Red Alert: Control Board Members Announced

The names of the seven members of the federal control board, which President Obama will announce this afternoon, have leaked and many of them will be no surprise to those who followed Control Board Watch. I profiled three appointees including Ana Matosantos (yellow flag), Arthur Gonzalez (yellow-red flag), and Jose Ramon Gonzalez (yellow-green flag).

The nominees who I have not yet profiled are Andrew Biggs, David Skeel, Carlos Garcia, and Jose Carrion, though I heard rumors about each.

Biggs is a resident scholar at the American Enterprise Institute, a right-of-center think tank in Washington, D.C. In truth, I do not know much about him with regard to his positions on Puerto Rico, but it is notable that his area of expertise at AEI includes state and local public pension reform – a sure sign that Congress sees this as a must-do for the Commonwealth.

Skeel is a law professor at the University of Pennsylvania who has been outspoken on public finance issues in the past, including Puerto Rico. He has been a supporter of bankruptcy access for Puerto Rico, having written a column for the Wall Street Journal in favor of doing so in January.

Garcia is a former GDB president under Governor Luis Fortuno. As such, he has intimate familiarity with the Commonwealth’s financial operations and the management of our public debt, and no doubt he offers a valuable and unique perspective to the board. His recent tenure at GDB, however, caused controversy during the nomination process. He presided over the GDB at a time when our public debt skyrocketed, and was likely involved with debt issuances that are still outstanding today.

Carrion leads an insurance brokerage firm on the island called Carrión, Laffitte & Casellas, and is deeply respected in the Puerto Rican business community. He has nearly two decades of experience in the insurance industry on the island, and was at one point contacted regarding his interest in the board’s executive director position (which he denied interest in earlier this month). Carrion also happens to be the chief financial officer of the Republican Party in Puerto Rico.

The appointment of the board represents the first major milestone in the implementation of PROMESA, but the crucial work in reinvigorating the Puerto Rican economy is only just beginning. More on the board, as well as its potential staffers and advisers, to come.

Candidate Profile: Carlos Vivoni

Carlos Vivoni is an Executive Vice President of Housing Promoters, Inc., a private Puerto-Rican based company that specializes in renting, buying, selling and appraising real estate. Prior to this executive position, he served as the Secretary of Economic Development and Commerce for the government of Puerto Rico, as well as the Secretary of Housing, under Governor Pedro Rossello. He also worked as a Vice President at Citibank in Puerto Rico from 1986-1993.

carlos vivoniHis public sector experience, familiarity with the inner working of the Puerto Rican Government, and long history as a champion for economic development on the island make him a logical candidate, and his name has gained traction in the rumor mill over the last several weeks.

During his tenures as Secretary of Economic Development and Commerce and Secretary of Housing, Vivoni championed privatization of our vast public sector and diversification of the job market on the island, arguing that an economy based on federal tax breaks was not sustainable in the long run. Both of these points figure to be major topics of the discussion for the board moving forward, and are no doubt part of the reason that he is garnering consideration on the right.

Still, his career has not been without controversy.

In 2011, a Department of Housing and Urban Development (HUD) program on the island was investigated for fraud and abuse problems that allegedly benefitted Housing Promoters, Inc, where Vivoni works as Executive Vice President.

The controversy centered a 2010 contract for which Housing Promoters initially bid and was rejected, only to have the rejection overturned and ultimately awarded the company.  The move drew scrutiny when revealed that a former Housing Promoters employee was appointed to oversee the bidding process.

Verdict: yellow-flag Yellow Flag – Carlos Vivoni is experienced in public sector work aimed at promoting economic development on the island, which makes him a logical fit. However, he has no apparent experience in dealing with large-scale debt crises, and his involvement in a 2011 scandal will undoubtedly call his credibility into question.

Red Alert: US Treasury Consultant Martha Kopacz

As you may have seen me point out on Twitter, control board advisory candidate and Treasury consultant (see her testimony in the Wal-Mart case) Martha Kopacz voiced the opinion that Puerto Ricans should abandon the statehood discussion while the Commonwealth mounts its financial recovery under the oversight of the board, during a panel discussion in San Juan.

As I noted in her preview, Kopacz has long been a mouthpiece of the US Treasury Department, and the fact that she testified to being a Treasury consultant confirms her prejudice.  Her comments yesterday on status should give each of us pause.  No matter how you feel about the status debate (it’s fair to say that everyone knows how I feel), the Treasury Department and the “restructuring experts” that work for it should not be in the business of weighing in on local matters, which are deeply personal to many of us.

There should be no remaining doubt that Kopacz is not independent and should not be considered for a board or an advisory/staff position, if the control board is truly to be independent of political forces.

Candidate Profile: Robert Foran

Robert Foran is the CEO of the Metropolitan Transit Authority, New York City’s public transportation agency – a position he has held since 2010.

