Dr. Frist's opthamalogical misdiagnosis

While it seems to occur all the time in the land of soap operas, it's not too common for someone who's completed a fellowship in Cardiothoracic surgery to also have completed adequate training to also be considered an expert in neurology (Terri Schiavo) and opthamology (insider trading). Bill Frist, however, appears to be the exception - he's not only an expert in all three fields, as well as infectious disease (remember his HIV is transmitted through sweat and tears statement that he never quite disavowed?) and the Senate Majority Leader. He's also a very rich man thanks to the family business (HCA/Columbia), especially since his immediate family was complete divested from the company just before the stock tanked.

As I've noted since the story broke, Frist has claimed there was nothing unethical about his retaining HCA stock while making major policy decisions that affected not only the healthcare industry but the family business as well, he's also maintained there was nothing illegal or unethical about the sale of the stock. The reasons he's used to maintain his inetgrity & innocence is that the trust making determinations about his holdings was completely blind
and he'd obtained approval for the stock sale months prior to the actual divestment on the grounds that he wanted to avoid the appearance of the conflict of interest he'd been claiming did not exist for the past decade should he pursue a bid for the nomination to be the Republican presidential candidate in 2008. Today's WaPo has even more detail to add to my previous comments and the comments I made yesterday [emphasis mine]

In January 2003, after winning election as majority leader, Frist was asked on CNBC whether his HCA holdings made it difficult for him to push for changes in Medicare, a federal health program for seniors that added to the hospital company's revenue.

"I think really for our viewers it should be understood that I put this into a blind trust," Frist replied. "So as far as I know, I own no HCA stock." He added that the trust was "totally blind. I have no control."

Two weeks before that interview, M. Kirk Scobey Jr., a Frist trustee, informed the senator in writing that one of his trusts had received HCA stock valued at between $15,000 and $50,000.

"He [Frist] could have been more exact in his comments," said Bob Stevenson, spokesman for Frist. Stevenson added that Frist might better have said he did not know to what extent he owned HCA shares.

Kathleen Clark, a law professor at Washington University in St. Louis, said she was surprised that Frist had ever claimed before this summer's liquidation that he might have owned no HCA stock. "Did he say that? What was he thinking of?" she asked. "How did he know to tell the trustee to sell it [his HCA stake] if he didn't know that he had it in the first place?"

Disclosures by the trustees to the Senate and to Frist indicate that Frist and his family probably owned a great deal of HCA stock at the time. When Frist's federal trusts were created in late 2000, the trustees disclosed that one trust alone contained between $5 million and $25 million in HCA shares and that each of seven other trusts held more than $1 million of the stock.

Frist was notified in November 2002 that 14,781 HCA shares had been sold from one of his trusts. But he was not told that all of his HCA shares had been disposed of until this summer -- after he had directed his trustees to sell them all, the documents show. [WaPo]

It appears as though the [not so] Honorable Senator Frist intentionally misdiagnosed himself (vis a vis the trust) as blind, as he seems to have been fully aware of at least his HCA stock holdings. Frist's latest defense strategy is based on the claim that he'd been contemplating divesting from HCA when elected to the role of Senate Majority Leader back in 2002 but was completely unaware he was permitted to do so until this spring at which time he took action to do so [under SEC rules, if one can show the decision to sell stock was in place and not affected by the insider information, the sale is not necessarily illegal]. This begs a few questions:

1. Why didn't Frist inquire as to whether he could sell his HCA stock when he first contemplated it 3 years ago?
2. Why did he consistently describe his access to information about his stock holdings as completely blind when a blind trust was not mandated by senate rules?
3. Why wasn't the stock sold immediately upon confirmation he was allowed to divest - more importantly, was was Frist himself able to direct the timing of the sale?

If I understand senate rules accurately, the trusts they require allow for knowledge of holdings but do not allow the holder to direct transactions - buy & sell orders are to be completed at the discretion of the trust managers. Even under SEC rules that allows legal sale of stock in the presence of insider information, the fact that Frist himself placed the call to trustees ordering the sale in June - well after he'd obtained approval to sell, undermines any assertion that insider information played no role in the sale of the stock. The good senator's own words and actions have busted him big time.

Tags: Bill Frist; politics; GOP lifestyle choice; insider trading

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