that it makes it a criminal offense punishable by a maximum of five years imprisonment, $10,000 fine, or both, knowingly and willfully to make a false statement or representation to any department or agency of the United States as to any matter within the jurisdiction of any department or agency of the United States. Written interrogations unless otherwise ordered by the Examiner may be answered subject to and with an awareness of the provisions of section 1001, Title 18, United States Code.

(7) The Examiner may require the applicant to respond to relevant questions, to undergo a medical examination, or to authorize the release of relevant information in the possession of other parties. Should the applicant refuse, the Examiner may refer the case to the Assistant Secretary of Defense (Comptroller), or his designee, for action in accordance with the provisions of § 155.4(b).

(8) When appropriate, the Examiner may amend the Statement of Reasons on motion of the applicant or Department Counsel, or on his own motion, to make it conform to the information presented and enter the amendment into the record. When such amendments are made, the Examiner will grant the applicant such additional time as the Examiner deems appropriate to answer such amendments and present evidence pertaining thereto.

(9) The Examiner may recess the hearing at the request of the applicant or his counsel, Department Counsel, or upon his own motion.

(10) A verbatim transcript (in triplicate) will be made of the hearing and made a permanent part of the record. The transcript will not include information introduced in accordance with provisions of paragraphs (f) (4) and (5) of this section. The applicant will be furnished without cost one copy of the transcript, less the exhibits. Corrections will be allowed by the Examiner solely for the purpose of conforming the transcript to the actual testimony.

(11) Whenever the Examiner concludes that he requires additional information in making a determination, he may request that a further investigation or examination be conducted. Information thus developed shall be made available to the Examiner subject to the provisions of this part.

(f) The case record. (1) The record of a case shall consist of all information presented in accordance with this part by the DoD and by or on behalf of the applicant. Irrelevant, immaterial, and unduly repetitious material shall be excluded in the discretion of the Examiner.

(2) Information adverse to the applicant on any controverted issue may not be made a part of the hearing record unless: (i) The information or a summary thereof has been made available to the applicant, and (ii) he either offers no objection to its presentation, or is afforded an opportunity to cross-examine the persons supplying the information either orally or in writing. The foregoing restrictions do not apply to information received and considered under paragraphs (f) (3), (4), (5), and (6) of this section.

(3) Records compiled in the regular course of business, or other physical evidence other than investigative reports, may be made a part of the record in the cases subject to rebuttal without authenticating witnesses, provided that such information has been furnished by an investigative agency pursuant to its responsibilities in connection with assisting the Secretary of Defense, or the Agency Head concerned, to safeguard classified information within industry pursuant to Executive Order 10865.

(4) Records compiled in the regular course of business or other physical evidence other than investigative reports, relating to a controverted issue, which, because they are classified, may not be inspected by the applicant, may be received and considered provided the Assistant Secretary of Defense (Comptroller), as designee of the Secretary of Defense, or when applicable, of the Agency Head concerned has: (i) Made a preliminary determination that such physical evidence appears to be material, and (ii) determines that failure to receive and consider such physical evidence would, in view of the level of access sought, be substantially harmful to the national security. Information as to the authenticity and accuracy of such physical evidence furnished by the investigative agency involved shall be considered.

(5) A written or oral statement adverse to the applicant on a controverted issue may be received and considered

without affording an opportunity to cross-examine the person making the statement only in the circumstances described in either of the following:

(i) The head of the department supplying the statement certifies that the person who furnished the information is a confidential informant who has been engaged in obtaining intelligence information for the Government and that disclosure of his identity would be substantially harmful to the national interest.

(ii) The Assistant Secretary of Defense (Comptroller) as designee of the Secretary of Defense, or when applicable, of the Agency Head, has preliminarily determined, after considering the information furnished by the investigative agency involved as to the reliability of the person and the accuracy of the statement concerned, that the statement concerned appears to be reliable and material, and has determined that failure to receive and consider such statement would, in view of the level of access sought, be substantially harmful to the national security, and that the person who furnished the information cannot appear to testify (a) due to death, severe illness, or similar cause, in which case the identity of the person and the information to be considered shall be made available to the applicant, or (b) due to some other cause determined by the Secretary of Defense, or, when appropriate, by the Agency Head concerned, to be good and sufficient.

