Frist’s Hca Stock Sale Raises Questions ; Senator’s Office: It’s to Eliminate Appearance of Conflict of Interest

Federal prosecutors contacted Senate Majority Leader Bill Frist’s office about his sale of stock in HCA Inc., the hospital operating company founded by his family.

The Securities and Exchange Commission began an investigation, too, and prosecutors asked HCA to turn over documents about the transaction.

Prosecutors from the Southern District of New York contacted Frist’s office “to inquire about the sale,” spokesman Bob Stevenson said yesterday. He did not say when the office was contacted, but said neither the senator nor his office had received a subpoena. Frist’s office previously confirmed the SEC was looking into the sale.

“As with the SEC, the majority leader will provide the U.S. attorney’s office with any information that it needs with respect to this matter,” Stevenson said.

The Nashville-based company said yesterday that federal prosecutors for the Southern District of New York had issued a subpoena for documents HCA believes are related to the sale of its stock by the senator.

Frist traded using only public information, and only to eliminate the appearance of a conflict of interest, Stevenson said.

HCA, the nation’s largest for-profit hospital company, was founded by Frist’s father. 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. The day before earnings news came out June 30, shares closed at $57.70. Within the month, they were trading in the high-$40s. They still have not recovered, though yesterday they rose $1.70, or 3.7 percent, to close at $47.60 on the New York Stock Exchange.

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.

The sale of stock was first reported Monday by Congressional Quarterly. On Tuesday, The Associated Press reported that the stock was sold at or near its peak between June 13, when Frist asked the shares to be sold, and July 1, when he was told the sale was complete.

For years, Frist was criticized for holding HCA stock while directing legislation on Medicare reform and patient issues. He and his office have consistently deflected criticism by noting that his assets were in a blind trust and not under his active control.

But Senate ethics rules allowed him more control than most observers realized. Under the guidelines, senators can directly order the sale of any asset in the trust to avoid the appearance of a conflict of interest.

Frist, a Tennessee Republican, is widely considered a potential presidential candidate in 2008.

HCA’s local operations are: CJW Medical Center, Henrico Doctors’ Hospital, Retreat Hospital, Tuckahoe Surgery Center, John Randolph Medical Center, Hanover Outpatient Surgery Center; a patient account services center; a supply chain center; and its Central Atlantic headquarters.