Frist is still searching for an excuse

September 22, 2005

When Senate Majority Leader Bill Frist’s campaign committee suffered big losses and came up short of money needed to cover a bank loan, there were few consequences. An occasional joke about why he’d want to privatize Social Security in light of his investment record, but that was about it.

Likewise, when the Atlanta Journal-Constitution published a detailed (and rather incriminating) expose on alleged fiscal mismanagement and bizarre investment strategies on Frist’s part over the last several years, the political world seemed to let out a collective yawn.

And yet, as of now, Frist seems to have a genuine problem on his hands. News broke this week over Frist selling all of his stock in his family’s hospital corporation (HCA) miraculously before an earnings report drove the price down. Much to Frist’s chagrin, this is not just a one-day story.

Senate Majority Leader Bill Frist (R-Tenn.) has maintained for years that his stock holdings in the nation’s largest for-profit hospital chain posed no conflict of interest for a policymaker deeply involved in health care matters. He even received two rulings in the 1990s from the Senate ethics committee that blessed the holding of the stock in blind trusts.

So when Frist decided in June to dump all the stock, and later cited as the reason his desire to avoid the appearance of a conflict of interest, eyebrows went up among ethics experts and congressional watchdogs. Why did he do it at that time?

That’s the question for which there is no answer, at least not yet. Yesterday, Amy Call, Frist’s chief spokesperson, said, when asked why he hadn’t sold the stock previously, “I don’t know that he’s been worried about it in the past.” But that answer doesn’t make any sense.

Something prompted Frist to change his mind. It couldn’t have been Senate ethics rules; he’s been there 11 years and been cleared by the Senate Ethics Committee to own the stock. So what made him, in his spokesperson’s words, “worry” about the stock now?

The Washington Post quotes plenty of experts on ethics and securities law, all of whom seem to believe Frist’s sudden decision raises fairly serious questions, none of which Frist’s office has responded to.

But the Post added this little gem at the end.

According to Thomson Financial, a reporting service, seven senior HCA executives sold 574,882 shares worth $19,942,610 between May 17 and June 10. A company spokesman, Jeff Prescott, said the executives are entitled “like other stockholders [to] make personal decisions . . . about when to sell.” He said the executives complied with “blackout restrictions” imposed by the SEC to prevent dealing within a certain period prior to restatements of earnings.

An SEC spokesman said it is the commission’s policy not to comment on investigations, and would neither confirm nor deny that it is probing insider trading at HCA.

Could Frist really have been this stupid?

I thought the point of a blind trust was that you didn’t know what holdings had been disposed of, and you couldn’t direct the administrator to sell a certain company’s stock????

  • Could Frist really have been this stupid?

    Um, CB, if Martha Stewart who was actually a floor trader at one time, could be that stupid….I’m absolutely certain Frist could be……I truly want to see how they get out of this one…..

  • But company insiders are NOT entitled, “like other shareholders [to] make personal decisions… about when to sell.” The purchase or sale of a security while in possession of material inside information with respect to that security is a violation of section 10(b) of the Securities Exchange Act of 1934 and SEC Rule 10b-5. Compliance with blackout periods may give a semblance of propriety but it does not protect an insider from criminal liability where the securities transaction was actually based on inside information. If anyone else had pulled this, the SEC would have been all over them. Let’s hope that proves to be the case this time.

  • Could Frist really have been this stupid?

    Oh, come on, CB. You and I both know he’s this stupid. He’s been driven insane by a desire to be president and his tenure as Senate Kahuna is all the evidence we require.

  • I’m with yamb. I thought blind trusts were used to prevent exactly this type of boondoggle. Can someone here clarify this, please?

  • Could Frist really have been this stupid?

    I don’t know. Could a Harvard-trained doctor be stupid enough to diagnose Terri Schiavo as not being in a vegetative state via videotape, thus contradicting Schiavo’s own physicians?

    Could a Harvard-trained doctor be fooled into thinking that intelligent design creationism should be taught in schools alongside the scientifically supported theory of evolution?

    Could a Harvard-trained doctor really be confused about whether or not HIV can be transmitted by tears or sweat?

  • Based on prevailing polling data, the unanimous consensus among sentient life forms in answer to the question, “Could Bill Frist really be that stupid” is definitely ‘yes’.

