September 24, 2005
What's That Smell?? A Presidental Campaign Burning
Majority Leader of the Senate Bill Frist (R-Tenn.) can kiss his hopes of a Presidential campaign goodbye. The SEC is checking out a very suspicious stock sale by Frist of HCA for insider trading. We thought Frist held the shares in a "blind trust," that is, a trust in which an independent administrator manages the stock portfolio without input (or knowledge) of the beneficiary. Frist himself has often told reporters he did not know how much HCA stock was in his trust. We were wrong. The Frist trust was a "qualified blind trust", a trust in which the beneficiary, Frist, can direct the sale of stock.
So what did we know: So we know Frist directed the sale of HCA stock in June, two weeks before the company announced earnings that did not meet expectations. The announcement caused a stock sell-off that lower the price of HCA ten percent or so. We also know that Frist's brother is the company's chairman emeritus. The transaction smells. At issue is whether there are any incriminating documents or witnesses. There may not be.
Whether First gets indicted (or reprimanded) is irrelevant. His Presidential campaign is dead (or at least on life support). If the SEC does nothing, he will still be under suspicion (the Chair is a fellow Republican Congressmen) and the investigation itself will be replayed endlessly in any subsequent campaign. This is Leno material "Why did Martha go to jail not Frist? His cooking was better." or "He could not help with the prison drapes." etc in the blogs. If he is indicted, of course, we all will witness another celebrity trial. Why these high profile folks cannot figure out (or get good advice) on how to handle their investments once they take public office is a mystery to me. The risk of mistakes are too high to play this close to the line.
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