ForanForan is a municipal finance veteran, having worked closely with MTA since the 1980s, while he was a banker at Bear Stearns. He has long been viewed as a candidate for the control board, in large part thanks to his role in spearheading MTA’s $15 billion debt restructuring, which began while Foran was at Bear Stearns in 2002.

MTA has faced challenges during Foran’s tenure as CEO, notably coping with billions in damage to its rail systems in the wake of Hurrican Sandy in 2012. The agency issued $2.5 billion in bonds to cope with that damage in 2012, and has recently generated an additional $1 billion in savings by reducing energy costs and reaching favorable settlements with labor unions that have allowed it to pay less money into its pension systems – both of which are issues that the control board will likely have to confront in restoring economic stability in the Commonwealth.

Despite these victories, the agency still faces a $14.8 billion deficit in its five-year capital plan as of last year.

Like several recently profiled candidates, Foran has had little to no involvement in Puerto Rico-related issues, and faces no apparent conflicts with the Garcia Padilla or Obama Administrations. Given this and his highly relevant experience with MTA, I think that Foran would make a fine candidate for board consideration.

Verdict: green-flag Green Flag – Foran is a municipal finance veteran whose work in spearheading the Metropolitan Transit Authority’s debt restructuring is highly relevant.



Candidate Profile: Gregory Kaufman & Alejandro Ballester

AlejandrokaufmanGregory Kaufman and Alejandro Ballester are names that have not been circulated widely by the media as candidates for the control board, but nonetheless sources tell me that they are garnering significant consideration for the control board.

Kaufman is the president and executive director of Popular Securities, the investment banking wing of Banco Popular, where Kaufman has worked since joining as a managing director in 2003. Prior to that he worked at Prudential Securities and, notably, was the vice president of finance at the Government Development Bank from 1993-1996 under Governor Pedro Rosello. He also serves on the board of directors at the foundation for Puerto Rico alongside former Governor Sila Calderon and another rumored control board candidate (who I red-flagged): Lizzie Rosso.

Ballester is a businessman who runs Ballester Hermanos, a major food and beverage distributor here is Puerto Rico. Notably, he sits on the board of directors at Banco Popular.

For me, their candidacy is quite simple, there is one giant red flag that should preclude both from board consideration: their current positions as, for Kaufman, head of Banco Popular’s securities division , for Ballester, as a director on Popular’s board. Popular Securities has many clients with exposure to the island’s debt. Any restructuring of this debt will negatively impact Popular Securities clients’ and the institution.

Popular is, of course, not only Puerto Rico’s largest bank, but also the bank of the Puerto Rican government. It has accumulated over $1 billion in government deposits during the second quarter of 2016 alone, while acting as the de facto receiver of the Government Development Bank. It is also the clearing house for the government’s public employee payroll, and serves as trustee for COFINA, the government entity that issues sales-tax revenue-backed bonds to investors.

Popular’s CEO, Richard Carrion, who was considered an early board candidate but seems to have fallen out of favor, serves on the board of the non-profit that came under scrutiny for listing Governor Garcia Padilla’s own brother as its only paid employee (along with red-flagged Dennis Rivera). In fact, the non-profit is headquartered in Popular’s San Juan office.

Perhaps most importantly Popular itself has a sizable exposure to Puerto Rican public debt (reportedly north of $1 billion) which Kaufman oversees directly. Simply put, it is inappropriate for the head of Popular’s investment division or a director with a vested interest in Popular’s business to be a major voice on the control board, which will wield absolute authority over the fate of bonds and contracts which will potentially have a direct impact on the bank.

All off this serves to make both Kaufman and Ballester, and anyone else closely affiliated with Popular, completely unfit to serve on the control board (or work for it in an advisory capacity).

Verdict: red-flag Red Flag – Kaufman’s status as a high-level Banco Popular employee and Ballester’s membership on Popular’s board of directors clearly makes them unfit to serve on the control board, given the myriad conflicts that arise out of the bank’s relationship with the Puerto Rican government and its public debt. 

Candidate Profile: Phil Swagel

Phil Swagel is a professor at the University of Maryland’s school of public policy, where he teaches international economic policy, and a non-resident scholar at the American Enterprise Institute, a right-leaning think tank in Washington, DC. Prior to teaching at Maryland, he was a visiting professor at Georgetown Univeristy’s McDonough School of Business.

phil swagelMost pertinent to potential control board work, however, is likely Swagel’s public sector experience. He was the Assistant Secretary for Economic Policy at the Treasury Department from December 2006 to January 2009, during the second term of President George W. Bush, where he advised on TARP policy. He was also chief of staff to the White House Nation Council of Economic Advisors, as well as an IMF economist and an economist at the Federal Reserve. Swagel’s experience at Treasury could be particularly helpful, because it would give the board someone experienced with the inner workings of the department without compromising the board’s integrity by presenting a conflict with the current administration.

