The other Majority Leader under investigation

September 29, 2005

The investigation into Senate Majority Leader Bill Frist’s unusually-timed investment strategy has become slightly more serious.

The Securities and Exchange Commission upgraded its probe of stock sales made by Senate Majority Leader Bill Frist to a formal investigation, giving the agency subpoena power and the ability to review phone records and other documents, according to people familiar with the matter.

The SEC’s formal order of investigation also applies to stock sales made by insiders at HCA Inc., six of whom sold stock just prior to an earnings warning that caused the company’s stock price to fall 9%, these people said. The SEC is investigating whether Mr. Frist or other individuals had any inside information that prompted them to sell shares. The Department of Justice is also investigating and sent a subpoena to HCA last week.

The formal status was approved by four of the SEC’s five members. On Monday, SEC Chairman Christopher Cox, a Republican and former California congressman, recused himself from the Frist investigation saying he wanted “to avoid any appearance of impropriety.”

Interestingly enough, the SEC probe is also breaking new ground. Senate Associate Historian Donald Ritchie said yesterday that no congressional leader has ever faced a federal investigation of stock sales. “I don’t know that there is anything comparable,” Ritchie said. (Congrats to Frist for blazing a new trail.)

On a related note, there’s been some question about how much, exactly, Frist gained by his well-timed decision to sell stock through his not-quite-blind trust. It looks like we’re talking about at least $2 million.

Senator Bill Frist, now subject to a formal investigation by the SEC for insider trading, made between $2 million and $6 million by selling his HCA holdings just before stock values plummeted in the face of a bad earnings report, according to an analysis released today by the nonprofit, nonpartisan Foundation for Taxpayer and Consumer Rights (FTCR).

“The amount of money involved makes Frist’s motive for insider trading clear,” said Carmen Balber.

It’s hard to imagine how Frist could be so careless, but a few million dollars might have had something to do with it.

Look for article in Raw Story:

http://rawstory.com/news/2005/Family_company_of_Senate_leader_made_0929.html

  • We’ve seen countless corporate executives – most of them card-carrying Republicans, no doubt – run afoul of the law over the last few years with accounting scandals and insider trading. It looks like their political brethren finally are getting a similar taste of the long arm of the law.

    To that I say: It’s about damn time!

    When you mix power, ego and money, it turns into a lethal – and sometimes illegal – cocktail. And some of these people will never learn.

  • What’s odd is that Frist knew when he sold the stock that his conduct would be scrutinzed.

    The SEC has a lot to consider here:

    Was the share price deliberately suppressed last year when HCA bought back $500m of shares? Or were the share prices jacked up between January and June 2005 when HCA sold $900m in shares and retired debt?

    Are the uninsured patients numbers real?

    Is Frist exerting influence on the IRS which claims that HCA owes more than $550m in back taxes?

    One lesson that we have learned is that “blind” trusts are not so blind. So who else in Congress has a “blind” trust? How do we know Ted Kennedy, for example, doesn’t cheat?

    I’ve always thought that the financial disclosure rules were a lot less than perfect. A lot of money is made after these characters leave office.

    I had to laugh when I read a few years ago that Mario Cuomo hired an art consultant. Hiring an art consultant means buying art. Where did he get that kind of money in just a few years after being governor of NY for 12 years?

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