September 23, 2005
HCA Receives Grand Jury Subpoena About Senator Frist's Stock Sale
HCA Inc., the large private hospital and medical clinic company, disclosed that it received a subpoena from the the U.S. Attorney's Office for the Southern District of New York for information related to sales of the company's stock by Senate Majority Leader Bill Frist. A company news release (here) states: "HCA (NYSE: HCA) today announced that the company received a subpoena from the office of the United States Attorney for the Southern District of New York for the production of documents. The company believes the subpoena relates to the sale of HCA stock by Senator William H. Frist. The company intends to cooperate fully with the office of the U.S. Attorney in this matter." Senator Frist directed the sale of all of his shares in HCA, including those owned by trusts for his wife and children, that were held in a blind trust. Approximately two weeks after Frist's shares were sold, HCA announced an earnings shortfall, and the company's shares dropped approximately $5 per share, from $55 to $50.
According to an AP article (here), Frist's HCA shares were worth between $7 and $15 million at the beginning of the year. A large number of HCA executives also sold shares, and the company was founded by Frist's father. The Wall Street Journal reports (here) that the SEC is also looking into the sale. One interesting aspect is that the trust arrangement for holding assets is usually designed to insulate the person from any direct control over the trust holdings, so that any transactions cannot be tied to any particular knowledge the owner might have. Senator Frist's financial disclosure form for 2003 (here) lists a number of blind trusts for which the assets are "unknown," and my quick review of the form does not show any specific listing for HCA shares (he does own Krisy Kreme shares in 2003). I always thought a blind trust meant the person could not be involved in the decisions, but I confess to no knowledge in the area beyond that general impression. (ph)
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