 with four counts of misdemeanor larceny for which he paid restitution of $210, and in April 2000 with two counts of felony larceny that were dismissed, charges not disclosed on his security clearance application (SF 86). Applicant did not respond directly to the Guideline J allegation of violating 18 U.S.C. § 1001 by failing to report the criminal charges on his SF 86. After a thorough review and consideration of the evidence of record, I make the following findings of fact:

Applicant is a 52-year-old maintenance and calibration technician who has worked for his present employer, a defense contractor, since mid-January 1978 with the exception of a layoff in 1995. He seeks to retain a secret-level security clearance that he has held since at least December 1988.

Applicant and his spouse, whom he married in 1978, have nine children who range in age from 14 to 26 years old. ⁽²⁾ In addition to the financial burdens of raising their children, Applicant's financial situation was negatively impacted in 1995 by a job layoff. When he was recalled to work, he earned about $9.79 an hour, a substantial decrease from the $23.92 hourly he had been making before the layoff. In October 1996, Applicant's home, which he had owned since 1984, was severely damaged in a fire. For the next two months, Applicant and his spouse crammed into a hotel room with eight of their children at a cost to them of $98.48 per day. They spent the next nine months in an apartment until they could move back into their home. His homeowner's insurance paid for the repairs to the home but did not cover the rent for the apartment. Several of his financial accounts became delinquent, as his income was not enough to support the family, pay the rent, and cover his expenses.

In mid-November 1996, Applicant filed for Chapter 13 bankruptcy with $44,637.74 in total claims (including $4,843.60 for water and sewer, $9,637.42 for electricity, $14,950.05 in arrears on his primary mortgage, $2,178 in a secured second mortgage loan debt, and $2,899.52 in credit card debt) to be repaid at $629 monthly under a plan confirmed in early February 1997. Applicant fell behind in his payments to the trustee, and the trustee filed a motion to dismiss in arch 1998. Applicant paid the bankruptcy trustee $3,853 in June 1998 bringing the total paid under the plan to $8,177, but he failed to continue his regular payments. His Chapter 13 case was dismissed in mid-June 1998 for noncompliance.

In September 1997, Applicant issued four checks totaling $208.48 to a local supermarket that were returned due to insufficient funds. He was charged in March 1998 with four counts of larceny of property $250 or less. The charges were dismissed on payment of $210 restitution. ⁽⁴⁾

By September 1998, Applicant and his spouse were in substantial arrears on their mortgage, as they had made only 12 payments total in the 1997/98 time frame. They filed a joint Chapter 13 bankruptcy petition in September 1998. Their case was dismissed in mid-October 1998 due to their inability to propose a meaningful plan.

In December 1998, Applicant and his spouse filed another joint petition seeking to repay their debts through Chapter 13 bankruptcy. Applicant reported monthly income of $1,856. Although his spouse was unemployed, they were also receiving $2,270 in social security payments for their children, and $800 for a rental unit in their home. Applicant and his spouse listed unsecured nonpriority claims of $22,000 ($19,000 in unpaid gas and electric services and $3,000 on one credit card account) and $159,000 in secured claims (first and second mortgage loans, $3,000 on a secured auto loan for a 1999 van, ⁽⁵⁾ and $15,000 in water and sewer costs for his home). They claimed only $130 in cash on hand or on deposit. Applicant and his spouse proposed to pay $700 per month to the trustee under the plan effective February 1999, with a balloon payment of $21,180 on the 60^th month, in repayment of $54,000 in secured claims, $650 in administrative claims, and $2,200 in unsecured claims. In January 1999, their primary mortgagor objected on the basis the mortgage arrearage was about $42,2386.32 due to a $15,896.88 disbursement for delinquent water and sewer taxes and penalties paid in April 1997. In late July 2000, the plan was confirmed with the repayment terms $700 monthly from February 1999 with a balloon payment of $21,180 in the 60^th month. Secured claims to be repaid under the plan were the pre-petition mortgage arrearage of $42,386.32 on the primary mortgage and $4,000 on the second mortgage, as well as $7,614 in water and sewer arrearage. In November 2000, the bankruptcy trustee sought to dismiss the case as Applicant and his spouse were in arrears $2,100 (three months of plan payments). In late January 2001, Applicant was ordered to pay arrears of $2,800 by late May 2001, and to remain current in the $700 monthly payments or the case would be dismissed. In August 2002, on Applicant and his spouse's motion, their Chapter 13 bankruptcy was dismissed due to their inability to continue making payments in accord with the plan.

