DATE: December 27, 1999

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

Applicant for Security Clearance

APPEAL BOARD DECISION AND REVERSAL ORDER

APPEARANCES

FOR GOVERNMENT

Melvin A. Howry, Esq., Department Counsel

FOR APPLICANT

Pro Se

Administrative Judge Barry M. Sax issued a decision, dated August 10, 1999, in which he concluded it is clearly consistent with the national interest to grant or continue a security clearance for Applicant. Department Counsel appealed. For the reasons set forth below, the Board reverses the Administrative Judge's decision.

This Board has jurisdiction on appeal under Executive Order 10865 and Department of Defense Directive 5220.6 (Directive), dated January 2, 1992, as amended.

Department Counsel's appeal presents the issue of whether the Administrative Judge's security clearance decision is arbitrary, capricious, or contrary to law.

The Defense Office of Hearings and Appeals issued to Applicant a Statement of Reasons (SOR) dated March 3, 1999. The SOR was based on Criterion F (Financial Considerations).

A hearing was held on July 13, 1999. The Administrative Judge subsequently issued a decision in which he concluded it is clearly consistent with the national interest to grant or continue a security clearance for Applicant.

The case is before the Board on Department Counsel's appeal from the Administrative Judge's favorable security clearance decision.

The Administrative Judge found: (a) Applicant was laid off in June 1993 and did not regain full-time employment until December 1996; (b) as a result of that relative unemployment, Applicant became delinquent on the seven debts alleged in the SOR; (c) when Applicant became employed full-time in December 1996, his first priority was to become current on his child support payments; (d) Applicant made payments toward child support in 1997, reducing his unsatisfied obligation for child support to $18,000; (e) Applicant is still working on becoming current with his child support payments; (f) Applicant's current expenses exceed his take home pay by approximately $50 a month; (g) Applicant's child support obligations for his daughter will end in September 1999, when she becomes 18 years old; (h) Applicant does not expect to have any substantial amounts of money available to pay his delinquent debts (totaling about $45,000) until his son become 18 years old, which will happen in two years; (i) as of the hearing, Applicant had made no efforts to resolve any of his delinquent debts; and (j) after the hearing, Applicant filed for Chapter 7 bankruptcy. Those findings are not at issue on appeal.

The Administrative Judge concluded Applicant's bankruptcy filing: (a) removed from Applicant the financial pressures that are the primary concern under Criterion F; and (b) demonstrated that Applicant is now working to resolve his delinquent debts through the bankruptcy process. The Judge also concluded Applicant's earlier statements about how he intended to deal with his delinquent debts were "simply statements," unlike his recent filing for Chapter 7 bankruptcy. The Judge then concluded it is clearly consistent with the national interest to grant or continue a security clearance for Applicant.

Department Counsel contends the Administrative Judge's favorable security clearance decision is arbitrary, capricious, or contrary to law because Applicant's post-hearing filing for Chapter 7 bankruptcy is insufficient, in light of the record evidence as a whole, to sustain the Judge's favorable security clearance decision. For the reasons that follow, the Board concludes Department Counsel's contention has merit.

An Administrative Judge's decision can be arbitrary or capricious if: it does not examine relevant evidence; it fails to articulate a satisfactory explanation for its conclusions, including a rational connection between the facts found and the choice made; it does not consider relevant factors; it reflects a clear error of judgment; it fails to consider an important aspect of the case; it offers an explanation for the decision that runs contrary to the record evidence; or it is so implausible that it cannot be ascribed to a mere difference of opinion. See, e.g., ISCR Case No. 98-0331 (May 26, 1999) at p. 6. A Judge's decision can be contrary to law if it fails to comply with pertinent provisions of the Directive or is contrary to applicable legal principles.

