It's one thing to lie in politics. It's
another to be caught in a lie. Bill Frist has been caught in a lie. His
political future is over. The immediate question is, can he survive as majority
Republican claims he wasn't privy to any inside information leading up to the
sale of his stock in Hospital Corporation of America (HCA), the country's
largest for-profit hospital chain founded by Frist's father, Thomas, and
brother, Thomas, Jr., weeks before the company reported lower than expected
earnings July 13 that sent the stock south.
Now the Securities
and Exchange Commission is investigating the matter, a spokesman for the
senator said last week, to determine if Frist broke any laws.
secretary told the Washington Post last week that Frist decided to sell his
stock to eliminate any appearance of a conflict-of-interest due to his work in
the Senate in shaping the nation's healthcare policies. So, the senator's
spokesman said, Frist drafted a letter to Northern Trust and Equitable Trust in
Nashville on June 13 advising them to sell all of his stock in HCA, as well as
his wife and children's investments in the company.
improprieties have been in the making for quite some time. According to an
Associated Press report Saturday, Frist “received regular updates of transfers
of assets to his blind trusts and sales of assets. He also was able to initiate
a stock sale of a hospital chain founded by his family with perfect timing.
Shortly after the sale this summer, the stock price dived.”
In fact, Frist had
attempted to have it both ways since he created his so-called blind trust in
the 1990s: being intimately involved with his investments that directly
conflict with his political work as a senator and then claiming that he's
totally unaware of his personal financial investments -- and stock sales -- because
it's in a blind trust.
media, quick to accept Frist's statements that he's been in the dark about his
HCA holdings, were complicit in allowing the obvious conflict of having a
senator who makes national decisions on healthcare that directly benefit the
senator's fortunes and that of his family, fall off the radar screen.
Indeed, in Jan. 26,
2003, in an article, titled “Frist's Health Care Votes Reflect Roots,” Frist
told the Post that he “no longer knows how much the (HCA) stock is worth.”
But letters sent to
Frist by Kirk Scobey, Jr., his trustee, and documents filed with the Senate
contradict Frist's statement.
Frist knew that
Scobey transferred three additional blocks of HCA stock -- worth $750,000 -- to
his trust in 2001 and 2002, which came from Frist's parents' estate. Public
filings show that Scobey sold as much as $8 million of Frist's HCA stock
between 1994 and 2000, and a bulk of which was sold between 2001 and 2002.
Frist knew of these sales, or at least had access to information that these
sales took place,” reported the Nashville Scene, in an
investigative story in July 2003 into Frist's so-called blind trust.”How? The
income from these sales of HCA stock was reported on Frist's annual financial
disclosure statements that he filed with the Secretary of the Senate.”
annual reporting of capital gains, it's kind of a crock for Frist to say he
doesn't know what he owns because it's in a blind trust," Charlie Gofen, a
portfolio manager at Gofen and Glossberg, a Chicago-based investment-counseling
firm, told the paper at the time.
provided the Scene with supporting documents into the senator's blind trust.
The paper hired an eight-member, bipartisan, unpaid panel of experts in trusts
from around the country to analyze it and what the panel discovered was that
Frist's "blind" trust isn't really blind at all.”
of HCA stock isn't considered a conflict of interest according to Senate
rules,” the paper reported. “But then, according to those rules, almost nothing
qualifies as a conflict of interest.”
Frist created his
blind trust in accordance with the rules of the Ethics in Government Act. That
law states that a "qualified blind trust" must meet certain
- The trustee, who is the individual
charged with managing the assets of the trust, must be independent.
- There can be no restrictions on
disposing of the trust's assets.
- Communication between the trustee and
the politician must be limited.
- And the trust must be approved by the
Senate's Ethics Committee.
In 1995, with his
holdings in HCA and the senator's increasing role in shaping the nation's
healthcare policies coming under intense scrutiny, Frist first put his assets
into a blind trust. Five years later, in December 2000, Frist put his assets
into a newer blind trust, prompting the Nashville Scene to ask “Why the new
“At the time he
created his first trust, Frist's portfolio included so-called 'non-public
securities,'" the paper reported. “More than likely, these were private
partnerships and the like. Federal laws say such securities cannot be put into
a so-called 'qualified blind trust' -- the type of high-end trust that Frist
now has. Once these securities were sold the 'more stringent' form of trust was
created as soon as practical."
by the paper said what was likely the key selling point for Frist when he
created the new trust in December 2000 was that he was given the opportunity to
look at his specific financial holdings, including HCA.
“Whenever one blind
trust is discarded in favor of a newer one, panelists say the blind trust
ceases to be blind during the changeover period,” the paper reported.
But what was
virtually unknown, is that Frist was able to figure out the value of his
financial holdings in the blind trust in a much simpler way that would give him
a window into the value of his HCA stock, the main source of his wealth. Each
year, the senator files his annual financial disclosure statement with the
Office of the Secretary of the Senate and is required to disclose the amount of
income generated from his blind trust. Considering that 89 percent of his
assets are tied up in HCA stock, the senator would have a good indication of
how well his stock had performed.
When Frist named
Scobey as the administrator of his blind trust, he was choosing a
well-connected family friend.
James C. Gooch, a
trust and estates attorney who has worked at the prestigious Nashville law firm
Bass Berry & Sims, the same firm where Frist's brother-in-law H. Lee
Barfield is a partner, drafted Frist's trust, which, among other things, states
that the trust is “concentrated in the stock of HCA”; and Scobey, president of
Equitable Trust, an institution Frist has done business with for years, was
chosen as the trustee.
“Scobey's boss at
Equitable is William H. Cammack, the firm's chairman. In fact, Gooch, Cammack
and Scobey are all solid members of genteel West Nashville culture, the same
culture that produced and nurtured Bill Frist,” the Nashville Scene reported.
to documents filed with the Secretary of the Senate, doesn't charge Frist a
substantial fee to manage the trust. Furthermore, Equitable waived its $5,000
annual fee it usually charges individuals to manage similar assets, as well as
cut its management fee for trusts as big as Frist's from .3 of 1 percent to .22
of 1 percent.
But wait, there's
more. Back in September of 2002, a business partially owned and funded by Frist
was embroiled in a lawsuit that claimed that the company's founder, along with
Frist's business agent, sold a laundromat to a Bellevue, Tenn., couple at an
Jon and Lynn Hargis
of Bellevue, Tenn., didn't accuse the senator of wrongdoing in their lawsuit
against Campus Concepts Inc., a company that Frist holds a 49 percent stake in.
But the couple said Frist's close friend and business partner, David E. Harvey,
the president of Campus Concepts, had told them that the laundromat had grossed
$10,000 more a month than it was actually bringing in. The Hargises said Harvey
provided them with tax returns to back up his claims and the couple then agreed
to purchase the laundromat for $460,000.
discovered a few months later that the income figures Harvey provided were
grossly inflated and that he lied in papers he filed with the Tennessee
Department of Revenue. Frist has been an investor in Campus Concepts since
At the time the lawsuit was filed, a spokeswoman
for Frist told The Tennessean, a Nashville newspaper, that the senator wasn't
involved in the "day-to-day operations" of Campus Concepts and that
his share and investment in the business was placed into a blind trust.