* The original of this document contains information which is subject to withholding from disclosure under 5 U.S.C. 552. Such material has been deleted from this copy and replaced with XXXXXXX’s.

April 4, 2002

DEPARTMENT OF ENERGY

OFFICE OF HEARINGS AND APPEALS

Hearing Officer Decision

Name of Case: Personnel Security Hearing

Date of Filing: November 27, 2001

Case Number: VSO-0509

This Decision concerns the eligibility of xxxxxxxxxxxxxxxxxxx (the individual) to hold an access authorization under the Department of Energy (DOE) regulations set forth at 10 C.F.R. Part 710, Subpart A, entitled "General Criteria and Procedures for Determining Eligibility for Access to Classified Matter or Special Nuclear Material."(1) A DOE Operations Office suspended the individual’s access authorization pursuant to the provisions of Part 710. As discussed below, after carefully considering the record before me in light of the relevant regulations, I have determined that the individual’s access authorization should not be restored.

I. Background

For several years the individual has been employed by a DOE contractor in a position that required him to maintain an access authorization. Unresolved questions regarding the individual’s suitability to hold an access authorization arose in January 2001 after the individual informed the DOE that he had filed a bankruptcy petition the previous month. After inquiring about the circumstances surrounding the bankruptcy filing, the DOE issued a Notification Letter to the individual in November 2001, citing the individual’s financial irresponsibility as derogatory information falling within the ambit of 10 C.F.R. § 710.8(l) (Criterion L). (2)

Upon receipt of the Notification Letter, the individual filed a response to the Notification Letter and requested a hearing. The DOE transmitted the individual's hearing request to the Office of Hearings and Appeals (OHA) Director, and the OHA Director appointed me as the Hearing Officer in this case. 10 C.F.R. § 710.25 (a), (b). I subsequently convened a hearing in this matter within the time frame prescribed by the regulations. 10 C.F.R. § 710.25(g).

At the hearing, 2 witnesses testified. The DOE called one witness, a personnel security specialist. The individual who represented himself at the hearing presented only his own testimony. The DOE submitted seven exhibits into the record (Exhibits 1-7); the individual tendered 13 (Exhibits A through H). On March 7, 2002, I received the hearing transcript at which time I closed the record in this case.

II. Regulatory Standard

A. The Individual’s Burden

A DOE administrative review proceeding under Part 710 is not a criminal matter, where the government has the burden of proving the defendant guilty beyond a reasonable doubt. The standard in this proceeding places the burden of persuasion on the individual. It is designed to protect national security interests. The hearing is “for the purpose of affording the individual an opportunity of supporting his eligibility for access authorization.” 10 C.F.R. § 710.21(b)(6). Once DOE Security has made a showing of derogatory information raising security concerns, the individual must come forward at the hearing with evidence to convince the DOE that restoring his access authorization “will not endanger the common defense and security and will be clearly consistent with the national interest.” 10 C.F.R. § 710.27(d). The individual therefore is afforded a full opportunity to present evidence supporting his eligibility for an access authorization. The regulations at Part 710 are drafted so as to permit the introduction of a very broad range of evidence at personnel security hearings. Even appropriate hearsay evidence may be admitted. 10 C.F.R. § 710.26(h). Thus, by regulation and through our own case law, an individual is afforded the utmost latitude in the presentation of evidence to mitigate security concerns.

This is not an easy evidentiary burden for the individual to sustain. The regulatory standard implies that there is a presumption against granting or restoring a security clearance. See Department of Navy v. Egan, 484 U.S. 518, 531 (1988) (“clearly consistent with the national interest” standard for granting of security clearances indicates “that security determinations should err, if they must, on the side of denials”); Dorfmont v. Brown, 913 F.2d 1399, 1403 (9th Cir. 1990), cert. denied, 499 U.S. 905 (1991) (strong presumption against the issuance of a security clearance). Consequently, it is necessary and appropriate to place the burden of persuasion on the individual in cases involving national security issues.