In October 1999, Applicant ordered checks ranging from numbers 351 through 500 on his account with a local bank. Over a two-day period in December 1999, five checks were drawn on Applicant's bank account (checks # 475, #482 in the amount of $2,307.90 for a computer, #485, #486, #487) in the aggregate amount of $3,148.02. The first name of the signatory differed from Applicant's by one letter. The bank processed the checks for payment. ⁽⁶⁾ After examining one of the checks, Applicant filed an affidavit with the bank affirming his signature had been forged, and the bank closed his account. He also complained to the police that an unknown person was cashing checks in his name. ⁽⁷⁾

In February 2000, the computer retailer complained to the police that two checks totaling $4,626 (#482 and #443, the latter for $2,318.39 drawn two days after #482) written on Applicant's account for the purchase of two computers, had been returned due to the account being closed. The retailer noted two different license numbers had been used on the checks. In April 2000, Applicant was charged with two felony counts of larceny by check over $250. In September 2003, the charges were dismissed at the state's request, with the court noting "wrong person; without prejudice."

On a May 15, 2002, security clearance application (SF 86), Applicant denied any financial delinquencies currently over 90 days or over 180 days within the preceding seven years but indicated he had filed for Chapter 13 bankruptcy. He responded negatively to whether he had ever been charged with any felony offenses or other offenses within the preceding seven years. Applicant deliberately omitted the larceny charges because he did not want his employer to learn of them.

Applicant's credit report of May 21, 2002, reported some financial accounts in collection (balances of $338 and $439 to the creditors in ¶¶ 1.f. and 1.g., respectively). Other accounts were rated as slow pay, including two credit card accounts that had been delinquent in the past, although not more than 60 days.

In September 2002, Applicant and his spouse refinanced, taking on a thirty-year variable rate mortgage of $176,500, to be repaid initially at $1,545 per month. In the refinancing, they paid $5,710.53 to settle the gas company debt, paid off their primary and secondary mortgages, and paid $867.71 in back water and sewer charges. Applicant took $17,465.07 cash out of the refinancing that he used to pay down his debt.

A check of Applicant's credit on May 29, 2003, showed Applicant was current in his mortgage payments, but the debts in ¶¶ 1.f. and 1.g. were still outstanding. A credit card account opened in May 2000 had been charged off in the amount of $984 after it had become $663 past due (¶ 1.h.).

On July 24, 2003, Applicant was interviewed by a special agent of the Defense Security Service (DSS) about his financial accounts, bankruptcy filings, and omissions from his security questionnaire. Applicant acknowledged he had struggled financially for "a number of years," due to having to provide for ten children, lack of income following his return to work after a layoff, and costs associated with a fire in his home in 1996. Applicant averred that his latest bankruptcy had been dismissed so that he could refinance his home and satisfy his delinquent accounts. Applicant claimed his credit cards were current, but he had fallen behind about $1,000 on his utility bills (water, gas, electric). Loss of rental income and home maintenance costs had again caused him to become delinquent. Applicant indicated he had been wrongly charged a few times with larceny and larceny by check since 1998:

Someone broke into the house and stole some checks. I also had some checks sent to me by the bank that never arrived. I believe that at least two individuals have attempted to use some of these stolen checks. I was able to clear this up on one occasion in the [city and state omitted] courthouse but I still have outstanding charges at the [city and state omitted] courthouse that are not yet resolved. I didn't list this information on my security questionnaire because it is personally embarrassing and I thought people at work would find out about some of my difficulties if I included the information on my questionnaire. (Ex. 2)

Applicant maintained he would not allow someone to use his financial problems or arrest record to blackmail him into acting against the U.S. Applicant provided a personal financial statement in which he reported a monthly net remainder of $264.

