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Federal prosecutors and SEC looking into Frist stock sale

By wire services
Published September 24, 2005

WASHINGTON - The U.S. Securities and Exchange Commission and the Justice Department are investigating Senate Majority Leader Bill Frist's order to sell all his shares of HCA Inc. a month before the price dropped on news of weaker-than-expected earnings, Frist's office said. The hospital operating company was founded by his family.

Prosecutors from the Southern District of New York contacted Frist's office "to inquire about the sale," spokesman Bob Stevenson said Friday. He did not say when the office was contacted, but said neither the senator nor his office had received a subpoena.

"As with the SEC, the majority leader will provide the U.S. attorney's office with any information that it needs with respect to this matter," Stevenson said.

The Nashville company said Friday that federal prosecutors had issued a subpoena for documents related to the sale of its stock by the senator.

The SEC also contacted HCA on Friday to informally request copies of the subpoenaed documents, HCA spokesman Jeff Prescott said.

Frist, 53, requested the trade using only public information, and only to eliminate the appearance of a conflict of interest, Stevenson said.

Frist spokeswoman Amy Call said: "His only objective in selling the stock was to eliminate the appearance of a conflict of interest."

HCA, the nation's largest for-profit hospital company, was founded by Frist's father, Thomas. His brother, Thomas Frist Jr., was formerly its CEO and chairman and remains on the board of directors. HCA owns nine hospitals in the Tampa Bay area.

Frist asked a trustee to sell all his HCA stock in June, near a 52-week stock price peak of $58.40. The sale came about two weeks before the company issued a disappointing earnings forecast that drove its stock price down almost 16 percent. The value of Frist's stock at the time of the sale was not disclosed. Earlier this year, he reported holding blind trusts valued at $7-million to $35-million.

The sale of stock was first reported Monday by Congressional Quarterly, owned by Times Publishing Co., which also publishes the St. Petersburg Times.

On Tuesday, the Associated Press reported that the stock was sold at or near its peak between June 13, when Frist asked the shares to be sold, and July 1, when he was told the sale was complete. On July 8 he was informed that his wife and children's shares had also been sold per his request, Call said.

Frist, a Tennessee Republican, has been criticized for holding HCA stock while directing legislation on Medicare reform and patient issues. He has responded by pointing out that his assets were in a blind trust and not under his active control.

But Senate ethics rules do allow him to order the sale of any asset in the trust to avoid the appearance of a conflict of interest. The senator also can communicate to the trustee matters of concern, including "an interest in maximizing income or long-term capital gain."

Information from the Associated Press and Bloomberg News was used in this report.

[Last modified September 24, 2005, 01:01:06]