(6) A written or oral statement relating to the characterization in the Statement of Reasons of any organization or individual other than the applicant may be received and considered without affording the applicant an opportunity to cross-examine the person making the statement irrespective of whether the statement is adverse to the applicant or relates to a controverted issue.

(7) Whenever physical evidence or statements are received and considered under paragraphs (f) (4) and (5) of this section, the applicant will be furnished with as comprehensive and detailed a summary of the information or physical evidence as the national security permits. Certificates evidencing the determinations required by these sections will be entered into the hearing record. Appropriate consideration shall be accorded by officials charged with making determinations under this

Directive to the fact that the applicant did not have an opportunity to cross-examine the person or persons who provided the information, or to inspect the physical evidence.

(g) Determinations. (1) Following the hearing, or after all evidence has been received in an administrative proceeding without a hearing as provided under paragraph (b) (3) of this section, the Examiner will determine whether it is clearly consistent with the national interest to grant or continue the applicant's clearance at a specific level, or he may impose a suspension consistent with the provisions of § 155.8. He will make findings of fact for or against the applicant with respect to each allegation in the Statement of Reasons and provide reasons in support of the said findings of fact. The Examiner's determination shall be based on grounds set out in the Statement of Reasons and upon information placed in the record in conformity with this part. Where the Examiner's determination is adverse to the applicant, the Examiner shall also determine whether any clearance then held by the applicant should be suspended or limited pending appeal under this part.

(2) A copy of the Examiner's determination shall be furnished directly to the applicant and Department Counsel: Provided, In those cases in which information was received and considered under paragraphs (f) (4) and (f) (5) of this section, a copy of the determination, less any deletions required in the interest of national security, will be furnished to the applicant. In the absence of timely appeal under paragraph (h) of this section, this determination constitutes the final decision in the case.

(h) Appeals. (1) Within 10 days after receiving the Examiner's determination, the applicant or Department Counsel may appeal by filing a Notice of Appeal with the Appeal Board.

(2) Appeals may be made either in person or by filing a brief. No further testimony or other evidence shall be received. A brief shall state with particularity the specific issues involved in the appeal, cite the relevant portions of the record and set out the reasons why the determination should be reversed. Where an appeal is made in person, the appellant shall file with the Appeal Board, prior to the scheduled appeal hearing, a written statement identifying the issues to be

considered before the Appeal Board. Appellant shall send copies of documents filed with the Appeal Board to appellee who may file a statement in reply.

(3) The Chairman shall preside at oral argument before the Board, and shall be charged with the responsibility of establishing orderly procedures and maintaining decorum. He may, upon the showing of good cause and at his discretion within the limits of space available, permit and prescribe conditions for the attendance of spectators during oral argument. Upon failure of a spectator to conduct himself in a proper manner, the Chairman may revoke the permission, and expel the offender from the room. Should the conduct of applicant or his counsel interfere with the orderly procedure of the oral argument, or should any ruling of the Chairman be deliberately ignored or flouted, the Chairman is empowered, after due warning, to recess the proceeding until such time as the Board has received satisfactory assurances that the conduct will not be repeated, and he may take appropriate action under paragraph (c) (5) of this section.

(4) The Appeal Board may recommend to the Assistant Secretary of Defense (Comptroller), or his designee, that a case be returned to the Examiner with instructions (i) to take further testimony or other evidence, or (ii) for further investigation.

(5) Appeal Board deliberations will be made in executive session and the Board's determination arrived at by majority vote. The Board will prepare a written determination setting forth whether it is clearly consistent with the national interest to grant or continue a clearance to a specific level. The determination will include findings for or against the applicant with respect to each allegation in the Statement of Reasons.

