October 25, 2005
For Frist, a Political Fortune May Be Inextricably Linked to a Financial One
By SHERYL GAY STOLBERG, NY TIMES

LINK

WASHINGTON, Oct. 24 - When a little-known transplant surgeon named Bill Frist decided to enter politics in 1994, he relied on his family's fortune and name to catapult him to the Senate. From the moment he arrived in Washington, Mr. Frist, now the Republican leader, has made health care his signature issue.

But as the senator lays the groundwork for a possible presidential bid in 2008, he is finding that that his family ties may be as much a hindrance as a help.

The Securities and Exchange Commission is investigating Mr. Frist's decision to sell stock, once estimated at more than $10 million, in HCA Inc., the giant for-profit hospital chain founded by his father and brother. The inquiry has reminded people of the very conflict Mr. Frist said he hoped to avoid by selling the stock, damaging his White House prospects and hampering his effectiveness as Senate leader.

Medical malpractice legislation, which Mr. Frist has called "a majority priority" is stalled in the Senate and unlikely to be revived, in part because the bill would benefit a subsidiary of HCA. In addition, some independent political analysts say Mr. Frist will have a difficult time assuming any leadership role on concerns like Medicare reimbursements to hospitals and legal immunity for vaccine makers, a hot issue as avian flu continues to spread.

Senate ethics officials have twice assured Mr. Frist in writing that his HCA holdings posed no conflict, and the senator continues to trumpet his family ties. On Saturday, he recounted his father's rags-to-riches story at a political dinner in Iowa. Mr. Frist has repeatedly said he did nothing wrong, as he did last week when he told reporters he had held himself to "the highest ethical standard."

A review of Mr. Frist's legislative activities shows that while he has taken pains to keep HCA at a distance during his 11 years on Capitol Hill, he has also been deeply involved in legislation affecting his family's business. As far back as 1995, his first year in the Senate, Mr. Frist supported a budget bill that increased Medicare reimbursements to for-profit hospitals like those owned by HCA, which derives more than one third of its inpatient revenue from Medicare.

Mr. Frist declined to be interviewed; his spokesman, Bob Stevenson, said he had already addressed such issues publicly. But Mr. Stevenson said the Medicare provision was a small part of the huge 1995 budget package, and the senator's aides pointed out that two years later Mr. Frist supported cuts in Medicare reimbursements for hospitals, going against the interests of HCA, when he voted for the Balanced Budget Act.

In 1997, Mr. Frist was named to a bipartisan commission designed to recommend changes to Medicare; at the time, the senator received explicit clearance from the Senate Ethics Committee to participate.

In 2003, as majority leader, Mr. Frist played a central role in shepherding the Medicare prescription drug legislation through the Senate, and he served on the conference committee that negotiated the final package with the House.

The bill included a provision, backed by HCA and other large hospitals, that temporarily barred Medicare financing for small specialty hospitals; Mr. Frist has said he did not participate in that discussion.

He has also long championed limiting jury awards for medical malpractice victims, a measure that would benefit HCA, which owns HCI Inc., one of the nation's largest medical malpractice insurance companies.

"I think he's lost his leadership ability on this issue completely now, and he was the one that was pushing the hardest in the Senate," said Joanne Doroshow, president of the Center for Justice and Democracy, a public interest group that is opposing the bill.

HCA maintains a strong presence on Capitol Hill - records show that the company has spent $1.3 million on Washington lobbyists since 1998 - but it says it does not lobby Mr. Frist, and Mr. Frist's aides say the senator has a strict policy against that.

HCA has also been a major source of campaign contributions for Mr. Frist, according to the Center for Responsive Politics, a nonpartisan organization that tracks campaign financing. Through its political action committee, its officials, its employees and their families, the company donated $179,500 to Mr. Frist from 1996 to 2004, consistently putting HCA on his list of top 10 contributors.

Yet Mr. Frist draws praise from one lobbyist who has frequently been at odds with HCA. Randy Fenninger, the Washington representative for the specialty hospitals, says the senator seems scrupulous about remaining neutral on HCA's legislative priorities.

"I can't say 100 percent he's avoided every conflict," Mr. Fenninger said. "But I know he's made enough of an effort to do it that he's irritated people who thought he was going to be their friend."

