Frist denies he had inside data on stock

Senate Majority Leader Bill Frist said yesterday he began moves to sell stock in his family’s health care company months before the transaction, and had no inside information when his blind trust sold the shares before they tumbled 9 percent on a single day in July.

Both the Securities and Exchange Commission (SEC) and the U.S. Attorney’s Office for the Southern District of New York are investigating Mr. Frist’s sale of stock in Hospital Corp. of America Inc. (HCA), the company founded by his family.

Mr. Frist, the top Republican in the Senate, said he did nothing wrong and will cooperate fully in the investigations.

“My only objective in selling the stock was to eliminate the appearance of a conflict of interest,” he said. “I had no information about HCA or its performance that was not publicly available when I directed the trustees to sell the stock.”

SEC Chairman Christopher Cox, who was a House member until a few months ago, said he will recuse himself from the investigation.

“Because of my service in the congressional leadership for the last 10 years, I have recused myself in this matter,” said the California Republican.

Citizens for Responsibility and Ethics in Washington, a liberal-leaning watchdog group, said it had filed a complaint against Mr. Frist with the ethics committee accusing him of “apparent insider trading” and an attempted cover-up.

Mr. Frist, speaking to reporters in the Capitol Crypt yesterday evening, said he more than satisfied Senate ethics rules when he asked for two opinions from the chamber’s ethics officials about whether he could continue to hold the shares as a senator, when he placed the shares and other investments in a blind trust, and when he sold the HCA shares.

The Tennessee Republican said he asked his staff in April to determine whether Senate rules and the law would allow him to direct his blind trust to sell the HCA shares specifically.

He asked Senate ethics committee officials for “preapproval” in May and received it in mid-June. He then directed the trustees to sell the shares.

Mr. Frist did not take questions from reporters yesterday.

His sale of stock was completed about two weeks before HCA issued a disappointing earnings forecast that drove down its share price almost 16 percent. Top executives and directors of HCA, including the chief executive and the treasurer, also were selling off shares worth a total $112 million.

On Friday, Nashville, Tenn.-based HCA said it had received a subpoena from federal prosecutors asking for documents that the company thinks are related to Mr. Frist’s sale of company stock. Mr. Frist’s office said prosecutors and SEC investigators had contacted the senator’s office about the sale.

Documents show that Mr. Frist was updated several times about his investments in HCA and other transactions even though they were held in blind trusts.

Mr. Frist insisted in public statements afterward that he didn’t know what was in the trusts. He specifically denied knowledge of his HCA holdings.

Story Continues →