Monday, September 26, 2005

Senator Frist's Blind Trusts

In addition to seeking information from HCA, Inc., federal prosecutors in the U.S. Attorney's Office for the Southern District of New York and attorneys from the Enforcement Division of the SEC have contacted Senate Majority Leader Bill Frist's office for information related to the sales of HCA stock in so-called "blind trusts" that held assets in his name, and for his wife and children.  With the parallel investigations, Senator Frist may be asked to testify under oath before the Commission staff and federal prosecutors, and could even be subpoenaed to testify before a grand jury in Manhattan.  An AP story (here) notes that at one time, Senator Frist stated about the trusts that "I have no control. It is illegal right now for me to know what the composition of those trusts are. So I have no idea." I'm not sure where he got the idea that it is illegal, although the Senator may simply have meant it would be a violation of the trust agreement for him to be involved in investment decisions.  It's hard to think of a crime involved just from his directing the sale of assets (leaving aside possible insider trading), unless he were to have taken trust assets improperly, which certainly does not appear to be the case.  Whether his conduct is proper under the trust instrument is largely irrelevant to the DOJ and SEC investigations, which will focus on any leaks of information from the company.  Given the volume of stock sales by other HCA executives around the same time as Senator Frist's sales, it may be difficult to track down any improper disclosure of information, but investigators from those offices have not shied away from tough cases in the past. (ph)

                                                                                             

UPDATE: A New York Times article (here) discusses how blind the trusts are under Senate disclosure rules. (ph)

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Grand Jury, Insider Trading, Investigations | Permalink

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