Outside the blind trusts he created to avoid a conflict of interest, Senate Majority Leader Bill Frist earned tens of thousands of dollars from stock in a family-founded hospital chain largely controlled by his brother, documents show.
The Tennessee Republican, whose sale this summer of HCA Inc. stock is under federal investigation, has long maintained he could own HCA shares and still vote on health care legislation without a conflict because he had placed the stock in blind trusts approved by the Senate.
However, ethics experts say a partnership arrangement shown in documents obtained by The Associated Press raises serious doubts about whether the senator truly avoided a conflict.
In that case, the HCA stock was accumulated by a family investment partnership started by the senator’s late parents and later overseen by his brother, Thomas Frist. The brother served as president of the partnership’s management company and as a top officer of HCA. Sen. Frist holds no position with the company.
The senator’s share of the partnership was placed in a Tennessee blind trust between 1998 and 2002 that was separate from those governed by Senate ethics rules. Frist reported Bowling Avenue Partners, made up mostly of non-public HCA stock, earned him $265,495 in dividends and other income over the four years.
Defeating the purpose of a blind trust?
Edmond M. Ianni, a former Wilmington, Del., bank executive who established blind trusts for corporate executives, questioned why the senator’s brother was able to manage assets “when the whole purpose of a blind trust is to ensure lack of not only conflict of interest — but appearance of conflict of interest.”
Kathleen Clark, a government ethics expert at the Washington University in St. Louis School of Law, said she doesn’t believe the Senate trusts or the Tennessee trust insulated Frist from a conflict because the senator or his brother was advised of transactions and could influence decisions.
“What I find most appalling is the Senate calls it a qualified blind trust when it’s not blind,” Clark said. “Since the Senate says it’s OK, the Senate has made it a political question. It’s up to the voter. But there’s no doubt it’s a conflict of interest.”
Frist’s interest in Bowling Avenue Partners and the Tennessee blind trust were listed on the annual disclosure reports he filed with the Senate. Thomas Frist’s ability to influence HCA stock decisions in the partnership was detailed in separate trust and partnership documents obtained by the AP.
Those documents show Thomas Frist was listed as the “general partner” and “registered agent” of Bowling Avenue Partners. He also was listed as president of the partnership’s management company.
Hospital chain founded by brother, father
Thomas Frist founded HCA, the nation’s largest for-profit hospital chain, with his and the senator’s father. He currently is the company’s chairman emeritus.
Frist advisers confirmed the senator’s brother could influence investment decisions in the Bowling Avenue partnership and said the partnership was placed in a Tennessee trust because Senate ethics rules didn’t allow the non-public HCA shares to be included in Senate-approved trusts.
“His interests in the family partnership were not held by his Senate blind trusts because Senate rules did not permit it. Senator Frist did not control the assets in this partnership and he annually disclosed his interests to the public as required,” Frist spokesman Bob Stevenson said.
Thomas Frist did not return repeated phone calls to his office at HCA seeking comment.
Bowling Avenue Partners’ HCA shares became marketable securities when the estate of Frist’s mother was settled in probate. Frist then began transferring those shares in stages from the Tennessee blind trust to the Senate-approved trusts in 2001 and 2002.
The value of all the transferred shares, calculated on the dates they went into the Senate trusts, was between $775,000 and $1.57 million, according to letters the trustees sent to Frist and the Senate. That stock was on top of millions of dollars in various investments Frist already owned in the Senate blind trusts.
A medical background
With his background as a heart surgeon as well as majority leader, Frist has been at the forefront of legislation that would affect the hospital chain. Among the issues: a Medicare prescription drug benefit and limits on medical malpractice lawsuits.
Frist kept HCA stock in Bowling Avenue Partners and the Tennessee blind trust — but outside the Senate-approved trusts — between 1998 and 2002.
His investments in Nashville-based HCA are being investigated by federal prosecutors and the Securities and Exchange Commission after an AP report that the senator had asked administrators of his Senate blind trusts to sell his HCA holdings.
Frist ordered the stock sold June 13 and all sales were completed by July 1. HCA stock peaked on June 22 and then gradually declined. On July 13, it dropped 9 percent.
Reports to the SEC showed insiders sold about 2.3 million shares of HCA stock worth at least $112 million from January through June 2005.
Frist has denied having insider company information when he ordered the stock sold in June. The profit the senator made from the sales is not known.
The Bowling Avenue name came from the street of the Frist family home in Nashville.