Applicant, who had rented one floor of his triple decker home before and after the fire, was without a tenant for about 16 months (2004 through spring 2005). Lacking the rental income and incurring about $3,000 in costs to fix up the rental unit, Applicant continued to have financial problems. As of June 14, 2004, a credit bureau was reporting a $160 collection balance owed since March 1999 (¶ 1.e) under Applicant's name, although that debt was incurred by his son; $233 in collection with another assignee (¶ 1.d.); and a $482 debt telephone services debt charged off in November 2003 (¶ 1.i.). Applicant had no personal knowledge of some of the debts, including the debt in ¶ 1.d. On December 7, 2004, Applicant asked the credit bureau to investigate some of the items on his credit report and to rush the response because his security eligibility was in question. There is no evidence he ever received a response. On December 27, 2004, Applicant satisfied the debt in ¶ 1.e. On February 3, 2005, he paid his delinquent cellular phone costs in full (¶ 1.i.). That same month, another creditor accepted a payment of $1,479.08 in settlement of less than the full balance owed.

A recent credit inquiry of July 15, 2005, revealed an outstanding judgment of $1,042 had been awarded the city's water and sewer department (¶ 1.i.) in July 2003. Two of his credit card accounts were past due $30 each. A $492 charged off balance was reportedly owed on a department store revolving charge account, but Applicant had settled that debt in February 2005. There was no past due balance on his mortgage, or on his automobile lease that he had entered into in November 2001 on which he was paying $283 monthly as of June 2005.

Applicant paid between $400 and $430 on the water and sewer debt by mid-August 2005. He had contacted the creditor listed in ¶ 1.h., who could find no record of his account. Applicant was driving a 2005 model-year automobile that he leased at $440 monthly. ⁽⁸⁾ He was trying to refinance his mortgage yet again to lower his monthly payment so that he could pay some outstanding bills.

As of August 2005, all of Applicant's children were residing in the home. Two children were receiving social security disability payments, but since Applicant's spouse handles that, he could not confirm the amount or whether a third child was also receiving social security benefits. Three of Applicant's children were contributing to the family's finances when necessary. Applicant still had bills that he had not paid, but he was making some payments on his debts.

"[N]o one has a 'right' to a security clearance." Department of the Navy v. Egan, 484 U.S. 518, 528 (1988). 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 occupy a position . . . that will give that person access to such information." Id. at 527. The President has authorized the Secretary of Defense or his designee to grant applicants eligibility for access to classified information "only upon a finding that it is clearly consistent with the national interest to do so." Exec. Or. 10865, Safeguarding Classified Information within Industry § 2 (Feb. 20, 1960). Eligibility for a security clearance is predicated upon the applicant meeting the security guidelines contained in the Directive. An applicant "has the ultimate burden of demonstrating that it is clearly consistent with the national interest to grant or continue his security clearance." ISCR Case No. 01-20700 at 3.

Enclosure 2 of the Directive sets forth personnel security guidelines, as well as the disqualifying conditions (DC) and mitigating conditions (MC) under each guideline. In evaluating the security worthiness of an applicant, the administrative judge must also assess the adjudicative process factors listed in ¶ 6.3 of the Directive. The decision to deny an individual a security clearance is not necessarily a determination as to the loyalty of the applicant. See Exec. Or. 10865 § 7. It is merely an indication that the applicant has not met the strict guidelines the President and the Secretary of Defense have established for issuing a clearance.

Concerning the evidence as a whole, the following adjudicative guidelines are most pertinent to this case:

Financial Considerations. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Unexplained affluence is often linked to proceeds from financially profitable criminal acts. (¶ E2.A6.1.1.)