(6) In those cases in which information was received and considered under paragraphs (f) (4) and (5) of this section and the Appeal Board's determination is adverse to the applicant, the case record, together with the determinations of the Examiner and the Appeal Board, will be referred to the Secretary of Defense or the appropriate Agency Head, who, following his personal review of the case, will make a final determination.

(7) The determination of the Appeal Board will be made only on the record considered by the Examiner and the de

termination shall be final except as provided in paragraph (h) (5) of this section. The applicant and Department Counsel will be furnished with a copy of all final determinations made by the Board including the Board's findings with respect to each allegation in the Statement of Reasons; Provided, In those cases in which information was received and considered under paragraphs (f) (4) and (5) of this section, a copy of the determination, less any deletions required in the interest of national security, will be furnished to the applicant.

(8) No provision of this part shall be construed as conferring a right upon an applicant to appeal from a final determination to the Secretary of Defense, to the Assistant Secretary of Defense (Comptroller) or to the Agency Head.

(9) Nothing contained in this part shall be deemed to limit or affect the responsibility and powers of the Secretary of Defense or of an Agency Head to deny or revoke a clearance when the security of the nation so requires. This authority may be exercised only where he determines personally that the provisions of this part cannot be invoked consistently with the national security. Such determinations shall be conclusive.

§ 155.8 Suspension actions in security violation cases.

(a) In any case alleging (1) willful, unauthorized use or release of classified information or documents; (2) willful appropriation or retention of classified documents for personal use or for the use of others; or (3) willful concealment of the loss or compromise of classified documents or information, in which the circumstances do not, in the opinion of the Screening Board, warrant revocation of an existing clearance, the Board shall make a separate finding whether the allegations are established by a preponderance of the evidence. In each case where it so finds, the Screening Board, after consideration of the seriousness of the willful act and in light of all the surrounding circumstances, may recommend to the Assistant Secretary of Defense (Comptroller), or his designee, the suspension of an existing clearance for a period of time not to exceed one year, and shall set out in writing its reasons therefor.

(b) The applicant will be informed of the proposed suspension and will be fur

nished a copy of the Statement of Reasons. He will be afforded twenty (20) calendar days to give notice of intent to contest the proposed suspension by submitting a responsive answer to the Statement of Reasons. The answer must comply in all respects with the requirements set out in § 155.7(b) (1).

(1) Where the applicant fails to give timely and proper notice of intent to contest the proposed suspension, it shall be ordered into effect.

(2) Where the applicant gives timely and proper notice of intent to contest the proposed suspension, the case shall be referred to a Hearing Examiner for hearing and determination. The hearing shall be governed by the provisions of this Directive to the extent applicable. The Examiner may adopt, modify, or reject the recommendation of the Screening Board. The applicant may appeal the Examiner's determination as provided

under § 155.7(h).

(c) Upon expiration of the period prescribed in any suspension ordered under this part, the applicant may apply for reinstatement of his clearance by filing the necessary forms.

§ 155.9 Reimbursement for loss of earnings.

or

(a) An applicant may be reimbursed for a loss of earnings resulting directly from the suspension, revocation, denial of his clearance, Provided, (1) A final determination thereafter is made that it is clearly consistent with the national interest to grant him a clearance for access to classified information at least equal to that which was suspended, revoked, or denied, and (2) it is found to be fair and equitable for the Department of Defense to reimburse the applicant for all or a part of the loss of earnings.

(b) It shall be considered fair and equitable, except as hereinafter provided, to reimburse any applicant who has sufferred loss of earnings as a result of suspension, revocation, or denial of clearance when that clearance is, in the course of the timely exhaustion of remedies by the applicant, granted or restored. A claim for reimbursement may be denied when:

(1) The subsequent determination to grant the clearance depends upon material facts withheld by the applicant, or where circumstances have changed since

the suspension, revocation, or denial and the grant or restoration of the clearance;

or

(2) The suspension, revocation, or denial follows the applicant's failure to comply with procedural requirements.

