Frist Not Charged as Investigators Close Probe of His Hospital Stock Sales
Friday, April 27, 2007
Ending an investigation that clouded the tenure of former Senate majority leader Bill Frist, federal prosecutors have decided not to file insider-trading charges against the Tennessee Republican for his sales of stock in a family-owned chain of hospitals.
The U.S. Attorney in the Southern District of New York and Securities and Exchange Commission staff sent Frist letters last week signaling that they had closed their joint, 18-month investigation. The letters essentially cleared him of wrongdoing.
Frist said in a statement that he "acted properly" and that his only reason for selling stock in his trust accounts was to "eliminate the appearance of a conflict of interest."
"I've always conducted myself according to the highest ethical standards in both my personal and public life, and my family and I are pleased that this matter has been resolved," Frist said.
The stock probe had dogged Frist, a prominent Nashville heart surgeon who rose through the political establishment with support from President Bush, since news of his directive to sell his remaining HCA shares became public in the fall of 2005. Frist decided against a run for the presidency in 2008 and left Congress last year to "take a sabbatical from public life," he said at the time.
Frist's father and brother founded HCA, which grew into the country's biggest hospital chain and last year became the subject of one of the largest-ever private investment buyouts, valued at $33 billion. The former senator fielded questions throughout his political career about the source of his wealth and whether his close ties to HCA influenced his position on health-care legislation and prescription drug prices.
At issue in the long-running investigation was the sale of all of Frist's remaining HCA shares by July 8, 2005, a few days before a downbeat forecast that sent HCA's stock price tumbling by 9 percent in a single day. Executives at the Equitable Trust and Northern Trust, who maintained Frist's stock in private accounts, sold the stock after receiving his orders.
The timing triggered multiple federal investigations and months of complex legal reviews. Ultimately, Frist -- a devotee of the BlackBerry device -- produced a paper trail that suggested he began the process of selling the stock in late April 2005, months before he knew of HCA's troubles. According to his records, he consulted with a staff attorney at that time, when he said he was unaware of HCA's problems collecting payments from uninsured patients.
Frist said that subsequent reviews by an outside attorney and a Senate ethics panel delayed the sale until the summer of 2005, the time of company's financial downturn.
As a final step in the investigation, Frist had a formal interview with Justice Department and SEC lawyers to address the stock sales in late January 2007, according to people familiar with his account. Spokesmen for the SEC and Michael J. Garcia, the U.S. attorney for the Southern District of New York, declined to comment yesterday.
To proceed with an insider-trading case, authorities require proof that a person bought or sold stock on the basis of secret information that other investors would have wanted to know. The legal standards are high, particularly in the absence of incriminating documents and testimony from people involved in the decision to sell the stock.
Frist's older brother, Thomas, a board member and former chief executive at HCA, also had been the subject of government scrutiny. It appears that he will not be charged either, sources familiar with the probe said.
In statements last year, Frist hinted that he sold his HCA holdings to avoid conflict-of-interest questions if he ran for president. Instead, the maneuver drew scrutiny that subjected him to a damaging investigation.
Although the probes are over, it is unclear whether they will take a long-term toll. Frist suffered for his role in the political furor over Terri Schiavo, a comatose Florida woman who died in 2005 after her feeding tube was removed, when he gave a medical opinion, based on videotapes of her, that she had not suffered irreversible brain damage. He also lost ground when Democrats seized control of Congress in January in what was seen as a rebuke to Republican leadership.
The former lawmaker has been back in the news of late. Frist recently issued statements of support for former senator Fred D. Thompson (R-Tenn.), his friend who has been mulling a bid for the White House in 2008. Frist also garnered news coverage in February when he spent a month in the Darfur region of Sudan on a medical mission, which was similar to trips the surgeon-turned-senator took to Africa throughout his tenure in Washington.
Staff writer Jeffrey H. Birnbaum contributed to this report.