The Corner

Good News For Sen. Frist

The weekend edition of the Wall Street Journal (subscription required) indicates that Senate Majority Leader Bill Frist appears to have a very good defense to suspicions about whether he traded on inside information in selling his HCA stock. Specifically, there is a paper trail showing he set his stock sales in motion long before there was a public warning about earnings expectations. Further, Frist had an incentive to shed his stock that had nothing to do with its value.

It turns out that Frist’s financial disclosure form was due to be filed on May 16. Frist is obviously considering a run for president, and has in the past been criticized for holding assets in health care companies while having a major role in health care policy. It would make sense that he would want to eliminate the source of this criticism. On April 29 – over two months before the July 13 earnings warning that caused the stock to decline 9 percent in value – he told his accountant he wanted “”to dispose of all hospital stocks in all the accounts that I have control of.” He then asked the Senate Ethics Committee for permission to do so on May 20. He got approval around June 9 and, four days later on June 13, instructed the trustees overseeing his assets to sell the stock. That was done in transactions on July 1 and July 8.

Relying on the fact that some insiders unloaded their stock in the June run-up to the July 13 earnings warning, investigators, according to the Journal, are curious about whether Sen. Frist may have been tipped off by his brother, Thomas Frist Jr., a director and the company’s former chief executive. But if Thomas Frist was worried about HCA, he didn’t show it since he held on to his own shares.

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