Bill Frist: Inside Trader

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On June 13, 2005, Senate Majority Leader Bill Frist, "a potential presidential candidate in 2008, sold all his stock in his family's hospital corporation, about two weeks before it issued a disappointing earnings report and the price fell nearly fifteen percent," the Associated Press's Jonathan M. Katz reported September 21, 2005.

"Thomas Frist, the senator's father, and the senator's brother, Thomas Frist Jr., founded HCA Inc. in 1968 along with Jack Massey, the former owner of Kentucky Fried Chicken. Thomas Frist Jr., who stepped down as chairman of the company in 2002, still serves on the company's board of directors." [1]

Senate "Retirement" Fund
Frist "paid $72,012 from his own pocket to his 2000 re-election campaign fund in August, two months after he was notified that trustees had sold millions of dollars of his stock in HCA Inc.," Associated Press Writer Jonathan M. Katz reported October 20, 2005.

"The documents also show the campaign fund on the same day paid off a $349,107 outstanding loan from U.S. Bank Corp.," Katz wrote. "Both transactions enabled the Tennessee Republican to close the Senate campaign fund in anticipation of his retirement from the Senate next year and a possible run for the White House in 2008."

Frist Subpoenaed
The Securities and Exchange Commission has subpoenaed Bill Frist in the past two weeks "to turn over personal records in an investigation into possible insider trading," Reuters reported October 13, 2005. The Washington Post, "citing anonymous sources, said Frist was expected to testify under oath about what he knew about HCA's finances in the weeks ahead of the stock sales."

Truth is Stranger than Fiction
"Just two days before Sen. Trent Lott (R-MS) stepped down as Majority Leader in 2002, the company Frist's father started quietly settled a massive Medicare fraud lawsuit for $630 million. The eleventh-hour deal -- brokered with Justice Department attorneys after a seven-year court battle -- was made as Frist (R-TN) secured the necessary votes to assume the Senate's top post ...

"The timing of the agreement could raise further questions about Frist's ties to the company. Given that the Justice Department had been investigating HCA since 1993 -- some 120 months -- the coincidence of a settlement date so close to Frist's leadership election is striking." --John Byrne, The Raw Story, September 29, 2005.

SEC Orders Full Probe

"While insiders at HCA Inc. were selling millions of dollars of their own stock this year, they were also painting a sunny picture of the company's outlook for investors," the Associated Press's Jonathan M. Katz reported September 29, 2005. "The SEC turned its initial inquiry into a formal investigation of the company," HCA announced.

Formal Order of Investigation

"The SEC authorized a formal order of investigation of Frist's sale in June of HCA Inc. shares, people with direct knowledge of the inquiry said [September 27, 2005]. The order allows the agency's enforcement unit to subpoena documents and compel witnesses to testify, said the people, who asked not to be identified because the order hasn't been made public.", September 28, 2005.

"A formal order requires the approval of at least one of the SEC's five commissioners. While it raises the legal stakes for Frist, a Tennessee Republican, it doesn't indicate that the SEC's investigators have uncovered evidence of illegal insider trading, said Michael Missal, a former enforcement lawyer at the agency."

However, Stuart Rothenberg, editor of the independent Rothenberg Political Report in Washington, said "This turns the flame up under the kettle and keeps the water boiling, ... It means he's going to continue to be peppered with questions about this stock sale, and no politician wants to be questioned about things like that," Bloomberg said.

Emerging Picture: Conspiracy


"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."

Deceiving Public

"FTCR also pointed today to overly rosy earnings projections made by HCA executives at a conference with investors just as Frist and HCA insiders were dumping HCA stock en masse. The evidence shows insiders were deceiving the public and suggests a conspiracy within the company to defraud investors which Frist could well have been a part of." [2]

For example, see:

Transcript], June 14, 2005, of HCA Sr. Vice President Vic Campbell's misleading statements to investors, which FTCR is forwarding to the SEC today. 

Profit, No Loss

Frist's "move to sell his remaining shares of HCA Inc. stock in June [2005] came at the tail end of at least a three-month period in which many of the company's top executives were cashing in long-term stock options for millions of dollars in profits," The Tennessean reported September 23, 2005.

"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," R. Jeffrey Smith and Jeffrey H. Birnbaum wrote. "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."

Frist "instructed the trustee managing the [HCA Inc.] assets to sell his shares and those of his wife and children." [3]

"Precisely a month" after he sold his stock in June 2005, "its price tumbled 9 percent when executives in the company ... disclosed that hospital admissions of insured patients were lower than expected, depressing profits in the second quarter," R. Jeffrey Smith and Jeffrey H. Birnbaum, wrote in the Washington Post, September 22, 2005.

"The timing thus raised questions about whether Frist had somehow traded on information he obtained in advance from the company," Smith and Birnbaum wrote.

Blind Trust

"The value of Frist's stock at the time of the sale was not given. This year [2005], he reported holding blind trusts of $7 million to $35 million," Katz wrote.

"Until the sale," Smith and Birnbaum wrote, "Frist's holdings in HCA formed a significant source of his wealth. His political career was launched in part by a loan secured by the stock; in 1994, he valued his holdings at $13 million, and the following year he placed them in a blind trust. In 2000, he transferred the HCA stock into a new blind trust, a transaction that could have given him insight into its value.

"Frist's signed financial disclosure statements indicate that the overall value of his blind trusts did not substantially change from 2003 to 2004. As one of the Senate's multimillionaires, Frist has other non-HCA-stock holdings outside of the 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.'"


"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," Smith and Birnbaum said.

"Prosecutors also have contacted the senator's office, Frist spokesman Bob Stevenson said Friday. He said neither the senator nor his office had received a subpoena," the Associated Press's Jonathan Katz and Larry Margasak reported September 24, 2005. "Frist's office confirmed the Securities and Exchange Commission was looking into the sale."

Frist Received Updates

Frist "was updated several times about his investments in blind trusts during 2002, the last time two weeks before he publicly denied any knowledge of what was in the accounts, documents show," Katz and Margasak wrote. "The updates included stock transactions involving HCA Inc., the hospital operating company founded by Frist's family."

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