If Bill Frist thought the questions about his sudden dumping of HCA stock before low earnings reports caused the stock to tumble are going to go away,
he's in for a surprise.
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?
Good question. And apparently Frist's explanation--that he told the trustee administering the blind trust that holds his stock to sell it off to avoid conflicts of interest--doesn't wash.
The WaPo quotes several experts that claim Frist's scenario defeats the purpose of blind trusts.
Several ethics experts and watchdogs said they found it odd that Frist could intervene to order such a sale when the HCA stock was ostensibly out of his reach in blind trusts. Fred Wertheimer, president of Democracy 21, said, "The notion that you have a blind trust but you can tell your trustee when to sell stock in it just doesn't make any sense. It means you have a seeing eye trust and not a blind trust. It's ridiculous."
Larry Noble, executive director of the nonpartisan Center for Responsive Politics, agreed that the arrangement "seems to defeat the purpose of a blind trust. Somebody else is supposed to have control over it to avoid potential conflicts of interest. If you can just reach in and sell stock, it seems it defeats the whole purpose."
[..]
Jan W. Baran, a Republican ethics expert at Wiley Rein & Fielding LLP, said, "That's the question, 'What changed?' " to compel Frist to sell his stock when he did.
According to Senate ethics rules, Baran said, Frist "can tell somebody to dispose of all of an asset that was initially placed into the blind trust. As a matter of Senate ethics rules, he is in compliance. The question that remains is, why did he sell the stock at that time? What conflicts arose in June that did not exist beforehand?"
"For the Securities and Exchange Commission," Baran added, "the answer is probably very important."
Very important indeed--remember, the stock was sold just days before the earnings report.
And then there's this ...
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.
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 ...