Earlier this spring, he was critical of a bill that would require the Federal Reserve to consider municipal bonds as a “safe” investment alongside cash, treasury bonds, and debt issued by government-sponsored enterprises for the purposes of bank regulation, saying, “The Fed in its proposal went too far in allowing risky securities to be treated as safe, and the legislation would go yet further.” But, despite his obvious experience in the realm of public finance, his apparent involvement in the debate over Puerto Rico’s debt has been minimal. Likewise, there is nothing to suggest that he faces any notable conflicts in Puerto Rico or the current administration. Hence, he should be a fine member of the Board.

Verdict: green-flag Green Flag – Swagel is an experienced financial mind with no apparent conflicts that should preclude him from board consideration.

Candidate Profile: José Fourquet

Jose Fourquet is a Wall Street veteran who currently serves as managing director and head of the Miami Private Investment Management (PIM) branch of Lehman Brothers, which was of course acquired by Barclay’s after it failed in 2008. Previously, Fourquet also worked as the vice president of the fixed income, currency and commodities division at Goldman Sachs.Tourquet

A Puerto Rico native, Fourquet is a well-seasoned and highly respected figure in the public sector – he was nominated by President George W. Bush, and unanimously confirmed by the U.S. Senate, to serve as the 12th United States Executive Director of the Inter-American Development Bank (IDB) in 2001. He also boasts a most unique credential on his resume (though not terribly pertinent to control board work) having worked for 6 years as a operations officer with the CIA stationed in Latin America.

His tenure at IDB is perhaps best known for the 2003 approval of a $75 million loan to finance a Peruvian natural gas project, which was spearheaded by the Argentinean company Pluspetrol. Fourquet was criticized for abstaining from the vote over whether to approve the deal rather than voting “no,” following concerns raised by US officials over the project’s environmental impact.

Likely due in large part to his Puerto Rican background, Fourquet has been considered a likely control board candidate for some time, and was amongst the first possible candidates reported by El Nuevo Dia. Beyond this, however, Fourquet has not been vocal regarding his stance on PR debt-related issues. As such, he is an unknown actor as to the issues PROMESA raises.

Verdict: yellow-flag Yellow Flag – Fourquet is a finance veteran with significant public sector experience. However, simply not enough is known about his network here in PR with regard to potential conflicts to deliver a green flag right now. 

Candidate Profile: Mark Page

Mark PageMark Page is the former director of the New York City Office of Management and Budget (OMB), where he has served in various capacities as far back 1978 and as director under Mayor Michael Bloomberg from 2002 until 2014.

Page is an expert in public finance who, throughout his career, was intimately involved in the bond issuances used to finance the many arms of New York City’s government. Prior to serving as director, Page served as deputy council, deputy director and general counsel of OMB. His responsibilities included assisting the mayor in developing and overseeing the city’s budget and advising the mayor on policies affecting the city’s fiscal ability. He also served as the executive director of the New York City Municipal Water Authority, the executive director of the New York City Transitional Finance Authority, and the president of the development corporation TSASC, Inc.

Page’s long career, however, has not been without controversy. While OMB director, he introduced and championed CityTime, a new public employee timekeeping system which the New York Times claimed was supposed to be “the envy of mayors everywhere.” The project turned into a failure, which cost taxpayers upwards of $700 million, lead to criminal charges (unrelated to Page) and lengthy investigations within Mayor Bloomberg’s administration, and resulted in the creation of a new office within City Hall to monitor technology contracts.

The CityTime failure appears to be one blip in an otherwise illustrious career and, in fact, Puerto Rico may well benefit from attempts to streamline government and make it more efficient (which is what Page had in mind by most accounts in championing the project). But lawmakers must also consider that the Control Board will be faced with rapidly-changing circumstances and financial information that will no doubt necessitate quick and decisive action, and that it cannot afford to be bogged down by the inability of its members to respond to criticism over its policies, or their reluctance to adjust their approaches as necessary if they are not effective.

Verdict: yellow-flag Yellow Flag -There is no doubt that Page has the public finance credentials to be a helpful voice on the control board, but lawmakers must carefully assess his role in the CityTime failure. I will continue to evaluate him as I learn more about his work.   

Red Alert: Patricia Eaves Possibly Conflicted Through Ties to PPD & Melba Acosta

Over the weekend, sources informed me that Patricia Eaves, a control board candidate who I already profiled, is married to Efren Pagan of ARCO Publicity. For those who do not now, ARCO is the publicity firm of record for the PPD. Additionally, Efren’s brother (and Patricia’s brother in law) Jose Pagan is a senior advisor to outgoing GDB president Melba Acosta.patricia eaves red

In my initial profile I gave Eaves a green flag, but her deep family ties to the PPD show deep conflicts of interest since the Board can alter this government’s decisions and laws. Given the vital importance of Board members being independent,  I am changing my verdict to red.

You can see my conversation with Patricia on Twitter regarding this new information here.

If you have tips about Eaves or any other candidates, please submit them to the TIP section on or send me an email.