Personal Conduct. Conduct involving questionable judgment, untrustworthiness, unreliability, lack of candor, dishonesty, or unwillingness to comply with rules and regulations could indicate that the person may not properly safeguard classified information. ( ¶ E2.A5.1.1.)

Criminal Conduct. A history or pattern of criminal activity creates doubt about a person's judgment, reliability and trustworthiness. (¶ E2.A10.1.1.)

Having considered the evidence of record in light of the appropriate legal precepts and factors, and having assessed the credibility of the Applicant, I conclude the following with respect to Guidelines F, E, and J:

Under Guideline F, financial considerations, the security eligibility of an applicant is placed into question when the applicant is shown to have a history of excessive indebtedness, recurring financial difficulties, or a history of not meeting his financial obligations. The government must consider whether individuals granted access to classified information are, because of financial irresponsibility, in a position where they may be more susceptible to mishandling or compromising classified information. Applicant has had financial difficulties since about 1995 when he was laid off from his defense contractor employment. Although he was recalled, it was under a new contract where Applicant was paid less than half of his former salary--not enough to support his large family, even with the social security benefits two of his children received. After fire severely damaged his home 1996, Applicant incurred the costs of lodging for almost one year while the house was being repaired. By mid-November 1996, he was seriously in arrears of his mortgage. While he paid about $8,177 under a Chapter 13 bankruptcy in 1997/98, his case was dismissed in June 1998 for failure to make regular payments to the trustee. He also issued four insufficient funds checks to a local supermarket and made only about half of his mortgage payments in 1997 and 1998. As of December 1998, he owed $22,000 in unsecured debt and mortgage arrearage of more than $46,000, including $15,896.88 in water and sewer fees paid on his behalf by the primary mortgagor. Disqualifying conditions (DC) ¶ E2.A6.1.2.1. A history of not meeting financial obligations, and ¶ E2.A6.1.2.3. Inability or unwillingness to satisfy debts, apply.

The Directive provides for mitigation where the financial problems were due to factors beyond an applicant's control (¶ E2.A6.1.3.3. The conditions that resulted in the behavior were largely beyond the person's control (e.g., loss of employment, a business downturn, unexpected medical emergency, or a death, divorce or separation)). The job layoff and recall at less than half his prior salary and the fire are the types of circumstances contemplated within ¶ E2.A6.1.3.3. With a subsequent refinancing of his mortgage in September 2002, Applicant resolved much of the debt that led him to file for Chapter 13 bankruptcy three times. Although there is a basis to apply MC ¶ E2.A6.1.3.6. The individual initiated a good faith effort to repay overdue creditors or otherwise resolve debts, Applicant does not have a good handle on his finances. In the nine months after his refinancing, he had fallen behind about $1,000 in his utilities. A $482 telephone services debt (¶ 1.i.) was charged off in November 2003. While he paid those delinquent cellular phone charges and settled another delinquent debt for less than its full balance in February 2005, he owed an outstanding water and sewer services judgment of $1,042 as of July 2005. At the same time, he was leasing a 2005 model year vehicle at $440 per month, an expense difficult to justify even if he drives 30 miles one way to work. As of August 2005, he was again looking to refinance his mortgage to free up some cash for other debts. It is too soon to conclude that his financial problems are safely behind him. While the Chapter 13 bankruptcy filings themselves are not viewed negatively, his noncompliance with the plans (and with respect to ¶ 1.b. inability to propose a meaningful plan) warrants adverse findings with respect to SOR ¶¶ 1.a., 1.b., and 1.c. With respect to those debts that were denied (¶¶ 1.d., 1.e., 1.f., 1.g. and 1.h.), Applicant satisfied ¶ 1.e. after he determined it was his son's debt. While the others are listed on his credit reports of record, those credit reports also report a discrepancy in social security numbers. It cannot be determined for certain that the other accounts are his responsibility, so favorable findings are returned as to those debts. SOR ¶ 1.i. is also resolved in his favor in light of his payment, albeit very belated, of that cellular phone delinquency. SOR ¶ 1.j. is held against him because of his recent and ongoing delinquencies in his utility (including water and sewer) obligations.

