Thursday, October 27, 2005

Bill Frist's Pants Are On Fire, according to his own Trust. Managers

Letters from trust appear to contradict senator's statements

WASHINGTON — Even after Senate Majority Leader Bill Frist set up blind trusts to manage his investments, the Tennessee Republican was informed that he and his children received hundreds of thousands of dollars of stock in HCA Inc., the health-care company his family founded.

Records filed with the Senate show that trusts held for Frist and his children received as much as $2.3 million in HCA stock between January 2001, when Frist established blind trusts in an attempt to minimize conflicts of interest, and last June, when he ordered his trustees to sell all the stock he had left in the company.

Most of the HCA stock was transferred into the blind trusts once family partnerships set up to manage substantial wealth that Frist's parents left to relatives were dissolved, a Frist adviser said. Frist's parents died in 1998, but their estate wasn't settled through probate until 2001. The stock owned in the partnerships was distributed over the next couple of years.

Frist's HCA sale this summer is under investigation by the Securities and Exchange Commission because the company's share price fell 9% on a weak earnings report a month after he ordered his stock liquidated. Frist has said he had no inside information about HCA's finances and only sold the stock to avoid accusations of a conflict of interest in the future.

Senate records show Frist had been notified for years that he continued to own HCA stock in his blind trusts, contradicting public statements he made in the past about the distance the trusts put between him and his assets.

"Right now, I don't know if I own HCA because it's a qualified blind trust," Frist told the National Journal in September 2002.

A few months earlier, on May 16, his trustees informed him that one of his trusts had received HCA stock worth as much as $500,000 and another one had gotten HCA stock worth as much as $1 million, Senate records show.

In January 2003, after Frist took over as the top Senate Republican, he told cable news network CNBC the same thing in answering a question about his HCA holdings.

"As far as I know, I own no HCA stock," Frist said then.

Yet in December 2002, after the family partnership was liquidated, Frist had been notified that HCA stock worth $15,000-$50,000 was put into another trust.

"Mr. Frist keeps lying," said Melanie Sloan, executive director of Citizens for Responsibility and Ethics in Washington, a liberal watchdog group that has filed a Senate Ethics Committee complaint about Frist's HCA holdings and will submit a revised one today. "He's killing his own political career. Nobody else has to do a thing to him, because he's just imploding."

Frist aides said all the communication Frist received about the trusts had complied with Senate ethics rules.

"He was asked the question (about HCA stock) frequently," said Frist spokesman Bob Stevenson. "The main point was, 'I put it into a blind trust and therefore I've ceded responsibility to the trustee.' ... He was trying to explain to people what exactly happened when he put his assets into blind trusts. Once you put them into the trust, he didn't have any information as to the day-to-day disposition of those assets."

Ethics experts said the communication between Frist and his trustees was unlikely to affect the SEC inquiry, which appears to be focusing on whether Frist acted properly when he sold the HCA stock, not on whether he should have owned it in the first place. But Frist's public statements about the issue may pose a different kind of problem for him.

"There is a second political issue about whether he made a misstatement about his knowledge concerning these blind trusts," said Jan Baran, a Republican ethics lawyer in Washington. "That's something he has to explain — the lawyers can't do that for him. He has to explain why he made what seems to be an exaggeration."

For years, government watchdogs and Frist's political opponents have said his ties to HCA pose a conflict for him. His father and brother co-founded the company in 1968, and Frist's substantial personal fortune had HCA as its base.

In 2000, after winning his second term in office, Frist formed a series of blind trusts approved by the Senate Ethics Committee and transferred all his HCA stock into them. But Senate rules keep the trusts from being truly blind. Frist was notified in writing any time the trustees sold all of a stock position he had when he formed the trusts, and notified him when deposits were made into the accounts for him or his wife Karyn.

The Ethics Committee was also notified at the same time. The committee has ruled repeatedly that Frist's HCA holdings were not a conflict of interest, because he never worked for the company and his family didn't own enough stock to hold a controlling interest, as long as he didn't vote or act in ways that specifically benefited HCA.

"The Ethics Committee was aware of a lot of these communications," said Mike Surrusco, director of ethics campaigns for Common Cause, a nonpartisan watchdog group. "The question is how does the ethics committee reconcile this with what is generally understood to be the requirements of a blind trust?"

Common Cause has filed a complaint about Frist's sale, as well, but has not heard back from the ethics committee.

Now the notifications to Frist may be compounding the political problem the HCA sale was supposed to help dodge. Frist has hinted that he ordered the HCA stock sold in order to remove a possible weakness if he runs for president in 2008.

"I think the blind trusts have not been created because of an ethical conflict, it's been created because of a political issue," said Baran, who doesn't think Frist has broken any laws or regulations in handling the stock. "He was trying to eliminate the political appearance of a conflict. It didn't work, that's the bottom line." •

Can this get any better? Can we stand it? Sometimes, Karma is absolutely uplifting.


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