B. Basis for the Hearing Officer’s Decision

In personnel security cases arising under Part 710, it is my role as the Hearing Officer to issue a Decision that reflects my comprehensive, common-sense judgment, made after consideration of all the relevant information, favorable and unfavorable, as to whether the granting or continuation of a person’s access authorization will not endanger the common defense and security and is clearly consistent with the national interest. 10 C.F.R. § 710.7(a). I am instructed by the regulations to resolve any doubt as to an individual’s access authorization eligibility in favor of the national security. Id.

III. Findings of Fact

The essential facts in this case are not in dispute. During an initial background investigation in 1986, the individual informed the DOE that he and his wife had filed a Chapter 7 Bankruptcy Petition in 1983. This revelation prompted the DOE to conduct an interview with the individual to discuss the financial circumstances that led to the joint bankruptcy filing. Ex. 1-6. The DOE subsequently resolved the derogatory information associated with the individual’s financial difficulties and granted the individual a security clearance in 1987.

In January 2001, the individual reported to the DOE that he and his wife had filed a Chapter 7 Bankruptcy Petition in December 2000. During a Personnel Security Interview conducted by the DOE in June 2001 (2001 PSI), the individual related that he had overextended himself on nine credit cards. Ex. 6-2 at 16. At the hearing, the individual testified that he had obtained all nine credit cards at low introductory rates and did not fully understand that the interest rates would escalate after one year. Transcript of Hearing (Tr.) at 46. The individual attributes the 2000 bankruptcy “primarily to an ill-advised vacation trip to the Caribbean in 1996" where “he and his wife spent entirely too much money.(3) Among the other expenses the individual claims contributed to his filing the joint 2000 Bankruptcy Petition are the following:

Tr. at 45-46, 84-85, 99.

According to the bankruptcy court records, the individual declared assets in the amount of $125,323 and liabilities in the amount of $158,015 at the time he and his wife filed the Bankruptcy Petition in December 2000. Ex. 4-3. On March 27, 2001, the United States Bankruptcy Court with jurisdiction over the petition filed jointly by the individual and his wife granted the couple a discharge of their debts under 11 U.S.C. § 727. Ex. 4-2.

On June 18, 2001, the individual executed a Personal Financial Statement in which he listed two vehicle loans from a bank as current financial obligations. Id. A credit report obtained by the DOE in February 2002 revealed that the individual is currently delinquent on one of the two car loans referred to in his June 18, 2001 Personal Financial Statement. At the hearing, the individual claimed that the vehicle in question developed costly mechanical problems. Around the same time, the individual discovered that he had not executed the necessary documentation in the bankruptcy proceeding to reaffirm the debt associated with the two vehicle loans. As a consequence, the individual’s bankruptcy lawyer advised the individual that he could stop making the monthly car payment on the vehicle in question and return the car to the dealership. The individual followed his attorney’s advice in this matter. Sometime in January 2002, the individual purchased another vehicle and borrowed money at an interest rate of 24% to fund the transaction.

IV. Analysis and Findings

I have thoroughly considered the record of this proceeding, including the submissions tendered in this case and the testimony of the witnesses presented at the hearing. In resolving the question of the individual’s eligibility for access authorization, I have been guided by the applicable factors prescribed in 10 C.F.R. § 710.7(c).(5) After due deliberation, I have determined that the individual’s access authorization should not be restored at this time. I cannot find that such restoration would not endanger the common defense and security and would be clearly consistent with the national interest. 10 C.F.R. § 710.27(a). The specific findings I make in support of this decision are discussed below.