Under Guideline E, personal conduct, the government alleges Applicant deliberately falsified his SF 86 by failing to disclose the larceny charges filed against him in 1998 and 2000. As of his SF 86 in May 2002, Applicant had already paid the $210 in restitution for the bad check charges filed in March 1998 and he had been served with the complaint for the felony larceny by check charges. DC ¶ E2.A5.1.2.2. The deliberate omission, concealment, or falsification of relevant and material facts from any personnel security questionnaire, personal history statement, or similar form used to conduct investigations, determine employment qualifications, award benefits or status, determine security clearance eligibility or trustworthiness, or award fiduciary responsibilities applies.

The government must be assured that those granted access can be counted on to fulfill their obligations of full candor. During his DSS interview in July 2003, Applicant admitted he had charges against him that had not yet been resolved and that he did not list the information on his SF 86 because of personal embarrassment and concern coworkers would learn of the criminal charges. MC ¶ E2.A5.1.3.3. The individual made prompt, good-faith efforts to correct the falsification before being confronted with the facts, is inapplicable where the correction was not reasonably prompt. At the hearing, he explained he wanted primarily to hide from his employer not the larceny charges but rather arrests during his youth. (Tr. 109) Applicant has not shown that his representations can be relied on. Even if Applicant had evidence that he did not commit felony larceny, it does not absolve him of his obligation to report the charge and then explain it was a case of identity theft. The evidence of record supports a finding of culpability with respect to the 1998 misdemeanor larceny, and his recent denial of wrongdoing in that case raises concerns of his rehabilitation as to the Guideline E concerns. SOR ¶¶ 2.a. and 2.b. are resolved against him.

Furthermore, an adverse finding is also returned as to ¶ 3.a., as Applicant committed felonious criminal conduct by knowingly falsifying his SF 86. Title 18, Section 1001 of the United States Code provides:

(a) Except as otherwise provided in this section, whoever, in any matter within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States, knowingly and willfully: (1) falsifies, conceals, or covers up by any trick, scheme, or device a material fact; (2) makes any materially false, fictitious, or fraudulent statement or representation; or (3) makes or uses any false writing or document knowing the same to contain any materially false, fictitious, or fraudulent statement or entry; shall be fined under this title or imprisoned not more than 5 years, or both.

Criminal activity raises serious doubt about a person's judgment, reliability, and trustworthiness, even in the absence of formal charges (see E2.A10.1.2.1. Allegations or admission of criminal conduct, regardless of whether the person was formally charged). While this criminal conduct is not recent (¶ E2.A10.1.3.1.), he has not show that he understands his obligation of full candor with the government.

Formal findings as required by Section 3, Paragraph 7 of Enclosure 1 to the Directive are hereby rendered as follows:

Paragraph 1. Guideline F: AGAINST THE APPLICANT

Subparagraph 1.a.: Against the Applicant

Subparagraph 1.b.: Against the Applicant

Subparagraph 1.c.: Against the Applicant

Subparagraph 1.d.: For the Applicant

Subparagraph 1.e.: For the Applicant

Subparagraph 1.f.: For the Applicant

Subparagraph 1.g.: For the Applicant

Subparagraph 1.h.: For the Applicant

Subparagraph 1.i.: For the Applicant

Subparagraph 1.j.: Against the Applicant

Paragraph 2. Guideline E: AGAINST THE APPLICANT

Subparagraph 2.a.: Against the Applicant

Subparagraph 2.b.: Against the Applicant

Paragraph 3. Guideline J: AGAINST THE APPLICANT

Subparagraph 3.a.: Against the Applicant

In light of all the circumstances presented by the record in this case, it is not clearly consistent with the national interest to grant or continue a security clearance for Applicant. Clearance is denied.