WASHINGTON – The Securities and Exchange Commission and the Department of Justice are investigating Senate Majority Leader Bill Frist’s sale of all his stock in HCA – a hospital chain his family helped found – shortly before a disappointing earnings report triggered a drop in the stock’s value, Frist’s office said Friday.
The SEC and Justice Department declined to comment on the focus of the investigation. But the Nashville, Tenn.-based HCA said in a statement issued Friday that federal prosecutors issued a subpoena late Thursday night seeking “the production of documents” that the company believes “relates to the sale of HCA stock” by Frist.
Frist’s spokesman, Bob Stevenson, denied any wrongdoing by the senator from Tennessee.
“Sen. Frist had no information about the company or its performance that was not available to the public when he directed … trustees to sell the HCA stock,” Stevenson said in a statement. “His only objective in selling the stock was to eliminate the appearance of a conflict of interest.”
Still, the investigations pose a political embarrassment to Frist, the Senate’s most powerful Republican, who widely is viewed as a potential presidential candidate in 2008
Frist created a blind trust containing his HCA stock in 1999, although Senate rules do not require senators to put their stock holdings in such trusts, Stevenson said. A blind trust gives control of the assets to a trustee who provides no details about transactions, only about total value and income earned.
In financial disclosures he filed earlier this year, Frist put the worth of his several blind trusts at between $7 million and $35 million.
Congressional Quarterly disclosed Monday that Frist ordered all his HCA stocks sold from the one trust in June. Stevenson said the article, and other media reports, prompted the SEC and Justice Department investigations.
On June 13, Frist told the trustee to sell all his shares in HCA and those owned by his wife and his children, a step allowed under Senate ethics rules. Stevenson said that the trustee decided when to sell the stocks, and that Frist had no way of knowing how much was sold, or what was earned on the sale.
HCA shares hit a high this year of $58.22 on June 22. After the company announced that its second-quarter earnings would fall below analysts’ expectations, the price fell to $49.90 on July 13.
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