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Study: Foreclosure, Debt Causes More Denials of Security Clearances

More government workers and contractors are being denied security clearances or having their clearances revoked due to their financial debt, according to a study by security clearance lawyer Sheldon Cohen [PDF].

According to his report, the number of Defense Department security clearance denials and revocations “has kept pace with the number of foreclosures, defaults, and short sales in the country.” From the study:

Since the collapse of the housing market in 2008, debt resulting from job losses and home foreclosures have had a devastating effect on people holding national security clearances. That, more than any other factor today, is causing the revocation or denial of security clearances, resulting in the loss of good paying jobs, and putting skilled workers further and further behind in their effort to dig out of debt.

The government’s decisions to grant security clearances to individual contractors or government workers take into consideration the individual’s financial status—the idea being that people in tough financial positions are more likely to breach security when offered financial incentives. From the guidelines:

Failure or inability 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 information. An individual who is financially overextended is at risk of having to engage in illegal acts to generate funds. Compulsive gambling is a concern as it may lead to financial crimes including espionage. Affluence that cannot be explained by known sources of income is also a security concern. It may indicate proceeds from financially profitable criminal acts.

Given this rationale, it doesn't seem that the increase in denials or revocations of clearance are necessarily a bad thing, but it does seem that for government workers and contractors in tough financial straits, the hardship of losing a house, for instance, could be compounded by a denial or revocation of clearance—an aspect of the nation's financial crisis that we found interesting.

The new study examined security clearance cases at the Department of Defense Office of Hearings and Appeals, and found that between January 2006 and June 2010, 62 out of 71 cases hinging on an individual’s financial position were decided against the applicant at the appeals stage. Clearance denials were affirmed more often than they were reversed, and initial clearances were more often reversed than affirmed.

“The Appeal Board has not affirmed a favorable decision that was appealed by the government in almost two and a half years to the time of the writing of this article,” the report said.

The study noted that it only provides a limited view of what’s happening with security clearances. That’s because the Defense Department Office of Hearings and Appeals is one of 11 offices that rules on these security clearance cases, and according to Secrecy News, it’s one of the few that actually publishes its decisions.

An estimated 3 million government workers and 1.5 million contractors have some level of security clearance, CBS News reported. The Washington Post, in a recent investigation of the U.S. national security system, estimated that about 854,000 people hold top-secret clearance.

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