Z gave an example, so I'll give one too. Family background questions are asked every single time when the applicant is required to obtain a security clearance, so good luck with the legality and ethics angle, imo. Family background is a major part of the investigation, and not only do they ask you all about your family, they ask your family, then they get references from THEM, and ask THEM about you AND YOUR FAMILY, in addition to getting references from your references and asking THEM about you and your family.
That's right-- They would have asked you if your crack dealing mom was a hooker (when you replied that my dad is a pimp) . Then they would ask mom and dad if they were a pimp and a hooker--and asked them to elaborate, no doubt- (they would have obviously known about the crack dealing) Then they would have asked the pimp and crack dealer for references, then they would have asked THOSE people about the pimping, whoring and crack dealing, in addition to the "references of the references" you provided.
Believe it. Happens on virtually every single investigation. (Not the hooker/pimp/drug dealer part, the part about how they go about getting your background...I think that's why they call it "background" in the investigation)
I have had several of them. I remember the first time. I still chuckle at this---
Two of my friends called me from home when I was stationed at Lejeune. Fred says, "DUDE---that's totally fucked up man... The fucking FBI was here, they asked me if I fucking smoked pot and I said ya. I didn't know what to say. They asked me if you (me) ever smoked pot and I said no. Then they told me that Greg (another friend) said that sometimes you were in my room when I smoked pot, so I didn't know what to say, so I told them that it was true. Am I in trouble or anything, what the fuck did you do, dude?"
Greg calls me same weekend:
"Fucking Fred thinks he's going to prison. He's been freaking out all weekend. What was that, a security clearance thing? I should have said Chuck, (another friend) but I wasn't thinking."
I laughed, but it can get shitty, quick, as my small example shows.
I have never smoked pot in my life. I have been present when it is smoked, (and no doubt influenced by residual/passive smoke) but I was never asked that. Nor had I ever given Fred as a reference. I hadn't given Greg, either. I used employers when I was a teen as references. My PARENTS (When THEY were interviewed) gave GREG as a reference, and GREG not only told them that I was present when Fred smoked pot, he had already used him as a reference (Fred) to be interviewed. They BOTH were asked many questions about my parents, and my old man was a FEDERALLY in the friggin' JUSTICE DEPARTMENT, lol..and my step-mom was a private investigator.
...And I got polygraphed, too, and during the polygraph, the examiner specifically excluded the "being present in a friend's room when HE smoked pot" when they got to drug use questions.
I would possibly not have been given that 1st clearance if I had LIED about it in any way---actually far more important, even way back then...
I know Dez's INVESTIGATORS would have had a GD NIGHTMARE on their hands if he was going for a clearance, lol lol lol