But independent political analysts and an ethics lawyer who represents Republicans say the stock inquiry has created a political problem for Mr. Frist. The investigation has come after a bruising year for the majority leader; his handling of the Senate fight over President Bush's judicial nominees has been criticized, and he was ridiculed when he said Terri Schiavo, the brain-damaged Florida woman at the center of a right-to-die case, appeared responsive in a videotape.

"I consider him to be one of the most unlucky politicians in town," said the ethics lawyer, Jan Baran. "Here's a guy who's trying to comply with the law, he's trying to do the right thing both legally and politically, and he's unlucky because he disposes of the stock and the price fell."

For Mr. Frist, family ties have long been both a political blessing and a curse. The would-be senator was still in high school when HCA was founded in 1968 by his older brother, Thomas; his father, Thomas Frist Sr., a prominent Nashville doctor; and Jack C. Massey, best known for taking Kentucky Fried Chicken public.

The younger Thomas Frist, known as Tommy, has long been a powerful influence in his brother's life. "Tommy is like a second daddy to Bill," said Tom Perdue, the senator's 1994 campaign manager. "Tommy is someone that Bill can flat talk to."

But Mr. Frist has said the two do not talk about business, and friends say Bill Frist expressed little interest in joining his older brother at HCA, instead choosing to set up a transplant center at Vanderbilt University in Nashville.

"People try to paint him as tied to HCA," Tommy Frist said in an interview in July, "but he never participated. At Vanderbilt, he was a competitor of ours."

J. Barry Banker, a friend of the senator's from high school, said Mr. Frist's "passion and devotion" was to practice medicine. "While Bill has principles of understanding business," Mr. Banker said, "I just don't think that was ever a direction he wanted to pursue."

He may not have needed to. Records on file with the secretary of the Senate show that when Mr. Frist took office in 1995, he owned as much as $25 million in HCA stock. Aides say all of it was either a gift or was inherited.

Mr. Frist borrowed against that wealth to finance his first Senate campaign, in which he unseated Jim Sasser, a three-term Democrat. In February 1994, as Mr. Frist was campaigning, HCA merged with the Columbia Hospital Corporation.

The merged company, while soon becoming the country's biggest for-profit hospital chain, attracted a federal Medicare fraud investigation that eventually required $1.7 billion to settle. In 1997, in a shakeup intended to restore the company's credibility, Tommy Frist, who had left management before the fraud charges, returned as chief executive and created new ethics rules.

Once in the Senate, Mr. Frist began positioning himself as a leader on health care. He has championed greater spending on global AIDS, more money for bioterrorism preparedness and legal immunity for vaccine manufacturers.

But questions about potential conflicts with HCA and his brother began dogging Mr. Frist soon after he arrived in Washington in January 1995. That year, when Mr. Frist supported the budget package that included higher Medicare reimbursements, the leaders of not-for-profit hospital groups argued that he should recuse himself. He did not.

In 1997, when Mr. Frist was named to the bipartisan Medicare commission, the questions were raised again, prompting him to seek advice from the Senate Ethics Committee, which said there was no conflict as long as his actions affected hospitals broadly, as opposed to HCA specifically.

In 1999, during Mr. Frist's re-election campaign, news accounts accused Mr. Frist of having a conflict of interest in his work on a patients' bill of rights. Mr. Frist again asked for guidance from the Ethics Committee; its response was the same as two years earlier.

The Democratic candidate who ultimately challenged Mr. Frist, Jeff Clark, said he tried to make an issue of the senator's ties to HCA but got little traction.

"If you want to say you're informed, and that's why you should be a great senator, that's fine," he said. "But you can't also say that you have no idea what is going on in your brother's family and your base of wealth."

In 2000, Mr. Frist decided to take his investments out of several Tennessee trusts and place them in a "qualified blind trust." Under Senate rules, such trusts are managed by independent trustees; the lawmaker, however, can direct the trustee to sell off an asset. Mr. Frist often said he did not know how much HCA stock he held; this year, he reported $7 million to $35 million in assets, including his HCA shares.

