Gregory 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 – 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.