A. Whether the Individual’s Financial Difficulties Constitute a Security Concern

When a person files for bankruptcy, a security concern arises not from the bankruptcy filing per se, but rather from the circumstances surrounding the individual’s bankruptcy and his attendant financial problems. See Personnel Security Hearing (Case No. VSO-0414), 28 DOE ¶ 82,794 (2001), aff’d, 28 DOE ¶ 83,025 (2001) (affirmed by OSA, 2001). When reviewing the access authorization of a person who has filed for bankruptcy relief, I must focus on how the individual reached the point at which it became necessary for him to seek the help of the bankruptcy court in order to regain control of his financial situation through the legal discharge of his debts. See Personnel Security Hearing (Case No. VSO-0288), 27 DOE ¶ 82,826 (1999), aff’d, 28 DOE ¶ 83,004 (2000) (affirmed by OSA, 2000). In this regard, I must consider whether legitimate financial hardship necessitated the bankruptcy filing or whether the bankruptcy resulted from the security clearance holder’s irresponsible behavior.

In this case, there appears to have been both legitimate financial hardship and irresponsible financial behavior on the individual’s part that led to both of his bankruptcy filings. At the hearing, the individual revealed that three factors precipitated his filing a Bankruptcy Petition in 1983: reduced income resulting from a career change, a failed business venture, and excessive spending on vacations, entertainment and home improvements. Tr. at 54-56.

With regard to the most recent bankruptcy filing, the individual attributes his action to many factors. While the individual did not tender any documentation to support his claim that unreimbursed health care expenses contributed to his financial plight, such a claim, if true, would tend to indicate that a legitimate financial hardship contributed to his bankruptcy filing in 2000. Debts associated with house and car repairs, if properly documented and explained, could also be considered nondiscretionary expenses that might contribute to a legitimate financial hardship. It is clear from the record, however, that the individual’s financial irresponsibility also contributed significantly to his financial difficulties prior to the 2000 bankruptcy filing. Lavish vacations, landscaping for his home, frequent dining out, and excessive entertainment expenses all added to the debt that burdened the individual prior to his bankruptcy. Id. at 45-46, 74, 85.

Much of the individual’s debt stemmed from his use of nine credit cards. Ex. 6-2 at 16. The individual testified that he accumulated $50,000 in debt by charging the maximum amount on these credit cards. He suggested, however, that he did not understand that the introductory rates on the numerous credit cards that he obtained would gradually rise to rates of 26% and 34%. I did not find the individual’s argument credible. It simply strains credulity that someone whose previous employment included positions of xxxxxxxxxxxx and xxxxxxxxxxxxxxx would not know from either reading the credit card offers or applications, or from common knowledge, that low interest rates on the credit cards could escalate after a period of time.

Because it appears that many of the expenses incurred by the individual prior to his bankruptcy filings were discretionary, I find that the DOE correctly invoked Criterion L when it suspended the individual’s security clearance. The individual demonstrated financial irresponsibility by making the following expenditures when he did not have sufficient income to cover the debt: expensive vacations, restaurant meals, landscaping, and entertainment. This conduct raises questions whether the individual may be subject to pressure, coercion, exploitation or duress since he seeks to maintain a lifestyle that cannot be supported by his income level. A finding of derogatory information, however, does not end the evaluation of evidence concerning the individual’s eligibility for access authorization. See Personnel Security Hearing (Case No. VSO-0244), 27 DOE ¶ 82,797 (1999) (affirmed by OSA, 1999); Personnel Security Hearing (Case No. VSO-0154), 26 DOE ¶ 82,794 (1997), aff’d, Personnel Security Review (Case No. VSA-0154), 27 DOE ¶ 83,008 (1998) (affirmed by OSA, 1998).

B. Whether Mitigating Circumstances Justify the Restoration of the Individual’s Access Authorization

The individual claims that his financial situation has improved since his debts were discharged through bankruptcy in March 2001. He testified that he and his wife now make $75,000 per year and have few expenses. Tr. at 41. Their current financial obligations include car payments in the cumulative amount of $538 per month, $939 in rent and $1300 in other expenses. Id., Ex. 4-2.(6) The individual also reports that he has no credit cards, just a debit card. He tendered bank statements for the period December 7, 2001 through February 11, 2002 to demonstrate that he is currently living within his means. Ex. F and G.