Records show that Mr. Frist, his wife and their children initially contributed $10 million in HCA stock to the trust, which also included stock in the pharmaceutical companies Abbott Laboratories and Johnson & Johnson. Senate rules did not require a blind trust, but Mr. Frist said last week that he wanted to go beyond what the rules required.

"I thought, 'Why not raise the bar?' " Mr. Frist told reporters. "Why not do a good deed and put everything in a blind trust where you are not the day-to-day manager, where you can proceed with business here and avoid any appearance?"

In April, Mr. Frist has said, he asked his aides and lawyers if he could sell his HCA stock. He explained the decision this way: "Looking ahead at my final years in the Senate and what might come next, I have for some time wanted to eliminate even the possibility of an appearance of conflict by totally divesting."

Mr. Frist ordered the sale on June 13, just as the HCA stock price peaked and shortly before it took a tumble in July. When Mr. Frist disclosed the sale in September, after questions from a reporter for Congressional Quarterly, the Securities and Exchange Commission began an inquiry. The senator has since received a subpoena for documents; Mr. Frist says he is cooperating fully.

Some say the episode shows Mr. Frist's lack of political sophistication. Bruce Oppenheimer, a professor of political science at Vanderbilt University, said Mr. Frist, who made the leap from medicine into politics, "doesn't have a good political ear."

Charlie Cook, the editor of the nonpartisan Cook Political Report, agreed. He said that Mr. Frist should have rid himself of his health care investments when he first arrived in Washington, and that he was now open to being "second-guessed" anytime he promoted health legislation.

"It sort of seems a waste that one of the few people in the Senate with any insight, any unique knowledge, has to keep his hands off," Mr. Cook said. "But unfortunately that's the situation he's put himself in."

November 17, 2005
Group Seeks Further Inquiry in Frist's Stock Sales
By SHERYL GAY STOLBERG, NY TIMES

LINK

WASHINGTON, Nov. 16 - A consumer advocacy group called Wednesday for the Securities and Exchange Commission to expand its inquiry into the stock trades of Senator Bill Frist, the Republican leader, saying it had uncovered "questionable transactions lucrative to Frist family members."

The commission is already investigating the senator's decision to sell all of his stock in HCA Inc., the healthcare giant founded by his father and brother, shortly before the price hit a peak and then plummeted. Mr. Frist, whose records, along with company's, have been subpoenaed, has repeatedly said that he has done nothing wrong.

Now the advocacy group, Public Citizen, says financial disclosure documents filed by Mr. Frist reveal several additional "exceedingly well-timed transactions" made by trusts that manage investments for his three sons. All involve healthcare companies that at one point had ties to the Frist family.

"We're not sure what this means," said Frank Clemente, director of Congress Watch, Public Citizen's government watchdog arm. But, he added, "It has the smell of the HCA stock trading, and we just thought it was important to bring this to light."

Public Citizen called for an additional investigation by the Senate Ethics Committee. Spokesmen for the ethics panel, the S.E.C. and Senator Frist declined comment.

Mr. Frist has placed his financial holdings, and those of his wife and sons, in a series of trusts that, under Senate rules, are managed by an outside agent who has only limited communications with the senator. The trusts are meant to help elected officials avoid conflicts of interest, or the appearance of them, and the senator, a Republican from Tennessee who had been widely expected to make a bid for the White House in 2008, has said his only purpose in selling the HCA stock was to eliminate any appearance of conflict.

He had long insisted that the main trust was a "blind trust" and that he had no control over it, but since the disclosure of this sale of HCA stock, Mr. Frist has acknowledged that the trust, as established, enabled him to direct its manager to sell off assets.

Public Citizen looked at stock transactions beyond HCA. It found that in September 2003, trusts in the name of the Mr. Frist's sons bought $300,000 to $750,000 worth of stock in American Retirement Corporation, a Brentwood, Tenn., company that offers services to the elderly, including assisted living and nursing home care. One of the founders of the company, established in 1978, was the senator's father, although the Frists no longer appear to have an interest in it.

Public Citizen found that in June 2005, at the same time the senator disposed of his HCA stock, the sons' trusts "reaped multimillion-dollar gains" by disposing of the American Retirement Corporation stock. The value had by then increased 367 percent, the group said, to anywhere from $1.4 million to $3.5 million.

Cook Political Report