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Frist Issue Adds to GOP's Ethics Troubles
Sale of Stock Before Its Price Fell Gives Critics Opening to Target Senate Leadership

By Charles Babington and Jeffrey H. Birnbaum
Washington Post Staff Writers
Sunday, September 25, 2005

Two federal inquiries into Senate Majority Leader Bill Frist's stock sales have handed Democrats a chance to broaden their long-stated claim that Republicans push ethical boundaries and focus on laws that help the rich, political analysts said yesterday.

Until now, such accusations have centered on the House and White House. House Majority Leader Tom DeLay (Tex.) has been chastised three times by the chamber's ethics committee, and a Texas grand jury recently indicted a political action committee he had organized. The Bush administration's top federal procurement official, David H. Safavian, was arrested last week on charges of obstructing a criminal investigation into lobbyist Jack Abramoff, who has close ties to DeLay and other prominent GOP lawmakers.

Now, with the revelation that federal prosecutors and the Securities and Exchange Commission are looking into Frist's sale of hospital stock shortly before its value fell, Democrats are expanding their ethics accusations into the Senate's GOP leadership ranks.

Activists in both parties agree it is much too early to say whether Frist (R-Tenn.) engaged in insider trading, a charge that could cripple his 2008 presidential hopes. But the mere launch of inquiries by the SEC and the Justice Department allows Democrats to claim that both House and Senate majority leaders operate under ethical clouds.

"It is a drip, drip, drip," said former House majority leader Tony Coelho (D-Calif.), who knows the corrosive power of ethics charges. Coelho, who resigned in 1989 following accusations about a loan deal, said, "With DeLay and now Frist, it's a buildup of arrogance of power. . . . With [President] Bush's numbers down, this could be a very negative thing for the Republicans."

Democratic consultant Jenny Backus said many Americans already think "things are rotten" in the capital's Republican-dominated political circles. "To have the Senate majority leader under an ethics cloud is going to drive this point home for the voters," she said.

Republicans expressed confidence in Frist and his ability to weather the controversy. "Democrats will try to make a lot out of this and pounce on whatever they can," said Nicholas E. Calio, a former aide to both Presidents Bush. "To me, it's inconceivable that he [Frist] would sell stock based on inside information. He doesn't need the money."

In carefully worded statements, Frist's office has said the senator instructed managers of his "qualified blind trust" in June to sell his family's shares in HCA Inc., the nation's largest hospital chain, founded by Frist's father and brother. A month later, the stock's price dropped 9 percent after the company predicted weakening earnings. It is illegal to trade stocks based on inside information. Frist, a wealthy surgeon, "had no information about the company or its performance that was not available to the public when he directed the trustees to sell the HCA stock," his office said.

The senator's spokesmen say he sold the HCA stock to avoid possible conflicts of interest as Congress deals with health care legislation. For years, however, Frist had rejected arguments that his stock holdings could cause a possible conflict.

Frist, asked in a January 2003 TV interview whether he should sell his HCA stock, replied that his assets were in a blind trust and, "as far as I know, I own no HCA stock." Referring to his trust and those of his family, he added: "It is illegal right now for me to know what the composition of those trusts are. So I have no idea."

Financial disclosure documents filed with the Secretary of the Senate by the trustees, and reviewed Friday by the Associated Press, show that two weeks before the interview, a trustee notified Frist that HCA stock had been contributed to his trust. Spokesman Bob Stevenson said yesterday that Frist was truthful in the TV interview because the trustee can sell assets at any time without notifying the senator, and, therefore, on any given day the trust's contents are unknown to him. Stevenson said Frist declined to be interviewed for this article.

The Senate Ethics Manual allows a lawmaker to instruct the trustee of a qualified blind trust "to sell all of an asset" if the senator determines it "creates a conflict of interest or the appearance thereof due to the subsequent assumptions of duties" by the senator.

Some nonpartisan analysts said the Frist case could fizzle, in legal and political terms, if anything short of insider trading is proved. For one thing, they say, the story has broken at a time when hurricanes are dominating the national news. Moreover, they say, questions of blind trusts and stock transactions may prove too arcane to captivate the average voter.

"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. "The Democrats are going to have to make the case about party corruption. What's more, this is a stock deal. Partisan people will say this proves a lot. Other people will say, 'Stocks and trusts, I don't know this stuff.' "

Backus disagrees. Average Americans, she said, understand the notion of powerful and privileged people getting sweetheart deals. Many are already suspicious of a Republican Party that pushes tax cuts, bankruptcy policies and other measures that disproportionately benefit the wealthy, she said.

In fact, Backus said, DeLay's controversial dealings with Texas campaign finance laws and legislative redistricting are more difficult to explain than the questions surrounding Frist. "You have to talk a lot of Washington talk" to outline the case against DeLay, she said. People will more readily grasp the implications of a "less-than-blind trust" and GOP leaders who seem more intent on "the interests of their friends than the interests of the American people."

Backus also noted that ethics inquiries sometimes claim unintended victims. For instance, she said, Attorney General Alberto R. Gonzales's possible shot at a Supreme Court seat could be complicated by the fact that his Justice Department is scrutinizing the leader of the Senate, which will confirm or reject the next nominee.

Another Democratic consultant, Jim Jordan, said Frist's troubles could prompt other GOP senators to view him warily, just as some House Republicans worry that DeLay's ethical lapses might tarnish them. "The interesting question is whether rank-and-file Republican members decide to try to save themselves by throwing their corrupt leadership overboard," Jordan said.

Charlie Cook of the independent Cook Political Report said the Frist news comes at a time of sagging approval ratings and other problems for the Republican Party. "You wonder if it's death by a thousand cuts," he said. "All these little bitty scandals. Individually they don't amount to much. Collectively they sort of add up."

"The biggest toll," Cook said, "is for Frist's presidential aspirations. They were already on the ropes. He's not gotten good reviews as the Republican leader in the Senate. . . . The guy is pretty damaged merchandise in terms of presidential aspirations."

© 2005 The Washington Post Company