Department Counsel correctly notes the following: (1) up to the hearing, Applicant made no efforts to contact his creditors or take any steps to address or resolve his delinquent non-child support debts; (2) at the hearing, Applicant indicated he still had not made any efforts to resolve or address those delinquent debts, and he expected to be unable to resolve those delinquent debts for another two years; and (3) Applicant did not take any steps to resolve or address his delinquent debts until after the Administrative Judge made a "suggestion" at the hearing that Applicant file for Chapter 7 bankruptcy. Considering the record as a whole, it is clear that (a) Applicant had taken no steps to resolve or address his delinquent debts even after he returned to full-time employment in December 1996, and (b) as of the hearing date, Applicant had no intention of resolving or addressing his delinquent debts for at least another two years, until Applicant picked up on the Administrative Judge's "suggestion" that he file for Chapter 7 bankruptcy after the hearing. A common sense interpretation of the record evidence would lead a reasonable mind to conclude that, but for the "suggestion" by the Judge at the hearing, Applicant had no intention of resolving or addressing his delinquent debts for at least another two years.

Applicant had a heavy burden of persuasion to demonstrate extenuation, mitigation, or changed circumstances sufficient to overcome the negative security implications of his history of unresolved delinquent debts. Directive, Additional Procedural Guidance, Item 15. The mere filing of a bankruptcy petition is not proof that the person making the filing will receive a discharge of debts in bankruptcy. See, e.g., ISCR Case No. 98-0349 (February 3, 1999) at p. 3. Furthermore, the possibility of a future discharge of debts in bankruptcy is not proof of current reform and rehabilitation under Criterion F. See, e.g., ISCR Case No. 98-0614 (July 12, 1999) at p. 4. See also ISCR Case No. 99-0012 (December 1, 1999) at p. 3 ("The possibility that Applicant might achieve resolution of his outstanding debts at some future date does not constitute evidence of financial reform or rehabilitation in the present."). And, even if Applicant were to ultimately receive a discharge in bankruptcy, such a discharge would give him a financial fresh start, but it would not be a substitute for evidence of a demonstrated track record of financial reform that is necessary to satisfy Applicant's burden of persuasion under the Directive. See, e.g., ISCR Case No. 98-0445 (April 2, 1999) at p. 3.

Given Applicant's history of delinquent debts, the absence of any effort by Applicant to address or resolve his delinquent debts after he regained full-time employment in December 1996, and Applicant's statements at the hearing that he did not intend to address or resolve his delinquent debts for at least another two years, Applicant's post-hearing filing of a Chapter 7 bankruptcy petition falls far short of constituting substantial evidence of financial reform and rehabilitation. The favorable weight that reasonably could be given to Applicant's post-hearing filing of a Chapter 7 bankruptcy petition is far outweighed by the record evidence of Applicant's failure to resolve or address his delinquent debts in a reasonable manner after he regained full-employment in December 1996. See, e.g., ISCR Case No. 98-0349 (February 3, 1999) at p. 2 (applicant has obligation to deal with financial problems in a responsible and reasonable manner). Considering the record evidence as a whole, it was arbitrary and capricious for the Judge to base his favorable decision on Applicant's post-hearing bankruptcy filing.

Department Counsel has met its burden of demonstrating error that warrant reversal. Pursuant to Item 33.c. of the Directive's Additional Procedural Guidance, the Board reverses the Administrative Judge's August 10, 1999 decision.

Signed: Emilio Jaksetic

Emilio Jaksetic

Administrative Judge

Chairman, Appeal Board

Signed: Jeffrey D. Billett

Jeffrey D. Billett

Administrative Judge

Member, Appeal Board

I disagree with my colleagues' analysis and disposition of this case. Although the Administrative Judge relied excessively on a Bankruptcy petition that he (and to some extent Department Counsel) helped generate in the course of the hearing, the ultimate decision below was sustainable. Applicant had not generated a new bad debt in approximately three years. Applicant had been paying his most important payment (his child support) first. Applicant's brief asks the Board to consider affirming on alternate grounds which I believe is appropriate in this case. To reverse here suggests that had the case been remanded the Administrative Judge could not legally have issued a favorable decision on this record after correction of the errors. I obviously do not support such a suggestion.

Signed: Michael Y. Ra'anan

Michael Y. Ra'anan

Administrative Judge

Member, Appeal Board

1. Applicant's reply brief contains some statements that go beyond the record evidence. Such statements constitute new evidence, which the Board cannot consider on appeal. Directive, Additional Procedural Guidance, Item 29.