    For a contradictory point of view we now turn to the Republican National Campaign Committee, or as they are known in Washington, “The Drooling Idiots”……

  • Edo – read the article. There’s an exception to Senate blind trust rules in cases where an ENTIRE asset is sold, which is the case here. On that point, Frist is OK. But it’s a very slender reed on which to hang a defense, if one is needed. On the larger subject of why someone holding a blind trust would direct the trustee to sell – and why the trustee would actully carry out the request – there is no good explanation. It ain’t exactly illegal, but it probably is something that could land Frist in hot water with a Senate ethics probe.

    But where Friest very possibly could be in big trouble is on the insider trading charge. As Josh Marshall points out, the key graph is this one:


    According to Thomson Financial, a reporting service, seven senior HCA executives sold 574,882 shares worth $19,942,610 between May 17 and June 10. A company spokesman, Jeff Prescott, said the executives are entitled “like other stockholders [to] make personal decisions . . . about when to sell.” He said the executives complied with “blackout restrictions” imposed by the SEC to prevent dealing within a certain period prior to restatements of earnings.

    As FiatLex points out above, HCA’s spokeshuman is flat out lying here, or at least blowing smoke, using the blackout stuff to make it sound like everything is on the up and up. Something tells me that Mr. Frist will soon be using some of his HCA dollars to hire a lawyer experienced in securities law.

  • It’s not been a good past few weeks for the top three Senate Repubs. Rick Santorum is tanking in the polls. It’s only a matter of time before Mitch McConnell gets dragged into the ethics mess in Kentucky. And now this with Frist. Oh schadenfreude, oh schadenfreude …

  • I think there’s more going on than just one disappointing quarter. The stock was trading at around $40 at 12/04. When Frist sold it, the price was about $55. So did Frist know that the stock wouldn’t bounce back in the second half?

    Last year, HCA borrowed money to buy back shares. This year, it issued $900 million in new stock, paid off debt but the earnongs were not that great. Yet the stock climbed steadily for almost six months.

    Interestingly enough, HCA has a potential $400 million income tax liability if the IRS rules against HCA in a tax dispute. The ruling is expected some time soon.

    You know, I just don’t think that I want my Social Security money going into a stock market that I have no say in.

  • Our friend Frist has impeccable timing. If he sold HCA Inc in June of this year he sold very close to the all time high! Have you any idea how difficult that is to do??? Your typical stock trader would kill for that kind of timing. Yet Bill claims he had no advanced warning??? A major stock holder and US senator has no advanced warning??? Give me a break!!!!

  • Now, there should be no surprise at the high cost of health care; the rising cost of health care; the inability to obtain health care. I’ve been working in emergency departments for many years. I am an eye witness to the shenanigans that have gone on since “health care” was suddenly discovered as an “industry” over the past few decades.

  • It’s not stupidity. It’s arrogance. The criminals have grown bolder after Bush and others brazenly get away with theft.

  • This is not a case of being “that” stupid, it’s a clear case of being overwhelmingly arrogant, built not only from being the Majority Leader, but from the incredible God Complex possessed by surgeons, especially brain surgeons.

    But, let us be reminded that George Bush escaped two insider trading raps during his father’s Presidency and with such a Republican dominated Admin with so many political appointees in key roles in these Depts and Agencies, Frist no doubt believes he can/will get away with it.

  • Steve Benen.

    Please get this off youir page and onto the front pages of some major newspapers.

    what an expose…………………

  • Why the gratuitous slap at brain surgeons, BS? Did you run into complications after your lobotomy?

    Seriously, though, I’ve known brain surgeons (no, I’m not a doctor) and in my experience they have one of the toughest jobs in medicine. EVERY case is life and death, and far from thinking they’re god, they are daily faced with their failures to stem the tides of brain cancers and other fatal diseases. The pressures they face from patients and their distraught families every single day are formidable. If any medical specialists deserve to be very well paid, it would be those guys. Give them a break, they’ve got enough grief already.

  • I heard that when viewing the Terry Schiavo video, backyards at a slow speed, she told him to sell, sell, selll………

  • This “yawn” term they use to describe a lack of media coverage of some item implies that 1) the story is boring 2) it is not compelling news.

    That leads to the inference that “there’s nothing there to report.”

    The truth might be something closer to “newspapers and broadcast news did not publish the story, or chose to publish it on back pages.” Goodness knows why.

    And then the “other” media says, the media “yawned.” Who’s calling who a yawner? Why don’t they admit that corporate honchos edit the news?

  • Well, I believe nobody believes he is this stupid, just couldn’t stand to lose that much money. Period. Martha should rally to hold his feet to the fire, so he can stay warm, till he goes to jail!

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