WASHINGTON - Blind trusts are designed to keep an arm's-length distance between federal officials and their investments, to avoid conflicts of interest. But documents show that Senate Majority Leader Bill Frist knew quite a bit about his accounts from nearly two dozen letters from the trust administrators.
Frist, R-Tenn., 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. Shortly after the sale this summer, the stock price dived.
The senator received approval from the Senate Ethics Committee before he initiated the sale, Frist spokesman Bob Stevenson said. All the information Frist received complied with federal law and Senate ethics rules, Stevenson said.
A possible presidential contender in 2008, Frist now faces dual investigations by the U.S. attorney for the Southern District of New York and the Securities and Exchange Commission into his stock sales.
Sheldon Cohen, who was the trustee for Democrat Walter Mondale's blind trust when he was vice president, and drafted Democrat Lyndon Johnson's blind trust for Johnson's presidency, said that in the executive branch,"You don't tell them how it's composed." He said Frist, like any federal official, "absolves himself of conflict by not knowing what he owns."
Cohen said that when Mondale left office, he told Cohen to sell his assets. "He had no idea what I was holding," the Washington attorney and former Internal Revenue Service commissioner said.
The stock Frist owned was in HCA Inc., a chain of hospitals founded in the 1960s by his father and brother. Shortly after that sale, the stock price dipped because of a warning that earnings would not meet Wall Street expectations.
How much Frist knew about his investments is unclear.
Documents on file with the Senate show the trustees for Frist and his immediate family wrote the senator nearly two dozen times between 2001 and July 2005.
The documents list assets going into the account and assets sold. The trust is considered blind because eventually, through the sale of transferred assets and the purchase of new assets, the official will be shielded from knowing the assets he owns.
Frist's 2005 financial disclosure form lists blind trusts valued between $7-million and $35-million.
Another potential problem for Frist are his statements that he had no knowledge of his blind trust investments.
Asked in a television interview in January 2003 whether he should sell his HCA stock, Frist said: "Well, I think really for our viewers it should be understood that I put this into a blind trust. So as far as I know, I own no HCA stock"
Frist, referring to his trust and those of his family, also said: "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea."
Stevenson, Frist's spokesman, said there limited instances "where federal law and Senate ethics regulations call for the disclosure of certain transactions or events to the Ethics Committee and to Sen. Frist as the trust's owner. Except in these very limited instances, Sen. Frist does not receive information related to the disposition of his assets under the control of the trustee."
Aides to the senator said he acted to avoid a conflict of interest, and that he had no information about the company that wasn't available to the public.
Nonpartisan analysts said the issue could have little legal or political impact if anything short of insider trading is proved.
"I'm not yet convinced that the cloud over Frist is all that dark and all that big," said Stuart Rothenberg of the nonpartisan Rothenberg Political Report. "Other people will say, "Stocks and trusts, I don't know this stuff.' "
Information from the Associated Press and Washington Post was used in this report.