Saturday, September 24, 2005

Frist under fire

So what if both the SEC and the DoJ are investigating Senate Majority Leader Bill Frist? This should come as no surprise since his position makes him a lightning rod attracting strikes by the minority party. These investigations must be as inconsequential as all the other attacks against Senator Frist have been, right?

Perhaps if you look at just the latest developments, it might appear that way. However, if you start by looking back as far as Frist's first days in the Senate, the picture begins to look very different.

Frist came to the Senate in 1995, holding a blind trust with HCA shares in it. This should come as no surprise because HCA was founded by Frist's father, and his brother is a Director. Since Frist is not supposed to make decisions to purchase or sell securities in his blind trust, his claim was that there was no conflict of interest between his position in the Senate and his holdings in the trust because, "It is illegal right now for me to know what the composition of those trusts are. So I have no idea."

Nonetheless, Frist came under immediate criticism for holding HCA stock while directing legislation on patient issues and Medicare reform. Senate rules permit legislators to divest their shares in a company from a blind trust, but only if they assume new duties and find that their ownership presents the appearance of a conflict of interest. However, according to Frist, "So as far as I know, I own no HCA stock."

Now let's take look at more recent activities surrounding this issue. It seems that the SEC and the U.S. attorney's office in Manhattan are (independently) contacting Senator Frist regarding the sale of HCA stock in June when it was near its 52-week high. The sale came just two weeks before the corporation issued a poor earnings forecast that drove its stock price down over fifteen percent. The hospital conglomerate is also under subpoena by the same attorney's office for documents related to the sale.

Not to worry: a statement from Frist's office made it clear that the Senator, "had no information about the company or its performance that was not available to the public when he directed the trustees to sell the HCA stock. His only objective in selling the stock was to eliminate the appearance of a conflict of interest."

But this begs a couple of questions. First of all, why would he suddenly be concerned about a "conflict of interest" when he wasn't in prior years? Even more curious, didn't Frist claim no knowledge of owning the stock? It turns out that two weeks before disclaiming the knowledge, the trustee, M. Kirk Scobey Jr., notified Frist of HCA stock being contributed to the trust. Even as far back as 2002, the trustee notified Frist of separate HCA investments to his trust in the amounts of $15,000, $50,000, $250,000, $500,000, and $1-million.

Democrats were quick to fire on Frist. According to Rep. Rahm Emanuel (D-Ill.), "Bill Frist has this all upside down. He thought Terri Schiavo could see and his trust was blind." And, in classic Howard Dean style, the Chairman of the DNC said of the issue that, "Republicans in Washington have made their culture of corruption the norm."

Dean's comment is right on target, and the GOP has the power in both the legislative and the executive branches of government. This makes one question whether or not we'll see Frist take a fall for this. But if we do, it's sure to have repurcussions throughout the Republican party and maybe in the 2006 elections.

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