In addition, the individual testified that he intends to reduce his 2002 car loan more quickly than scheduled by paying more than the required payment each month. Tr. at 43. He adds that he will continue to contribute to his 401(k) plan and repay the money he borrowed from that source. Id. See Exs. H, I, J. He further intends to reduce his insurance premiums and co-payments by switching his wife to her employer’s health insurance plan where the benefits are better.

Finally, the individual relates that while he was under a lot of financial stress, he never resorted to an illegal means to remedy his situation. Response to Notification Letter at 10. He further asserts that “he would never do anything to damage or breach the security of our nation or compromise secret material.” Id.

Once a pattern of financial irresponsibility has been established, it is the individual’s burden to demonstrate a new pattern of financial responsibility. Personnel Security Hearing, VSO-0108, 26 DOE ¶ 82,764 (1996) (affirmed by OSA, 1997). Based on the record before me, I find that the individual has not met his burden of mitigating the security concerns connected with the financial irresponsibility that he has demonstrated in the past. There is neither documentary nor testimonial evidence that the individual has received financial counseling since the filing of his bankruptcy.(7) Further, the individual has presented no evidence that he has either developed, or is adhering to, a budget. In addition, I am not convinced that the individual has taken responsibility for the financial difficulties he previously encountered. When asked to explain why he purchased goods or services when he did not have the financial resources to do so, he stated, “It’s part of being an American . . . wanting a decent lifestyle.” Tr. at 98. It is clear to me from the record that the individual tries to maintain a lifestyle that cannot be supported on his income. In this regard, it might have been helpful had the individual’s wife testified since it was she who, according to the individual, urged the indivdiual to spend $4,500 on the one-week Caribbean cruise. I presume also that the wife agreed to the $4,000 trip they took to San Francisco at a time when their financial situation was somewhat precarious. The wife’s testimony could also have addressed whether she is fully subscribed to a new, more prudent lifestyle and dedicated to living on a budget.(8)

Even had the individual provided evidence that he is conducting his financial affairs in a responsbile manner, however, there has simply not been sufficient time for him to demonstrate a solid pattern of financial stability and responsibility. At the time of the hearing, it had only been 14 months since the individual and his wife had filed their second bankruptcy petition. In view of the individual’s financial history, more time needs to elapse before I could make a predictive assessment that the individual will remain financially responsible in the future.

In reaching my determination, I was impressed that the individual does not currently have any credit cards. This fact is important in view of the individual’s admission that he does not have the discipline to defer purchasing things that he wants when he has access to credit. See Ex.6-2 at 10. Whether the individual will resist unsolicited credit card offers in the future is an unsettled matter in my mind, however. The record shows that whenever the individual’s income increased, so did his debt. Tr. at 73. I find that it is premature to determine whether the individual will exercise the self-restraint necessary to forego credit cards offers.

I also considered as prudent the individual’s intention to switch health insurance carriers for his wife. Since some of the individual’s pre-bankruptcy debt allegedly arose from unreimbursed health care expenses for his wife, the individual’s decision to find an insurance plan with better benefits for his wife is a factor in the individual’s favor.

As for the individual’s testimony that his future plans include attending seminars that are nationally available to improve his skill base and presumably increase his income, I make the following comments. One of the factors that contributed to the individual’s December 2000 bankruptcy filing were expenses associated with his attendance at “national” seminars, at least two of which were held in vacation sites. While the individual spent $6,000 for two such seminars, he admitted that the seminars did not advance his career. It appears from the individual’s past actions that he does not examine carefully whether expending large sums of money at work-related seminars will actually reap career benefits. This kind of conduct is troubling considering that the individual needs to be vigilant about his finances.

Other factors that I considered included that the individual’s first bankruptcy filing occurred in 1983, almost 20 years ago. However, the individual’s December 2000 bankruptcy filing in contrast is too recent to be mitigated by the passage of time. I also cannot excuse the individual’s financial irresponsibility as an isolated incident in 2000 because he previously exercised poor judgment in handling his finances prior to his 1983 bankruptcy filing. As for the individual’s age and maturity at the time he encountered financial difficulties, he was a mature man in his mid-thirties and mid- fifties, respectively, when he filed his 1983 and 2000 bankruptcy petitions.

