September 22, 2005
Looks like the mainstream media is starting to get interested in Frist’s remarkably clear-sighted blind trust:
Senate Majority Leader Bill Frist (R-Tenn.) has maintained for years that his stock holdings in the nation’s largest for-profit hospital chain posed no conflict of interest for a policymaker deeply involved in health care matters. He even received two rulings in the 1990s from the Senate ethics committee that blessed the holding of the stock in blind trusts.
So when Frist decided in June to dump all the stock, and later cited as the reason his desire to avoid the appearance of a conflict of interest, eyebrows went up among ethics experts and congressional watchdogs. Why did he do it at that time?
Precisely a month later, after the stock was sold, its price tumbled 9 percent when executives in the company – HCA Inc., which was founded by Frist’s father and on whose board Frist’s brother serves – disclosed that hospital admissions of insured patients were lower than expected, depressing profits in the second quarter.
… Several ethics experts and watchdogs said they found it odd that Frist could intervene to order such a sale when the HCA stock was ostensibly out of his reach in blind trusts. Fred Wertheimer, president of Democracy 21, said, “The notion that you have a blind trust but you can tell your trustee when to sell stock in it just doesn’t make any sense. It means you have a seeing eye trust and not a blind trust. It’s ridiculous.”
Larry Noble, executive director of the nonpartisan Center for Responsive Politics, agreed that the arrangement “seems to defeat the purpose of a blind trust. Somebody else is supposed to have control over it to avoid potential conflicts of interest. If you can just reach in and sell stock, it seems it defeats the whole purpose.”
… According to Senate ethics rules, [Jan W. Baran, a Republican ethics expert] said, Frist “can tell somebody to dispose of all of an asset that was initially placed into the blind trust. As a matter of Senate ethics rules, he is in compliance. The question that remains is, why did he sell the stock at that time? What conflicts arose in June that did not exist beforehand?”
“For the Securities and Exchange Commission,” Baran added, “the answer is probably very important.”
More background here.
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