Frist Sale of HCA Stock: Conflict of Interest or Insider Trading?

The Tennessean reports the facts:

Senate Majority Leader Bill Frist sold his stock in HCA Inc., the Nashville-based hospital chain his family founded, shortly before the stock took almost a 9% dive in mid-July. The sale helps minimize allegations that he has a conflict of interest on health-care issues as he considers a run for president. Frist’s brother, Thomas, is a former chief executive officer and current director of the company.

Of course, Senator Frist has noted on health-care issues before July 2005. Some of the left are asking if Frist had insider information. The news article quotes a Frist spokesperson:

Frist spokeswoman Amy Call said the senator had no knowledge of when the stock actually sold. He requested the sale June 13, but the execution of the sale was up to the blind trust that manages his holdings. “Frist had no control over when the stocks were sold. The trustee could have chosen to hold them or sell at any time. Also, we don’t know when the stock was sold, only when we were notified.”

Blind trusts exist to avoid political conflicts of interest, which is a different issue from insider trading. Joshua Marshall – who understands this distinction – promises “more soon”.

Update: Richard Drezen reports:

According to Senate ethics rules, Baran 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.” According to Thomson Financial, a reporting service, seven senior HCA executives sold 574,882 shares worth $19,942,610 between May 17 and June 10. A company spokesman, Jeff Prescott, said the executives are entitled “like other stockholders [to] make personal decisions . . . about when to sell.” He said the executives complied with “blackout restrictions” imposed by the SEC to prevent dealing within a certain period prior to restatements of earnings. An SEC spokesman said it is the commission’s policy not to comment on investigations, and would neither confirm nor deny that it is probing insider trading at HCA.