As for the individual’s job performance, I accorded only minimal weight to the letter of recommendation the individual submitted which attests to his technical competence and professional contributions to the DOE. Successful, even outstanding job performance alone, does not alleviate the national security concerns associated with a pattern of financial irresponsibility. See Personnel Security Review, Case No. VSO-0353, 28 DOE ¶ 83,025 (2001) (affirmed by OSA, 2001).

In the end, for all the reasons set forth above, the individual has not convinced me that his actions to date constitute a solid pattern of financial stability and responsibility that will be sustained in the future. Therefore, I cannot find that the individual’s access authorization should be restored at this time.

V. Conclusion

For the reasons set forth above, I find that there is sufficient derogatory information in the possession of the DOE that raises serious security concerns under Criterion L as to the individual’s access authorization. I find further that the individual has failed to bring forth sufficient evidence to mitigate the DOE’s security concerns. Accordingly, after considering all the relevant information, favorable and unfavorable, in a comprehensive and common-sense manner, I conclude that the individual has not yet demonstrated that restoring his access authorization would not endanger the common defense and would be clearly consistent with the national interest. I therefore find that the individual's access authorization should not be restored.

Ann S. Augustyn
Hearing Officer
Office of Hearings and Appeals

Date: April 4, 2002

(1) Access authorization is defined as “an administrative determination that an individual is eligible for access to classified matter or is eligible for access to, or control over, special nuclear material.” 10 C.F.R. § 710.5(a). Such authorization will be referred to from time to time in this Decision as access authorization or security clearance.

(2) Criterion L is invoked when a person has allegedly “[e]ngaged in any unusual conduct or is subject to any circumstances which tend to show that the individual is not honest, reliable, or trustworthy; or which furnishes reason to believe that the individual may be subject to pressure, coercion, exploitation, or duress which may cause the individual to act contrary to the best interests of the national security. Such conduct or circumstances include, but are not limited to, criminal behavior, a pattern of financial irresponsibility, conflicting allegiances, or violation of any commitment or promise upon which DOE previously relied to favorably resolve an issue of access authorization eligibility.” 10 C.F.R. § 710.8(l).

(3) ”Under questioning at the hearing the individual revealed that he spent $4,500 for a one-week trip to the Caribbean in 1996.

(4) The individual testified that two of the seminars cost $6,000. Tr. at 99. He did not relate the cost of the third seminar.

(5) The factors enumerated in 10 C.F.R. § 710.7(c) include the following: the nature, extent, and seriousness of the conduct, the circumstances surrounding his conduct, to include knowledgeable participation; the frequency and recency of his conduct; the age and maturity at the time of the conduct; the voluntariness of his participation; the absence or presence of rehabilitation or reformation and other pertinent behavioral changes; the motivation for his conduct; the potential for pressure, coercion, exploitation, or duress; the likelihood of continuation or recurrence; and other relevant and material factors.

(6) The individual also borrowed $8,000 from his 401(k) retirement fund and is currently repaying that amount monthly via payroll deduction.

(7) At the hearing, the individual testified that he did not seek credit counseling until just before he filed bankruptcy. Tr. at 79. The individual explained that in his former job as xxxxxxxxxxxx, he counseled others in xxxxxxxxxxxxxxxxxx so he believed that he could take care of everything himself. Id. His former experience in the xxxxxxx xxxxxxxx obviously has not helped him manage his own financial affairs.

(8) At the hearing, I pointed out that one of the debit statements the individual submitted on his behalf reflects 12 restaurant charges in a recent month. Tr. at 91. The individual explained that that figure is a “drastic reduction” in the number of times he and his wife used to dine out. Id. I am simply amazed that someone who has emerged from bankruptcy twice and who professes to have his finances under control continues to dine out an average of three times each week. This evidence does not necessarily weigh in the individual’s favor.