(c) Claims for reimbursement in Department of Defense cases shall be initiated by a petition filed by the applicant with the Assistant Secretary of Defense (Comptroller). The petition shall contain a detailed statement why fairness and equity require reimbursement, including the basis for the assertion that the loss of earnings is attributable to the suspension, denial, or revocation of the clearance, and shall identify the alleged errors of fact or judgment involved.

(d) Claims for reimbursement in Agency cases shall be initiated by a petition filed by the applicant with the Agency concerned. At the request of the Agency Head concerned, the Department of Defense under its procedures will review the petition and furnish that Agency with a recommendation with respect to the merits of the petition. However, the Department of Defense is not responsible for payment of such claims.

(e) When a case has been reopened under 155.10, and thereupon a determination favorable to the applicant is made, a request for reimbursement may be considered only where (1) the applicant exhausted all of the administrative remedies available in the original proceeding, (2) the applicant made a full and complete disclosure during the original proceeding, and (3) the determination to grant or restore the clearance is not based upon circumstances occuring after the final denial or revocation.

(f) The amount of reimbursement shall not exceed the difference between the earnings of the applicant at the time of the suspension, revocation, or denial, whichever is earlier, and the interim net earnings. No reimbursement shall be allowed for any period of undue delay resulting from the applicant's acts or failure to act. Any payment shall be in full satisfaction of any further claim against the United States, the Department of Defense, and the Departments and Agencies referred to in § 155.3(b), arising out of the suspension, revocation, or denial of a clearance. Any claim shall be forever barred unless it is filed within one year after the date such claim first accrues,

or within one year of the final disposition of the case, whichever is later.

(g) Approved claims against the Department of Defense shall be forwarded to the Department of the Army for payment from "Claims, Defense" Appropriation, in the same manner that Federal tort claims are currently processed under 26 FR 11089.

§ 155.10 Pending and reopened cases.

(a) All cases pending before the Screening Board, the Examiners and the Appeal Board will be processed to a final determination under this part.

(b) Any person whose clearance has been denied or revoked under this Program or any predecessor program, may have his eligibility for a clearance reconsidered upon a showing of newly discovered evidence or other good cause. The request for reconsideration shall set out fully the grounds therefor. The Assistant Secretary of Defense (Comptroller), or his designee, in his discretion, shall grant or deny such requests for reconsideration.

(c) Where a clearance previously has been granted under this Program, and a Department component or Agency received additional derogatory information which was not considered at the time the case was decided, it shall refer the information to the Deputy Director for Contract Administration Services, or to the Federal Bureau of Investigation for appropriate action.

This part is issued pursuant to the authority vested in the Secretary of Defense by 10 U.S. Code 133; 5 U.S. Code 3571, 7312, and 7532; Executive Order 10450, "Security Requirements for Government Employment," April 27, 1953, as amended by Executive Orders 10491, 10531, 10548, 10550, hereafter referred to as Executive Order 10450; and Public Law 89-380; 80 Stat. 94.

[32 F.R. 5420, Mar. 31, 1967; 33 FR. 4462, Mar. 13, 1968]

§ 156.3 Applicability.

This part is applicable to employees and applicants for employment in sensitive positions with the Department of Defense. This part is not applicable to the National Security Agency. Policies and procedures which govern the civilian applicant and employee security program of that Agency are prescribed by Public Law 88-290, directives of the Executive Branch, directives of the Department of Defense, and regulations of the National Security Agency. The provisions of section 7532 of title 5, United States Code, apply to the Agency if the Director, NSA, proposes a suspension or termination of an employee in acccordance with the said section. When the Director, NSA, elects to utilize the provisions of section 7532 of title 5, United States Code, he shall consult with the DoD General Counsel prior to preparation of a letter of charges.

[32 F.R. 5420, Mar. 31, 1967] § 156.4 Responsibility.

The Secretaries of the Military Departments, the Assistant Secretary of