Feds investigating Frist's HCA stock sale
Friday, September 23, 2005 at 9:58AM Should Senator Frist be involved in legislation involving securities fraud? The following incident suggests maybe not.
The Associated Press
Updated: 12:44 p.m. ET Sept. 23, 2005
NASHVILLE, Tenn. - Hospital operator HCA Inc. said Friday that federal prosecutors have issued a subpoena for documents the company believes may be related to the sale of its stock by Senate Majority Leader Bill Frist.
A release from the Nashville-based company said the subpoena came from the U.S. attorney for the Southern District of New York.
Frist’s office confirmed the SEC is looking into the sale.
“Not surprisingly, the Securities and Exchange Commission contacted Senator Frist’s office after the story appeared in the press about the sale of his Hospital Corporation of America stock,” Frist spokesman Bob Stevenson said in an e-mail. “The majority leader will provide the SEC any information that it needs with respect to this matter.”
Frist traded using only public information, and only to eliminate the appearance of a conflict of interest, Stevenson said.
The SEC had not contacted HCA as of Friday morning, said HCA spokesman Jeff Prescott. He declined further comment.
Company founded by Frist's father
HCA, the nation’s largest for-profit hospital company, was founded by Frist’s father and his brother was formerly its CEO and chairman and remains on the board of directors.
Frist asked a trustee to sell all his HCA stock in June, near a 52-week stock price peak of $58.40 and at the same time HCA insiders were selling off shares. Reports to the Securities and Exchange Commission showed insiders sold about 2.3 million shares, worth about $112 million, from January through June, said Mark LoPresti of Thomson Financial.
The sale came about two weeks before the company issued a disappointing earnings forecast that drove its stock price down almost 16 percent by mid-July. They still have not recovered, closing Thursday at $45.90.
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.
Insider knowledge?
For years, Frist was criticized for holding HCA stock while directing legislation on Medicare reform and patient issues. His office has consistently deflected criticism by noting that his assets were in a blind trust and not under his active control.
Frist, a Tennessee Republican, is widely considered a potential presidential candidate in 2008.
HCA said the subpoena seeks the “production of documents,” and said it plans to fully cooperate with the district attorney’s investigation.
The Wall Street Journal reported Friday that the SEC is looking into whether Frist had any inside knowledge that prompted his sales.
On Thursday, SEC spokesman John Nester would neither confirm nor deny that Frist or any officer or director of HCA is the subject of an investigation, citing the agency’s policy.
Shares of HCA fell 20 cents to $45.70 in premarket trading on the New York Stock Exchange.
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